Request By:
Mr. William G. Clouse, Jr.
Madison County Attorney
Courthouse
P.O. Box 961
Richmond, Kentucky 40475
Opinion
Opinion By: David L. Armstrong, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
Several questions concerning the issuance of bonds for sewer districts were raised in your letter, which reads:
"1. If a sewer district is created under KRS 220.010 thru KRS 220.552 are issuance of bonds permitted for such districts?
"2. Are such districts required to limit any bond issuance to an interest rate not exceeding six and half (6 1/2) percent per annum under KRS 220.390?
"3. If the sewer district is permitted to issue bonds bearing interest exceeding six and one half (6 1/2) percent per annum, then cite authority.
"4. Is there any other method other than bond issue that will give the sewer district authority to borrow money? "
Concerning Question 1, if the district organization is perfected, as provided in KRS 220.110, the district, through its Board of Directors, may issue bonds for its statutory purposes. See KRS 220.030(4). See review powers of fiscal court relating to district land acquisitions, capital improvements, etc., in KRS 220.035; and the issuance of bonds pursuant to KRS 220.380. The latter statute permits the district's issuance of bonds to defray the cost of organizing the district and the preliminary expense after organization, and for the purpose of acquiring any sanitary works authorized by KRS 220.010 to 220.520. See KRS 220.380 for other conditions affecting issuance of bonds.
In response to Question No. 2, under KRS 220.390, any district bonds authorized under KRS 220.380 to 220.520 are held to a maximum interest rate of six and one-half percent (6 1/2%) per annum. However, since a district sewer project would constitute a "public project" under KRS 58.010(1) (see also KRS 58.010(3), defining a governmental agency), KRS 58.430 would apply to such sanitation district revenue bonds. Under KRS 58.430 from and after March 9, 1970, notwithstanding any other statutes which might otherwise prevail, it shall be lawful for public bodies (here the Sanitation District) 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 body of the issuer. By its express language KRS 58.430 repealed the maximum rate found in KRS 220.390 and 220.400. Public body, as defined in KRS 58.410, includes a sanitation district. See
Dreidel v. City of Louisville, 268 Ky. 659, 105 S.W.2d 807 (1937).
We have answered Question No. 3, above, under Question No. 2.
Concerning Question No. 4, in the narrow area of facilitating the preliminary work on any approved project, the Board of Directors of the District may, under KRS 220.370, borrow money for the district at a rate of interest not exceeding six percent (6%) per annum, and may issue and sell, or deliver directly to its creditors, negotiable warrants signed for the district by the members of the Board of Directors. However, KRS 58.430 repealed the maximum interest rate of six percent, as described above.
Obviously, the purpose of KRS 58.430 was to permit public bodies to meet prevailing interest rate competition. Otherwise, such bonds could not be sold at those old statutory rates.