Request By:
Hon. James O. Risch
Asst. Director of Law
City of Louisville
Department of Law
City Hall
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Asst. Deputy Attorney General
Under KRS 177.365, 6.7% of all amounts received from the imposition of the state gasoline tax (KRS 138.220), the state special fuels tax (KRS 138.565), the state motor carrier tax (KRS 138.660), and the state tax on liquified petroleum gas (KRS 234.320), shall be set aside by the Department of Finance for the construction, reconstruction and maintenance of urban roads and streets and for no other purpose.
Each fiscal year, beginning July 1, 1980, the Department of Finance shall pay to each incorporated city and county containing an "unincorporated urban place" its pro rata share of any funds appropriated and any unexpended balance of such funds. KRS 177.369. Under subsection (2) of the latter statute the expenditure of any money received by the city or county pursuant to subsection (1) of the statute shall be made solely for the purposes set out in KRS 177.365, i.e., the purpose of construction, reconstruction, and maintenance of urban roads and streets.
Under subsection (3) of KRS 177.369, any city receiving any of this money above described must retain all records of the expenditure of the money for a period of five (5) years; and said records shall be subject to audit by the Department of Finance for that period in order to determine the proper expenditure of the money for road and street purposes above described. The Department of Finance, to aid in their accounting of such funds, has required the City of Louisville to deposit such money received from the state in a separate road fund account.
Question:
"Does KRS 177.365 limit the use of interest which accrues on funds received by the City pursuant to KRS 177.369, said funds being deposited in an account to aid the Department of Finance in their accounting for such funds?"
The controlling law in this situation is § 230 of the Kentucky Constitution. It provides in part that:
"No money derived from excise or license taxation relating to gasoline and other motor fuels, and no moneys derived from fees, excise or license taxation relating to registration, operation, or use of vehicles on public highways shall be expended for other than the cost of administration, statutory refunds and adjustments, payment of highway obligations, costs for construction, reconstruction, rights of way, maintenance and repair of public highways and bridges, and expense of enforcing state traffic and motor vehicle laws."
Thus the subject funds are first subject to the general mandate of § 230 of the Constitution relating to road expenditures. As the court in
Keck v. Manning, 313 Ky. 433, 231 S.W.2d 604 (1950) 606, wrote, "The purpose of the 1944 amendment, often referred to as the 'anti-diversion amendment,' was not to curtail the road program but to make secure the funds with which to continue it. . . . The amendment was supported by the motor vehicle interests to prevent this fund, raised by special taxes levied against them, from being put to uses having no connection with the construction, maintenance and administration of the highway system." (Emphasis added.)
Secondly, KRS 177.369(2) serves to narrow the expenditure restriction to only the purpose of construction, reconstruction, and maintenance of urban roads and streets set forth in KRS 177.365.
Thus it is mandatory that any interest accruing in the City's special road account, as described above, be expended for the precisely same purpose for which the principal is spent. The literal mandate of KRS 177.369(2) must be precisely observed by the City of Louisville. The statute must be accepted and enforced as written.