Request By:
Mr. Mark Fitzgerald
House of Representatives
Chairman
Subcommittee on Special Districts
Capitol Building
Frankfort, Kentucky 40601
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
The Subcommittee on Special Districts is preparing a uniform act to regulate the formation and operation of special districts. The subcommittee, as an underlying principle, is attempting to make special districts more responsive to local general purpose government by vesting powers of oversight and control with elected local officials, namely, the county judge/executive and the fiscal court. Cf. KRS 67.080 and 67.083. This has brought on the general question concerning the degree of control that a fiscal court may exert over a taxing district, as mentioned in § 157 of the Kentucky Constitution, without disturbing the "separate taxing district" role envisioned by the constitution.
Specifically your question is: Would the exercise of fiscal court approval over land acquisitions and capital expenditures of a special taxing district erase the independent status of such districts within the meaning of § 157 of the Constitution? We are of the opinion that it would.
Section 157 establishes, generally, a maximum tax rate for counties and taxing districts of 50 cents on each $100 of taxable property. It further provides that no city, county, taxing district, or other municipality, shall be permitted to become indebted in any manner or for any purpose for an amount exceeding in any year the income and revenue provided for such year without assent of two-thirds of the voters thereof voting on the question at an election (November - general election) held for that purpose. Section 157 has two major features: (1) A maximum tax rate for counties, cities, and taxing districts; and (2) specific debt limitations for such local units of government.
The court has equated "taxing district" with "other municipality" where the special local unit, while having no taxing power, can compel the tax levying unit of government to pay over proceeds of taxes levied by the latter. KRS 66.510 to 66.543 provides for financing of public improvements from county license taxes. While a County Public Improvements Finance Board is given a certain autonomy, its financing plan must be approved by fiscal court. Its projects are funded by county appropriations. See KRS 66.520 and 66.523. The board has no taxing power. However, the court held in
Sawyer v. Jefferson County Fiscal Court, Ky., 438 S.W.2d 531 (1969) that the board was a "municipality" under § 157 for debt restriction purposes, since the County Public Improvements Finance Board could compel the county to pay over proceeds of county taxes. In Sawyer the question was whether the fiscal court, in contracting to pledge the county appropriated money of future years to secure the payment of money borrowed by the board, violated § 157. The court held that if the obligation is that of the county, § 157 is plainly violated. He added this at page 533:
"It is difficult to see how the mere fact that the obligation is made in the name of an agency created exclusively by and for the county can keep it from being considered an obligation of the county itself."
It is our opinion that the control by fiscal court of land acquisitions and capital expenditures of separate taxing districts would in effect strike down the autonomy of separate taxing districts as envisioned by § 157 of the Constitution. The terms "cities, counties, taxing district" , as used in the constitutional section are highly significant. The language suggests an autonomy in function and local units of government which are co-equal in performing certain governmental functions. This juxtaposition of terms invokes the doctrine of ejusdem generis as applied to "other municipality" , as it appears in § 157. This simply means that "other municipality" is restricted to things of the same class with those specifically named in preceding words.
City of Lexington v. Edgerton, 289 Ky. 815, 159 S.W.2d 1015 (1941) 1017. Thus these specifically named local governmental entities take on a co-equal and autonomous character.
A municipality in Kentucky is a political subdivision of the state.
Smith v. Board of Education of Ludlow, Ky., (C.C.A. -6, 1940) 111 F.2d 573, 575. A political subdivision, generally, exists for the purpose of discharging some function of local government. It has a prescribed area and possesses authority for subordinate self-government through officers slected by it.
Dugas v. Beauregard, Conn., 236 A.2d 87 (1967) 89. Of course the delegation of local governmental function to a political subdivision must conform to any constitutional mandate.
State v. Mitchell, Conn., 231 A.2d 539 (1967); and
Commander v. Board of Com'rs of Buras Levee Dist., 202 La. 325, 11 So.2d 605 (1942) 607. Thus cities, counties and taxing districts are all political subdivisions. The court held in
Gleason v. Weber, 155 Ky. 431, 159 S.W. 976 (1913) 979, that a "district" is included in the constitutional phrase "other municipalities. "
The fiscal court's control over land acquisition and capital expenditures of the taxing district in particular situations could easily lead to a breakdown of the operations of the taxing district, rendering its work ineffectual.
It is our opinion that the separate taxing district, as treated in § 157 of the Constitution, not only carries with it the power to tax for some governmental purpose, but inherently carries with it the power to control its functions in carrying out the governmental purpose or purposes. This means it must have a discretion in the management of its internal affairs, a certain administrative and legislative independence.
Further, we do not believe the courts would uphold the legislature in providing a refuge from its own debt restrictions under the guise of a separate taxing district, but which district is under the effective control of the fiscal court. As Judge Cullen in effect said above in Sawyer, it is difficult to see how the county can assume a dual personality in order to go beyond its own debt limitations. Cf.
Boggs v. Reep, Ky., 404 S.W.2d 24 (1966), dealing with a library district case. There the court held in effect that the district was a separate taxing district under the constitution, and the fiscal court in levying the tax was merely an agent of the district. The court concluded that the library district tax is not a part of the county tax within the prohibition of § 157, Constitution. But the library district has a basic autonomy. See KRS 173.745.
The "straw man" or holding corporation cases are not apropos [see
Waller v. Board of Education of Georgetown, 209 Ky. 726, 273 S.W. 498 (1925) and
Baker v. City of Lexington, Ky., 273 S.W.2d 34 (1954)]. The holding corporations did not have taxing power and were not taxing districts or political subdivisions as envisioned by § 157, Constitution. They were not subject to the constitutional limitations.
As a part of this constitutionally granted autonomy, the cases have laid down the principle that a taxing district may in its discretion provide for the maturity of its bonds within a period of less than 40 years. Section 159, Constitution, provides that a taxing district, in contracting an indebtedness, is required to levy an annual tax sufficient to pay interest and principal within not more than 40 years for the time the debt is contracted. See
Williams v. City of Barbourville, Ky., 246 S.W.2d 591 (1952) 593, and page 2904, Vol. 2, Debates, Constitutional Convention of Kentucky (1890). It is difficult to see how the taxing district could effectively use its taxing power, its debt quantum power, and its power to establish the duration of the debt payment period in the face of these proposed fiscal court controls.
The sovereign power of taxation can be delegated to taxing districts as political subdivisions. The legislature can define and confer legislative power on such districts in a practically unlimited manner, subject, however, to constitutional restrictions.
Barrow v. Bardley, 190 Ky. 480, 227 S.W. 1016 (1921) 1017, 1018.
The intended autonomy of political subdivisions, including taxing districts, is reflected in