Request By:
Mr. Weldon Shouse
Attorney at Law
Security Trust Building
Lexington, Kentucky 40507
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
The Lexington-Fayette Urban County Airport Board, created pursuant to KRS 183.132, for airport purposes, has need of some fifty acres of land adjacent to the airport. The owners have agreed to sell and the Board is desirous of buying the property. The purchase price is in excess of the airport's anticipated revenue, or budgeted revenue, for the year 1980. A local bank is willing to loan to the airport board 100% of the required funds to purchase the property, the loan to be evidenced by a note in the amount of the purchase price, with interest thereon payable annually, and payable on or before two years, to be secured by a mortgage on the land purchased. It is anticipated by the Board that at least 80% of the purchase price, and perhaps 90% thereof, will be reimbursed by the Federal authorities under the Airport Development Act of the Federal Aviation Administration. However, this application would be filed by October of 1980 and would not be funded until some time in 1981.
As attorney for the Board, you request our opinion as to whether or not the Board is subject to the restrictions contained in Sections 157 and 158 of the Kentucky Constitution.
Section 157 of the Kentucky Constitution imposes maximum tax rates upon cities, towns, counties, taxing districts, and "other municipalities. " (Emphasis added). The section also provides that no city, town, taxing district, "or other municipality" , shall be authorized or permitted to become indebted, in any manner or for any purpose, to an amount exceeding, in any year, the income and revenue provided for such year, without the assent of two-thirds of the voters thereof, voting an election to be held for that purpose. . . . (Emphasis added).
Section 158 of the Constitution imposes absolute restrictions on indebtedness of cities, towns, counties, taxing districts, "and municipalities" , except in case of certain emergencies. (Emphasis added).
First, let us examine the legal nature of the airport board.
The Lexington-Fayette Urban County Airport Board is a public or municipal corporation and an instrumentality of the Commonwealth. See KRS 183.132 and 183.476. Also see
Louisville & Jefferson Co. A. Bd. v. American Airlines (U.S.D. Ct. W.D. Ky., 1958) 160 F.Supp. 771, 774; and
American Airlines, Inc. v. Louisville & Jefferson C.A.B. (U.S.C.A. -6, 1959) 269 F.2d 811. The airport board is thus a public body engaged in public duties and is subject generally to general law applicable to municipal corporations. As a municipal corporation it possesses only such power as the constitution and the General Assembly has expressly or impliedly granted.
City of Middlesboro v. Kentucky Utilities Co., 284 Ky. 833, 146 S.W.2d 48 (1940) 52. In
Padgett v. Louisville and Jefferson County Air Board (U.S.C.A. -6, 1974) 492 F.2d 1258, 1259, the United States Sixth Circuit characterized a Kentucky air board as a quasi-governmental agency.
It is significant to note that the airport board is not a taxing district or taxing unit as envisioned in Sections 157 and 158 of the Constitution. It simply has no taxing power. Pursuant to KRS 183.133 it can establish and fix reasonable rates, charges and fees for the use of certain of its facilities and for certain other purposes. It can condemn for its statutory purpose. It can acquire land and personal property. Thus the board has a basic autonomy, but not taxing power. Cf. KRS 183.134. The board may issue revenue bonds for its statutory purposes. KRS 183.136.
The question at this point is whether or not a municipal corporate entity coming under "other municipality" as found in Sections 157 and 158 of the Constitution must be both a municipal corporation (or quasi-municipal corporation) and a taxing unit at the same time, so as to come under the financing restrictions of those sections.
In speaking of the provision in Section 157 prohibiting an indebtedness exceeding the "income and revenue provided for such year," the court, in
Bell v. Board of Education of Barren County Sch. Dist., Ky., 343 S.W.2d 804 (1961) 806, wrote this:
"The construction of the phrase 'income and revenue provided for such year' has been that it means that which the particular taxing district has actually provided for in reasonable and good faith anticipation of collecting." (Emphasis added).
In
Payne v. City of Covington, 276 Ky. 380, 123 S.W.2d 1045 (1938), the court, in interpreting Sections 157 and 158 of the Constitution as establishing a pay-as-you-go plan, wrote this at page 1051:
"But the various taxing units of the commonwealth embraced by the two sections of the Constitution, supra (157 and 158) shall, after this opinion becomes final, observe and be governed by the interpretation herein made, and shall contract no debts beyond the amount of revenue which they themselves provide under authority given to them by the Constitution or Statutes legally enacted thereunder."
The court, in
Griffin v. Clay County, 304 Ky. 592, 201 S.W.2d 733 (1947) 736, in examining Sections 157 and 158 of the Constitution said this:
"Such examination leads us to the conclusion that the framers of our Constitution intended first to prohibit the creation of indebtedness by taxing districts without making provisions for its payment, and second, that every valid debt of such taxing district must be paid."
Judge Cullen, in Skidmore v. City of Elizabethtown, Ky., 291 S.W.2d 3 (1956), in speaking of Section 157, wrote as follows on page 5:
"We think Section 157 of the Constitution is concerned only with the protection of such future revenues as can be exacted in the form of taxes."
The court, in Skidmore, above, went on to hold that the pledging of the parking meter revenues for the combined parking project did not create a debt of the city within the meaning of Section 157 of the Constitution. See also
Grimm v. Moloney, Ky., 358 S.W.2d 496 (1962) 498, holding that constitutional restrictions on municipal indebtedness are not applicable to obligations which are payable out of money derived from income and revenues of city owned and revenue producing public utilities.
On the basis of the above authorities, it is our opinion that when Sections 157 and 158 are read in their entirety, the restrictions of those sections are to be applied to a unit of government constituting a "municipality" and a "taxing unit" at the same time. In other words, those designated categories must co-exist in order for the restrictions to apply.
Under that analysis, it is further our opinion that the airport board is not subject to the restrictions of Sections 157 and 158 of the Constitution, since the board is not a taxing unit.
While KRS 183.135 provides that an air board may borrow money on its own credit in anticipation of revenue to be derived from taxes, appropriations or other income and may pledge the same as security (including the airport and facilities), such taxes are not its own taxes, but are taxes of a governmental unit, for example, creating or contributing to the air board's operations. Thus the statute in no way converts the air board into a taxing unit. Under KRS 183.135, the airport board must exercise its sound business judgment in borrowing for the aforementioned purpose in anticipation of available revenues. In Skidmore, above, the court ruled that Section 157 is concerned only with protection of such future revenues as can be exacted in the form of taxes. Here the air board has no control over anticipated taxes to be levied by some other governmental unit. Therefore the actual protection afforded by Section 157 does not technically come into play. This does not mean that an air board can borrow subject to no control. Indeed KRS 183.135, as a legislative policy, requires the air board to carefully anticipate, along with the lender, the anticipated revenue which may become available.