Could the Terrebonne port lease or sell a publicly owned shipyard to its private operator for a nominal price?

Plain-English summary

The Terrebonne Parish Port Commission was discussing a shipbuilding facility with a private company. The company would donate nearby land; the port would issue taxable revenue bonds to build the facility and lease it back to the company. The proposed terms included a nominal rent after the bonds were paid and an option to buy for the bond payoff amount during the lease or a nominal amount later. In 2005, the Attorney General said the port could not lease or sell its property for a nominal amount or below fair market value.

The AG acknowledged the port's statutory powers to acquire land and build facilities but applied the Louisiana Constitution's prohibition on donating public property. It treated a below-market lease or sale of the port-owned facility as a donation to the private lessee or buyer. The opinion did not determine a particular market valuation or approve a different transaction; it resolved the proposed discounted pricing as described.

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

Could the port reduce rent to a nominal amount after its bonds were paid?

The AG said no. It viewed a nominal lease price for the port-owned facility as a donation of public property to the private operator.

Could the company buy the facility for only the outstanding bond payoff?

The opinion rejected a sale below fair market value, including the proposed option to buy for bond payoff during the lease if that price was below market value.

Did the company's donation of land permit a below-market deal later?

The AG described the proposed land donation but still concluded that the port-owned facility could not be leased or sold for nominal or below-market consideration under the constitutional restriction it applied.

Background and statutory framework

The proposed transaction involved a private shipbuilding company and a port facility financed through taxable revenue bonds, with rent expected to service the debt. The AG identified the port as a political subdivision under La. R.S. 34:2201-2205 and cited its facility powers under La. R.S. 34:2203. It then applied La. Const. Art. VII, Sec. 14(A)'s ban on donating public property to the proposed lease and purchase prices.

Citations

• La. Const. Art. VII, Sec. 14(A) (public-property donation restriction quoted in the opinion).
• La. R.S. 34:2201-2205 (Terrebonne port authority statutes identified by the AG).
• La. R.S. 34:2203 (port land and facility powers).

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/05-0346

Original opinion text

October 18, 2005
OPINION NUMBER 05-0346
90-B-A PUBLIC FUNDS & CONTRACTS
90-B-3 PUBLIC LANDS
La. Const. Art. VII, Sec. 14(A);
Honorable Reggie P. Dupre, Jr.
R.S. 34:2201-2205
Louisiana State Senator, District 20 Port may not lease or sell port property for a nominal
P.O. Box 3893
amount or for less than appraised fair market value
Houma, LA 70361
without violating constitutional prohibition of donation of
public funds.

Dear Senator Dupre:

You have requested the opinion of this office on the following issues:

1. Can the board of commissioners of the Terrebonne Parish Port Commission in Houma (Port) sell or lease real estate that the Port owns at a nominal price or at a price that is less than the appraised fair market value without violating Article VII, Section 14 of the Louisiana Constitution?

According to your request, the Port is engaged in discussions and negotiations with a national shipbuilding firm (National) that owns property in the immediate vicinity of the Port property. The parties are considering a transaction which would have National donate land to the Port who would issue taxable revenue bonds to be used to construct a shipbuilding facility (Facility) and other infrastructure improvements upon the donated property. Upon completion, the Facility would become the property of the Port who would then lease the Facility to National under a long term lease, the rental income being used to satisfy the bond obligation. National has requested that after the bond obligation has been meet that the rental rate be reduced to a nominal amount. National has also requested the right to purchase the property at any time during the term of the lease for the cost of paying off the bonds, or thereafter for a nominal amount.

In response to this question, we would point out that the Terrebonne Parish Port Commission was organized pursuant to La. R.S. 34:2201-2205. La. R.S. 34:2201 designates the Port as a political subdivision of the state. Pursuant to La. R.S. 34:2203 the Port was given the power to purchase and acquire lands and to purchase, acquire and construct facilities necessary to carry out its responsibilities in the operation of a port.

Although the Port is given broad powers in carrying out its duties and responsibilities, this does not mean that there are no limitations on what amount may be charged for the rental of port property or the amount that must be obtained in the sale of port property. The board of commissioners is required to act prudently and responsibly when entering into a negotiated lease agreement or in deciding to sell port property.

Page 2

Opinion Number 05-0346
Honorable Reggie P. Dupre, Jr.
State Senator, District 20
Page -2-

Article VII, Sec. 14(A) of the Louisiana Constitution provides, in pertinent part:

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 to or for any person, association, or corporation, public or private.

You have asked whether the Port may rent or sell the Port owned Facility for a nominal amount or lease the Facility, at any point during the lease term to National, for less than fair market value or sell the Facility to National for less than fair market value. We would view a lease or sale of the Facility at a nominal amount or a lease or sale of the Facility for an amount less than the fair market value for such property to constitute a donation of funds by the Port to the lessee or buyer and therefore a violation of the above quoted constitutional provision.

I trust this addresses your concerns. Please contact us if we can be of further assistance.

Yours very truly,

CHARLES C. FOTI, JR.
ATTORNEY GENERAL

BY: ___
RICHARD L. MCGIMSEY
Assistant Attorney General

CCF, Jr/RLM:dam

Page 3

OPINION NUMBER 05-0346

90-B-A PUBLIC FUNDS & CONTRACTS
90-B-3 PUBLIC LANDS
La. Const. Art. VII, Sec. 14(A);
R.S. 34:2201-2205

Port may not lease or sell port property for a nominal amount or for less than appraised fair market value without violating constitutional prohibition of donation of public funds.

Honorable Reggie P. Dupre, Jr.
Louisiana State Senator, District 20
P.O. Box 3893
Houma, LA 70361

DATE RECEIVED:

DATE RELEASED: October 18, 2005

RICHARD L. MCGIMSEY
ASSISTANT ATTORNEY GENERAL