Can a Mississippi city give a developer cheap surplus land for condos and count economic benefits as 'good and valuable consideration'?
Plain-English summary
A developer wanted to invest about $15 million to build condominiums on three parcels in downtown Vicksburg. The City owned the parcels, originally bought for other uses that never came to fruition. The mayor asked whether the City could declare those parcels surplus and convey them under Section 57-7-1 of the Mississippi Code, treat condo development as a commercial use under that statute, and count economic benefits (added ad valorem tax revenue, downtown foot traffic, construction jobs, blight elimination, sales tax growth) as part of the "good and valuable consideration" the City received.
The AG said yes on each piece, with the usual factual-finding caveat:
Surplus designation. A municipality may determine that property is no longer needed for governmental purposes and dispose of it under the appropriate disposal statute, including Section 57-7-1. Original intended use that did not pan out does not block a later surplus determination.
Commercial use under Section 57-7-1. Section 57-7-1 authorizes municipalities and other governmental subdivisions to set aside surplus land for "industrial and commercial purposes" and to lease or sell the land on terms the governing authority prescribes. The Mississippi Supreme Court in Ball v. Mayor and Board of Aldermen of City of Natchez, 983 So. 2d 295 (Miss. 2008), held that condominium development qualifies as a commercial use under Section 57-7-1. Whether the specific Vicksburg transaction met Section 57-7-1's requirements was a factual call for the City's governing authority.
Section 57-7-1 versus Section 21-17-1. The Ball court also held that Section 21-17-1(13) is "in addition and supplemental" to other laws, so Section 57-7-1 was an independent path to disposal that did not have to comply with the disposal provisions of Section 21-17-1. A municipality choosing the Section 57-7-1 path can use it without folding in Section 21-17-1's procedural requirements.
Good and valuable consideration. The AG had been clear in earlier opinions that Section 57-7-1 sales and leases do not require fair market value, but they must be "for good and valuable consideration and may not be such as would constitute a donation." The determination of what constitutes good and valuable consideration is within the discretion of the governing authority, must be reflected in the minutes, and is subject to review by the Office of the State Auditor. Non-monetary factors like economic benefit and blight elimination may be considered.
The AG also reissued this opinion in place of an October 6, 2020 opinion to Mayor Flaggs that had a scrivener's error.
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.
Common questions
What is "surplus property" for a Mississippi municipality?
Property the city owns but no longer needs for governmental purposes. The determination is up to the governing authority, on the facts.
What is Section 57-7-1?
A statute that lets municipalities, counties, supervisor districts, airport authorities, and other governmental subdivisions set aside surplus airport land or other lands not needed for airport or governmental purposes, designate them for industrial and commercial purposes, and lease or sell them on terms the entity prescribes. The statute also authorizes the entity to provide utilities and infrastructure improvements to make the land usable for industrial or commercial enterprise.
Why was Ball v. Natchez important?
Two reasons. First, the Mississippi Supreme Court treated condominium development as a commercial use under Section 57-7-1, which removed any doubt about whether residential-style projects could fit. Second, the Court read Section 21-17-1(13) as supplemental to other laws, so a municipality could proceed under Section 57-7-1 without satisfying Section 21-17-1's separate procedures.
Does the city have to charge fair market value?
No. Section 57-7-1 disposals do not require fair market value, but they must be for "good and valuable consideration" that does not amount to a donation. Non-monetary economic benefits can be part of the consideration.
Who reviews the city's consideration analysis?
The Office of the State Auditor. The AG cannot make factual determinations under Section 7-5-25, and a Section 57-7-1 transaction's consideration is fundamentally factual. The State Auditor checks the math.
Background and statutory framework
Section 57-7-1 authorizes governmental subdivisions to set aside surplus land for industrial or commercial use and lease or sell it on terms the entity prescribes. It also lets the entity provide utilities, roads, drainage, and other infrastructure to make the land usable, with the cost recoverable from sale or lease proceeds.
Section 21-17-1 governs disposal of municipally-owned property generally. Section 21-17-1(13) makes that statute "in addition and supplemental" to other laws.
Ball v. Mayor and Board of Aldermen of City of Natchez, 983 So. 2d 295, 305-306 (Miss. 2008), holds (a) condominium development is a commercial use under Section 57-7-1 and (b) Section 21-17-1 does not displace Section 57-7-1.
Earlier AG opinions (Shoemake, Aug. 29, 2008; Crowell, July 26, 2002; Power, July 26, 2013; Montgomery, Mar. 31, 2006; Thomas, Apr. 7, 2017) flesh out the "good and valuable consideration" rule. Sales and leases under Section 57-7-1 may include non-monetary considerations and do not require fair market value, but the consideration cannot be such that it amounts to a donation. The municipal governing authority makes the call, reflects it in the minutes, and the State Auditor reviews.
The opinion is signed by Special Assistant Attorney General Beebe Garrard on behalf of Attorney General Lynn Fitch.
Citations
- Miss. Code Ann. Section 57-7-1 (surplus governmental land for industrial and commercial purposes)
- Miss. Code Ann. Section 21-17-1 (general disposal of municipal property)
- Miss. Code Ann. Section 21-17-1(13) (supplemental nature of disposal authority)
- Ball v. Mayor and Bd. of Aldermen of City of Natchez, 983 So. 2d 295 (Miss. 2008)
- MS AG Op., Montgomery at *1 (Mar. 31, 2006)
- MS AG Op., Shoemake (Aug. 29, 2008)
- MS AG Op., Crowell (July 26, 2002)
- MS AG Op., Power (July 26, 2013)
- MS AG Op., Thomas at *1 (Apr. 7, 2017)
Source
- Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
- Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2020/11/G.FlaggsJr._November-24-2020-Sale-of-Surplus-Property.pdf
Original opinion text
November 24, 2020
The Honorable George Flaggs, Jr.
Mayor, City of Vicksburg
1401 Walnut Street
Vicksburg, Mississippi 39181
Re: Sale of Surplus Property
Dear Mayor Flaggs:
The Office of the Attorney General has received your request for an official opinion.
[Footnote: Due to a scrivener's error, this opinion is issued in place of the October 6, 2020 opinion issued to The Honorable George Flaggs, Jr., which is hereby withdrawn.]
Background Facts
In your request, you state that a developer is interested in building condominiums on three parcels of property in downtown Vicksburg (the "City"), each of which is owned by the City. You state the developer plans to invest approximately $15,000,000.00 in the downtown area. In addition to adding ad valorem taxes, foot traffic downtown, construction jobs, and eliminating blighting conditions in the area, you state the addition of condominiums to downtown Vicksburg would stimulate growth and a need for new businesses.
The City wishes to convey the parcels of land to the developer pursuant to Section 57-7-1 of the Mississippi Code, and you state that the addition of condominiums to your downtown area is a commercial use since it will stimulate economic development, increase ad valorem taxes, create construction jobs, eliminate blighting conditions, and increase sales taxes. You also cite the Mississippi Supreme Court's holding in Ball v. Mayor and Board of Aldermen of the City of Natchez, 983 So. 2d 295 (Miss. 2008), wherein the court found that the trial court did not err in finding that the construction of condominiums was a commercial use in that scenario pursuant to Section 57-7-1.
Questions Presented
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Does the City have authority to determine that these properties are "surplus and not needed for government purposes" even though they were purchased for other uses that did not come to fruition?
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Does Section 57-7-1 authorize the City to convey surplus property to a developer for the construction of condominiums as a commercial use, in light of the economic benefits, additional ad valorem taxes, elimination of blighting conditions in the area, and stimulation of growth?
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Can the economic benefits, increase in ad valorem taxes, elimination of blighting conditions in the area, and stimulation of growth in the downtown be considered in the determination of "good and valuable consideration so as to not constitute a donation."
Brief Response
In response to your first question, yes. If the City determines that municipal property is no longer needed for municipal purposes, it may sell or lease the real property in accordance with the appropriate disposal statute.
In response to your second question, yes. The City has the authority to determine that the development of condominiums is a commercial or industrial purpose as contemplated by Section 57-7-1.
With respect to your third question, when making the determination of what constitutes good and valuable consideration for the disposal of property pursuant to Section 57-7-1, the municipality may consider factors other than monetary value. This is a factual determination that must be made by the City's governing authorities and is subject to review by the Office of the State Auditor.
Applicable Law and Discussion
Addressing your first and second questions together, Section 57-7-1 governs disposal of surplus property by certain governmental bodies and provides:
In the event that any municipality, county, supervisors district, municipal airport authority, regional airport authority or other governmental subdivision shall have surplus airport land or other lands which are not needed for airport purposes or for other governmental purposes, then such property so designated and described may be set aside and improved for industrial and commercial purposes and the same may thereafter be operated or the same may be leased or sold upon such terms and conditions as a municipality, county, municipal airport authority, regional airport authority or governmental subdivision shall prescribe.
In order to provide for the improvement of such property for industrial and commercial purposes, the municipality or other authority shall be authorized to provide all necessary utilities therefor and to lay out, construct and/or improve and hard-surface roadways, streets, driveways and access roads, railroads and spur tracks, and provide for the grading, drainage, sewer, lights and water, and all other necessary or proper utilities as may be necessary or proper to make such land desirable or useful as a site or sites for industrial and commercial enterprises. The cost and expense of such improvements to said real estate shall be paid for from funds made available from the lease or sale of such lands to the extent such funds are available.
If a municipality disposes of property pursuant to Section 57-7-1, which is specific to the sale or lease of surplus real property for industrial or commercial purposes, it need not comply with the disposal provisions of Section 21-17-1. See Ball v. Mayor and Bd. Of Aldermen of City of Natchez, 983 So. 2d 295, 305 (Miss. 2008) ("The provisions of Mississippi Code Annotated Section 21-17-1(13) clearly and unambiguously state that the powers conferred by Section 13 are 'in addition and supplemental' to other laws and 'nothing contained in this section shall be construed to prohibit, or to prescribe conditions concerning, any practice or practices authorized under any other laws.' Therefore, the City had authority to proceed pursuant to Mississippi Code Annotated Section 57-7-1."); MS AG Op., Montgomery at *1 (Mar. 31, 2006).
As you noted in your request, the Mississippi Supreme Court, in Ball, held that a proposed development of condominiums was commercial in nature. Ball v. Mayor and Bd. Of Aldermen of City of Natchez, 983 So. 2d at 306. Whether your specific transaction qualifies as one that meets the requirements of Section 57-7-1 is a factual determination to be made by the City's governing authorities.
Turning to your third question, our office has previously opined:
Once the municipality has determined that the property is no longer needed for municipal purposes, it may sell or lease the real property for good and valuable consideration, upon such terms and conditions as the municipality may prescribe. MS AG Op., Shoemake (August 29, 2008). We have previously opined that, while sales and leases pursuant to Section 57-7-1 do not necessarily require fair market value, such disposal "should be made for good and valuable consideration and may not be such as would constitute a donation." MS AG Op., Crowell (July 26, 2002). The determination of what constitutes "good and valuable consideration" is within the discretion of the governing authorities and should be reflected in the municipal minutes. MS AG Op., Power (July 26, 2013).
MS AG Op., Montgomery at 1 (Mar. 31, 2006) (emphasis added). The City of Vicksburg has previously asked for an opinion regarding what constitutes good and valuable consideration as contemplated in Section 57-7-1. MS AG Op., Thomas at 1 (Apr. 7, 2017). Citing the above Montgomery opinion, among others, our office opined that "[w]hether the consideration listed in your request constitutes sufficient 'good and valuable consideration' is a factual determination which must be made by the governing authorities, subject to review by the Office of the State Auditor. When making such determination, the municipality may consider factors other than monetary value." Id. This remains the position of the Attorney General's Office.
If this office may be of any further assistance to you, please do not hesitate to contact us.
Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By: /s/ Beebe Garrard
Beebe Garrard
Special Assistant Attorney General