Can Kentucky's Department of Fish and Wildlife lease out its own land on its own, without the Finance Cabinet?

Plain-English summary

The Department of Fish and Wildlife Resources earns income by leasing land it owns or manages to others. Tenants cut hay, plant crops, or put up cell towers, and the rent flows into the Department's game and fish fund. For years the Finance and Administration Cabinet handled the bidding for these leases at the Department's request. After the legislature passed two bills (Senate Bill 217 in 2022 and Senate Bill 241 in 2023) giving the Department its own procurement authority, the Cabinet took the position that it no longer had any role in the Department's leases. That left the Department's lease income in limbo, so the Commissioner asked the Attorney General to sort out who has the power to do what.

The Attorney General read the new procurement statutes narrowly. The word "procurement" in the Model Procurement Code means buying, renting, or leasing supplies, services, or construction for the agency. In other words, it covers the agency acquiring things, not the agency leasing out its own land to someone else. So the Department's expanded procurement power lets it acquire property without Finance Cabinet sign-off, but it does not let the Department lease away the real property it already holds.

Leasing out state-owned real property is governed by a different chapter, KRS Chapter 56, which gives the Finance and Administration Cabinet the power and the duty to lease state real property on an agency's behalf. Nothing in the new Fish and Wildlife statutes carved those leases out of Chapter 56. The bottom line: the Cabinet still handles these leases, and once the Department submits a proper written request, the Cabinet is obliged to consider it and act, not to refuse outright.

What this means for you

State agencies and agency counsel

Under this opinion, the procurement authority in KRS 150.0242 lets the Department acquire property on its own, but it does not authorize the Department to lease out real property it owns or manages. Those out-leases remain governed by KRS Chapter 56 and run through the Finance and Administration Cabinet.

Government procurement officers

The opinion reads "procurement" in KRS 45A.030(22) as the acquisition of supplies, services, or construction, so it does not reach the disposition or out-leasing of agency-held real property.

Agricultural and commercial lessees

For people who lease Department land to farm, cut hay, or site equipment, the opinion treats the Finance and Administration Cabinet, not the Department alone, as the body with authority over those leases. It also states the Cabinet has a duty to act on the Department's request rather than simply decline.

Common questions

Q: Did the 2022 and 2023 laws let Fish and Wildlife handle its own land leases?
A: Not for leasing out its own land, according to this opinion. The new procurement authority covers acquiring property. Leasing Department-owned land to others stays under KRS Chapter 56 and the Finance and Administration Cabinet.

Q: Can the Finance Cabinet just refuse to deal with the Department's leases?
A: No. The opinion reads KRS 56.463 as giving the Cabinet a duty to consider and act on a proper written lease request from the Department, not a license to ignore it.

Q: Does the Department control whether a particular lease gets bid out?
A: No. The opinion says the Cabinet Secretary determines whether a lease is suitable to the public's interest after reviewing the Department's written request.

Q: Where does the lease income go?
A: The opinion notes these leases provide a stream of income to the Department's game and fish fund under KRS 150.150(1)(a).

Background and statutory framework

The 2022 and 2023 legislation (2022 Ky. Acts ch. 197 and 2023 Ky. Acts ch. 139) gave the Department procurement authority under KRS 150.0242, including the ability to conduct procurements without Finance and Administration Cabinet approval and to act as its own chief purchasing officer. The opinion read "procurement," defined in KRS 45A.030(22) as "the purchasing, buying, renting, leasing, or otherwise obtaining of any supplies, services, or construction," to mean acquisition by the agency, not out-leasing of agency-held real property. Out-leasing of state real property is governed by KRS Chapter 56: KRS 56.500(2) bars a state agency from leasing real property except as provided, and KRS 56.463(6) gives the Finance and Administration Cabinet the power and duty to lease state real property in accordance with KRS 45A.045. Because nothing in KRS Chapter 150 exempts the Department's land from Chapter 56, the opinion concluded the Cabinet retains authority over these leases and a corresponding duty to act on the Department's requests.

Citations and references

Statutes:
- KRS 150.0242(1), (2) (Department procurement authority)
- KRS 45A.030(22) (definition of procurement); KRS 45A.045(4) (disposition of state real property)
- KRS 56.500(2); KRS 56.463(6) (FAC power and duty to lease state real property)
- KRS 150.061(1) (appointment of Commissioner); KRS 150.150(1)(a) (game and fish fund)

Cases:
- Commonwealth, Dep't of Fish & Wildlife Res. Comm'n v. McCoy-Johnson, No. 20-CI-00706 (Franklin Cir. Ct. Oct. 28, 2020)

Source

• Landing page: https://www.ag.ky.gov/Opinions/Pages/default.aspx
• Original PDF: https://www.ag.ky.gov/Resources/Opinions/Opinions/Opinion%20of%20the%20Attorney%20General%2023-05.pdf

Original opinion text

The full opinion as issued by the Office of the Kentucky Attorney General:

Commonwealth of Kentucky
Office of the Attorney General
Daniel Cameron, Attorney General
Capitol Building, Suite 118, 700 Capital Avenue, Frankfort, Kentucky 40601
July 18, 2023
OAG 23-05
Subject: Whether the procurement authority of the Department of Fish and Wildlife Resources under KRS Chapters 45A and 150 allows it to engage in a bid process for income-generating real property leases.
Requested by: Rich Storm, Commissioner, Department of Fish and Wildlife Resources
Written by: Aaron J. Silletto, Assistant Attorney General, Office of Civil and Environmental Law
Syllabus: The procurement authority of the Department of Fish and Wildlife Resources does not allow it to unilaterally lease to others any of the real property it owns or manages.

Opinion of the Attorney General

The Department of Fish and Wildlife Resources ("Department") has agreements with a variety of public agencies and private persons to lease land owned or managed by the Department. These real property lease agreements cover a variety of activities, including allowing tenants to cut hay, plant crops, or erect cellular communications towers, and generate income for the Department. In the past, the Finance and Administration Cabinet ("FAC") has invited bids from the public for these real property lease agreements at the Department's request. As the terms of these lease agreements expire, the Department now wishes to renew or re-bid them. But in a change from its past actions, citing recent legislation granting procurement authority to the Department and its Commissioner, FAC is no longer willing to facilitate the Department's bidding process for leases of real property owned or managed by the Department. This dispute between the Department and FAC imperils the Department's ability to enter into these lease agreements, and thus, jeopardizes a substantial source of income to the Department in the current fiscal year.

This dispute is the latest in a growing line of conflicts between the current gubernatorial administration and the Department. The conflicts started in 2020, when the Governor proposed transferring $5.5 million of boat registration fees per year from the Department to the state's general fund. [See 2020 House Bill 352 (as introduced), Part V, J.2., p. 125.] The General Assembly declined to do so, [See 2020 Ky. Acts ch. 92 (House Bill 352), Part V, I.] but the stage was set for this ongoing tug-of-war between the administration and the Department. Since then, the administration and the Department have fought over who gets to appoint the Commissioner of the Department, [See OAG 20-12 (June 26, 2020); Commonwealth, Dep't of Fish & Wildlife Res. Comm'n v. McCoy-Johnson, No. 20-CI-00706 (Franklin Cir. Ct. Oct. 28, 2020), appeal dismissed as moot, No. 2020-CA-1435-MR (Ky. App. Sept. 1, 2021).] with the General Assembly eventually resolving that issue in favor of the Department of Fish and Wildlife Resources Commission. [2021 Ky. Acts ch. 161 § 2 (amending KRS 150.061).] Ongoing efforts by the administration to control the Department through the FAC Secretary's power as the Commonwealth's chief financial officer, KRS 42.012, and chief purchasing officer, KRS 45A.030(3), have resulted in the General Assembly enacting bills at its last two legislative sessions to grant greater independence and procurement authority to the Department (2022 Senate Bill 217 or "SB 217" [2022 Ky. Acts ch. 197]), and then to clarify the extent of that authority (2023 Senate Bill 241 or "SB 241" [2023 Ky. Acts ch. 139]). In this latest skirmish, FAC now believes that, after the enactment of SB 217 and SB 241, it no longer has any duty or responsibility to assist the Department with respect to leases of real property owned or managed by the Department.

With the passage of SB 217 and SB 241, the General Assembly has empowered the Department to "conduct all procurements necessary for the performance of its duties in accordance with the procurement procedures outlined in KRS Chapter 45A, [KRS Chapter 150], and the administrative regulations promulgated under this chapter, but the [D]epartment shall not be subject to any provision of KRS Chapter 45A that requires the approval of any Finance and Administration Cabinet official for the department to proceed with any aspect of the procurement process." KRS 150.0242(1) (emphasis added). The statute also permits the Commissioner to act as the Department's "chief purchasing officer for the purposes of conducting procurements," rather than the FAC Secretary. Id. (emphasis added). Otherwise, KRS Chapter 45A, the Kentucky Model Procurement Code, applies to the Department's procurement process. KRS 150.0242(2).

The Model Procurement Code defines the term "procurement" as "the purchasing, buying, renting, leasing, or otherwise obtaining of any supplies, services, or construction." KRS 45A.030(22) (emphasis added). Thus, the Department's and the Commissioner's "procurement" powers under KRS 150.0242 relate to the acquisition of property by the Department, whether by purchase or by lease. [SB 241 specifically states that it applies to "all procurements and acquisitions of interests in real property undertaken by, or for the benefit of, the Department." 2023 Ky. Acts ch. 139 § 22 (emphasis added).] The term, as defined by the Model Procurement Code, cannot mean the sale or lease of real property owned or managed by the Department to someone else.

Kentucky law addresses leases of real property owned by the Commonwealth and its agencies in KRS Chapter 56. "No state agency . . . shall have power or authority . . . [t]o lease . . . any real property, including any interest in real property, belonging to the state or to any state agency, except as provided by [KRS Chapter 56] and KRS 45A.045." KRS 56.500(2). Under KRS Chapter 56, FAC has the "power and duty" to "lease any real property, or any interest in such real property, owned by the state or any agency thereof, in accordance with KRS 45A.045." KRS 56.463(6). [KRS 45A.045, which is referred to in both KRS 56.463(6) and KRS 56.500(2), grants to FAC, inter alia, the general power to "sell, trade, or otherwise dispose of any interest in real property of the state." KRS 45A.045(4) (emphasis added).] Nothing in KRS Chapter 150 exempts leases of real property owned or managed by the Department from the requirements of KRS Chapter 56. [The General Assembly has exempted the Commission from KRS Chapter 56 with respect to its appointment of the Commissioner. KRS 150.061(1) ("Notwithstanding any provisions of KRS Chapter . . . 56 . . . to the contrary, the commission shall have the sole authority to appoint a commissioner of the Department of Fish and Wildlife Resources. . . ."). But that exemption from KRS Chapter 56 does not apply to any other contract or agreement involving the Department.] Therefore, the General Assembly has not given the Department the power to lease to anyone else any of the real property it owns or manages, as any such leases are not within the Department's "procurement" authority under KRS Chapters 45A and 150. Rather, FAC has the "power and duty" under KRS 56.463 to lease real property owned or managed by the Department on the Department's behalf.

To say that FAC has the statutory power and duty to lease real property owned or managed by the Department on the Department's behalf does not mean the Department may compel FAC to agree to bid out any particular lease agreement. Under KRS 45A.045, the FAC Secretary determines whether such a lease agreement would be "suitable to the public's interest." KRS 45A.045(4). Such determination "shall be reached only after review of a written request" by the Department, which request "shall describe the property and state the reasons why the agency believes the property should be" leased. Id. Once presented with such a request, FAC is obliged to make a determination regarding the suitability of the lease. KRS 56.463; KRS 56.463(6).

The Department has provided this Office with several examples of agricultural leases approved and bid out by FAC prior to the enactment of SB 217 and SB 241. In addition to providing a stream of income to the Department's game and fish fund, KRS 150.150(1)(a), these leases also routinely provide that "[f]ive percent of the . . . crop must be left standing in the field at harvest for wildlife food and cover." These example leases also describe the purpose for leasing Department lands as follows:

The KDFWR, being sound stewards of the soil and water, wishes to exemplify practices that are beneficial to the State's wildlife resources. Agricultural practices are essential components to many wildlife resource management activities and provide for overall general wildlife habitat enhancement goals. Agricultural operations on KDFWR owned land, leased or operated properties should follow a general, consistent, uniform pattern for sustainable practices. These programs are developed to enhance and perpetuate Kentucky's diverse wildlife species and to insure that sustainable land use practices are carried out. Departmental staff uses agricultural activities on lands owned or managed for the following reasons: To utilize farming as a method of maintaining open lands and early successional vegetative cover for wildlife. Provide food for [wildlife]. To generate monies to help offset operational, maintenance, and habitat costs of the [Department's land]. To provide public a demonstration of sustainable agricultural techniques on KDFWR owned/managed properties.

Thus, there appear to be both valid fiscal reasons and wildlife conservation reasons for approving such leases.

Under KRS 56.463, FAC has the duty to approve such leases when in the best interests of the Commonwealth. Neither SB 217 nor SB 241 provides FAC with grounds for refusing to consider the Department's request to lease some of the real property it owns or manages. Having received an appropriate request, FAC is obliged to consider and act upon it.

Daniel Cameron
Attorney General
Aaron J. Silletto
Assistant Attorney General