Request By:
Honorable Joseph R. Rubin
Rubin & Hays
209 South Fifth Street, Suite 300
Louisville, Kentucky 40202
Opinion
Opinion By: David L. Armstrong, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
Your letter requesting our opinion as to the construction of a portion of House Bill 598, 1984, reads in part:
"This letter is written by us as Bond Counsel on behalf of Perry County, Kentucky, which is in the process of issuing $26,100,000 of 'Health Care System Revenue Bonds' for Appalachian Regional Hospitals, Inc., under KRS 103.200 through 103.285. The Fiscal Court of the County has (on May 21, 1984) approved the form of a Contract providing for the sale of such Bonds to Merrill Lynch, Pierce, Fenner & Smith Incorporated, with the interest rate being a variable rate, which will fluctuate from time to time, based on a formula set out in the Bond Issue Proceedings. The exact method for computing the variable rate has been determined and will be formally approved on Monday, July 16.
"House Bill 598, enacted by the 1984 Kentucky General Assembly (eff. 7-13-84), ratifies the validity of all previous variable rate bonds issued by cities and counties under such statutes, but includes a definition of 'bonds' in KRS 103.200(2) stating that such definition 'for pollution control facilities shall also include commercial paper and variable rate bonds.' Also, KRS 103.220(1), as amended by such Act, states that such bonds may bear interest at a rate fixed by the governing body of the issuer, and that 'Bonds' issued to finance pollution control facilities may bear interest at any rate or rates, either fixed or variable, in accordance with such method as shall be set by the governing body of the issuer.
"KRS 58.430 reads as follows:
"From and after March 9, 1970, notwithstanding any other acts or laws of other import which may presently prevail, wherever the same may be found in the Kentucky Revised Statutes as of such effective date, it shall be lawful for public bodies to establish, agree and bind themselves to pay interest upon their public obligations at any rate or rates which may be determined upon by the governing bodies which are the issuers bodies which are the issuers thereof; but subject, nevertheless, to such approvals as may now or hereafter be applicable thereto according to law."
KRS 103.200(2) reads:
"(2) As used in KRS 103.200 to 103.285, 'bonds' or 'negotiable bonds' means bonds, notes, bond anticipation notes or any other obligations for the payment of money issued by a city, county or other authority pursuant to KRS 103.200 to 103.285 and for pollution control facilities shall also include commercial paper bonds and variable rate bonds."
Your question:
"We therefore earnestly request the issuance of an Opinion by the Office of the Attorney General, for the benefit of Perry County, to the effect that the proposed issue of Health Care Revenue Bonds (and for that matter any other Industrial Building Revenue Bonds) may be issued, if determined by the Issuer, with the agreement of the Borrower and the Purchaser of the Bonds, bearing interest at a fluctuating or variable rate, adjustable in accordance with whatever formula is agreed upon by the Issuer, the Borrower, and the Purchaser."
It is our opinion that when reading the entire legislation of 1984, and considering the history and purpose of KRS Chapter 103 (industrial revenue bonds), and in connection with any industrial revenue bonds covered by KRS 103.200 to 103.285, an agreed fluctuating or variable rate of interest, under terms suggested in your question, is permissible. This includes the subject issue of Perry County.
To construe KRS 103.200 and 103.220 as permitting a variable interest rate for pollution control projects only would, we think, constitute an unreasonable and absurd premise, especially when considering the realities of the present day use of KRS Chapter 103 in Kentucky.
The court wrote in Jefferson County Bd. of Election Comr's. v. Russell, Ky. 323 S.W.2d 864 (1959), that in order to effectuate the legislative intent, words may be supplied, omitted, substituted or modified. It is an established rule of statute construction that the courts will consider the purpose which the statute is intended to accomplish and will not give a strict, literal construction to the statute if it would lead to an unreasonable or absurd conclusion. Justice Clark, for the court, in Perry v. Commerce Loan Co., 383 U.S. 392, 15 L. Ed. 2d 827, 86 S. Ct. 852 (1966), wrote that the court has followed the plain meaning of statutes. However, when that meaning has led to absurd or futile results, the court has looked beyond the words to the purpose of the act.
The Court of Appeals, in Nickell v. Thomas, Ky. App., 665 S.W.2d 927 (1984), wrote that the function of the court is limited to a reasonable interpretation of the legislative language.
The Supreme Court of Kentucky in Budget Marketing, Inc., v. Com. ex rel. Stephens, Ky., 587 S.W.2d 245 (1979), pointed out that it is the duty of the court to draw all inferences and implications from the act as whole and thereby sustain the validity of the act and expound it.
It must be noted that KRS 103.200 and 103.220 in no explicit language establish pollution projects as the sole category of projects subject to a variable rate of interest. In addition, the pertinent statutes amended by House Bill 598 in no way prohibit the application of the variable rate to projects other than pollution control projects. The statutes merely, for some strange reason, emphasize pollution control projects, but not to the detriment of other kinds of projects falling within the broad range of KRS 103.200 to 103.285. To construe it otherwise could very well lead to a practical collapse of projects other than pollution control.
We also believe that the legislation is designed to apply retroactively as well as prospectively, when viewed as a whole.
KRS 58.430, you have cited, is a specific statute dealing only with interest rates on public bonds. That statute is so flexibly worded as to support variable rate structures in the issuance of public bonds. Even if the amended sections in KRS Chapter 103 were to be said to be in some conflict with the provisions of KRS 58.430, it is our opinion that the specific statute, KRS 58.430, should control over the provisions of KRS Chapter 103. The specific statute controls a more general statute. Heady v. Commonwealth, Ky., 597 S.W.2d 613 (1980).