Request By:
Mr. Robert E. Spillman
Executive Director
School Facility Construction Commission
322 Capitol Annex
Frankfort, Kentucky 40601
Opinion
Opinion By: David L. Armstrong, Attorney General; Nathan Goldman, Assistant Attorney General
In your letter to the Attorney General you ask several questions concerning the Kentucky School Facilities Construction Commission Act, KRS 157.611 through 157.640. The Act creates the School Facility Construction Commission (hereafter, the Commission) whose purpose is "to help local districts meet the school construction needs of the state in a manner which will ensure an equitable distribution of funds based on unmet need." KRS 157.611(1). We will address your questions one-by-one.
(1) "Can the Kentucky School Facilities Construction Commission implement the funding program delegated to it under the act by utilizing local issuing agencies such as cities and counties acting in accordance with the provisions of KRS 162.120, et seq. as opposed to the Commission acting as an issuing agency for school building revenue bonds?"
KRS 157.611(2) and KRS 157.625 authorize the Commission to issue bonds in the name of the Commission for the construction of school buildings. KRS 162.120 through 162.300 authorizes cities and counties to issue bonds in their names for the construction of school buildings. Your question is whether the Commission has the authority to decide which mechanism shall be used for a particular district.
In
Fyfe v. Hardin County Board of Education, 305 Ky. 589, 205 S.W.2d 165 (1947) the Court held that cities and counties must issue bonds pursuant to KRS 162.120, et seq. when requested to by the board of education. "The county has no choice in the matter and is simply a conduit through which the board of education secures a loan and a building." 205 S.W.2d at 167, quoting
Franklin County v. Franklin County Board of Education, 267 Ky. 554, 102 S.W.2d 1024, 1025.
KRS 157.611(3) states: "Nothing in KRS 157.611 to 157.640 shall prohibit a school district from issuing bonds in accordance with KRS Chapter 162." Thus, the Act envisions two alternative methods for financing school building construction - the Act or KRS Chapter 162. Logically, if there are two alternatives, then one may be chosen and the other excluded. The question you raise is who may choose - may the local board of education decide which alternative to follow or may the Commission make that choice.
We can find no authority in the Act that would give the Commission such unilateral power. Clearly, the Commission may decide that its issuance of bonds would not be the most expeditious choice and may recommend that the local district go tod the city or county. However, we cannot say that the Commission can require the local district to utilize that method or that the local district must go to the Commission first.
(2) "Can the Kentucky School Facilities Construction Commission enter into participation agreements with local school districts providing for the payment of debt service on bonds issued by local issuing agencies without the necessity of taking title and leasing school projects to local districts?"
KRS 157.611(2) states in part:
"The Commission is empowered to act on behalf of school districts to issue bonds in the name of the Commission and to enter into lease agreements with local boards of education to finance construction of new facilities or major renovation of existing school facilities. The commission is also empowered to enter into agreements which may provide for a percentage discount, on a biennially renewable basis, of annual lease agreements due the commission for those districts which participate."
KRS 157.615(7) defines "percentage discounts" as "the degree to which the commission will participate in meeting the bond and interest redemption schedule required to amortize bonds issued by the commission on behalf of a local school district." KRS 157.622(1)(c) states:
"Each eligible district which has otherwise complied with the provisions of this Act shall be offered sufficient funding to finance construction of the portion of its unmet need computed by opplying the ratio determined in subsection (1)(b) of this section to the total unmet need for the district."
In our opinion, the Commission may provide a percentage discount to those districts for which it has issued its bonds or may provide an allocation based on the formula of KRS 157.662. How the allocation is to be used is a matter of discretion with the parties involved. Thus, we believe that the Commission and the local district may enter into such participation agreements as you have described in your letter. Furthermore, since the situation you describe does not involve the issuance of bonds by the Commission, there is no statutory requirement that the Commission take title to the particular school project.
(3) "Can the Kentucky School Facilities Construction Commission elect to sell its bonds or the bonds of local issuing agencies issued on behalf of eligible school districts to which the Commission has made a commitment on a negotiated basis without the necessity for a publicly advertised, competitive sale under the provisions of KRS 157.630?"
KRS 157.630 states, in part: "Bonds of the commission shall be sold in such form and in such manner as the commission deems appropriate in accordance with prevailing market conditions."
Similar language has been interpreted in
Eagle v. City of Corbin, 275 Ky. 808, 122 S.W.2d 798 (1938) and, most recently, in
Haney v. City of Somerset, Ky., 530 S.W.2d 377 (1975), to require a publicly advertised competitive sale of bonds unless there is a clear statutory enactment that would permit the sale of bonds at a private, negotiated sale. No such clear enactment exists in KRS 157.611-640 or elsewhere. Thus, it is our opinion that the Commission may sell its bonds only at a publicly advertised competitive sale.
(4) "Can the Kentucky School Facilities Construction Commission utilize a composite bond issue to provide funding for multiple school districts in one bond issue? "
KRS 157.625(1) states, in part:
"Bonds of the commission shall be issued in the name of the commission . . . and shall additionally be identified by the name of the bard of education executing the lease. "
This provision implies that each bond issue will be for a single district. However, KRS 446.020(1) states, in part: "A word importing the singular number only may extend and be applied to several persons or things, as well as to one person or thing. . . ." Thus, in our opinion, the Commission may include more than one district in a bond issue. Each district should be identified separately in the issue, e.g., school building revenue bonds - Blackacre County Board of Education and Whiteacre County Board of Education.