Could the Iberia Parish Airport Authority lease a grant-funded storage facility to a private manufacturer for nominal rent?

Plain-English summary

The Iberia Parish Airport Authority proposed to use an economic-development grant to build a storage tank facility and related road and rail access, then lease the facility for a low rent to a vinegar manufacturer. In Opinion 03-0397, the Louisiana AG said the authority had legal power to make the arrangement if it determined that the company's presence in its industrial park would produce enough positive public and authority benefit to justify the inducement.

The AG treated Louisiana's constitutional industrial-inducement provision as an exception to the general ban on donating public property or value. The letter did not itself make the required local benefit finding; it conditioned its approval on the authority's determination.

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

Airport authority members

The AG identified statutory authority to acquire and improve an industrial-park site and lease a facility to an enterprise locating there. The proposed nominal rent depended on the authority's own determination that the expected positive economic impact justified the inducement.

Businesses leasing airport industrial property

The opinion addressed a particular facility proposed for Louisiana Specialty Products. The request reported that new jobs and economic-development benefits had been suggested to the authority as reasons for the low rent. The AG left it to the authority to determine whether the economic impact justified the inducement.

Common questions

Could the airport authority charge only a low land-based rent for the improved facility?

The AG said the proposed arrangement was authorized if the authority found sufficient positive economic impact to justify the industrial inducement.

Did the public-funds donation ban automatically prohibit the lease?

The AG said La. Const. Art. VI, Sec. 21 supplied an industrial-inducement exception to the general restriction in La. Const. Art. VII, Sec. 14 for this type of arrangement.

Who decided whether the economic benefit was sufficient?

The AG's conclusion was conditional on a determination by the airport authority. The letter did not calculate the project's value or make that finding for it.

Background and statutory framework

The authority operated Acadiana Regional Airport and an adjoining industrial park. It planned to sell one site to Louisiana Specialty Products at its appraised value and use a state economic-development grant to build a separate storage tank facility, road, and rail spur. The proposed lease gave the company exclusive use of the facility at a base rent for raw land, without a separate charge for grant-funded improvements.

La. Const. Art. VI, Sec. 21 addressed industrial inducements by political subdivisions. LSA-R.S. 2:331 gave airport authorities power to lease industrial sites and buildings; LSA-R.S. 33:4717.2 allowed consideration of economic impact in setting transfer consideration. The AG read these authorities alongside La. Const. Art. VII, Sec. 14's public-property restriction.

Citations and references

• La. Const. Art. VI, Sec. 21: constitutional industrial-inducement authority.
• LSA-R.S. 2:331: airport authority industrial-park and leasing powers.
• LSA-R.S. 33:4717.2: consideration of economic impact in industrial property transfers.
• La. Const. Art. VII, Sec. 14: general restriction on donating public property or value.
• Attorney General Opinion 02-0304: earlier interpretation cited by the AG.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/03-0397

Original opinion text

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

P~ICHARD P. IEYOUB
70804-9005
ATTORNEY GENERAL

November 7, 2003
Opinion Number 03-0397

1-B AERONAUTICS
90-A-1 PUBLIC FUNDS & CONTRACTS
Mr. Jacques Cousin
Assistant District Attorney
Addresses issues raised by the Iberia Parish
Sixteenth Judicial District Airport Authority regarding economic
inducement and a proposed lease of a storage
Courthouse Building, Suite 200
tank facility to Louisiana Specialty Products, Inc.
300 Iberia Street
New Iberia, Louisiana 70560-4583

Dear Mr. Cousin:

This office is in receipt of your request for an Attorney General’s opinion on behalf of the Iberia Parish Airport Authority (the "Authority").

According to your correspondence, the Authority is the operator of the Acadiana Regional Airport located in Iberia Parish, Louisiana. You further advise that the airport property operated by the Authority includes an airfield and several hundred surrounding acres, some of which has been developed into an Industrial Park.

It is our understanding that the Authority has agreed to sell, for cash, a particular site within the Industrial Park, consisting of 2.27 acres, to Louisiana Specialty Products, Inc.
("LSP") at the appraised value of $50,000. LSP is expected to build a vinegar production plant upon that site. The subject of your inquiry is however, an adjoining tract of land, upon which LSP proposes to operate a storage facility as part of its vinegar production business.

It is expected that construction of the storage tank facility, to be undertaken by the Authority, will be funded entirely with a grant from the Louisiana Economic Development Corporation, acting through the Louisiana Department of Economic Development ("LED"). It is also expected that in addition to the storage facility, the grant money will also be utilized to construct a new asphalt roadway and a railroad track spur to service the storage tank facility. The Authority will then lease the Storage tank facility to LSP, for its exclusive use.

You advise that the Authority proposes to lease the storage tank facility to LSP at an initial rental of $768 per year ($0.04 per square foot), the standard base rental rate charged by the Authority for raw land at the airport, for the first seven (7) years of the lease term, with two five (5) year options to renew, for the same annual consideration.

Page 2

Opinion Number 03-0397
Mr. Jacques Cousin
Assistant District Attorney
Sixteenth Judicial District
Page -2-

The Authority proposes to charge no rental on the improvements to be constructed with the LED grant.

It has been suggested to the Authority that the proposed creation of 23 new jobs within three years (as will be required of LSP in the grant agreement by and between LED, LSP and the Authority) as well as the economic development benefits expected by virtue of having LSP locate its operations at the Industrial Park, will create a substantial benefit to the public, and presumably to the Authority, justifying the lease of the storage tank facility for a nominal consideration.

Specifically, on behalf of the Authority, you request our opinion as to the legality of the Authority’s proposed arrangement with LSP, particularly in light of LA. Const. Art. VII, Sec. 14.

In connection with your inquiry, we call your attention to the following provisions of law.

La. Const. Art. Vl, Sec. 21 pertinently provides that "... in order to induce and encourage the location of or addition to industrial enterprises therein which would have economic impact upon the area and thereby the state...the legislature may by law authorize subject to restrictions it may impose, any political subdivision" to acquire and improve "industrial plant buildings and industrial plant equipment, machinery, furnishings, and appurtenances" and to "sell, lease, lease purchase, or demolish all or any part of the foregoing".

Pertinently, LSA-R.S. 2:331 provides airport districts and authorities with the authority to acquire and improve land for industrial parks, to construct or improve industrial plant buildings, and to "...lease, by suitable and appropriate contract, to any enterprise locating or existing within such airport district, commission, board or airport authority, a plant site, appurtenances and plant building or buildings, either, both or severally."

Also pertinent to your inquiry is LSA-R.S. 33:4717.2, which in part, grants political subdivisions of the state which are permitted by law to own land, buildings, or other property for industrial inducement purposes, the authority to sell, lease or otherwise dispose of all or any part of industrial plant site, building, port, harbor or terminal facility, or other property owned by the political subdivision. This statute provides that the governing authority of the political subdivision may consider the potential value of the economic impact of the enterprise being induced to locate or expand within the political subdivision, as well as the value of the property involved, in determining the consideration of the transfer.

In our opinion, the above referenced provisions of law provide the Authority with authority to enter into the Authority’s proposed arrangement with LSP, as long as the Authority determines that the location of LSP’s operations within the Authority’s

Page 3

Opinion Number 03-0397
Mr. Jacques Cousin
Assistant District Attorney
Sixteenth Judicial District
Page -3-

Industrial Park will bring about a positive economic impact for the public and the Authority such as is sufficient to justify the industrial inducement to LSP.

We understand your concern that a lease to LSP for a nominal amount could arguably violate La. Const. Art. VII, Sec 14’s prohibition of loans, pledges or donations by political subdivisions to or for any person, association or corporation. However, in our opinion, the industrial inducement provisions of La. Const. Art. VI, Sec. 21, quoted above, provide an exception to La. Const. Art. VII, Sec. 14, in situations involving industrial inducement. La. Const. Art. VII, Sec. 14 pertinently provides: "Except as otherwise provided by this constitution, the funds, credit, property, or things of value of the state or of any political subdivision shall not be loaned, pledged, or donated...". In accord: Attorney General’s Opinion No. 02-0304.

We trust the foregoing to be of assistance. 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

// JE_~INE-MAI~IE ZERI’I~GUE BARHAM
’~ AssiStant Attor~al

RPI/JMZB/dam