Request By:
Harold Wayne Newton, Esq.
Hancock County Attorney
Third Floor, Administration Building
Hawesville, Kentucky 42348
Opinion
Opinion By: Steven L. Beshear, Attorney General; Thomas R. Emerson, Assistant Attorney General
This is in reply to your letter raising questions concerning proposals for water service in the county.
The East Daviess County Water Association, a nonprofit corporation initially formed to provide water service in eastern Daviess County, has recently begun to run water lines into parts of Hancock County and to provide water service to some Hancock County residents. Money for these lines has come from federal loans and grants to the water association and from contributions from the budget of Hancock County. Once the water lines are constructed the water association owns the lines, receives all income from the sale of water and has the responsibility of maintaining the lines. While the fiscal court has been budgeting and expending increased funds in the last few years for the construction of these water lines, only a few additional miles of pipe are installed each year.
It was recently proposed that the fiscal court borrow approximately $423,000 and either transfer the money to the water association for the construction of new water lines in Hancock County or construct the water lines itself and then transfer them to the water association. The $423,000 would be repaid by the county over a three to five year period by an annual budget appropriation set up to service the debt. The income derived from the sale of water would be kept by the water association which would be obligated to furnish the water, maintain the lines and do everything else necessary to operate the system. The water association would pay the county a small monthly fee per customer over a period of forty years in an attempt to pay back some of the money furnished by the county.
You raise the following questions concerning the proposed undertaking:
"Can the Fiscal Court of Hancock County legally borrow the sum of $423,000.00 for this purpose?
If so, can the Fiscal Court thereafter appropriate, from its annual budget, over a three to five year period, a sufficient sum of money to service the debt and interest?
If so, can the County transfer the borrowed money to the East Daviess County Water Association for the construction of the proposed water lines, or must the County actually construct the lines?
Can the County relinquish to the Association ownership and/or control of the water lines?
If the County, through its Fiscal Court, cannot legally do these things, can they be done through a presently existing public improvement corporation?"
If the fiscal court is to legally undertake the course of action proposed in your letter, specific legislative authority to do so must be found. In Fiscal
Court, Etc. v. City of Louisville, Ky., 559 S.W.2d 478 (1977), the Court said that the General Assembly, if it is to constitutionally vest powers of government in counties, through fiscal courts, must do so by statutes expressly delegating such powers. At page 482 of its opinion, the Court said:
"The metallic thread which history and tradition weave through the warp and woof of our Constitution is that while the General Assembly may grant governmental powers to counties it must do so with the precision of a rifle shot and not with the casualness of a shotgun blast. The thoughtful, purposeful and deliberate delegation of a known power is required of the General Assembly. . . ."
KRS 67.083(3)(r) provides in part that a fiscal court may enact ordinances, issue regulations, levy taxes, issue bonds, appropriate funds and employ personnel in connection with providing water and sewage and garbage disposal service. The statute refers to functions to be performed by the county through its fiscal court, direct operations of county government, and not the expenditure of funds in support of the activities of a water association, a nonprofit corporation not associated with and not under the control of county government. Thus, in our opinion the fiscal court lacks the authority to simply donate funds to a water association for the construction of a water distribution system to be owned and operated by a nonprofit corporation not associated with county government. See OAG 79-129, copy enclosed.
Another obstacle in the way of the proposed project is Section 179 of the Kentucky Constitution which provides in part that the General Assembly shall not authorize any county to appropriate money for, or to loan its credit to, any corporation, association or individual, except for the purposes of constructing or maintaining bridges, turnpike roads or gravel roads. Since the water association appears to be a nonprofit corporation organized and existing pursuant to the terms and provisions of KRS 273.161 to 273.390, it cannot be the recipient of an appropriation or loan from a county fiscal court. See OAG 81-381 and OAG 82-30, copies of which are enclosed.
Even if the county itself through the fiscal court constructed the water distribution system it could not turn around and simply give away the system to the water association. In OAG 83-37, copy enclosed, we said in part that a fiscal court cannot subsidize a private corporate hospital by selling the county's hospital physical plant to the hospital for no consideration. The county cannot legally transfer title to a water distribution system, constructed with county funds, to a nonprofit corporation without receiving consideration (its fair market value) .
Thus, in summary, there is no statutory authority for a fiscal court to appropriate money to and on behalf of a nonprofit corporation which is not associated with and not under the control of county government for the construction of a water distribution system in the county. Such an appropriation is prohibited by Section 179 of the Kentucky Constitution. If the county constructed such a water distribution system it could not simply give the system away but would have to receive fair market value for a transfer of ownership. A water association organized and functioning pursuant to KRS 273.161 to 273.390 has in part the power to make contracts and incur liabilities, borrow money at such rates of interest as the corporation may determine, issue its notes, bonds, and other obligations, and secure any of its obligations by mortgage or pledge of all or any of its property, franchises and income. KRS 273.171(8).