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Official Opinion 97-9

Official Opinion 97-9

March 19, 1997
To: 

President
Georgia Military College

Re: 

The Georgia Military College may not pledge real property to secure borrowing.

In connection with the possibility that the Georgia Military College ("GMC") may seek to borrow money from a private-sector financial institution, you have asked for my opinion as to whether GMC can pledge real property which it owns as security for repayment of such a loan. Specifically, the facts, as I understand them, are these. GMC wishes to renovate and expand its student center. The board of trustees of GMC holds legal title to the student center building, and the student center is an integral part of the GMC campus. GMC's revenue sources include tuition charges, which account for approximately 95% of GMC's total revenues, and auxiliary services revenues, which are generated by operation of the campus bookstore, the on-campus barracks, and the on-campus mess hall. Please be aware that, if the facts as stated above are inaccurate or if factual circumstances change, the conclusions reached in this opinion may be inapposite.

The Georgia Military College ("GMC") is a public authority of the State of Georgia, having obtained that status through general laws passed in 1990. O.C.G.A. § 20-3-541. GMC is governed by a board of trustees, composed of the mayor of the City of Milledgeville, Georgia, and six additional board members elected from each of the six municipal voting districts of the City of Milledgeville. O.C.G.A. §§ 20-3-546, -542, -561.

The GMC board of trustees has the authority to "borrow money, execute and deliver the note of the college, and to secure the same." O.C.G.A. § 20-3-546(7). The board also possesses the authority to "exercise any power usually granted to such board, necessary to its usefulness, not inconsistent with the Constitution and laws" of the State of Georgia. O.C.G.A. § 20-3-546(11).

Title to all of GMC's property "is vested in the board of trustees, to be held by the board in trust for the benefit and use of the college." O.C.G.A. § 20-3-563. Additionally, with respect to dealings in property, Code Section 20-3-564 provides:

All properties owned or held by the board of trustees pursuant to this article [Article 9 of Chapter 3 of Title 20] which have been declared to be the public property of the state may be sold, leased, or otherwise disposed of by the board, whenever the board may deem such sale, lease, or other disposition in the best interest of the college, if the board shall first determine that such property can no longer be advantageously used by the college; provided, however, that where any such property has been granted or conveyed to the college or the board for specified uses, such property shall only be sold, leased, conveyed, or otherwise disposed of for similar uses or purposes, which shall be in conformity with any use or trust declared in any such grant or conveyance; provided, further, that every such sale, lease, or other disposition of real property shall be subject to the approval of the Governor.

(Emphasis added.)

Code Section 20-3-565 provides:

In case of any sale, lease, or disposition of property under Code Section 20-3-564, the board of trustees, through its proper officers, and the Governor, on behalf of the state, shall execute and deliver such written evidence of title or of the creation of a leasehold interest as may be necessary.

Code Section 20-3-546 clearly contemplates the ability to provide security for borrowings. The central issue is: which assets may GMC pledge to secure such borrowing?

Code Sections 20-3-564 and 20-3-565, on their faces, appear to contemplate complete alienation of title and do not appear to contemplate conveyance of less than full ownership or leasehold interest in real property. Moreover, in a secured lending situation, it does not seem likely that the board would be able to make the determination statutorily required by Section 20-3-546 -- that the property can no longer be advantageously used by the college. Implicit in borrowing to improve real property is the idea that the property can be advantageously used.

"A lien against public property is disallowed by law . . . ." DeKalb County v. J & A Pipeline Co., 263 Ga. 645, 651 (1993). However, "[a] mere pledge of income would not be a pledge of 'property'. . . ." State v. Regents of the Univ. Sys. of Ga., 179 Ga. 210, 228 (1934).

Taking the relevant statutory laws and judicial decisions as a whole, it is my official opinion that the GMC board may borrow money, pledging as security for such borrowing any and all otherwise unencumbered revenue flows which it receives from its income-producing properties and activities, but the board cannot pledge as security the real property to which it holds title.

Prepared by:

SHIRLEY R. KINSEY
Assistant Attorney General