Can a Mississippi community college lease land to a private nonprofit without monetary rent if the lessee covers construction, taxes, and maintenance?

Plain-English summary

The Board of Trustees of East Mississippi Community College (EMCC) wanted to enter a long-term ground lease with a private nonprofit corporation. Instead of paying cash rent, the nonprofit would cover all construction costs for a multimillion-dollar facility, all maintenance, all real and personal property taxes, and EMCC would have the right to use part of the facility. The college's attorney asked whether the arrangement satisfied the constitutional prohibition on donations of state lands.

The AG said the answer turns on the adequacy of consideration, a factual call for the EMCC Board of Trustees. The board may count the proposed construction, upkeep, tax payments, and college use rights when it makes that decision. The opinion does not decide that the proposed lease offers adequate consideration.

Two constitutional provisions are in play. Section 95 prohibits donating state land to private corporations or individuals or selling at less than the price set for individuals. Section 66 prohibits the legislature from granting donations except by two-thirds vote.

The lead case is Whitworth College v. City of Brookhaven, 161 F. Supp. 775 (S.D. Miss. 1958), aff'd, 260 F.2d 868 (5th Cir. 1958), where a federal court (not the U.S. Supreme Court) considered the adequacy of consideration of a municipal-property lease to a private college for $1/year plus an obligation to use the property for educational purposes, maintain improvements, and pay fire and tornado insurance. Taking the lease as a whole, the court held the consideration was adequate and the lease was not a Section 95 donation.

The AG's earlier Holleman opinion (April 2, 2010) approved a similar arrangement: Mississippi Gulf Coast Community College leased its building and equipment to USA (a private college) so that MGCCC's students could continue their studies. USA paid for furniture, computers, internet networking equipment ($100,000+), plus $66,000 cash rent in years two and three. The opinion noted that consideration "was not nominal and, in fact, exceeded that in Whitworth," and that for Section 66 purposes, a governmental interest (educational opportunities for residents) was being served, so non-cash consideration could count. The AG cited Craig v. Mercy Hospital-Street Memorial, 45 So. 2d 809 (Miss. 1950) for the rule that noncash consideration may be counted when a governmental interest is served. The board still had to decide whether the total consideration was adequate.

For EMCC, the Legislature had specifically authorized the long-term lease in Senate Bill 3120 (2019 Regular Session), giving the Board of Trustees of EMCC the discretion to enter long-term leases of unimproved real property in Lowndes County for facilities that would "complement the public and educational purposes" of the college. The lease term could not exceed 60 years with one renewal option.

The statute authorizes the described kind of lease. Whether this proposed lease supplies adequate consideration is the Board's factual judgment. The AG said the proposed terms "appears equivalent to or perhaps exceeds" the consideration in Craig and Whitworth, but left the adequacy decision to the Board.

Currency note

This opinion was issued in 2020. 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.

Background and statutory framework

Two constitutional provisions police public-property donations.

Section 95 (Mississippi Constitution): "Lands belonging to, or under the control of the State, shall never be donated directly or indirectly, to private corporations or individuals, or to railroad companies. Nor shall such land be sold to corporations or associations for a less price than that for which it is subject to sale to individuals."

Section 66 (Mississippi Constitution): "No law granting a donation or gratuity in favor of any person or object shall be enacted except by the concurrence of two-thirds of the members elect of each branch of the Legislature, nor by any vote for a sectarian purpose or use."

Federal authority on Section 95 came in Whitworth College v. City of Brookhaven, 161 F. Supp. 775 (S.D. Miss. 1958), affirmed at 260 F.2d 868 (5th Cir. 1958). These citations show federal court action, the "F. Supp." reporter is for federal district courts (Southern District of Mississippi here), and "F.2d" is for the federal courts of appeals (Fifth Circuit). The Mississippi Attorney General is summarizing federal court interpretation of the state constitutional provision. The lease in Whitworth set a token $1/year cash rent plus three additional obligations: use the property for educational purposes only, maintain improvements, pay fire and tornado insurance premiums. The federal court found this entire package was adequate consideration, not a sham donation.

The 2010 Holleman AG opinion built on Whitworth and on Craig v. Mercy Hospital-Street Memorial, 45 So. 2d 809 (Miss. 1950) (a Mississippi Supreme Court decision). Craig stands for the principle that consideration may include non-monetary benefits when a governmental interest is being served. The opinion says the MGCCC-USA arrangement in Holleman served a governmental interest in educational opportunities. It also says that arrangement offered consideration exceeding that in Whitworth, while leaving the donation determination to the MGCCC board.

For EMCC, the Legislature had given specific authority through Senate Bill 3120 of the 2019 Regular Session. That statute authorized the EMCC Board of Trustees, in its discretion, to enter long-term leases of unimproved real property in Lowndes County for facilities that complement EMCC's public and educational purposes. The term limit is 60 years, with one renewal option.

The opinion identifies the specific leasing authority in Senate Bill 3120 and explains that construction, upkeep, taxes, and use rights may be counted as consideration. It leaves the factual question of adequacy to the EMCC Board of Trustees.

Common questions

Q: Does the lessee have to pay cash rent?
A: The opinion permits the Board to consider noncash benefits, including the proposed construction, upkeep, tax payments, and college use rights, when assessing this lease. Whitworth upheld a $1-per-year lease with other obligations, but the EMCC Board must decide whether this lease offers adequate consideration.

Q: Does the opinion tell the Board how to record its adequacy decision?
A: No. It says the Board must decide the factual question of adequate consideration, but gives no voting, minutes, or resolution procedure.

Q: Does the AG determine the value of the proposed consideration?
A: No. The opinion says the proposed terms appear equivalent to or perhaps exceed the consideration discussed in Craig and Whitworth, but leaves the adequacy determination to the EMCC Board.

Q: What leasing authority does this opinion identify?
A: Senate Bill 3120 authorizes the EMCC Board, in its discretion, to lease unimproved property it owns in Lowndes County for the facilities described in the bill. The opinion does not decide what authority the college would have without that bill.

Q: Does an educational purpose alone resolve the donation question?
A: No. The opinion says that when a governmental interest is served, the Board may count noncash benefits in deciding whether a donation results. The Board must still decide whether the total consideration is adequate.

Q: Why does the opinion discuss a federal court case?
A: It cites Whitworth for its assessment of a municipal-property lease under Section 95. That court considered the whole lease, including the tenant's noncash obligations, and found adequate consideration.

Citations and references

Constitutional provisions:

• Mississippi Constitution, Section 66 (no donations of state property/funds without two-thirds legislative vote)
• Mississippi Constitution, Section 95 (no donations of state land to private parties)

Statutes/legislation:

• Senate Bill 3120 (2019 Regular Session) (specific authority for EMCC long-term ground lease)

Cases:

• Whitworth College v. City of Brookhaven, 161 F. Supp. 775 (S.D. Miss. 1958), aff'd, 260 F.2d 868 (5th Cir. 1958), federal court holding that non-cash consideration can satisfy Section 95
• Craig v. Mercy Hospital-Street Memorial, 45 So. 2d 809 (Miss. 1950), Mississippi Supreme Court rule that non-monetary consideration is acceptable when a governmental interest is served

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2020/07/M.Easterling_January-31-2020-Authority-of-Community-College-to-Enter-Into-Lease-with-Private-Corporation.pdf

Original opinion text

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

OPINIONS DIVISION

January 31, 2020

Michelle D. Easterling, Esquire
Attorney for East Mississippi Community College
Post Office Box 835
West Point, Mississippi 39773

Re: Authority of Community College to Enter Into Lease with Private Corporation

Dear Ms. Easterling:

Attorney General Lynn Fitch is in receipt of your opinion request and has assigned it to me for research and reply. In your letter, you explain the Board of Trustees of East Mississippi Community College (hereinafter "EMCC") desires to enter into a long-term ground lease agreement with a private, non-profit corporation, without a specific fair market value rent, but rather with the lessee agreeing to pay all construction costs, ad valorem taxes and maintenance of the building that will be constructed. You have included the proposed lease agreement, which has been presented to the EMCC Board of Trustees for approval.

Questions Presented

1. Notwithstanding your response regarding the matter of the duration of the lease, must EMCC receive fair market value (monetary) lease payments for the private entity's use of the College's property? If so, can the private entity lessee's payment of all construction costs for the building to be erected on such property, payment of all maintenance and upkeep of the building and property, as well as payment of any and all real and/or personal property taxes to the private entity substitute in lieu of, or in exchange for, fair market value compensation for use of the property by the private entity?

2. Would the payments outlined in question #1, together with the College's right to utilize a portion of the facility, be sufficient consideration to avoid any allegation of unconstitutional donation? Specifically, I wish to confirm that by allowing the private entity to construct and maintain the premises at its own expense, pay all real or personal property taxes thereon, and opening the facility to the public, including allowing EMCC certain uses of the facility, that there would be no unconstitutional donation in violation of Miss. Constitution, Article IV, Section 95.

Applicable Law and Discussion

Senate Bill 3120 of the 2019 Mississippi Legislative Session provides:

> The Board of Trustees of East Mississippi Community College District is authorized and empowered, in its discretion, to enter into a long-term lease agreement of any unimproved real property owned by the board that is located in Lowndes County, Mississippi, for the purpose of facilitating the construction of a state-of-the-art multimillion dollar facility which may include a museum, a conference and learning center, classrooms, meeting rooms, a kitchen and/or a catering kitchen and other facilities that will complement the public and educational purposes of East Mississippi Community College. The term of the lease shall not exceed sixty (60) years and may include one (1) renewal option.

The EMCC Board of Trustees has the authority to lease real property for a term not to exceed sixty (60) years, with one renewal option, to a private non-profit corporation for purposes outlined in Senate Bill 3120.

There are two sections of the Mississippi Constitution of 1890 which address prohibited donations of public funds and property. Section 95 provides, in part:

> Lands belonging to, or under the control of the State, shall never be donated directly or indirectly, to private corporations or individuals, or to railroad companies. Nor shall such land be sold to corporations or associations for a less price than that for which it is subject to sale to individuals.

This prohibition was at issue in Whitworth College v. City of Brookhaven, 161 F. Supp. 775 (S.D. Miss. 1958) affirmed 260 F. 2d 868 (5th Cir. 1958), in which the Court considered the adequacy of the consideration of a lease of municipal property by the City of Brookhaven to Whitworth College, a Mississippi corporation. Pursuant to the lease, Whitworth College agreed to (1) pay $1.00 per year to the City, (2) use the property only for educational purposes, (3) maintain improvements to the property, and (4) pay premiums for fire and tornado insurance on the leased premises. Taking the lease in its entirety, the Court found the consideration thereunder as sufficient and therefore did not find the lease to Whitworth College to be a prohibited donation under Section 95, 161 F. Supp. at 779.

Additionally, Section 66 of the Mississippi Constitution likewise prohibits the donation of public funds or property to private entities and reads as follows:

> No law granting a donation or gratuity in favor of any person or object shall be enacted except by the concurrence of two-thirds of the members elect of each branch of the Legislature, nor by any vote for a sectarian purpose or use.

This office has previously opined that leases of public property must be for adequate consideration in order to avoid violation of Section 66, although such consideration need not be in the form of monetary compensation. See MS AG Op., Holleman (April 2, 2010); MS AG Op., Clark and Martin (Sept. 26, 2008).

In our opinion to Dean Holleman, dated April 2, 2010, our office considered whether a community college could enter into an agreement with a private college for the use of its building and equipment with part of the consideration for the agreement being in the form of other benefits constituting consideration.

At issue in the Holleman opinion was a proposed agreement by the Board of Trustees of Mississippi Gulf Coast Community College (hereinafter "MGCCC") for the use of its building and equipment by USA, a private college, in order for MGCCC students and district residents to continue their studies. In exchange for the use of the property, USA agreed to (1) purchase furniture and computers for offices and classrooms, (2) install internet connections in the building and related networking and video conferencing equipment at an estimated cost in excess of $100,000.00, and (3) pay MGCCC $66,000 per year during the second and third years of the term.

Our office concluded MGCCC was authorized to enter into the proposed agreement for the use of its building and equipment by USA in order for the community college students and district residents to continue their studies. While it was incumbent upon the Board of Trustees to determine whether a donation resulted from the proposed agreement, we noted the consideration was not nominal and, in fact, exceeded that in Whitworth, wherein the Court found no violation of Section 95 of the Mississippi Constitution. With regard to Section 66, we found a governmental interest was being served by providing educational opportunities for residents; thus, consideration other than cash payments could be taken into account when determining whether a donation would result from the proposed agreement. See Craig v. Mercy Hospital-Street Memorial, 45 So. 2d 809 (1950), suggestion of error overruled 47 So. 2d 867 (1950).

Conclusion

It is the opinion of this office that the EMCC Board of Trustees may take into account the proposed lessee's payment of all construction costs for the building to be erected on the property, payment of all maintenance and upkeep of the building and property, payment of all real and/or personal property and EMCC's right to use a portion of the facility when making its determination as to whether a donation results from the proposed lease agreement. While the consideration contained in the proposed lease agreement appears equivalent to or perhaps exceeds that set forth in Craig and Whitworth, respectively, the adequacy of the consideration is a question of fact which must be decided by the EMCC Board of Trustees.

If this office may be of any further assistance to you, please let us know.

Sincerely,

LYNN FITCH, ATTORNEY GENERAL

Avery Mounger Lee
Special Assistant Attorney General