Commissioner of Transportation
The Department of Transportation may enter into transportation construction contracts with all or a portion of the financial backing for the contracts coming from a contractual promise from the State Road and Tollway Authority to borrow and provide money to DOT as and when needed to expend on projects that are the subjects of the construction contracts.
In the context of accelerating work on the Governor’s Road Improvement Program (“GRIP”), you have asked whether it is legally possible under Georgia law for the Department of Transportation (hereinafter “DOT” or “Department”) to enter into transportation construction contracts with all or a portion of the financial backing for the contracts coming from a contractual promise from the State Road and Tollway Authority (hereinafter “SRTA” or “Authority”) to borrow and provide money to DOT as and when needed to expend on projects that are the subjects of the construction contracts. For the reasons discussed below, I conclude that it is legally possible for DOT to enter into construction contracts on the terms you describe.
The basis for DOT’s ability to rely upon SRTA’s contractual promise rests, first, in the “intergovernmental contracts” provision of the state constitution (the “Intergovernmental Contracts Clause”). The relevant portion of that provision of the constitution reads as follows:
The state, or any institution, department, or other agency thereof, and any county, municipality, school district, or other political subdivision of the state may contract for any period not exceeding 50 years with each other or with any other public agency, public corporation, or public authority for joint services, for the provision of services, or for the joint or separate use of facilities or equipment; but such contracts must deal with activities, services, or facilities which the contracting parties are authorized by law to undertake or provide. By way of specific instance and not limitation, a mutual undertaking by a local government entity to borrow and an undertaking by the state or a state authority to lend funds from and to one another for water or sewerage facilities or systems or for regional or multijurisdictional solid waste recycling or solid waste facilities or systems pursuant to law shall be a provision for services and an activity within the meaning of this Paragraph.
GA. CONST. Art. IX, Sec. III, Para. I(a).
An intergovernmental contract made pursuant to the Intergovernmental Contracts Clause is not subject to the debt limitation provisions of the constitution. 1994 Op. Att’y Gen. 94-6, citing Building Auth. of Fulton County v. Georgia, 253 Ga. 242, 249 (1984). Furthermore, the Code expressly authorizes the Department to exercise the “intergovernmental contracts” power. This occurs in O.C.G.A. § 32-2-61 as an exception to the requirement that the Department contract only on a present funds basis:
(a) The department is expressly prohibited from . . . entering into any contract for which it does not have sufficient funds appropriated . . . . However, such prohibition shall not apply to contracts entered into pursuant to Article IX, Section III, Paragraph I [intergovernmental contracts] and Article VII, Section IV, Paragraph IV [guaranteed revenue debt contracts] of the Constitution of Georgia; and the department is expressly authorized to enter into such contracts and to obligate the department in connection therewith. For the purpose of paying obligations imposed by any such contract, such funds as may be appropriated to the department for activities incident to providing and maintaining an adequate system of public roads in the state and the cost incident thereto may be pledged by the department.
By its express terms, the Intergovernmental Contract Clause requires both contracting parties to possess the constitutional or statutory power to perform the services that are the subject of the intergovernmental contract. The Department possesses the power to
plan, designate, improve, manage, control, construct, and maintain a state highway system and shall have control of and responsibility for all construction, maintenance, or any other work upon the state highway system and all other work which may be designated to be done by the department by this title or any other law.
O.C.G.A. §32-2-2(a)(1) (2001). The Authority has the power
[t]o make such contracts, leases, or conveyances as the legitimate and necessary purposes of this article shall require, including but not limited to contracts for construction or maintenance of projects . . . .
O.C.G.A. §32-10-63(5) (2001). The Authority’s “projects” can include
land public transportation systems, including: (A) one or more roads or bridges or a system of roads, bridges, and tunnels or improvements thereto included on an approved state-wide transportation improvement program on the Developmental Highway System as set forth in Code Section 32-4-22, as now or hereafter amended, or a comprehensive transportation plan pursuant to Code Section 32-2-3 or which are toll access roads, bridges, or tunnels, with access limited or unlimited as determined by the authority, and such buildings, structures, parking areas, appurtenances, and facilities related thereto, including but not limited to approaches, cross streets, roads, bridges, tunnels, and avenues of access for such system; and (B) any program for mass transportation or mass transportation facilities as approved by the authority and the department and such buildings, structures, parking areas, appurtenances, and facilities related thereto, including, but not limited to, approaches, cross streets, roads, bridges, tunnels, and avenues of access for such facilities.
O.C.G.A. §32-10-60(5) (2001). Additionally, SRTA has the power to participate in the construction of the “Developmental Highway System,” of which GRIP is a part. O.C.G.A. § 32-4-22(a) (2001).
The Developmental Highway System shall be under the control and supervision of the board [of transportation], subject to the provisions of this Code section or any other Act of the General Assembly; provided, however, that the State Road and Tollway Authority is authorized to construct all or any part of such system and to enter into agreements with the department, pursuant to Code Section 32-2-61, for such purpose. Any project the cost of which is paid from the proceeds of garvee bonds as defined in Code Section 32-10-90.1 shall be, pursuant to a contract or agreement between the authority and the department, planned, designed, and constructed by the Department of Transportation or a contractor contracting with the Department of Transportation.
O.C.G.A. §32-4-22(c) (2001). Moreover, SRTA possesses the power to issue bonds. O.C.G.A. §§ 32-10-60(7), 32-10-90, and 32-10-90.1 (2001).
Thus, it appears that an intergovernmental contract between SRTA and DOT covering the subject matter described above would be legally valid.
In light of that validity, the next question is whether SRTA’s contractual obligation to DOT would be one against which DOT could contract with private parties. “No agency of the state may execute a contract with a private party for the purchase of goods or services which purports to obligate appropriations or state funds from any other source not on hand at the time of the contract. . . .” 1974 Op. Att’y Gen. 74-115. In this context, because of the effect of the Intergovernmental Contracts Clause, SRTA’s contractual obligation to DOT constitutes a source of money “on hand at the time of the contract.”
Therefore, it is my official opinion that the Department of Transportation may enter into transportation construction contracts with all or a portion of the financial backing for the contracts coming from a contractual promise from the State Road and Tollway Authority to borrow and provide money to DOT as and when needed to expend on projects that are the subjects of the construction contracts.
SHIRLEY R. KINSEY
Assistant Attorney General