Could a Terrebonne water district pay to build a waterline serving private commercial lots as an economic-development project?

Plain-English summary

Terrebonne's water district was asked to help build a line serving land that a private owner expected to divide into commercial lots. The parish government would pay $50,000 or half the cost; the district would cover the rest, despite its usual policy requiring developers to pay for new lines. In Opinion 03-0345, the AG said the district could not use its funds for this proposed project. The office found no law obligating or authorizing the water district to spend money entrusted for its public water system on economic development.

The proposed cooperative endeavor with Terrebonne Parish did not supply the missing authority. The opinion relied on La. Const. Art. VII, Sec. 14 and the cited City of Port Allen decision: a public purpose alone did not permit a political subdivision to give away something of value when it had no legal obligation to do so.

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

Water district officials

The district's money was entrusted for operation of a public water distribution system. The AG said its research found no authority or duty for this district to fund the proposed economic-development line serving private interests. The opinion's conclusion applied even with the parish paying part of the cost.

Parish and developer

The contemplated parish cost share and a waterline right-of-way from the landowner were part of the request. Neither changed the AG's conclusion about the water district's share. The opinion did not decide a different project funded entirely by the parish or developer.

Common questions

Would a parish contribution make the district's spending lawful?

No on these facts. The AG said the district could not use its funds for this line whether or not it cooperated with Terrebonne Parish.

Was economic development by itself enough justification?

No. The AG said a public purpose did not remove the need for legal authority or obligation to spend district funds. Its footnote also mentioned a public benefit proportionate to the cost.

Did the opinion prohibit all waterline extensions?

It addressed this proposed line for private commercial lots and the district's proposed economic-development funding. It did not decide every future extension of a public water system.

Background and statutory framework

La. Const. Art. VII, Sec. 14(A) generally restricted donations of public funds and property. The AG cited City of Port Allen v. Louisiana Mun. Risk, 439 So.2d 399 (La. 1983), for the rule concerning giving up value without a legal obligation. It applied that rule to funds held for the district's water-distribution work. The opinion's footnote added that a lawful public expenditure also needed a public purpose and a public benefit proportionate to cost.

Citations and references

• La. Const. Art. VII, Sec. 14(A): public-funds restriction.
• City of Port Allen v. Louisiana Mun. Risk, 439 So.2d 399 (La. 1983): legal-obligation principle cited by the AG.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/03-0345

Original opinion text

One American Place
301 Main Street, Suite 600
DEPARTMENT OF JUSTICE
P.O. Box 94005
CIVIL DIVISION
TEL.: (225) 342-7013
BATON ROUGE
FAX: (225) 342-2090

RICHARD P. IEYOUB
70804-9005
ATTORNEY GENERAL

DEC 0 4 2003
Opinion Number 03-0345

90-A-2 PUBLIC FUNDS- Loan Pledge or Grants
Mr. Robert Prejeant, Attorney
172-A WATER DISTRICTS

Terrebonne Parish Consolidated La, Const, Art. VII, Sec. 14 prohibits Terrebonne Parish
Waterworks District No. 1
Consolidated Waterworks District No. 1 from utilizing its
P. O. Box 669
funds for the construction of a waterline intended to
serve private interests, whether or not the project is
Houma, Louisiana 70361-0669
undertaken in cooperation with the Terrebonne Parish
Consolidated Government.
Dear Mr. Prejeant:

Reference is made to your request, on behalf of Terrebonne Parish Consolidated Waterworks District No. 1 (’~2Vaterworks"), for an Attorney General’s opinion regarding the use of Waterworks funds for construction of a waterline which will serve property expected to be subdivided by its private owner, for sale as commercial lots.

You letter indicates that it is the long-established policy of Waterworks to require real estate developers and other sub-dividers of property to bear the expense of the installation of water mains or lines to newly developed or subdivided areas. In spite of this policy, it has been suggested that Waterworks install the waterline in question, which will run adjacent to an existing road right-of-way and within a waterline installation right-of-way which is expected to be granted by the landowner/developer, pursuant to a cooperative endeavor with the Terrebonne Parish Consolidated Government ("Terrebonne"), in the interest of economic development. It is our understanding that the terms of the proposed cooperative endeavor will require Terrebonne to provide either $50,000.00 or half of the project costs associated with the installation of the waterline. It is assumed that any costs of the proposed waterline installation project which are not borne by Terrebonne will be paid by the District, with District funds.
Specifically, the question to be addressed by this office is whether or not Waterworks may engage in the proposed construction project for installation of the waterline, the expenses for which will be shared by Waterworks and Terrebonne, in order to provide economic development to the area where the property to be developed is located.

As your letter indicates, you are aware that the questioned presented by your request must be addressed in light of the provisions of La. Const. (1974) Art. VII, Se¢. 14, which contains the constitutional standard for the lawful use of public funds and property. La. Const. Art. VII, Sec. 14(A) generally prohibits the state and its political subdivisions from loaning, pledging or donating public funds, assets or property to persons, associations or corporations, public or private.

This office has long recognized the caution which must be exercised in the expenditure of public funds. Historically, the Attorney General has followed the Louisiana Supreme Court’s interpretation of La. Const. Art. VII, Sec. 14, as set forth in City of Port Allen v. Louisiana Mun. Risk, 439 So.2d 399 (La. 1983), wherein the Court states: "...this

Page 2

Opinion Number 03-0345
Mr. Robert Prejeant, Attorney
Terrebonne Parish Consolidated
Waterworks District No. 1
Page -2-

Section is violated whenever the state or a political subdivision seeks to give up something of value when it is under no legal obligation to do so." The previous opinions of this office recognize that the requirement of a legal obligation to expend public funds or use public property is the threshold predicate for the constitutionality of an expenditure or use." Pertinently, in City of Port Allen, supra, the Court stated: "...even if political subdivisions cooperate for a public purpose, they still may not give away their assets to other political subdivisions, the United States government or public or private associations or corporation or to individuals merely for a public purpose’." See also: Attorney General’s Opinions Nos. 02-0125 and 01-0389.

It is our understanding that the proposed waterline installation project is to be undertaken by Waterworks in the interest of economic development; however, this office is not aware of, nor did our research reveal, any provision of law which would obligate or authorize a waterworks district to engage in economic development, or to utilize the public funds entrusted to it for operation of a public water distribution system for economic development. As such, we are constrained to opine that La, Const, Art. VII, Sec. 14 prohibits Terrebonne Parish Consolidated Waterworks District No. 1 from utilizing its funds for the construction of a waterline intended to serve private interests, whether or not the project is undertaken in cooperation with the Terrebonne Parish Consolidated Government. In accord: Attorney General’s Opinion No. 00-57, which determined that a consolidated gravity drainage district could not use public funds entrusted to it for drainage purposes for economic development. Attorney General’s Opinion No. 97-408, which determined that a school board could not lease property it owned for a nominal rent, even in the interest of economic development, because school boards are not authorized or obligated to engage in economic development.

We trust the foregoing to be helpful. Please do not hesitate to contact this office if we can be of assistance in other areas of the law.

Yours very truly,

RICHARD P. IEYOUB
Attorney General

RPI/JMZB/dam

~ Although the requirement of a legal obligation is the threshold predicate for the constitutionality of an expenditure of public funds, it is not, the only predicate. The expenditure must also be for a public purpose and create a public benefit proportionate to its cost. Attorney General’s Opinion No. 90-63.