Could Natchitoches give land to a private developer through an industrial-incubator agreement?

Plain-English summary

Natchitoches proposed supplying land for two industrial-incubator facilities that a private entity would build. The entity would also help attract new industry, and the city would transfer part of the land to it in return. In Opinion 03-0076, the Louisiana Attorney General said the described cooperative-endeavor agreement could be constitutional. His answer depended on the city's legal authority to undertake industrial-park development, a public purpose, and a public benefit proportionate to the value of what the city gave up.

The AG identified statutory authority for the city to create and develop industrial-park projects. He said the expenditure served a public purpose and assumed the proportional-benefit condition was met. The letter did not value the land or facilities itself.

Currency note

This opinion was issued in 2003. 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 the opinion meant at issuance

Natchitoches officials

The opinion allowed the described land-for-facilities arrangement only on its stated legal and value assumptions. It did not say the constitutional permission for cooperative endeavors erased the ban on donating public property.

Private development partners

The private entity would build the facilities and provide industry-attraction services in exchange for a portion of city land. The AG's answer was tied to that exchange and the assumed proportional public benefit.

Common questions

Q: Did the AG say any economic-development land transfer was valid?
A: No. He required an underlying legal basis, a public purpose, and public benefit proportionate to the public cost.

Q: Did the AG calculate whether Natchitoches received enough value?
A: No. He expressly assumed the public benefit was proportionate to the expenditure.

Background and statutory framework

The AG discussed Article 7, Section 14 of the Louisiana Constitution and its provision allowing cooperative-endeavor agreements without permitting donations of public property. He cited La. R.S. 38:130.52 for the city's industrial-park authority and City of Port Allen v. Louisiana Municipal Risk Agency, 439 So.2d 399, in a footnote. The source gives no readable issue date beyond the opinion number.

Citations and references

Authorities in the opinion: Louisiana Constitution Article 7, Section 14; La. R.S. 38:130.52; City of Port Allen v. Louisiana Municipal Risk Agency, 439 So.2d 399.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/03-0076

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

DEPARTMENT OF JUSTICE
One American Place
301 Main 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

Opinion Number 03-0076

71 Municipalities
Mr. Randy S. LaCaze, Director
90-A-1 Public Funds & Contracts
Office of Community Development
Article 7, Section 14 of Louisiana Constitution
City of Natchitoches
La. R.S. 38:130.52

P.O. Box 37
City of Natchitoches may enter into cooperative endeavor
Natchitoches, LA 71458-0037
agreement with private entity to attract and foster new
industry.

Dear Mr. LaCaze:

The City of Natchitoches is considering entering into a cooperative endeavor agreement with a private entity for the purpose of attracting and fostering new industry in the City.
The agreement provides that the City will supply the property upon which two incubator facilities will be constructed by the private entity. The entity will further provide its services to attract new industry and in consideration, the City will transfer a portion of the land to the entity. You question if this agreement is constitutionally sound.

In short, we believe the agreement to be constitutionally sound. Article 7, Section 14 of the Louisiana Constitution prohibits the donation of funds, property, or any thing of value of the state or one of its political subdivisions to or for any person or corporation.
There are some exceptions to this prohibition, i.e. the use of public funds for programs for social welfare for the aid and support of the needy and contributions of public funds to pension and insurance programs for public employees. Subsection C of this Article specifically allows the state and its political subdivisions to enter into cooperative endeavor agreements with each other or with public or private associations or corporations. Subsection C is not an exception to the prohibition of donating public funds or property.1 A constitutionally sound cooperative endeavor agreement must meet a three pronged test: first, there must be a legal obligation to expend the funds; the expenditure must be for a public purpose; and, the expenditure must create a public benefit that is proportionate to its cost. Our office has interpreted legal obligation to mean that there is some underlying authority for the expenditure.

The City is authorized to create and develop industrial park projects to promote industrial development.2 The expenditure serves a public purpose and assuming that the public benefit received from the expenditure is proportionate to its cost, the agreement is in compliance with the constitution.

City of Port Allen v. Louisiana Municipal Risk Agency, 439 So.2d 399 (La. 1983).
La. R.S. 38:130.52.

Page 2

Opinion Number 03.0076
Mr. Randy S. LaCaze, Director
Office of Community Development
City of Natchitoches
Page -2-

We trust that this adequately responds to your request. If you have any questions or
comments, please do not hesitate to contact our office.

Yours very truly,

RICHARD P. IEYOUB
Attorney General

BY:
TINA VICARI GRANT
Assistant Attorney General

RPI/TVG/dam