Request By:
Mr. Glycon L. Ovey, Jr.
Attorney at Law
P.O. Box 731 - Dale Avenue
Eddyville, Kentucky 42038
Opinion
Opinion By: David L. Armstrong, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
The Lyon County Riverport Authority purchased, about two years ago, the Lyon County Industrial Park from the Kell Industrial Foundation, Inc. The port now desires to sell parcels of the Industrial Park to industrial clients.
The question is this:
"Is the port required to advertise to the general public its intent to sell said property and request bids for the purchase of said property under Kentucky law?"
A riverport is a governmental agency, a public corporation existing for a public purpose. See OAG 77-16, published, Banks-Baldwin, 2-353 and 2-354. See also KRS 65.510, 65.520 and 65.530, relating to duties and powers of a riverport authority.
KRS 65.530(1) specifically provides that a riverport authority has the authority to "attract industrial or commercial operations to the property held as industrial parks." (Emphasis added).
We said in OAG 80-71, published, Banks-Baldwin, that, in the area of purchases, a riverport authority does not come under KRS 424.260. However, we wrote that a riverport authority is a local public agency under the terms of KRS 45A.345(8). As such it could, under KRS 45A.343, adopt the provisions of KRS 45A.345 through 45A.460 of the Model Procurement Code. However, those sections, even if adopted by the riverport authority, cover purchase transactions of the authority, except for the sale or otherwise disposal of surplus or excess personal property not needed by the governmental agency. See KRS 45A.425, requiring bidding in some situations, as amended in 1984. Thus KRS Chapter 45A, in the main, relates to purchases, not sales.
KRS 65.530(4) provides in part:
"The authority may lease, sell, convey, or assign its interest in land owned, optioned, or otherwise held by it to any person for the purpose of constructing and/or operating any industrial or commercial facility or for the purpose of acting as the authority's agent or licensee in effectively carrying out any of its powers and duties." (Emphasis added).
You have told us that the riverport authority intends to sell outright, i.e., to convey the fee simple title to these tracts to industrial clients who will construct and operate industrial facilities on such acquired properties. The only condition will simply be that, under KRS 65.530(4), the property sold must be used to construct and operate an industrial facility.
We have read the recent holding of the Supreme Court of Kentucky in E.M. Bailey Distrib. Co. v. Conagra, Inc., and the Lyon County Riverport Authority (on review of the Court of Appeals, 82-CA-1443-MR, 1984). In that case "the port authority leased to Conagra, Inc., grain loading facilities owned by the authority in Lyon County." (Emphasis added). The lease was privately entered into without bidding procedure. The agreement was for two years with an automatic renewal for three consecutive one-year periods. The agreement requires the port authority to construct and install certain facilities and equipment and must keep the facility in good repair. The authority must pay for utilities furnished to the grain loading facilities. The authority must also keep the channel providing access to the facility in safe and navigable condition. In return for the various benefits, the port authority receives a guaranteed annual rent, the minimum being $10,000.
The Supreme Court in the Bailey case held that the port authority, as a public entity, violated § 164 of the Kentucky Constitution by not advertising for competitive bids "for the privileged use of the public facility." (Emphasis added).
It is our opinion, under the facts submitted, that § 164 of the Constitution, requiring competitive bidding for the granting of any franchise or privilege, has no application to your situation, since the "use of public facilities" , in the sense envisioned in § 164, will not be involved. Here the title to these properties will not be retained by the port authority. The title will be conveyed to the industrial grantee, subject only to its use as an industrial facility. We do not believe that statutory condition converts the situation into a case for applying § 164.
A franchise is an agreement between the granting authority and the holder. However, the franchise involves the use of highways, streets, or other public facilities. City of Owensboro v. Top Vision Cable Co. of Ky., Ky., 487 S.W.2d 283 (1972) 287. It is essential that a local governmental unit maintain control of its own facilities. See also
City of Nicholasville v. Blue Grass R.E. Coop. Corp., Ky., 514 S.W.2d 414 (1974) 416.
Finally, the precise terms of the proposed sale transactions will be left, within the framework of KRS 65.530, to the sound business judgment of the port authority, including a sale price no less than the fair market value of the land, as determined by competent appraisers.