Does Amendment 97 let an Arkansas city agency fund economic development projects or services through a private recipient?

Plain-English summary

Representative Bob Johnson and Senator Jane English asked whether Amendment 97 permits an entity funded by city revenues, such as a museum or Advertising and Promotion Commission, to provide money to a private person or organization for economic development projects or services.

Attorney General Leslie Rutledge answered that the authority in Article 12, Section 5(b) generally extends to a local governmental agency serving as an arm of a municipal corporation. Before Amendment 97, the constitutional prohibition on appropriating money for private recipients applied to municipal agencies as well as cities. Rutledge read the new economic development authorization as extending to those agencies too.

That general conclusion did not decide whether any particular agency could use its funds for a particular project. Rutledge said the answer depends on the project or service and the statutes or other authority governing the agency. She therefore declined to give a specific answer for a museum or commission. Because she answered the first question generally in the affirmative, she considered the legislators' second question about a possible constitutional amendment moot.

Currency note

This opinion was issued in 2017. Check current constitutional and statutory law before relying on it for an expenditure today.

Common questions

Q: Can a city agency use Article 12, Section 5(b)'s economic development authority?
A: As a general matter, yes, if it is a local governmental agency that serves as an arm of the municipal corporation. The opinion does not decide whether a particular agency or expenditure qualifies.

Q: Can a museum or Advertising and Promotion Commission fund any economic development project?
A: The opinion does not say so. Rutledge said an agency's particular funding authority turns on the project or service and any statutes or other rules governing that agency and its funds.

Q: What does Article 12, Section 5(b) authorize?
A: The provision quoted in the opinion permits a county, city, town, or other municipal corporation to obtain or appropriate money for a corporation, association, institution, or individual to finance economic development projects or provide economic development services.

Q: Did the AG answer whether the General Assembly could amend Section 5(b) by a three-fourths vote?
A: No. The legislators presented that as a fallback if the answer to their first question was no. Rutledge said the second question was moot after her answer to the first.

Background and statutory framework

Amendment 97 added an economic development authorization to Article 12, Section 5 of the Arkansas Constitution. Rutledge reasoned from the relationship between the older prohibition and the new authorization: both apply when a city acts through a local governmental agency serving as its arm.

For a proposed expenditure, the practical inquiry remains whether the particular project or service and the agency's governing authority permit the use of those funds. This opinion provides no finding about the legal status or spending authority of any particular museum or Advertising and Promotion Commission.

Citations

• Ark. Const. art. 12, § 5 (as amended by Amendment 97)

Source

• Arkansas Attorney General opinions search: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2017-003
May 4, 2017

STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE

The Honorable Bob Johnson
State Representative
511 North First, Suite 8
Jacksonville, AR 72076-4134

The Honorable Jane English
State Senator
3 Great Oak Court
North Little Rock, AR 72116

Dear Representative Johnson and Senator English:

This is in response to your request for my opinion on the following questions concerning economic development at the municipal level:

1) Arkansas Constitution, Article 12, § 5, as amended by Issue 3 at the 2016 general election, provides that a county, city, town, or other municipal corporation may obtain or appropriate money for a corporation, association, institution, or individual to finance economic development projects or provide economic development services. Does this language permit an entity funded by city revenues such as a museum or an Advertising and Promotion Commission to obtain or appropriate money to a corporation, association, institution, or individual for the purpose of financing economic development projects or providing economic development services?

2) If the answer to Question 1 is "no," may the General Assembly amend subsection (b) of Article 12, § 5 of the Arkansas Constitution with a three-fourths vote under subsection (d) of Article 12, § 5, to permit an entity funded by city revenues to obtain or appropriate money to a corporation, association, institution, or individual for the purpose of financing economic development projects or providing economic development services?

RESPONSE

It is my opinion in response to your first question that a municipal corporation's authority under Article 12, Section 5(b) of the Arkansas Constitution to obtain or appropriate money for economic development projects or services extends, as a general matter, to a local governmental agency that serves as an arm of the municipal corporation. The question will remain, however, whether financing economic development projects or providing economic development services (as those projects and services are defined by Article 12, Section 5(b)), is a proper function of a particular governmental agency, or a proper use of any funds that may be credited to or used by the agency. The answer to the latter question will depend upon both the project or services to be funded and any statutes or other governing authority pertaining to the local governmental agency. I am therefore unable to answer your first question as regards any particular entity.

Your second question is moot in light of my response to your first question.

DISCUSSION

Question 1: Does [Ark. Const. art. 12, § 5(b)] permit an entity funded by city revenues such as a museum or an Advertising and Promotion Commission to obtain or appropriate money to a corporation, association, institution, or individual for the purpose of financing economic development projects or providing economic development services?

Prior to its recent amendment, Article 12, Section 5 of the Arkansas Constitution stated in relevant part that "[n]o county, city, town or other municipal corporation, shall . . . obtain or appropriate money for . . . any corporation, association, institution or individual." Because of its broad proscription against "obtain[ing]" or "appropriate[ing]" money for "any corporation, association, institution or individual," this provision has been interpreted to bar any and all contributions by municipal corporations to private entities or persons regardless of the purposes served. The prohibition also applies to contributions by local governmental agencies that serve as arms of the municipal corporations.

As reflected in your question, Article 12, Section 5 was amended by Amendment 97 to the Arkansas Constitution. It now provides:

(a) No county, city, town or other municipal corporation, shall become a stockholder in any company, association, or corporation; or obtain or appropriate money for, or loan its credit to, any corporation, association, institution or individual.

(b) However, a county, city, town, or other municipal corporation may obtain or appropriate money for a corporation, association, institution, or individual to:

(1) Finance economic development projects; or

(2) Provide economic development services.

Amendment 97 defined "economic development projects" and "economic development services" as set forth in Article 12, Section 5(c). The same rules used to interpret statutes apply when interpreting the constitution. The primary rule of statutory interpretation is to read a statute as it is written. According to the plain language of Article 12, Section 5, as amended, a municipal corporation is authorized to "obtain or appropriate money for" a private entity or individual to finance certain projects or to provide certain services. Just as Article 12, Section 5's prohibition extends to a local governmental agency that serves as an arm of the municipal corporation, this authorization extends as well, in my opinion, to a local governmental agency. The municipal corporation in that case will, in effect, be "obtain[ing] or appropriat[ing]" money for the private entity or individual through the actions of its agency.

In my opinion, therefore, and as a general matter, a municipal corporation's authority under Article 12, Section 5(b) to obtain or appropriate money for economic development projects or services extends to a local governmental agency that serves as an arm of the municipal corporation. I cannot opine, however, regarding that constitutional provision's applicability to any specific local agency or any particular project. Such applicability in any given instance will depend upon both the project or services to be funded and any statutes or other governing authority pertaining to the local agency. I therefore cannot answer your first question as regards any particular entity.

Question 2: If the answer to Question 1 is "no," may the General Assembly amend subsection (b) of Article 12, § 5 of the Arkansas Constitution with a three-fourths vote under subsection (d) of Article 12, § 5, to permit an entity funded by city revenues to obtain or appropriate money to a corporation, association, institution, or individual for the purpose of financing economic development projects or providing economic development services?

My response to the previous question renders this question moot.

Sincerely,

LESLIE RUTLEDGE
Attorney General