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Official Opinion 97-7

Official Opinion 97-7

March 4, 1997
To: 

State Auditor

Re: 

The term "capital outlay projects for educational purposes" set forth at Article VIII, Section VI, Paragraph IV(b)(1) of the Georgia Constitution includes school buses and equipment with an extended useful life.

This responds to your question regarding the meaning of the term "capital outlay projects for educational purposes" set forth at Article VIII, Section VI, Paragraph IV(b)(1) of the Georgia Constitution.

Pursuant to approval by referendum at the November, 1996 general election, the Constitution was amended to add a new Paragraph IV to Section VI of Article VIII (the "educational purposes sales tax amendment") so as to authorize the boards of education of county school districts and independent school districts to impose, levy and collect a one percent sales and use tax for certain educational purposes. Paragraph IV(b)(1) of the amendment provides that the proceeds of the tax may be expended for "capital outlay projects for educational purposes." The term "capital outlay projects for educational purposes" is not defined in the amendment.

In order to determine the meaning of "capital outlay projects" as used in the educational purposes sales tax amendment, it is useful to examine how the term is used in the Official Code of Georgia Annotated. See Copher v. Mackey, 220 Ga. App. 43, 45 (1996) (the meaning and effect of statutes will be determined in connection with the common law, the Constitution, and other

statutes and the decisions of the courts). The term "capital outlay projects" is found at several sections of the Code. See, e.g., O.C.G.A. § 48-13-93(a)(2)(B) (specifying that proceeds of the excise tax on rental motor vehicles shall be expended on certain designated capital outlay projects) and O.C.G.A. § 50-8-8(b)(6)(B) (specifying that grants by the Department of Community Affairs may be made to local governments for purposes of capital outlay projects).

References to "capital outlay" may also be found at Title 20 of the Code which pertains to education. "Capital outlay" is defined at O.C.G.A. § 20-2-260(b)(3), regarding the distribution of capital outlay funds by the Department of Education, to include, but not be limited to, "expenditures which result in the acquisition of fixed assets, existing buildings, improvements to sites, construction of buildings, construction of additions to buildings, retrofitting of existing buildings for energy conservation, and initial and additional equipment and furnishings for educational facilities."

"Educational facilities" are defined at O.C.G.A. § 20-2-260(b)(5) to include

buildings, fixtures, and equipment necessary for the effective and efficient operation of the program of public education required by this article, which, without limiting the generality of the foregoing, shall include classrooms, libraries, rooms and space for physical education, space for fine arts, restrooms, specialized laboratories, cafeterias, media centers, building equipment, building fixtures, furnishings, related exterior facilities, landscaping and paving, and similar items which the State Board of Education may determine necessary.

The definition of educational facilities specifically excludes "swimming pools, tracks, stadiums, and other facilities or portions of facilities used primarily for athletic competition and the central and area administrative offices of local units of administration." O.C.G.A. § 20-2-260(b)(5).

While the provisions of Title 20 of the Code are useful in discerning the meaning of the term "capital outlay projects," it would appear more appropriate to look to the special county one percent sales and use tax ("special county tax") act to determine the meaning of the term as used in the educational purposes sales tax amendment, inasmuch as the educational purposes sales tax amendment provides at Paragraph IV(a) that the sales tax for educational purposes shall correspond to the

special county tax. See also O.C.G.A. § 48-8-141 (applying the special county tax act to the educational purposes sales tax). Although not defined, the term "capital outlay projects" is used in the special county tax act at O.C.G.A. § 48-8-111(a)(1), which specifies that proceeds of the special county tax may be expended for certain capital outlay projects. The term as used in the special county tax act is defined at 1985 Op. Att'y Gen. U85-24, p. 185, to refer to "major, permanent, or long-lived improvements or betterments, such as would be properly chargeable to a capital asset account and as distinguished from current expenditures and ordinary maintenance expenses."

Therefore, the term "capital outlay projects" as used in the educational sales tax purposes amendment should be read as well to refer to major, permanent, or long-lived improvements or betterments, such as would be properly chargeable to a capital asset account and as distinguished from current expenditures and ordinary maintenance expenses. This definition coincides with the accounting use of the term as an expenditure of significant value for the acquisition of a fixed asset or an addition to a fixed asset. See National Council on Governmental Accounting, Governmental Accounting, Auditing, and Financial Reporting app. B at 57 (1980) and Carl Vinson Institute of Government, Budget Management: A Reader In Local Government Financial Management 128-29 (1983) [hereinafter Budget Management].

A school bus and equipment with an extended useful life would appear to fit this definition of capital outlay projects. See Budget Management, supra, at 129 (an automobile is commonly classified as a fixed asset). Thus, school buses and equipment with an extended useful life may be purchased with educational purposes sales tax proceeds. However, if educational purposes sales tax proceeds are used to pay off general obligation debt issued under O.C.G.A. § 20-2-430, capital outlay expenditures are limited to the items set forth in the general obligation debt statute. In such a case, proceeds of general obligation bonds issued under O.C.G.A. § 20-2-430 must be expended for "building, equipping, or purchasing sites for the building and equipping of schoolhouses," which does not include the purchase of school buses. O.C.G.A. § 20-2-430. See 1975 Op. Att'y Gen. 75-94. See also O.C.G.A. § 20-2-431 (limiting bonded indebtedness for county school districts).

Prepared by:

DANIEL M. FORMBY
Deputy Attorney General