Request By:
Mr. David L. Gittleman
General Counsel
Transit Authority of River City
635 West Main Street
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
You raise a question concerning an interest rate affecting anticipation notes of the Transit Authority of River City (TARC, an instrumentality of the City of Louisville and Jefferson County).
Your letter reads:
"The Transit Authority of River City is preparing to issue $5,650,000.00 of Revenue (Federal UMTA Operating Grant and Louisville and Jefferson County Mass Transit Trust Fund and other revenue) Anticipation Notes, Series 1983, at an annual interest rate of 6.898 per cent. The notes are more specifically described in the proposed resolution of the Board of Directors of TARC, a copy of which is attached.
"Bond counsel, Kutak, Rock and Hie of Omaha, are concerned that the interest rate cannot exceed 6 1/2% as limited by KRS 58.170, and they reason that as pertains to this note issue, the relief provided by KRS 58.430 does not apply because of OAG 80-571. They reason that the language of OAG 80-571 applies and, therefore, this issue is not covered by KRS 58.430 and not relieved of the interest rate limit of KRS 58.170.
"I attach copies of correspondence from A. Wallace Grafton, Jr. and Attorney General Beshear, which I hope will be of assistance.
"I request an opinion letter stating that the $5,650,000.00 Revenue Anticipation Notes of the Transit Authority of River City described in the resolutions of its Board (or Executive Committee of May, 1983, are within, and subject to the relief of KRS 58.430 and, therefore, not subject to the interest limitations of KRS 58.170."
KRS 58.170 reads:
"(1) As used in this section, the term 'revenue bonds' shall mean bonds, notes or other obligations for the payment of money issued by the state, any county, municipality, or other public district or authority, except a school district, or any corporation or other corporate body acting as an agency or instrumentality of such unit, and payable from a special fund into which some or all of the revenues of a public project have been or will be paid. The term 'assessment bonds' shall mean bonds, notes or other obligations for the payment of money issued by any one or more of the same issuing authorities payable from a special fund into which assessments levied upon properties for benefits conferred have been or will be paid in accordance with law. 'Mortgage bonds' are revenue bonds which are secured by a mortgage deed of trust.
"(2) Any assessment, revenue or mortgage bonds hereafter authorized to be issued by the state, any county, municipality, or other public district or authority, except a school district, or any corporation or other corporate body acting as an agency or instrumentality of such unit, whether created by statute or organized under the provisions of the nonprofit corporation laws, under the provisions of any law heretofore enacted or hereafter enacted without specific provisions for exemption from the terms of this section, may, upon authorization by the governing body of such unit by specific reference to this section in the resolution or ordinance authorizing the bonds, bear interest, or be executed with attached coupons representing interest thereon, not exceeding six and one-half percent (6 1/2%) per annum, calculated upon the sale price of the bonds.
"(3) Section (2) of this section shall not be deemed to repeal any other statute specifying a limit in the maximum interest rate for any municipal bond, but shall be construed, except in the case of school districts, as permitting an alternate maximum rate if specified in the resolution or ordinance authorizing the bonds. If no specification of an alternate maximum rate is made in such resolution or ordinance as specified herein, the maximum rate specified in the statute under which the bonds are issued shall apply."
KRS 58.430 reads:
"From and after March 9, 1970, notwith-standing any other acts or laws of other import which may presently prevail, wherever the same may be found in the Kentucky Revised Statutes as of such date, it shall be lawful for public bodies to establish, agree and bind themselves to pay interest upon their public obligations at any rate or rates which may be determined upon by the governing bodies of the respective public bodies which are the issuers thereof; but subject, nevertheless, to such approvals as may now or hereafter be applicable thereto according to law."
You have indicated that the Transit Authority of River City was created jointly by the City of Louisville and Jefferson County pursuant to KRS Chapter 96A. Thus it is an agency and instrumentality of the City of Louisville and Jefferson County. See KRS 96A.020, 96A.090, 96A.120; and
Youtsey v. County Debt Commission, Ky., 501 S.W.2d 266 (1973).
You have also indicated that the proposed $5,650,000 will ultimately go toward reducing the Transit Authority's operating deficit. The anticipated revenue coming to TARC consists of nearly five million dollars ($5,000,000) from a federal grant and around $750,000 from an occupational or license tax of the City of Louisville and Jefferson County.
In OAG 80-571, published, Banks-Baldwin, it was our opinion that KRS 58.430 did not affect the maximum interest rate of six percent (6%), as stated in KRS 160.540, where a board of education borrows money in anticipation of school taxes. We pointed out in OAG 80-571 that KRS 58.410, et seq., envisioned only public obligations on public projects. We pointed out that KRS Chapter 58 is centrally and only concerned with the development of "public projects" through revenue bonds. Thus we said in that opinion that "These repeated references in the text of the law to be public obligations of a public body in connection with a "public project" lead to only one conclusion, in our opinion, which is that the General Assembly desired to give latitude to public bodies to borrow money for public projects without the inhibitions produced by a low ceiling on interest rates that could be paid." (Emphasis added). We held that KRS 160.540 has nothing to do with the financing of public projects. We said that KRS 160.540 is simply a statutory vehicle authorizing a school district to borrow money on the board's credit until the revenues to be produced by taxes will be realized.
KRS 58.170 involves a restricted interest rate on bonds or notes issued by a governmental agency. KRS 58.170 is inevitably integrated with the definition of "public project" , as defined in KRS 58.010(1). While your proposed note will be a grant anticipation note, no "public project" , as defined in KRS 58.010(1), is involved. The ultimate expenditure will involve operational costs only, not capital costs. Thus it appears that KRS 58.170, 58.155, and 58.430 do not apply to TARC in this situation, standing alone. However, in view of the specific provision in KRS 96A.120(3) that a mass transit authority may issue revenue bonds or anticipation notes, KRS 58.170 is made expressly applicable to this situation. KRS 96A.120(2) provides in part that the mass transit authority may use the procedures set forth in KRS 58.010 to 58.170 and "subject to any interest rate limitations which may be applicable thereto as provided by law." (Emphasis added). In this total context, and under the doctrine of in pari materia, KRS 58.430 applies to your situation. The variation of KRS Chapter 58 is simply that because of the wide range of financing suggested in KRS 96A.120, the existence of a "public project" in the technical statutory sense is not required for a mass transit authority. Statutes in pari materia should be construed together and, if possible, should be construed so as to harmonize and give effect to provisions of each act.
Economy Optical Co. v. Kentucky Bd. of Optometric Examiners, Ky., 310 S.W.2d 783 (1958).
CONCLUSION
It is our opinion that KRS 58.430 can be applied in this situation in view of the broad range of financing afforded mass transit authorities in KRS 96A.120.
Judge Cullen, in Youtsey v. County Debt Commission, Ky., 501 S.W.2d 266 (1973), points out the underlying necessity for financing operational costs as well as capital or public projects for mass transit authorities. To that extent, the application of KRS 58.430 (any necessary and competitive interest rate) to mass transit authorities is an exception under the "public project" concept.
As between KRS 58.170 and KRS 96A.120, we believe the courts would hold that the specific (KRS 96A.120 relates exclusively to mass transit authorities) would govern over the general, i.e., over KRS 58.170. See
Heady v. Commonwealth, Ky., 597 S.W.2d 613 (1980) 614, and cases cited therein;
Bowman v. Texas Educational Foundation, Inc., (U.S.C.A. -5, 1972) 454 F.2d 1097 at 1101;
American Medical Ass'n v. Mathews (U.S. Dist. Ct. N.D. Ill., 1977) 429 F.Supp. 1179, 1196.
Courts have held that in determining legislative intent, the court's duty is to favor an interpretation which would favor the public and the manifest purpose of the legislation. See
National Petroleum Refiners Association v. Federal Trade Commission (U.S.C.A. - D.C. Circ., 1973) 482 F.2d 672, 689, 691;
Rouse v. Johnson, 234 Ky. 473, 28 S.W.2d 745 (1930); and
City of Covington v. Sohio Petroleum Co., Ky., 279 S.W.2d 746 (1955).
Finally, we find that the language of KRS 96A.020(1) buttresses our position. That subsection reads in part:
"An authority shall be authorized to promote and develop mass transportation in its transit area and adjoining areas, including acquisition, operation and extension of existing mass transit systems; and an authority shall have and may exercise such powers as may be necessary or desirable to carry out such purposes." (Emphasis added).
There is a long line of cases holding that a political subdivision (or its agent or instrumentality) has such authority expressly delegated to it or such essential power as may reasonably be necessary to execute express powers or discharge duties devolved upon it.