Request By:
Mr. Michael B. Vincenti
Mr. Parker W. Eads
Wyatt, Tarrant & Combs
Citizens Plaza
Louisville, Kentucky 40202
Opinion
Opinion By: David L. Armstrong, Attorney General; Kevin M. Noland, General Counsel
On behalf of the Kentucky Center for the Arts Corporation ("KCAC"), you have requested an opinion of our office as to the following: Whether KCAC is an "agency" of the Commonwealth for purposes of KRS 44.070 through 44.160, inclusive (the "Board of Claims Act" ), which establishes a board of claims to hear actions for damages arising out of negligence on the part of the Commonwealth, any of its departments or agencies, and officers, agents and employees. You report that KCAC is currently evaluating its insurance coverage for the 1986-87 fiscal year, and whether the KCAC is within the Board of Claims Act jurisdiction is relevant to the KCAC's decisions regarding its insurance coverage.
First, an explanation of the Board of Claims Act may be in order. The Board of Claims Act authorizes the board of claims to compensate persons for damages sustained to either person or property, provided that no compensation shall be allowed, awarded or paid for pain or suffering. The Board of Claims Act provides that the jurisdiction of the board of claims is exclusive, and a single claim for the recovery of money or a single award of money shall not exceed fifty thousand dollars, exclusive of interest and costs. All awards and costs of operation assessed by the board of claims against other departments or agencies of the Commonwealth shall be paid upon warrants drawn by the Secretary of the Finance and Administration Cabinet (the "Finance Cabinet" ) upon the State Treasurer. It is stated in OAG 79-101 that KRS 44.070 "does not create a cause of action against the Commonwealth. Its effect is to waive the defense of sovereign immunity by providing a remedy for a particular character of claim."
The 1986 General Assembly enacted certain amendments to the Board of Claims Act which become effective July 15, 1986. An amendment to KRS 44.070 provides that a single claim for the recovery of money or a single award of money shall not exceed $100,000, exclusive of interest and costs, but that if a single act of negligence results in multiple claims, the total award may not exceed $250,000 to be equitably divided among the claimants. In no case may any claimant individually receive more than $100,000.
KCAC - BACKGROUND
As for KCAC, it was incorporated by an act of the 1980 Kentucky General Assembly (approved by the Governor on April 9, 1980, and now codified at KRS Chapter 153) for the purpose of promoting the growth and development of the arts, convention trade, tourism and the hotel industry within Jefferson County and the Commonwealth through the construction and operation of the kentucky Center for the Arts. The act authorized KCAC to supervise the construction of the Kentucky Center for the Arts in conjunction with the Finance Cabinet. Under the act, KCAC has the ongoing duty to: provide management functions to the Kentucky Center for the Arts; exercise control of exhibitions, performances and concessions in the Center; levy a surcharge on tickets for functions held within the Center; and, receive as a contribution toward the operating costs of the Center the proceeds of a 1% transient room tax imposed upon charges for the occupancy of rooms in motels, hotels and similar lodging facilities within the County. KCAC is also authorized to undertake other activities for the development of Louisville and Jefferson County as a convention, tourist and entertainment center, including: the presentation and promotion of arts activities and other events within the Center; the solicitation of arts-related conferences and conventions; and, participation with local hotels and convention bureaus in the development of tourist packages and the solicitation of non-arts related conferences and conventions featuring the facilities and programs of the Center. In furtherance of these purposes, the Act establishing KCAC grants it full corporate powers and also the power of eminent domain and the power to adopt administrative regulations pursuant to KRS Chapter 113 to govern the operation, maintenance and use of the Center. KCAC is empowered under the act to issue its own revenue bonds subject to procedures established by the Finance Cabinet. See generally KRS 153.420.
KCAC consists of eleven members representing metropolitan Louisville and Kentucky appointed by the Governor of the Commonwealth, who also designates one of the members as Chairman. The initial terms of the members of KCAC were staggered. Currently, members are appointed to four-year terms. KRS 153.410.
The act establishing KCAC provides that all of KCAC's revenues shall be used solely to defray the expenses of the Center, including payment of debt, the cost of management and operation of its facilities, the creation of an adequate reserve for repair, replacement, debt service and capital improvements, and the cost of insurance and promotional activities. An annual audit of the funds of KCAC is to be made by the State Auditor of Public Accounts and reported to the Governor. KRS 153.430(3).
The State Property and Buildings Commission (the "Commission") designated the Kentucky Center for the Arts as its Revenue Bond Project No. 27 and issued $29,350,000 of its revenue bonds to provide financing. The Finance Cabinet has entered into a Lease Agreement with the Commission (the "Lease" ) whereunder the Center has been leased from the Commission to the Finance Cabinet on a biennial basis with the current term of the Lease ending June 30, 1986. The Lease automatically renews for successive biennial periods ending on June 30 each even numbered year until the retirement of the revenue bonds unless the Finance Cabinet elects not to renew the Lease. The Lease requires the Finance Cabinet to seek legislative appropriations in amounts sufficient to permit the Finance Cabinet to make rental payments to the Commission in amounts sufficient to enable the Commission to pay principal, premium, if any, and interest on the revenue bonds during each biennial period for which the Lease is renewed.
DISCUSSION
In determining whether the Board of Claims Act applies to the KCAC, we refer to House Bill 310, which was passed by the 1986 General Assembly and which becomes effective July 15, 1986. HB 310 amended several sections of the Board of Claims Act. KRS 44.073(2), created by enactment of H.B. 310, provides:
"The board of claims shall have primary and exclusive jurisdiction over all negligence claims for the negligent performance of ministerial acts against the Commonwealth, any of its cabinets, departments, bureaus or agencies, or any officers, agents or employes thereof while acting within the scope of their employment by the Commonwealth, or any of its cabinets, departments, bureaus or agencies."
In determining whether the KCAC is an "agency" of the Commonwealth, as that term is used in KRS 44.073(2), it appears that the standard is provided by the
Court in Gnau v. Louisville and Jefferson Metropolitan Sewer District, Ky., 346 S.W.2d 755 (1961). In determining whether the Sewer District is an agency within the scope of the Board of Claims Act, the Court in Gnau stated at page 755:
"In referring to the Sewer District as an agency of the State it should not be implied that such District is a State agency as the term is employed in KRS 44.070 [Board of Claims Act] . The use of the phrase 'agency of the state' merely describes a public agency and technically does not mean an arm or branch of the central State Government. As is apparent from the above-quoted sections of the statute the waiver of immunity attaches only to those agencies which are under the direction and control of the central State government and are supported by monies which are disbursed by authority of the Commissioner of Finance out of the State treasury. " (Emphasis added).
Therefore, in determining whether the KCAC is within the scope of the Board of Claims Act, it must first be determined whether the KCAC is under the direction and control of the central State government. In consideration of the standard, it is noted that KCAC acts independently of local government and its control and direction come from members appointed by the Governor who has the power of removal. See KRS 153.410. The State Property and Buildings Commission owns the Center for the Arts and KCAC has been statutorily charged to manage it for the benefit of the Commonwealth as well as for the benefit of Louisville and Jefferson County. See KRS 153.420. KCAC is responsible to the Commission for the maintenance, operation and insurance of the Center for Arts. The Finance Cabinet currently makes payments adequate to pay the debt service on the revenue bonds of the Commission which financed the Center for the Arts. The General Assembly appropriates funds out of the General Fund to enable the Finance Cabinet to make the lease payments.
It is true that the Jefferson County Fiscal Court is authorized to levy a transient room tax for the benefit of the Center for the Arts, and KCAC also has certain contractual commitments to the City of Louisville arising out of the City's contribution of the parking garage for the Center for the Arts. However, this appears to be merely an example of cooperation between state and local government in which KCAC is functioning as an arm and branch of the Commonwealth. For example, even though KCAC receives revenues from Jefferson County through the transient room tax, both Louisville and Jefferson County are empowered to make appropriations to the University of Louisville, and the University of Louisville is an agency of the Commonwealth for the purposes of the Board of Claims Act. See
Rooks v. University of Louisville, Ky. App. 574 S.W.2d 923 (1978). In addition, like KCAC, the University of Louisville receives funds from private sources such as donations, gifts, grants and bequests.
Nor does it make any difference for purposes of the Board of Claims Act that KCAC is organized in corporate form. The Board of Trustees of the University of Louisville constitutes a "body corporate, with the usual corporate powers." KRS 164.830(1). The Board of Trustees of the University of Kentucky similarly constitutes a "body corporate . . . with the usual corporate powers" (see KRS 164.160) and the University of Kentucky is likewise an agency of the Commonwealth for purposes of the Board of Claims Act. See
University of Kentucky v. Guynn, Ky., 372 S.W.2d 414 (1963). Like KCAC, these institutions have a substantial degree of autonomy, but they are given specific public purposes to accomplish for the Commonwealth within a defined list of powers and duties. (See also the detailed discussion in OAG 71-347 relating to the Capital Plaza Authority).
The State Fair Board established by KRS 247.090 is also similar to KCAC for purposes of the applicability of the Board of Claims Act. The State Fair Board is clearly an agency of the Commonwealth under the Board of Claims Act.
Kentucky State Fair Board v. Nicklies, Ky., 361 S.W.2d 289 (1962). Although the State Fair Board, unlike KCAC, is enumerated in the list of departments, cabinets, and administrative bodies found at KRS 12.020, it is specifically stated therein that the list is not intended to be all-inclusive.
The above discussion leads one to the conclusion that KCAC is under the direction and control of the central State government. However, before reaching a conclusion as to whether KCAC is within the scope of the Board of Claims Act, we must consider, pursuant to the test enunciated in Gnau, supra, whether KCAC is supported by monies which are disbursed by authority of the Finance and Administration Cabinet out of the State treasury. Previously in this discussion it was noted that the Finance Cabinet, as the result of appropriations from the General Assembly, makes payment adequate to pay the debt service on the revenue bonds which finance the Center for the Arts. It is noted in the budget of the Commonwealth for the biennium 1986-88, enacted by the 1986 General Assembly, that an appropriation of $2,858,200 has been made for FY 1986-87, and $2,860,800 has been made for FY 1987-88 for debt service on the revenue bonds which finance the Center for the Arts. Additionally, the enacted 1986-88 budget provides $600,000 in each of the two fiscal years for "miscellaneous maintenance projects at the Center." See, "1986 General Assembly Statutory Final Enacted Budget Memorandum, FB 1986-88 Commonwealth Budget, " Appendix 2, page GO-39. The 1986-88 budget of the Commonwealth is enacted into law, effective July 15, 1986, and the $600,000 for each fiscal year appropriated therein for miscellaneous maintenance projects at the Center out of the state General Fund is particularly persuasive in reaching a conclusion that KACA is supported by General Fund monies disbursed by the Finance and Administration Cabinet Secretary pursuant to the enacted budget.
Finally, it is noted that in the "1986 General Assembly Statutory Final Enacted Budget Memorandum, FB 1986-88 Commonwealth Budget, " Appendix 2, page GO-39, it is stated:
"The General Assembly directs that the Kentucky Center for the Arts shall comply with the provisions of KRS Chapter 48."
KRS Chapter 48 relates to budgeting requirements imposed upon "budget units" of the Commonwealth. KRS Chapter 48 requires that the budget units engage in continuous financial planning, and it imposes requirements relating to pre-session preparation of requests and to the branch budget recommendations. This mandate (which becomes effective July 15, 1986) that KCAC must comply with the provisions of KRS Chapter 48 is important for the conclusion that KCAC is an agency of the central State government and is supported financially out of the State General Fund.
In conclusion, KCAC, which was created to manage the Kentucky Center for the Arts as an agency of the Commonwealth, is an agency of the Commonwealth for purposes of the Board of Claims Act.