Request By:
Mr. Vic Hellard, Jr.
Director
Legislative Research Commission
Capitol Building
Frankfort, Kentucky 40601
Opinion
Opinion By: Steven L. Beshear, Attorney General; Thomas R. Emerson, Assistant Attorney General
This is in reply to your letter setting forth a general and hypothetical fact situation and asking this office if we foresee any problems with or detect anything improper about those arrangements. The facts are as follows:
"The authorities at Western State Hospital may consider asking the Commonwealth of Kentucky for permission to deed certain acreage at Western State Hospital to the city and county jointly. If such permission were granted, let us assume that the city and county would then lease the property for a long term, such as ninety-nine years, to a non-profit corporation, formed by a group of citizens, with the intention that the non-profit corporation would make substantial improvements to the property, building a golf course and perhaps other facilities of this nature to be open to the public.
Furthermore, let us assume that there would be a provision in the agreement whereby the lease would be terminated and possession of the property would revert to the city and county immediately, if the property ceased to be used as a public facility of this nature."
We first direct your attention to KRS 45.360(7) which in part authorizes the State Finance Department to sell or otherwise dispose of all property of the state (including any interest in real property) which is not needed, or has become unsuitable for public use, or would be more suitable, in the public interest, for some other use, as determined by the Secretary of the Finance and Administration Cabinet. The determination of the Secretary shall be set forth in an order and shall be reached only after review of a written request by the agency desiring to dispose of the property. Other requirements are set forth in the statute. See also OAG 80-237, copy enclosed, at page two, and OAG 80-295, copy enclosed, at pages three and four. Thus, the Commonwealth may dispose of real property pursuant to the terms and provisions of KRS 45.360(7).
KRS 67.080(1)(b) provides that the fiscal court has the power to sell and convey any real estate belonging to the county. Furthermore, in the cases of
Burns v. Moore, 307 Ky. 167, 209 S.W.2d 735 (1948) and
Abernathy v. City of Irvine, Ky., 355 S.W.2d 159 (1962), the court said the power to sell includes the power to lease. While the fiscal court may lease real property not needed by the county for governmental purposes, it must use its good business judgment in entering into the lease. The lease must be considered as involving a public purpose and in the public interest particularly where the rental to be received does not approach a commercial rental basis. The fiscal court must carefully consider whether the lease is in the county's interest, especially as it relates to the length of the lease, and whether a legitimate exercise in private enterprise is involved. See OAG 82-60, copy enclosed, at pages two and three.
In connection with the provision that the lease would be terminated and possession of the land would revert to the city and county if the property ceased to be used for a public purpose, we direct your attention to OAG 71-374, copy enclosed, at page two. In that opinion we said in part that the county could insert a reverter clause in a deed of land that should it cease to be used for the purpose in question, particularly if it was donated, the land would revert it wes donated, the land would revert to the county. See also OAG 70-797, copy enclosed.
In OAG 82-41 and OAG 82-410, copies enclosed, we discussed a city's right to dispose of property which is in excess of its needs. KRS 82.081 and 82.082 authorize a city to sell surplus real property no longer needed for municipal purposes. A city's power to sell real property includes the power to lease it.
Abernathy, v. City of Irvine, Ky., 355 S.W.2d 159 (1962). The principles set forth earlier relative to the leasing of property by the county would also apply to the leasing of property by the city.
It would also appear that the contemplated use and disposition of the land in question by the city and county governments satisfy the rather broad provisions of KRS 45.360(7).
In view of the rather general and hypothetical fact situation presented, we can only conclude with some general principles pertaining to the disposition of real property by governmental entities. The Commonwealth may dispose of real property for the reasons set forth in and pursuant to the provisions of KRS 45.360(7). City and county governments have the authority to dispose of real property they no longer need and the power to sell includes the power to lease. In deciding upon the various elements and aspects of a leasing arrangement, local governments must use their good business judgment and consider the governmental unit's best interests.