Can Jackson County’s economic development agency dissolve itself and decide how to distribute its loan fund?

Plain-English summary

Senator Ronald Caldwell asked about a disagreement between the Jackson County Community and Economic Development Agency (JCCEDA) and the county quorum court. According to the background supplied with the request, the agency's board resolved to dissolve, repay contributions from three local development groups, and share excess funds among them. The quorum court declined to approve that plan and considered an ordinance that would retain the excess for a county industrial development fund.

The AG separated dissolution of the agency from termination of its revolving loan fund. Because the agency was created by county ordinance and had no power to abolish itself, only a county ordinance could dissolve it. On the fund, the AG said, based on limited facts, that the board likely had authority to terminate it and appeared to have a duty to disburse proceeds to the economic development entities listed in the Official Plan.

The opinion describes what that Plan provided: the three local groups would recover their original contributions without interest; if money remained, the board could vote by a simple majority to dispose of it for economic development purposes. The AG did not say the surplus had to be divided pro rata among all four founding entities. The plan described in the request and the Plan provision described in the AG's analysis are different, so the Plan's actual terms matter.

Currency note

This opinion was issued in 2021. Verify current Arkansas law and the governing ordinance and Plan before acting on its analysis.

What this means for you

If you serve on the quorum court

The AG said dissolution of this county-created agency required an ordinance. The board's resolution alone could not abolish it. The opinion separately treated the revolving loan fund under its Official Plan; review that document before deciding what action to take about the fund.

If you serve on a county-created development board

Check the creating ordinance for authority over the agency itself and the Official Plan for authority over the fund. In this case, the AG found no board power to abolish the agency, while finding it likely that the board could terminate and dispose of the fund under the Plan.

If you contributed to the loan fund

The AG described a Plan under which the three local entities recover their original contributions without interest. Any remaining funds are disposed of by a majority board vote for economic development purposes. The opinion did not promise contributors a pro rata share of the surplus.

Common questions

Could JCCEDA dissolve itself by board resolution? No. The AG said the agency's creating ordinance gave the board no power to abolish itself; another county ordinance was needed.

Who could terminate the revolving loan fund?
On the limited facts, the AG said the board likely had authority to do so under the Official Plan, which contemplated a simple majority vote.

Did the AG order a pro rata surplus payment?
No. The request described a resolution proposing such a payment. The AG described the Plan as returning the three local groups' original contributions, then allowing the board to dispose of any excess for economic development purposes.

Did the opinion resolve every dispute over the quorum court's proposed fund ordinance? No. The AG answered that the quorum court controlled dissolution of the agency and that the board appeared to control the fund under the Plan, based on the limited facts. The opinion did not analyze the text or validity of a later enacted fund ordinance.

Background and statutory framework

The AG identified Ark. Code Ann. § 14-14-705(b)(2) in a footnote to her discussion of the county administrative board. Another footnote cited § 14-14-801 and Federal Express Corp. v. Skelton on county appropriation authority while noting uncertainty about whether the federal grant went first to the county or directly to JCCEDA. The fund ultimately came under JCCEDA's authority under the 1990 ordinance, according to the opinion. Its Plan, developed in cooperation with three local groups, supplied the terms the AG used to assess fund disposition.

Citations and references

• Ark. Code Ann. § 14-14-705(b)(2)
• Ark. Code Ann. § 14-14-801
• Federal Express Corp. v. Skelton, 265 Ark. 187, 578 S.W.2d 1 (1979)

Source

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

Original opinion text

STATE OF ARKANSAS
ATTORN EY G EN ERAL
LESLIE RUTLEDGE

Opinion No. 2021-016

December 16, 2021

The Honorable Ronald Caldwell
State Senator
120 CR 393
Wynne, AR 72396

Dear Senator Caldwell:

This is in response to your request for an opinion on behalf of the Jackson County Judge concerning dissolution of the Jackson County Community and Economic Development Agency ("JCCEDA" or "the Agency"). In this regard, you have provide the following background information:

In 1990 the United State Department of Agriculture/Rural Development (USDA/RD) awarded a grant of approximately $70,000 to fund the Jackson County Community and Economic Development Agency.... The grant was conditioned upon some local match of $50,000 which was raised from three local independent industrial development groups.

JCCEDA was authorized by Jackson County Ordinance No. 1990-10 (copy attached). The organization came into being with a board appointed by the county judge and an executive director was employed. We believe the original grant had monies earmarked for payment of the salary of that director. The executive director stayed until salary played out and she quit.

At the outset, JCCEDA adopted a plan of operations captioned Official Plan (copy attached). JCCEDA, as established pursuant to USDA/RD guidelines, was designed to make loans to start-up businesses, required potential borrowers to provide business plans, and various documentation. The loans were documented and secured with mortgages and security interests where applicable.

323 CEN TER STREET. SUI TE 200 · LI TTLE ROC K. ARKAN SAS 7220 I TE LEP HONE (50 I ) 682-2007 · FA X (501) 682-8084 ARKAN SAS AG. GO V

The Honorable Ronald Caldwell
State Senator
Opinion No. 2021-016
Page 2

By the terms of the USDA/RD grant, the organization had to operate under the eye of USDA/RD for several years. At the end of that term, USDA/RD conducted an audit and released the organization from further oversight by USDA/RD.

A new director was employed at a modest salary and JCCEDA continued to operate into the 2000's. Ultimately interest in the loan program began to wane. As of early 2020, JCCEDA had not had a loan application in over four years. JCCEDA holds $77,552.18 remaining in its bank account.

In April, 2020 the board of JCCEDA met and adopted a resolution to dissolve in accordance with its original Official Plan (see page 5). A copy of the resolution is attached. The resolution provides for repayment of the original investments to the initial local independent industrial development groups and to share the excess pro rata among those same organizations.

Initially, the JCCEDA resolution was presented to the quorum court with a similar resolution for the quorum court to approve. The quorum court declined to adopt the resolution approving the dissolution.

The quorum court is now considering an amendment to the original ordinance (1990-10) which would refund the original local independent industrial development groups but retain the excess as an industrial development fund for future use at the pleasure of the quorum court. A copy of the ordinance, not yet adopted, is provided.

In light of the above background information, you have asked the following questions:

1) Can JCCEDA in following its official plan elect to dissolve without the concurrence of the quorum court, thereby dissolving and repaying the original investors and sharing the excess pro rata? Is the resolution adopted by JCCEDA sufficient without any further action by the quorum court?
2) Does the quorum court have standing to reject the JCCEDA board's plan of dissolution and make its own plan for dissolution?
3) Is it necessary for the quorum court to approve or reject the decision of the JCCEDA board?

The Honorable Ronald Caldwell
State Senator
Opinion No. 2021-016
Page 3

4) Assuming the JCCEDA board and the quorum court are at odds, what is the method for determining the proper method for dissolving the revolving loan fund of JCCEDA?

RESPONSE

I read your first question as inquiring whether the JCCEDA may dissolve itself. It may not. The Agency's dissolution, like its creation, would have to be accomplished by county ordinance. Consequently, the answer to your second question is "yes." The answer to your third question is "yes" with respect to the dissolution of the agency, but "no" as to the disposal of the revolving loan fund's excess money. In response to your fourth question, the JCCEDA has the authority to dispose of the surplus in accordance with the terms of its Official Plan.

DISCUSSION

Question 1: Can JCCEDA in following its official plan elect to dissolve without the concurrence ofthe quorum court, thereby dissolving and repaying the original investors and sharing the excess pro rata? Is the resolution adopted by JCCEDA sufficient without any further action by the quorum court?

At its root, your first question is asking whether the JCCEDA may dissolve itself without the Jackson County Quorum Court's approval. The answer is no.

From the information you provided, it appears that the JCCEDA is a county administrative board that the quorum court created in 1990 consistent with state law. 1 This is evinced by Ordinance 1990-10 attached to your correspondence ("the Ordinance"). The Ordinance, in line with state statute, establishes the powers and duties of the Agency and its board of directors. It does not grant the Agency or its board the power to abolish itself. Thus, the Agency and board may only be dissolved or abolished by ordinance. Nothing in the "Official Plan" alters that analysis.

Question 2: Does the quorum court have standing to reject the JCCEDA board's plan of dissolution and make its own plan for dissolution?

Yes. See my response above.

1
Ark. Code Ann.§ 14-14-705(b)(2) (Rep!. 2013).

The Honorable Ronald Caldwell
State Senator
Opinion No. 2021-016
Page 4

Question 3: Is it necessary for the quorum court to approve or reject the decision of the JCCEDA board?

Yes, as explained above, the power to abolish the Agency rests with the quorum court. But to the extent you mean to ask about the continuation and balance of the revolving loan fund, that question is addressed below.

Question 4: Assuming the JCCEDA board and the quorum court are at odds, what is the method/or determining the proper method/or dissolving the revolving loan fund of JCCEDA?

Based on the limited facts before me, it appears likely that the Agency's board of directors has the authority to dissolve the revolving loan fund. Furthermore, it would appear to be the board's duty to disburse the remaining proceeds to the economic development entities listed in the Official Plan.

Your correspondence states that in 1990, the U.S. Department of Agriculture/ Rural Development "awarded a grant of approximately $70,000 to fund" the JCCEDA. 2 It is unclear from your correspondence or the attached documents to what entity the USDA/RD made the grant, Jackson County-which would have to appropriate those funds to the JCCEDA 3-or directly to the JCCEDA itself. However, this may be a moot question, as the fund ultimately came under the authority of the JCCEDA, pursuant to the 1990 county ordinance. 4 And it appears, based on your correspondence, that the USDA/RD grant was seed money for the JCCEDA's revolving loan fund. Moreover, the 1990 ordinance apparently authorized the JCCEDA to apply for (and presumably accept) grants or other sources of financing (presumably for the revolving loan fund, although the ordinance does not expressly state that). Thus, those funds are under the Agency's purview.

2
A condition of this grant, you write, was a local match of $50,000, a condition met with the cooperation of three local economic development entities.

3
See Ark. Code Ann.§ 14-14-801 (Repl. 2013). Accord Federal Express Corp. v. Skelton, 265 Ark. 187, 578 S.W.2d 1 (1979) (stating that, as the legislative branch of county government, the quorum comt makes the laws and appropriates public revenues).

4
Section 7 of that ordinance grants the Agency the authority to apply and enter into agreements for grants or other financial assistance "for the operation of the agency."

The Honorable Ronald Caldwell
State Senator
Opinion No. 2021-016
Page 5

One significant factor that must be considered is that the JCCEDA's revolving loan fund also involves three local industrial development agencies that contributed the required local matching funds. The loan fund's Official Plan was promulgated by the JCCEDA "in cooperation with" these other three agencies and might be read as a quasi-agreement amongst the four entities with respect to the dispensation of the fund. 5

In furtherance of that end, the Official Plan contemplates that the loan fund may be terminated by a simple majority vote of the JCCEDA's board of directors. 6 In such a case, the Official Plan provides that the three local entities be repaid their initial contributions (exclusive of any interest). Furthermore, ifthere are additional funds in the loan fund, the Official Plan authorizes the board of directors, again by a majority vote, to dispose of the remaining funds with the proviso that the money be used for economic development purposes.

Sincerely,

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LESLIE RUTLEDGE
Attorney General

5
For example, the Official Plan established a Loan Review Committee composed of members appointed solely by the four economic development entities.

6
The 1990 ordinance empowers the county judge to appoint the members of the board of directors, subject to confirmation by the quorum court.