Can a Mississippi city accept land instead of cash to settle a special assessment debt the property owner owes?

Plain-English summary

The City of Clinton built a road and recovered the construction cost through Mississippi's special-assessment process. The road benefited only one property owner, so that owner is the only person on the assessment roll and owes the entire amount. The City asked whether it could take the property itself as payment, instead of cash, and how to value it.

The AG said yes on the legal question. No statute prohibits the arrangement. Under the Home Rule statute (§ 21-17-5) and the city's authority to purchase real estate for proper municipal purposes (§ 21-17-1), a debt owed to the city can be satisfied by transferring real property, provided the property serves a proper municipal use and benefits the city's residents.

The opinion clarifies one key limit. A 2000 opinion (Heidel) said cities cannot use a prior loan or donation as credit toward a current debt, because that would convert past charity into present consideration in violation of the Mississippi Constitution's anti-donation clause. But that does not mean a current debt cannot be paid with current property, equipment, services, or future cash. The Purdie scenario fits the permissible category: a property owner conveys real estate now to discharge a debt that exists now.

For the valuation question, the AG pointed to Section 43-37-3 of the Mississippi Code, which governs how public agencies acquire real property using public funds. Even though the City is not buying the property in the conventional sense, the property is being accepted in satisfaction of a special-assessment payment, which is public money. So the Section 43-37-3 process applies. The factual valuation has to be done by the City; the AG cannot decide that.

A footnote raises a procedural complication. The special-assessment process already determined the assessment amount and assessed it as a lien against the benefited property. If the city accepts the property itself as payment, it should take some official action (board minutes, recorded release) to correct the lien on the public records. Otherwise the property could later be subject to forfeiture proceedings on a debt that no longer exists.

What this means for you

For Mississippi city attorneys handling special-assessment cases

The legal authority exists. Two open questions for your particular case:

1. Does the property serve a proper municipal purpose? If the city has a planned use (park, drainage, right-of-way, future facility), document that on the minutes. If the city has no current use and is just getting the property to clear the debt, that is harder to justify as a "proper municipal purpose."

2. Have you cleared Section 43-37-3? That statute applies to "any person, agency or other entity acquiring real property for any project or program in which public funds are used." It typically requires a written offer based on appraised fair market value, written notice to the owner, and several procedural steps. Treat the in-lieu transfer as an acquisition for compliance purposes.

After the transfer, document the satisfaction of the lien. A signed release of the assessment lien in the county records prevents future title questions.

For Mississippi mayors and aldermen

Two options when a property owner cannot pay a special assessment in cash:

1. Take the property in satisfaction (this opinion's path). Works if the property is useful to the city.
2. Allow installment payments per the special-assessment chapter, with the lien remaining in place until paid. Works if the owner has cash flow but not a lump sum.

Foreclosure on the assessment lien is a third option, but it is slow and may produce a worse result for the city than the in-lieu transfer.

For documentation, your minutes should show the rationale: the proper municipal purpose, the valuation, the comparison to the debt, and any cash exchange (if the property is worth more or less than the debt).

For property owners facing special-assessment debt

If you cannot pay the assessment in cash, ask the city whether it would accept the property (or a portion of it) instead. Some cities will, especially if the property has municipal utility (drainage, park, right-of-way). The city is not required to do this; it is a negotiated solution.

Get an appraisal from a qualified appraiser. Section 43-37-3 procedures are designed to protect property owners from undervaluation, so familiarize yourself with the steps.

If the property is worth more than the debt, the city should pay you the difference. If the property is worth less, the city may accept it as partial satisfaction and require you to pay the rest, or it may decline the offer entirely.

For real estate lawyers

The transfer is structured like an acquisition, not a forfeiture. The property owner conveys voluntarily; the city accepts in lieu of cash. Title passes free of the assessment lien once the city formally releases the lien on the records.

Watch the Section 43-37-3 procedure. Acquiring real property using public funds, even by exchange for a debt, triggers the relocation-assistance and acquisition procedures. Skipping these procedures could give a third party a basis to challenge the transaction.

For special-assessment administrators

Update your forms and procedures to recognize in-lieu transfers as an option. Build the lien-release step into the close-out checklist. Coordinate with the city attorney on Section 43-37-3 compliance.

Common questions

Q: Does the city have to accept property in lieu of cash if offered?
A: No. The city has discretion. The AG's opinion is that the city may, not that it must.

Q: What counts as a proper municipal purpose?
A: Any use within the city's authority: parks, recreation, public facilities, drainage, right-of-way, public safety facilities, water and sewer infrastructure, etc. The city should document the planned or potential use.

Q: What if the property is worth more than the debt?
A: The city pays the difference, or the parties negotiate a partial transfer (a portion of the property) that matches the debt amount.

Q: What if the property is worth less than the debt?
A: The city may accept it as partial satisfaction and require additional payment, or it may decline. The Heidel-line concern about prior donations does not apply here, because the consideration (current property) is for a current debt.

Q: Does Section 43-37-3 require an appraisal?
A: It typically requires fair-market-value determination and written notice. The exact requirements depend on the property type and whether it is for federal-aid or state-only programs. Consult the statute and any applicable federal regulations.

Q: Can the property owner walk away after transferring the property and still be on the hook for the debt?
A: Not if the city issues a release of the lien. Without a release, technically the lien remains. The footnote in the opinion is the AG's reminder to issue the release.

Q: Can the city use this approach for ad valorem tax debts?
A: This opinion is specific to special assessments. Ad valorem tax debts have their own statutory framework with tax sales and redemption. The AG would need to opine on that separately.

Q: What about utility-bill debts?
A: Same caution. This opinion's authority is grounded in Section 21-17-5 home rule plus the general property-acquisition statute, but utility debts have different mechanisms (cutoff, lien, suit). Check the specific utility statute.

Q: Can the city accept services or equipment instead of property?
A: The Heidel opinion (cited here) said yes for "future cash payment, loans of equipment or provision of services" to satisfy a current debt. So services and equipment can also work, subject to similar proper-purpose requirements.

Q: What happens if the city later wants to sell the property?
A: The city can do so under the standard surplus-property statutes. Selling at the time of acquisition would suggest the acquisition was not for a proper municipal purpose, so plan to hold and use the property for some period.

Background and statutory framework

Mississippi's special-assessment chapter (§ 21-41-1 et seq.) lets cities recover the cost of localized improvements (paving, sewer, sidewalks, etc.) by assessing the cost against the benefited properties. After the improvement is built, the city's governing authority determines the cost, declares it by resolution, and enters it on an assessment roll. The assessed amount becomes a lien on each benefited property. The Mississippi Supreme Court described the framework in Edwards v. Bridgetown Community Association, 486 So. 2d 1235 (Miss. 1986).

The Clinton scenario is unusual because there is only one benefited owner, so the entire assessment falls on one property. That made the in-lieu approach attractive: instead of pursuing a forfeiture, the city takes the property and discharges the debt.

Section 21-17-1(1) gives municipalities authority to "purchase and hold real estate, either within or without the corporate limits, for all proper municipal purposes." Section 21-17-5(1) is the broader Home Rule statute.

Section 43-37-3 is Mississippi's enactment of the federal Uniform Relocation Assistance and Real Property Acquisition Policies Act framework. It requires public agencies to follow specific procedures (offers, notices, fair-market-value determinations) when acquiring real property using public funds. The AG reads the in-lieu transfer as a covered acquisition, because the city is using the assessment payment (public money) as consideration. That is a defensible reading even though the cash never moves.

The Heidel opinion (June 9, 2000) drew the line that matters here. A city cannot recharacterize a past donation as payment for a present debt. That would let a private actor convert a past gift into present consideration, which the Mississippi Constitution's anti-donation clause forbids. But Heidel itself acknowledged that future cash, equipment, services, or property can satisfy a current debt, because the consideration is current and the city is not pretending past charity is present payment.

Citations and references

Statutes:
- Miss. Code Ann. § 21-17-1, municipal authority to purchase and hold real estate for proper municipal purposes
- Miss. Code Ann. § 21-17-5, Home Rule statute
- Miss. Code Ann. § 21-41-1 et seq., special-improvement and special-assessment process
- Miss. Code Ann. § 21-41-13, declaration and entry of cost on assessment roll
- Miss. Code Ann. § 43-37-3, real-property acquisition using public funds (relocation-assistance procedures)

Case:
- Edwards v. Bridgetown Cmty. Ass'n, Inc., 486 So. 2d 1235 (Miss. 1986), describing special-improvement cost-recovery framework

Prior AG opinion cited:
- MS AG Op., Heidel (June 9, 2000), prior loans or donations cannot satisfy current debts, but future cash, equipment, services, or property can

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2021/10/W.Purdie-September-30-2021-Citys-Authority-to-Accept-Real-Property-in-Lieu-of-Cash-Payment-on-a-Debt.pdf

Original opinion text

September 30, 2021

William C. Purdie, Esq.
Attorney for City of Clinton
Post Office Box 156
Clinton, Mississippi 39060

Re: City's Authority to Accept Real Property in Lieu of Cash Payment on a Debt

Dear Mr. Purdie:

The Office of the Attorney General has received your request for an official opinion.

Background Facts

The City of Clinton (the "City") has completed construction of a roadway and associated improvements through the special improvement and special assessment process contemplated by Mississippi Code Annotated Section 21-41-1, et seq. According to your request, there is only one benefited property owner along this road; this property owner is the only entity on the assessment roll and is solely responsible for the entirety of the special assessment amount.

Questions Presented

1. Does the City have authority to accept real property in lieu of cash payment for a debt currently owed to the City?

2. If the answer to Question 1 is "yes," what is the process for properly determining the value of the real property being accepted?

Brief Response

1. Yes. There is no law prohibiting the proposed arrangement. Therefore, it is our opinion that pursuant to Section 21-17-5(1), municipal "Home Rule" authority, a debt, or portion thereof, may be satisfied by the transfer of real property, so long as the property accepted is used for proper municipal purposes and will benefit the citizens of the municipality.

2. Acquisitions of real property by a municipality are subject to the process set forth by Section 43-37-3.

Applicable Law and Discussion

Section 21-41-1, et seq. authorizes and governs the special assessment improvements process, which allows the costs of improvements to be "recovered 'by levying and collecting special assessments as provided in this chapter, and may finance such local improvements in the manner provided in this chapter.'" Edwards v. Bridgetown Cmty. Ass'n, Inc., 486 So. 2d 1235, 1239 (Miss. 1986). Upon completion of any authorized improvement, the governing authorities must determine the cost of the improvement, declare the same by resolution, and enter the same on the "assessment roll." Miss. Code Ann. § 21-41-13.

Section 21-17-1(1) provides, in relevant part:

(1) Every municipality of this state shall be a municipal corporation and shall have the power to sue and be sued; to purchase and hold real estate, either within or without the corporate limits, for all proper municipal purposes, including parks, cemeteries, hospitals schoolhouses, houses of correction, waterworks, electric lights, sewers, and other proper municipal purposes . . . .

Miss. Code Ann. § 21-17-1(1) (emphasis added).

No law prohibits the city from accepting real property in payment and satisfaction, complete or partial, of the special assessment. It is well within the municipality's authority to purchase the real property. Pursuant to Section 21-17-1(1), a city has authority to purchase and hold real estate for all proper municipal purposes. Furthermore, Section 21-17-5(1), the municipal "Home Rule" statute, grants municipalities broad authority over the "care, management and control of the municipal affairs and its property and finances" so long as their actions are not inconsistent with the Mississippi Code, or any other state law.

This office has previously opined that a city would violate the constitutional prohibition against unlawful donations by attributing the value of a prior loan or donation as credit or payment toward a current debt. MS AG Op., Heidel at 1* (June 9, 2000). However, we stated that even though a prior loan or donation could not satisfy a current debt, that was "not to say that a debt, or a portion thereof, may not be satisfied by future cash payment, loans of equipment or provision of services." Id. Consistent with Heidel, we find no statutory prohibition against a city accepting real property for a debt owed at the time of conveyance, in lieu of cash payment.[^1] However, the property accepted must be used for proper municipal purposes and benefit the citizens of the municipality.

In response to your second question, acquisitions of real property by a municipality are subject to the process set forth in Section 43-37-3, which provides that "[a]ny person, agency or other entity acquiring real property for any project or program in which public funds are used shall comply with" certain specified requirements. Miss. Code Ann. § 43-37-3(1). Although the City does not plan to purchase the property, because the property is being accepted by the City in lieu of a payment for the assessment, which would constitute public funds, it is the opinion of this office that Section 43-37-3 is applicable. Any factual determinations necessitated by the process are to be made by the municipality and cannot be addressed by official opinion.

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/ Abby Cummings
Abby Cummings
Special Assistant Attorney General

[^1]: We note that in making the improvements pursuant to the special assessment statutes, the city must have described the improvements made, adopted resolutions that determined the amount of the special assessment, and assessed that amount against the benefited property, which was fixed if no objection was made. If the city accepts property in lieu of cash payment of the assessment, some official action might be necessary to correct or adjust the amount of the lien against the property, as non-payment of the assessment may lead to forfeiture of the property.