Could a Louisiana drainage district spend leftover construction-bond money on canal maintenance?

Plain-English summary

Lafourche Parish Drainage District #1 had more than $19,000 left after paying off its general-obligation bonds. It asked whether it could spend the balance on canal cleaning and equipment for regular drainage work. The Attorney General said the money should be returned proportionately to taxpayers if that was practical.

If the expense of making refunds made that impractical, the AG said the surplus could be moved to the general fund for a purpose similar to the bonds' authorized purpose. Because these bonds financed capital construction, remaining funds had to be used for a capital purpose. Maintenance of the drainage system did not qualify.

Currency note

This opinion was issued in 2002. 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.

Common questions

Could the district spend the surplus on routine canal cleaning?
The AG said no. It treated maintenance as different from the capital construction purpose of the bonds.

What did the opinion prefer for leftover bond money?
A pro-rata return to taxpayers, if practical. The opinion allowed a similar capital use if refund expenses made a return impractical.

Could the money go into the general fund?
The AG said it could be transferred there when a refund was impractical, but still had to be spent for a purpose similar to the original capital bond purpose.

Background and statutory framework

The district reported that increased taxes shown on the 2002 rolls covered its remaining bond balance, which it retired in March 2002. The opinion applied earlier AG guidance about surplus general-obligation bond funds and distinguished capital construction from ongoing maintenance. It did not identify a new statutory provision governing this particular surplus.

Citations and references

• Prior AG Opinions 83-707, 88-281, 88-407, 88-566, 93-294, and 94-200, cited in the opinion

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/02-0221

Original opinion text

DEPARTMENT OF JUSTICE
One Arner~can PEace
301 Ma~n Street, Suite 600
CIVIL DIVISION
P.O. Box 94005
BATON ROUGE
TEL.: (225) 342-7013
FAX: (225) 342-2090
RICHARD P. IEYOUB
70804-9005
ATTORNEY GENERAL

SEP 13 2002
OPINION NUMBER 02-0221

8-1 BONDED - Indebtedness
8-A BOND ISSUE - Political subdivisions

Mr. Leroy A. Martin
Surplus funds attributable to general obligation bonds should be,
Secretary Treasurer
if practicable, returned to the taxpayers. If that is not practical,
the funds should be used for a purpose similar to that for which Lafourche Parish Drainage District #1 the bonds were issued.
150 West 214 St.
Galliano, LA 70354

Dear Mr. Martin:

On behalf of the Lafourche Parish Drainage District #1 (the "District"), you requested the opinion of this office concerning the permissible use of monies remaining after the payment in full of the general obligation bonds of the District. You advised that in 2002, the Lafourche Parish tax rolls showed an increase in taxes for the District to the extent that there were sufficient monies to pay the outstanding balance of the District’s general obligation bonds. The last bond was retired on March 20, 2002, leaving a surplus of over $19,000. Your question is whether these funds can be used for the District’s regular duties to provide drainage, such as cleaning canals and buying and maintaining equipment to accomplish these tasks.

It has been the long-standing opinion of this office that surplus funds attributable to a general obligation bond issue should be, if practicable, returned on a pro rata basis to the taxpayers. If the expenses of a pro rata return make such an alternative impractical, the funds should be transferred to the general fund to be used for a purpose similar to that for which the bonds were authorized.
Since the bonds were issued for capital construction, the surplus, if not returned to the taxpayers, should be used for a capital purpose. Use of the funds for maintenance of the system would not be a similar purpose and thus would not be an acceptable use. Ops.Atty.Gen. 83-707; 88-281; 88- 407; 88-566; 93-294; 94-200

Trusting this adequately responds to your request, we remain

Very truly yours,

RICHARD P. IEYOUB
ATTORNEY GENERAL

BY:
ESS
Attorney Gen~
RPI:MSH:jv