Did Simmesport need a voter election or public bids to sell its municipal natural-gas system?

Plain-English summary

Simmesport asked how it could sell its town-owned natural-gas system and whether it had to solicit public bids. In 2005, the Attorney General said the town could sell to a public or private buyer, but had to follow the applicable utility-sale statutes. The distinction between buyers mattered: La. R.S. 33:4341 required a favorable electorate vote for the sale the AG described, while subsection B dispensed with that election if the system was sold to another public entity.

For a nonpublic buyer, La. R.S. 42:7.3 required a written proposal introduced at an open meeting, publication of notice, waiting periods, disclosure of the proposed contract and purchase history, and a public hearing before consideration. For an election-required sale, La. R.S. 33:4346 then required an ordinance directing execution of the sale after a favorable vote. The AG read these statutes together and concluded a separate public-bid process was unnecessary because the utility-sale scheme incorporated protections such as notice, a chance to be heard, and appraisal. The conclusion did not dispense with the statute's own proposal and public-process requirements.

Currency note

This opinion was issued in 2005. 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

Did voters have to approve a sale to a private buyer?

The AG said a favorable electorate vote was required under La. R.S. 33:4341 for the sale it analyzed. It identified a specific exception when the town sold to another public entity.

Could the town sell the system to another public body without an election?

The opinion said La. R.S. 33:4341(B) dispensed with the election requirement for a sale to another public entity. It did not treat that exception as permission to ignore other applicable sale rules.

Did Simmesport have to use a separate public-bid process?

The AG said no. It viewed the gas-utility sale statutes as incorporating the public-protection features of bidding, making a second formal bid process duplicative.

What process did the AG identify for a private proposal?

The opinion cited a written proposal at an open meeting, published notice, a public hearing, access to contract and transaction-history documents, and statutory waiting periods before action. It said the town could not adopt the proposal at the meeting where it was first introduced.

Background and statutory framework

The mayor asked whether sale required an ordinance and public hearing or a citizen vote, and whether bids at an appraised value were needed. The AG read La. R.S. 33:4341, La. R.S. 42:7.3, and La. R.S. 33:4346 together. It distinguished the public-buyer election exception from the nonpublic-buyer proposal process and concluded the specialized gas-utility sale statutes made a separate public-bid procedure unnecessary.

Citations

• La. R.S. 33:4341 (sale authority and electorate-vote rule, with public-buyer exception).
• La. R.S. 42:7.3 (nonpublic proposal, notice, hearing, and disclosure process).
• La. R.S. 33:4346 (ordinance after election approval).

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/05-0341

Original opinion text

November 9, 2005
OPINION No. 05-0341

167-B – Utilities – Public

La. R.S. 33:4341
La. R.S. 42:7.3, et seq.
La. R.S. 33:4346

Honorable James T. Fontenot A town may sell its Natural Gas System to a public or non-public entity, but certain requirements as set forth in La. R.S. 33:4346 Mayor, Town of Simmesport and La. R.S. 42:7.3 must be met. The town does not have to be
Post Office Box 145
let out public bids because the Revised Statutes pertaining to the
Simmesport, Louisiana 71369 sale or lease of gas utilities encompass and incorporate the protections codified in the public bid law.

Dear Mayor Fontenot:

Your request for an Attorney General’s Opinion concerning the sale of the Natural Gas System (“the system”) of the Town of Simmesport has been referred to me for review and response. More specifically, you request answers to the following questions:

(1) Must the sale of the system take place by ordinance with a public hearing or must it be put to a vote by the citizens of Simmesport to decide?

(2) Must the proposed sale be let out for bids by acceptance at an appraised value of the system?

The Legislature has enacted several different statutes to deal with the sale of publicly- owned utilities. Among others, these statutes – La. R.S. 33:4341, La. R.S. 42:7.3 and La. R.S. 33:4346 -- must be read in pari materia to determine what the Legislature intended to occur in the case of the sale of a public utility. La. R.S. 33:4341 authorizes the sale or lease of revenue producing utilities. La. R. S. 42:7.3 deals with the features a proposal must contain in order for a non-public entity to sell natural gas to a public body or to assume operation or acquire ownership of a gas utility which a public body owns. La. R.S. 33:4346 concerns the disposition of the gas utility after its sale has been approved.

Must the sale of the system take place by ordinance with a public hearing or must it be put to a vote by the citizens of the Town of Simmesport?

Pursuant to La. R.S. 33:4341, Simmesport may sell its Natural Gas System for a term not to exceed sixty years after it has first received a favorable vote from the electorate.

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Honorable James T. Fontenot
Mayor, Town of Simmesport
OPINION No. 05-0341
Page 2

La. R.S. 33:4341 B. dispenses with the election requirement if the Town of Simmesport sells its system to another public entity.

La. R.S. 42:7.3 A. defines “gas utility” as “any revenue producing business or organization which is owned or operated by a public body, and which regularly supplies the public with natural gas at retail.” This statute applies to the Natural Gas System of the Town of Simmesport because the system is a revenue producing asset of the Town of Simmesport and because it supplies the public with natural gas at retail.

Before Simmesport can accept a proposal from a non-public entity for the purchase of its Natural Gas System, the proposal must comply with the requirements set forth in Section B. of La. R.S. 42:7.3. These requirements are self-explanatory and read as follows:

B. Prior to consideration or action by a public body to accept a proposal by a nonpublic entity to sell natural gas to a public body for use in its gas distribution system sales to retail customers for a term exceeding twelve months including rollovers or extensions, or to assume operation or acquire ownership of, a gas utility being operated or owned by the public body, the proposal shall:

(1) Be introduced, in writing, at an open meeting of the public body.

(2) Not be considered by the public body until notice of the proposal has been published in the official journal of the public body and at least thirty days has lapsed after the introduction of the proposal.

(3) Include a written report of the most recent five year history of the sale of natural gas to similar public bodies for use in gas distribution system sales to retail customers for a term exceeding twelve months including rollovers or extensions by the nonpublic entity if the entity is seeking to sell natural gas to a public body for use in its gas distribution system sales to retail customers for a term exceeding twelve months including rollovers or extensions to the public body or a five-year history of the purchase price of other gas utilities operated or owned by a public body paid by the nonpublic entity if the entity is seeking to assume operation or acquire ownership of the utility. A copy of the report shall be provided to all members of the public body and be available to the public.

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Honorable James T. Fontenot
Mayor, Town of Simmesport
OPINION No. 05-0341
Page 3

(4) Include any written contract or agreement proposed between the nonpublic entity seeking to sell natural gas to a public body for use in its gas distribution system sales to retail customers for a term exceeding twelve months including rollovers or extensions to, or assume operation or acquire ownership of, the gas utility and the public body. A copy of the contract or agreement shall be provided to all members of the public body and be available to the public.

The statute contains other requirements as well. Section C of La. R.S. 42:7.3 provides that the public shall be given notice of the proposal and that the notice shall contain the time and place where the public body will consider the proposal. The provisions of Section D state that a public hearing must be held before the proposal can be considered and prohibits the adoption of any proposal at the original meeting at which it is introduced. Any amendment or revision to the proposal must go through the same process as required for the original contract under Section E. Section E further mandates that the public body shall not be allowed to consummate the terms of the revised contract until 30 days have elapsed since the public first received notice of the revision.

It is also worth noting that La. R.S. 33:4346 provides that if the majority of the people in the election, as required by La. R.S. 33:4341, vote in favor of the sale, “the governing authority shall, not earlier than thirty days nor later than sixty days after the promulgation of the result, pass an ordinance ordering the appropriate executive officer to make the sale. …”

In summary, the Town of Simmesport may sell its Natural Gas System to a public or non-public entity, but the Town must meet certain requirements as set forth in La. R.S. 33:4341, La. R.S. 33:4346 and La. R.S. 42:7.3. The buyer’s proposal must first be reduced to writing and introduced at an open meeting of the City Council as well. The buyer must give the appropriate public notice of the sales proposal. After the proposal has gone through these steps, it must be placed on the ballot pursuant to La. R.S. 33:4341. Finally, upon a favorable vote of the electorate, the Town must pass an ordinance ordering the appropriate executive officer to execute the sale pursuant to the provisions of La. R. S. 33:4346.

Must the proposed sale be let out for bids by acceptance at an appraised value of the system?

It is the opinion of this office that the sale of the Natural Gas System of the Town of Simmesport does not have to be let out for public bid. The public bid system provides certain protections to the public for the sale or lease of public property including gas

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Honorable James T. Fontenot
Mayor, Town of Simmesport
OPINION No. 05-0341
Page 4

utilities. These protections include notice, an opportunity to be heard, fair market appraisal of the thing to be sold and equal and fair treatment of competitors in the bid process. The Revised Statutes pertaining to the sale or lease of gas utilities encompass and incorporate these very protections. To mandate that bids be let after compliance with the statutory requirements set forth above would be unnecessarily duplicative. Thus, the salient features contained within the public bid law apply to the sale of gas utilities under the terms of the Revised Statutes, even though such sales do not have to be let out for public bid.

We hope that this sufficiently answers your inquiry, but if we can be of any further assistance, please do not hesitate contact us.

Yours very truly,

CHARLES C. FOTI, JR.
ATTORNEY GENERAL

By:_________
Christopher D. Matchett
Assistant Attorney General

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OPINION NO. 05-0341

167-B – Utilities – Public

La. R.S. 33:4341
La. R.S. 42:7.3, et seq.
La. R.S. 33:4346

A town may sell its Natural Gas System to a public or non-public entity, but certain requirements as set forth in La. R.S. 33:4346 and La. R.S. 42:7.3 must be met. The town does not have to be let out public bids because the Revised Statutes pertaining to the sale or lease of gas utilities encompass and incorporate the protections codified in the public bid law.

Honorable James T. Fontenot
Mayor, Town of Simmesport
Post Office Box 145
Simmesport, Louisiana 71369

Date Received: 08/24/05
CHRISTOPHER D. MATCHETT
Assistant Attorney General
Date Released: November 9, 2005