Request By:
Mr. B. G. Edwards
City Clerk
City of Monticello
P.O. Box 518
Monticello, Kentucky 42633
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in answer to your letter of recent date in which you relate that the city of Monticello owns and operates an electric system pursuant to KRS 96.550 to KRS 96.900, otherwise known as the Little TVA Act. You further relate that the city council has directed you to seek an opinion concerning the construction of KRS 96.810 as it relates to the following question:
"Can an Electric Plant Board legally make an annual payment to the city's general funds not to exceed a cumulative return of six percent of the equity of the municipality as defined in KRS 96.180(2)?"
In connection with the above question you further relate the following:
"Monticello purchased its electric system in 1953 through the issuance of $225,000 revenue bonds. There are no outstanding bonds at the present time. In 1959, Monticello entered into a contract with TVA to supply power. TVA is still supplying the power. The council feels the system is city owned, and that the purchase price, $225,000, less outstanding bonds, none, would be the equity the city has in the sytem according to KRS 96.810."
KRS 96.810 provides that where the utility board has met all the obligations imposed upon it under the Act, including, of course, those mentioned in said statutes, it may, at the end of any twelve (12) months ending June 30, transfer any surplus to the general fund of the municipality which authorizes it. However, the payment to the general fund of the city cannot exceed an accumulation return of six percent (6%) per annum of the equity, if any, that the municipality has in the utility system. It is further provided under subsection (2) that the equity of the municipality contracting with the TVA for the purchase of electric energy shall be the purchase price of the electric plant less the face value of the outstanding bonds, or, if there is no purchase price, the original cost of the plant as defined by the federal power commission, less accrued depreciation, less the face value of the outstanding bonds. It is also provided that the payment of the bonds shall not be considered to increase the equity or investment of the municipality. Though this latter provision is somewhat ambiguous, we believe that it simply means that the original purchase price shall not be increased by the liquidation of the bonded indebtedness.
Under the circumstances, since the purchase price of the utility system is $225,000 and there are no longer any outstanding bonds, the equity that the city has in the utility system would be the purchase price of $225,000. As a consequence, assuming that the other provisions of KRS 96.810 are complied with, it would appear that the city would be entitled to receive into its general fund six percent (6%) per annum of $225,000.