Is an ordinary Arkansas county copier rental a short-term financing obligation under Amendment 78?

Plain-English summary

Senator Uvalde Lindsey asked whether ordinary copier leases held by Arkansas counties are “short-term financing obligations” under Amendment 78 and its implementing law. His letter reported that one county had several copier leases without quorum-court approval by ordinance. Attorney General Leslie Rutledge addressed the Amendment 78 classification question, not whether a copier lease requires approval under some other law.

The answer was not entirely clear because Amendment 78 includes “a lease” in its definition of short-term financing obligations. Reading the amendment and the Local Government Short-Term Financing Obligations Act of 2001 as a whole, the AG thought a reviewing court would probably find a typical office-equipment rental outside the interest-bearing debt instruments for capital improvements that the law contemplated. The implementing act describes proceeds, negotiable instruments, and tax treatment that do not appear to fit a simple rental agreement.

The AG stopped short of deciding any particular lease. Its terms must be reviewed by local counsel to assess whether Amendment 78 applies. The opinion does not decide whether quorum-court approval might be required on another legal basis.

Currency note

This opinion was issued in 2017. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What this means for you

County purchasing officials

Do not treat the word “lease” alone as settling Amendment 78's application. The AG read the term in the context of the amendment's financing framework. Have local counsel examine the actual agreement if its classification matters, and check any other purchasing or approval rule separately.

Quorum-court members

The opinion did not decide whether an ordinary copier lease requires an ordinance for reasons outside Amendment 78. The AG only assessed whether a typical rental likely qualifies as a short-term financing obligation under that amendment.

Common questions

Q: Did the AG say every copier lease is exempt from Amendment 78?
A: No. She described a typical office-equipment rental as probably outside the amendment and said each agreement's terms need review.

Q: Why did a copier rental raise an Amendment 78 question?
A: The amendment's definition of short-term financing obligations includes “a lease,” even though the broader financing framework appears to focus on debt instruments for public improvements.

Q: Can a county skip quorum-court approval for all copier leases?
A: This opinion does not decide that. It addresses Amendment 78 classification only and does not analyze other approval requirements.

Background and statutory framework

Amendment 78 permits short-term debt for specified public property and defines the financing obligations broadly enough to include a lease. The AG read its sections together with the implementing act, which describes features such as proceeds and negotiable instruments. She also noted an Arkansas Supreme Court decision that found a long-term water-purchase contract outside the amendment's short-term financing definition, without detailed analysis of that definition. Those sources informed her tentative view about ordinary copier rentals.

Citations and references

Statute: Ark. Code Ann. § 14-78-101, cited in the request as part of the implementing act.

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2016-128
April 25, 2017

STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE

The Honorable Uvalde Lindsey
State Senator
2257 East Gentle Oaks Lane
Fayetteville, AR 72703-6142

Dear Senator Lindsey:

This is in response to your request for an opinion on copier leases held by county governments. Your correspondence states that it is your understanding that a county in Arkansas has several copier leases, but has not required the quorum court to approve any of them by ordinance. In light of this understanding, you have posed the following question:

Are ordinary copier leases "short-term financing obligations" as contemplated by Amendment 78 and Ark. Code Ann. § 14-78-101, et seq.?

RESPONSE

The answer to this question is not entirely clear, given the definition of "short-term financing obligations" in Amendment 78. However, when looking at Amendment 78 and its supplementing legislation, the Local Government Short-Term Financing Obligations Act of 2001, as a whole, I do not believe a reviewing court would view a typical contract for the renting of office equipment as the type of interest-bearing debt obligations for capital improvements contemplated by that body of law. But the terms of a specific lease agreement would need to be reviewed and analyzed by local counsel to definitively assess Amendment 78's application to that agreement.

DISCUSSION

Amendment 78 enables cities and counties to form redevelopment districts to help finance redevelopment projects within those districts, and to incur short-term debt to raise funds to acquire, construct, install, or rent real and tangible personal property "having an expected useful life of more than one (1) year." The amendment, which amended the constitutional debt limitations under Article 12, section 4 and Article 16, section 1, refers to the debt instruments as "short-term financing obligations," defined as "a debt, a note, an installment purchase agreement, a lease, a lease-purchase contract, or any other similar agreement . . . ." These debt instruments, which must mature within, or have a term not to exceed, five years, must be approved by ordinance of the governing body "specifying the principal amount of the obligations to be issued, the purpose or purposes for which the obligations are to be issued, and provisions with respect to the obligations." Obviously, it is the use of the word "lease" in the above definition that has prompted your question, the answer to which is not self-evidently clear.

The rules of construction for statutes also apply when interpreting constitutional provisions. In construing statutes, the courts look to the language under discussion in the context of the statute as a whole, with similar parts considered in pari materia, rather than looking merely to isolated words or sections. The meaning reflected by the statute as a whole should take precedence over any meaning that may be reflected by isolated words or sections.

When looking at Amendment 78 in its full context, although this is not entirely free from doubt, it appears that its two sections were intended to work in tandem. As noted above, section 1 permits counties and municipalities to form redevelopment districts and to issue bonds to help finance redevelopment projects within these districts. Section 2, meanwhile, gives counties and municipalities a new way of raising funds by enabling them to incur short-term (no longer than five years) debt and using general or road-fund revenues to pay off the debt.

When both sections are read together in pari materia and the amendment is considered as a whole, it appears that the short-term financing authority given municipalities and counties by section 2 was intended to broaden "the constitutionally permissible range of financing options for making public improvements." This impression is buttressed by the language in section 3:

The authority conferred by this amendment shall be in addition to the authority of municipalities and counties to issue bonds and other debt obligations pursuant to Amendments 62, 65, and 72, and other provisions of the Constitution and laws of the state.

That the short-term financing obligations authorized by Amendment 78 likely do not encompass the type of lease agreement suggested by your question is further underscored by the language in the Local Government Short-Term Financing Obligations Act of 2001. That act speaks of the obligations, inter alia, as having "proceeds" and as being "negotiable instruments," and provides that the obligations and any interest thereon are exempt from "all" state, county, and local taxation, as municipal bonds would be. These would not appear to be the attributes of a simple rental agreement. Moreover, the act clearly distinguishes between the short-term financing obligations under Amendment 78 and a short-term financing agreement, which is defined as any loan, line of credit, note purchase or security agreement, mortgage or other similar agreement, "other than the short-term financing obligation itself, pursuant to which a short-term financing obligation is secured, sold, or otherwise provided for[.]" Thus, the obligations themselves and the proceeds therefrom provide the security for the short-term financing agreements contemplated by the act.

Amendment 78, and specifically the definition of short-term financing obligations, has not been the subject of much judicial scrutiny or analysis. In the only reported case touching upon Amendment 78, the Supreme Court quoted that definition in an opinion settling a contractual dispute between a town and its water supplier. The Court rejected the town's argument that its 40-year contract to purchase water, paid for by the town's water customers, violated the five-year limitation under Amendment 78. The Court, reciting but not undertaking an analysis of the definition, simply stated that the town's contract to purchase water was "not a short-term financing obligation as defined by [A]mendment 78." Absent additional judicial refinement, a court may similarly conclude that a simple rental contract for an office copier is not the kind of short-term financing obligation contemplated by Amendment 78, depending on the terms of the agreement.

In sum, it appears, when looking at this body of law as a whole, that a rental agreement for office copiers would not be the sort of short-term financing obligation contemplated by Amendment 78 or the Local Government Short-Term Financing Obligations Act of 2001. Judicial clarification, however, would be beneficial.

Additionally, the terms of any agreement would need to be scrutinized by local counsel to definitely determine whether a specific agreement would meet Amendment 78's definition of a short-term financing obligation. Such scrutiny is beyond the scope of an Attorney General's opinion.

Sincerely,

LESLIE RUTLEDGE
Attorney General