Request By:
Mr. Terry Sellars
Commissioner of Law
Lexington-Fayette Urban
County Government
200 East Main Street
Lexington, Kentucky 40507
Opinion
Opinion By: David L. Armstrong, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
On behalf of the Lexington-Fayette Urban County Government, you request the opinion of this office on the following questions:
"1. Whether a public library, organized pursuant to KRS 173.300 through KRS 173.400 is a 'local governmental unit or political subdivision' within the meaning of KRS 66.480; and
"2. Whether under KRS 66.480(1)(b) the governing body of a municipality, county, school district, or other local governmental unit or political subdivision may invest and reinvest money subject to its control and jurisdiction in interest bearing deposits in 'national' banks that are not chartered in Kentucky."
KRS 66.480(1) provides in part that "The governing body of a municipality, county, school district (provided that its action is approved by the State Board of Education), or other local governmental unit or political subdivision, may invest and reinvest money subject to its control and jurisdiction in: . . ." There follows in KRS 66.480 various kinds of specifically designated authorized investments.
In the group of statutes, KRS 173.300 to 173.410, an independent library may be created by any county or city (governing body) , except a city of the first class and a county containing a city of the first class. See KRS 173.310. Thus libraries established under these statutes are libraries created by counties (except Jefferson) and by cities from the second to sixth class, and regional libraries created by the legislative bodies of counties. See KRS 173.320. Such libraries are not separate taxing districts under § § 157 and 158 of the Kentucky Constitution.
Under KRS 173.300(1), the term "governmental unit" embraces any county or city, except a city of the first class and a county containing a first class city. Thus a library created by a city or county under KRS 173.300 to 173.410 is not a governmental unit by the above definition. The residual question is whether such library is a political subdivision. A "political subdivision" is not defined in KRS Chapter 446. The term is not defined in KRS 66.480. We have found no case in which the court has characterized such a library as a "political subdivision" . In
Board of Trustees v. City of Newport, 300 Ky. 125, 187 S.W.2d 806 (1945), the court characterized a library created under subject statutes as a public educational institution. But that fell short of the library's being a political subdivision. Such libraries have to be funded by the governmental unit creating them, although the Board of Trustees of such a library is called a corporate body. See KRS 173.360 as to appropriations and KRS 173.350 as relates to powers of the Board of Trustees. Nowhere in KRS Chapter 173 do we find the term political subdivision applied to such library. While a Board of Trustees has a degree of independence in carrying out the library function, it is primarily a creature or agent of the political subdivision which created the library; and its existence depends upon the financing by the creator. In
City of Owensboro v. Board of Trustees, 210 Ky. 482, 276 S.W. 143 (1925) 147, the Court called the city created library's Board of Trustees a public corporation charged with the performance of duties to the public; "and is essentially a part of the municipal government." (Emphasis added). Thus such a library as you mention is a part of a political subdivision (city or county which creates it), but standing alone it is not a political subdivision. Counties and cities are local governmental units or political subdivisions.
City of Lexington v. Hager, Ky., 337 S.W.2d 27 (1960) 28.
Your second question is whether under KRS 66.480(1)(b) the governing body of a municipality, county, school district (if approved by State Board of Education), or other local governmental unit or political subdivision may invest and reinvest money subject to its control and jurisdiction in interest bearing deposits in "national" banks that are not chartered in Kentucky.
KRS 66.480(1)(d) restricts the investment and reinvestment of such money to national banks chartered in Kentucky. That subsection reads in part "Interest-bearing deposits in national or state banks chartered in Kentucky . . ." (Emphasis added). The word arrangement and especially the words "chartered in Kentucky" coming after the phrase "national or state banks" suggest only that the national bank must be chartered in Kentucky to qualify. That interpretation is based upon the literal meaning of the statute.
Bailey v. Reeves, Ky., 662 S.W.2d 832 (1984) 834.
However, national banks are not chartered by the state of Kentucky. KRS 287.010(1) provides that the word "bank" means any bank which is now or may hereafter be organized under the laws of this state or a combined bank and trust company. Under KRS 287.010(2) the term "national bank" or "national bank association" means a bank created by Congress and organized pursuant to provisions of federal law. The two definitions above distinguish clearly between national banks and state chartered banks. The incorporation section of the Secretary of State's Office confirms that there are no Kentucky chartered national banks of record. There is no section in KRS Chapter 287 suggesting such a double charter. Thus the term "national bank chartered in Kentucky" is a misnomer. Since the law will not compel the doing of a vain thing, our construction is that such governmental units mentioned in KRS 66.480(1) may invest or reinvest their money in interest-being deposits of national banks or in state banks chartered in Kentucky, as directed in KRS 66.480(1)(d). See
Kentucky Title Co. v. Hail, 219 Ky. 256, 292 S.W. 817 (1927), observing that the law will not force any one to do a vain and useless thing. Although literal meaning of a statute is to be observed, it should not be used where it leads to an absurd or wholly unreasonable conclusion. See
Department of Revenue v. Greyhound Corporation, Ky., 321 S.W.2d 60 (1959). As a parallelism in the investment area, the State Investment Commission, under KRS 42.500(9)(c) permits the investment of state money in collateralized certificates of deposit, or other interest-bearing accounts in depository institutions chartered by this state or by the United States, except for shares in mutual savings banks.
CONCLUSIONS
(1) A public library created pursuant to KRS 173.300 through 173.410 is not a local governmental unit nor a political subdivision within the meaning of KRS 66.480 (investment of local public funds).
(2) Under KRS 66.480(1)(d), governmental units mentioned in subsection (1) may invest and reinvest their money in interest-bearing deposits in national banks.