Mississippi Advisory Opinions June 13, 2012: AGO 2012-00261 (June 13, 2012)

Advisory Opinion Text

Bryan Dye, Esq.

Attorney

City of Olive Branch

9200 Pigeon Roost

Olive Branch, MS 38654

Re: Authority to transfer sewer facilities pursuant to Mississippi Code Annotated Section 21-27-33

Dear Mr. Dye:

Attorney General Jim Hood has received your request for an opinion and has assigned it to me for research and response. Issues Presented

You inquire as to whether a municipality may transfer sewer-related real and personal property to a utility authority, pursuant to Mississippi Code Annotated Section 21-27-33 . Specifically, you provide, in part, the following:

The City of Olive Branch owns certain waste water treatment facilities and other sewer service facilities located within the municipal limits. The facilities include easement rights, ownership of treatment plant real property, and ownership of related infrastructure including pipe, pumps, and other sewer related equipment. Located within DeSoto County is the DeSoto County Regional Utility Authority (DCRUA), a governing body created pursuant to local and private legislation for the purpose of collecting and treating waste water within the county. The City of Olive Branch and other DeSoto County municipalities are members of DCRUA. The City of Olive Branch and DCRUA have discussed the transfer of the aforementioned real and personal property from the city to DCRUA. The city pays annual fees to DCRUA based on the volume of waste water treated. Fees collected by DCRUA from its member entities, including the City of Olive Branch, offset operational expense and fund debt service payments related to DCRUA facilities. For every $100, 000 in additional annual expense to DCRUA, the rate paid by member entities would increase approximately $0.05 per 1000/gal of waste water treated. An increase in the DCRUA rate of $0.05 per 1000/gal would equate to approximately $60, 000.00 in additional expense to the city of Olive Branch based on the city's current flow data. Accordingly, the city of Olive Branch has a legitimate interest in reducing expense to DCRUA since increased DCRUA expense can result in an increase in the rate paid by Olive Branch. Recognizing the relationship between DCRUA expense and the rate charged to the city, the board of aldermen has asked that I research the city's authority to convey the aforementioned real and personal property to DCRUA for no compensation. I am aware that Miss. Code Ann. Section 21-27-33 provides a means to dispose of portions of a municipal utility system on such terms as will best promote the public interest. I am further mindful of opinions issued to Helmert (MS AG Op., Helmert (October 28, 2005)) stating that, while fair market value is not required, that the terms and conditions for a transfer must promote the public interest; and the opinion to Perkins (MS AG Op., Perkins (November 1, 2002)) stating that the general disposition of municipal property under the statute (Miss. Code Ann. Section 21-17-1) is inapplicable to a disposition of utility property under Miss. Code Ann. Section 21-27-33 .

Given the foregoing, I would appreciate your opinion as to whether the city may transfer certain sewer-related real and personal property to DCRUA, a governing body organized and existing under the laws of the State of Mississippi, for no compensation pursuant to Miss. Code Ann. Section 21-27-33, assuming the board finds that such transfer would best promote the public interest.

Response

Yes, the municipality may transfer the subject sewer-related property to DCRUA, provided that the municipality complies with the requirements of Mississippi Code Annotated Section 21-27-33 .

Applicable Law and Discussion

Section 21-27-33 of the Mississippi Code governs the sale or disposition of public utility systems and reads as follows:

Municipalities of the state are hereby empowered and authorized, if they so desire, to sell, lease, or otherwise dispose of any or all electric, water, gas or other municipally-owned public utility systems or properties on such terms and conditions, and with such safeguards as will best promote and protect the public interest . Said municipal corporations are empowered and authorized to transfer title to said public utility properties by warranty deed, bill of sale, contract, or lease, in the manner provided by law. However, notice of intention to make such sale, lease, or disposition of any such system, setting out the price and other general terms and conditions of such proposed sale, lease, or disposition shall be given by publication, once a week for three consecutive weeks in a legal newspaper published in such municipality, and if no such newspaper be published in said municipality, then in some newspaper having a general circulation in such municipality. After ten days from the last publication of such notice, the system may be disposed of, unless within ten days after the last publication of such notice a petition signed by not less than twenty per centum of the qualified voters of such municipality be filed, objecting to and protesting against such sale, lease, or disposition, in which event the same shall not be made unless submitted to a special election ordered for the purpose of determining whether a majority of those voting in such election shall vote for or against such sale, lease, or other disposition. Such election shall be ordered to be held not less than forty days after the date of the last notice of the proposed sale, lease or disposition. Notice of such election, stating the purpose of election, shall be published once each week for three consecutive weeks next preceding the time set for holding said election in such newspaper as herein provided. The laws governing special municipal elections shall govern the ordering and conduct of said election. The ballots provided shall have plainly written or printed thereon the words "shall the waterworks, electric, or gas (as the case may be) system be sold, leased, or disposed of (as the case may be)" and below said words shall be suitably placed on separate lines, the words "yes" and "no" so that the voter may indicate the way he desires to vote on the question submitted. If a majority of those voting in said election shall vote in favor of such sale, lease, or disposition, then the proper officer of the municipality may proceed to sell, lease or dispose of such system in accordance with the terms and conditions set out in the notice of proposed intention to sell, lease or dispose of such system, as herein provided. If such election is determined against such sale, lease or disposition of such system, then such system shall not be sold, leased or disposed of, but shall remain the property of the municipality.

(Emphasis ours)

It is clear that a municipality has the authority to dispose of public utility property owned by the municipality on such terms as will best promote and protect the public interest, in accordance with its authority under Section 21-27-33 . We have previously opined that Section 21-27-33 controls over the general statute concerning disposal of municipal property found at Section 21-17-1 . MS AG Op., Perkins (November 1, 2002).

We are of the opinion that the authority granted in Section 21-27-33 does not authorize an outright donation of real and personal property. Section 21-17-5 (2) of the Mississippi Code limits a municipality's authority to grant donations and reads as follows:

Unless such actions are specifically authorized by another statute or law of the State of Mississippi, this section shall not authorize the governing authorities of municipalities to:

(g) grant any donation

In addition, Article 4, Section 66 of the Mississippi Constitution (1890) limits a municipality's authority to grant donations and reads as follows:

No law granting a donation or gratuity in favor of any person or object shall be enacted except by the concurrence of two-thirds of the members elect of each branch of the legislature, nor by any vote for a sectarian purpose or use.

We have previously opined that fair market value is not required for a municipality to convey utility property in accordance with Section 21-27-33, but the terms and conditions must promote and protect the public interest. MS AG Op., Helmert (Oct. 28, 2005). The language contained in Section 21-27-33 contemplates consideration in some form, as it references "... terms and conditions ... as will best promote and protect the public interest". We think such language requires a finding by the municipality that the some form of a public benefit will be received by the municipality as a result of such disposal. Thus, provided that the municipality ensures that the terms and conditions of the transfer will promote and protect the public interest and it has complied with the provisions of Section 21-27-33, it may make such conveyance to DCRUA.

While it appears, based upon your factual scenario, that the municipality will receive some public benefit as a result of such transfer, whether the municipality will, in fact, do so is a factual determination to be made by the governing authorities.

If our office may be of further assistance, please advise.

Sincerely,

Jim Hood, Attorney General.

Leigh Triche Janous, Special Assistant Attorney General.