The Cairo Development Authority may transfer assets, including cash and contract rights, to a joint, city-county development authority in return for services; in activating the joint authority, the governing bodies of the city and county may agree with one another not to appoint elected officials to the new entity.
This is in response to your letter of November 19, 1996, in which you asked that this office respond to certain questions involving the City of Cairo Development Authority (hereinafter, the "Constitutional Authority"). The materials included with your letter raised two questions concerning the Constitutional Authority and a new, joint authority (the "Statutory Authority") to be created by the City of Cairo and Grady County: First, may the Constitutional Authority transfer all of its assets to the Statutory Authority, and also assign an existing agreement among the Constitutional Authority, City and County, in exchange for economic development services? Second, may the governments which activate the Statutory Authority agree in their activating resolutions not to appoint elected officials to the new entity?
According to the materials provided, the City, the County and the Constitutional Authority have each contributed capital and services for the acquisition and development of Milestone Industrial Park, pursuant to an intergovernmental agreement dated February 24, 1988. Under that Agreement, the Constitutional Authority presently has title to the Park and "shall provide guidance regarding development of the property." The agreement also provides for the City and County to have a "proportionate interest" in certain proceeds involving the Park.
The correspondence you forwarded indicates that the Constitutional Authority has accumulated some funds "generated from (its) interest in rental properties." The materials do not say whether the cash is from proceeds generated by activities at Milestone Park. The proposed transaction would transfer this cash and would assign the Constitutional Authority's rights and responsibilities under the Milestone Agreement to the Statutory Authority.
On the facts as stated, the question about the transaction between the two authorities breaks down into three legal issues: Does the amendment which creates the Constitutional Authority authorize it to transfer all or part of its assets to the Statutory Authority in return for economic development services? Is the Milestone Agreement assignable without permission of the City and County? Does the Milestone Agreement give the Constitutional Authority absolute ownership of rental income?
May the Constitutional Authority Transfer Assets to a Joint Development Authority?
We have assumed that the new Statutory Authority will be activated pursuant to the Development Authorities Law in O.C.G.A. Ch. 36-62. The City of Cairo Development Authority exists pursuant to constitutional amendment. 1962 Ga. Laws 1200 et seq., as amended, 1970 Ga. Laws 1106 et seq., 1985 Ga. Laws 3780. The amendment is to be "liberally construed for the accomplishment of the purposes set forth" in the amendment, 1962 Ga. Laws 1200, 1209, i.e., "promoting and expanding . . . industry, agriculture, trade and commerce within the said City of Cairo and within its primary trade area, namely, the remainder of Grady County." 1962 Ga. Laws 1200, 1201.
The Constitution empowers the Constitutional Authority to "acquire, . . . sell, lease as either lessor or lessee, and mortgage land, buildings and property of all kinds, whether located in the City of Cairo, or within the limits of Grady County, Georgia." Id. at 1203. The Authority may "enter into any form of contract with respect to the use or disposal of [its land and improvements] in keeping with the purposes of its creation." Id. at 1204. It may "contract with the City of Cairo and other political subdivisions and with private persons and corporations for periods of time not in excess of 50 years, as to any phase or aspect of Authority business." Id. In general, it may "exercise usual powers of private corporations except such as are inconsistent with this amendment, including the power to appoint and hire other agents . . .," and it may "do any and all other acts and things necessary or convenient to accomplish the purpose and powers of the Authority." Id. at 1204-05.
There are limitations on the Constitutional Authority's ability to exercise the powers enumerated above. A resolution showing the approval of the Mayor and City Council must be entered into the minutes, "in any case where in the holding, purchase, acquisition, leasing, or ownership of property of any kind the Authority incurs or assumes or attempts to incur or assume, any indebtedness or obligation of any nature, directly or indirectly." 1962 Ga. Laws 1200, 1205.
[t]he property of the Authority shall not be subject to levy and sale under legal process except such property, income or funds as may be pledged, assigned, mortgaged or conveyed to secure an obligation of the Authority, and any such property, income or funds may be sold under legal process or under any power granted by the Authority.
1962 Ga. Laws 1200, 1208 (emphasis added).
In construing the controlling constitutional amendments, the natural and ordinary signification of their words should be given. See Thompson v. Eastern Air Lines, 200 Ga. 216 (1946). Under their plain language, these powers appear to be sufficient to authorize the Constitutional Authority to convey assets, including real property and cash, to the Statutory Authority, in return for its promise to perform functions authorized to both. See Richmond County Hosp. Auth. v. Richmond County, 255 Ga. 183, 187 (1985); Bradfield v. Hospital Auth., 226 Ga. 575 (1970). It should be noted however, that the Constitutional Authority continues to exist, and it and its property will remain subject to the duties and limitations noted above and imposed by the amendment creating the authority. For further example, see the requirement for annual audit in 1962 Ga. Laws 1200, 1209.
Assignability: Is the Milestone Agreement assignable without permission of the City and County?
Contracts are generally assignable. However, contract rights still "coupled with" continuing duties to perform an obligation, or "involving a relation of personal confidence," may not be assigned without consent of opposite parties. For a general discussion, see O.C.G.A. § 44-12-22 and Decatur North Associates, Ltd. v. Builders Glass, Inc., 180 Ga. App. 862 (1986). We have not found any cases applying this principle to an intergovernmental contract. However, it is clear that the Constitutional Authority occupies a fiduciary or quasi-fiduciary relationship with the City and County and owes continuing duties to them under the Milestone Agreement. Since the City and County must agree to activate the new authority in any event, it would be better practice, and probably required by contract law, to moot the issue by having them agree in advance to the assignment.
Meaning of the Milestone Agreement: Does the Milestone Agreement give the Constitutional Authority absolute ownership of the Park and rental income?
As noted the Milestone Agreement provides:
. . . any funds received upon the sale and/or lease of the subject property shall at the direction of the party be returned to the party holding such proportionate interest as may be determined by the secretary/treasurer of the Authority.
. . . each party agrees that the Authority shall retain such funds as may be received from the sale and/or rental of the subject property for disposition as directed by the party.
As we understand the situation, the proposal to "transfer" the assets of the Constitutional Authority has not yet taken a specific form. However, whatever form it takes, the question of whether it constitutes a "sale and/or lease" is germane to application of the Milestone Agreement. The Agreement gives the City and County a "proportionate interest" in the proceeds of the "sale and/or lease of the subject property," and it requires that such proceeds be retained by the Authority "for disposition as directed by the party," i.e., "each party" with such an interest. Similarly, these provisions appear applicable to any rental income already generated by the Authority from the Park and proposed to be transferred.
Again, since the City and County must in any event cooperate in the creation of the joint authority, this issue should be mooted in that process by joint agreement.
In other words, we find power in the amendment creating the Constitutional Authority for its transfer of assets to the Statutory Authority in return for services, but there are limitations in the amendment itself which should be addressed and provided for in the new arrangement. Further, the City and County should address issues concerning the assignment of the Milestone Agreement and its meaning and application.
You have also asked whether the local governments in activating the Statutory Authority may agree with one another not to appoint elected officials as members of the new entity. We have assumed that the question pertains to self appointment by the elected officers of each activating jurisdiction.
The creation of a joint development authority is authorized by joint resolutions of any two or more cities, two or more counties, or one or more counties and one or more cities. O.C.G.A. § 36-62-5.1(a). "A joint authority so created shall be governed by [Chapter 36-62] in the same manner as other authorities created pursuant to [that Chapter], except as specifically provided otherwise in this Code section." O.C.G.A. § 36-62-5.1(b).
Code Section 36-62-5.1 provides for the appointment of members of the joint authority as follows: "The resolutions creating and activating a joint authority shall specify the number of members of the authority, the number to be appointed by each participating county or municipal corporation, their terms of office, and their residency requirements." O.C.G.A. § 36-62-5.1(c).
There is no other reference to the appointment of members in this Code Section. Chapter 36-62 provides generally as follows: "The directors shall be taxpayers residing in the county or municipal corporation for which the authority is created, and their successors shall be appointed as provided by the resolution provided for in Code Section 36-62-4." O.C.G.A. § 36-62-5(a).
Code Section 36-62-4 is the Section which provides for resolutions activating individual development authorities. The Code presently empowers the local jurisdictions creating a development authority to "appoint no more than one member of the governing authority as a director." O.C.G.A. § 36-62-5(a). This is an exception to the general rule against self-appointment. See 1980 Op. Att'y Gen. 80-13. As a discretionary prerogative, the exception also would ordinarily be subject to the rule that local government officers may not bind their successors in office. However, an intergovernmental contract, such as the proposed agreement among the activating jurisdictions, overrides the rule against binding successors in office. Ga. Const. 1983, Art. IX, Sec. III, Para. I(a); Building Auth. v. State, 253 Ga. 242, 249(10) (1984). Hence, the activating resolutions may state an agreement among the governments not to appoint members of the governing bodies to the joint authority for a stated period of time not to exceed fifty years (the maximum period allowed by the intergovernmental contracts clause).
Therefore, it is our unofficial opinion that the Constitutional Authority may transfer its assets to the Statutory Authority in return for services and that the activating jurisdictions may agree with one another not to appoint elected officials to the new authority. Our answers have been stated in general terms based upon the description of the proposed arrangements provided to us which have not yet been reduced to specific terms. Any additional facts not stated or any deviation from the facts stated could alter the conclusions presented herein.
JOHN B. BALLARD, JR. Senior Assistant Attorney General
SHIRLEY R. KINSEY
Assistant Attorney General