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Official Opinion 94-6

Official Opinion 94-6

February 2, 1994
To: 

Executive Director
Georgia Environmental Facilities Authority

Re: 

Loans made by the Georgia Environmental Facilities Authority to local governments pursuant to the 1983 Georgia Constitution, Article IX, Section III, Paragraph I (the Intergovernmental Contracts Clause), are not subject to the debt limitations of Article IX, Section V, Paragraph I of the Georgia Constitution.

This replies to your request of December 29, 1993, for my opinion regarding the application of the municipal debt limitation provisions of the Georgia Constitution to loans made by the Georgia Environmental Facilities Authority ("GEFA") to local governments pursuant to the Intergovernmental Contracts Clause of the Constitution. Your letter states that the City of Camilla has applied to GEFA for water and wastewater system loans in the total amount of $8,000,000 ($6,000,000 from the State Revolving Fund and $2,000,000 from the GEFA Economic Development Set Aside Program). The loan contract requires the city to dedicate its general power of taxation and other revenue sources to repay the loan.

Your letter further states that the total of $8,000,000 in loans to the City of Camilla, if added to its existing debt, would cause the city's total outstanding debt to exceed its limitation on local debt.

The debt incurred by any county, municipality, or other political subdivision of this state, . . . shall never exceed 10 percent of the assessed value of all taxable property within such county, municipality, or political subdivision; and no such county, municipality, or political subdivision shall incur any new debt without the assent of a majority of the qualified voters of such county, municipality, or political subdivision voting in an election held for that purpose as provided by law.

Ga. Const. 1983, Art. IX, Sec. V, Para. I(a). Having been previously advised that intergovernmental loans by GEFA to local governments are not debt for purposes of obtaining voter approval, you now ask whether such loans are similarly excepted from the 10 percent debt limitation. See 1990 Op. Att'y Gen. U90-7 (voter referendum); 1985 Op. Att'y Gen. 85-29 (contract to provide funds not to exceed a period of 50 years).

Under Ga. Const. 1983, Art. IX, Sec. III, Para. I(a) (Supp. 1993):

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 ... pursuant to law shall be a provision for services and an activity within the meaning of this Paragraph.

(Emphasis added.) A county, municipality, or any combination thereof in Georgia has the power to provide storm water and sewage collection and disposal and for the development, storage, treatment, purification, and distribution of water. Ga. Const. 1983, Art. IX, Sec. II, Para. III(a). GEFA has the power to assist local governments by financing projects for the construction, extension, rehabilitation, repair, replacement and renewal of water, sewerage, solid waste, and recycling facilities and systems. O.C.G.A. 50-26-4, -5.

An intergovernmental contract pursuant to the intergovernmental contracts clause of the Georgia Constitution pledging tax revenues for these purposes does not require a local referendum. Youngblood v. State, 259 Ga. 864 (1990), citing Nations v. Downtown Dev. Auth., 256 Ga. 158 (1986) (pledge of municipal taxing power); 1990 Op. Att'y Gen. U90-7; see also 1985 Op. Att'y Gen. 85-29, supra. An intergovernmental contract pursuant to the intergovernmental contracts clause is subject to neither the referendum nor the debt limitation provisions of the constitution, as it is validated by the intergovernmental contracts clause. Building Auth. of Fulton County v. State, 253 Ga. 242, 249 (1984) (decided prior to the constitutional amendments of 1986 and 1992 adding the italicized language to the intergovernmental contracts clause quoted above).

Therefore, it is my official opinion that loans made by the Georgia Environmental Facilities Authority to local governments pursuant to the 1983 Georgia Constitution, Article IX, Section III, Paragraph I (the intergovernmental contracts clause), are not subject to the debt limitations of Article IX, Section V, Paragraph I of the Georgia Constitution.

Prepared by:

GEORGE S. ZIER Staff Attorney