Can a Mississippi city declare an active refuse transfer station surplus and sell it for industrial use?

Plain-English summary

Brookhaven has property it currently uses as a refuse location and refuse transfer station. The city wanted to designate that property as surplus and improve it for sale or lease for commercial or industrial purposes under Section 57-7-1. The question: can it?

The AG's answer is conditional. The city "may only dispose of property under Section 57-7-1 for industrial and commercial purposes if it determines that the property is no longer needed for governmental purposes." That surplus determination comes first. Citing the Manley and Turnage opinions, the AG says the city must decide whether property in active use for refuse disposal and transfer is "indeed surplus and no longer needed for governmental purposes," and that such determinations "are ultimately factual ones to be made by the municipality itself subject to review by the Office of the State Auditor."

If the property is surplus, the city has discretion on the sale or lease price, which "should be reflected in the municipal minutes." Quoting Flaggs and Crowell, the AG notes a Section 57-7-1 disposal does not necessarily require fair market value but "should be made for good and valuable consideration and may not be such as would constitute a donation." On leasing, the AG adds (citing Bobo) that a lease may exceed the current board's term but "would be voidable at the option of successor boards because there is no authority to bind successor boards."

What this means for you

For municipal attorneys and city councils

Under the opinion, the threshold question is factual: is the refuse property "no longer needed for governmental purposes"? The opinion places that determination with the municipality itself, subject to review by the State Auditor, and does not decide it for Brookhaven. Only if the city makes that finding can it use Section 57-7-1 to set the property aside, improve it for industrial or commercial use, and sell or lease it on terms the city prescribes. The opinion says the price is within the city's discretion, should be reflected in the minutes, and must be good and valuable consideration rather than a donation.

For developers and others contracting with the city

The opinion confirms a Section 57-7-1 sale or lease need not be at fair market value, but it must be for good and valuable consideration, not a donation, and the consideration should appear in the municipal minutes. It also notes a lease can run past the current board's term but is voidable by a successor board. The opinion does not describe how to structure a deal or what public benefits would justify the price; it states only the consideration standard.

Common questions

Q: Can Brookhaven declare its active refuse station surplus and sell it for industrial use?
A: Only if it first determines the property is no longer needed for governmental purposes. The opinion holds the city "may only dispose of property under Section 57-7-1 for industrial and commercial purposes if it determines that the property is no longer needed for governmental purposes."

Q: Who decides whether the property is "surplus"?
A: The municipality. The opinion says such determinations "are ultimately factual ones to be made by the municipality itself subject to review by the Office of the State Auditor."

Q: Does the city have to sell at fair market value?
A: No. The opinion says a Section 57-7-1 disposal "do[es] not necessarily require fair market value," but it "should be made for good and valuable consideration and may not be such as would constitute a donation," and the consideration should be reflected in the municipal minutes.

Q: What does Section 57-7-1 let the city do with surplus land?
A: Per the quoted statute, set the land aside and improve it for industrial and commercial purposes (utilities, roads, drainage, rail spurs, and the like), then operate, lease, or sell it on terms the city prescribes, with improvement costs paid from sale or lease proceeds to the extent available.

Q: Can a Section 57-7-1 lease bind future boards?
A: No. The opinion states a lease may exceed the current board's term, but it "would be voidable at the option of successor boards because there is no authority to bind successor boards."

Background and statutory framework

Section 57-7-1 governs the disposal of surplus airport land or other lands no longer needed for governmental purposes. The opinion quotes the statute:

In the event that any municipality . . . shall have surplus . . . lands which are not needed for . . . 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 . . . shall prescribe.

In order to provide for the improvement of such property for industrial and commercial purposes, the municipality . . . 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.

The opinion synthesizes the prior AG opinions it relies on: Manley (the authority is limited to a sale or lease of surplus property for commercial or industrial purposes, and surplus status must be determined first), Turnage (the surplus determination is a factual one for the municipality, subject to State Auditor review), Flaggs and Crowell (consideration is discretionary, reflected in the minutes, and must be good and valuable rather than a donation), and Bobo (a lease beyond the current board's term is voidable by successor boards).

Citations and references

Statutes:

• Miss. Code Ann. § 57-7-1, surplus property for industrial/commercial use

Prior AG opinions cited:

• MS AG Op., Manley (Sept. 10, 2014), Section 57-7-1 limited to industrial/commercial purposes
• MS AG Op., Turnage (July 28, 2017), surplus determination is factual; State Auditor reviewable
• MS AG Op., Flaggs (Nov. 24, 2020), good and valuable consideration required
• MS AG Op., Crowell (July 26, 2002), donation prohibited
• MS AG Op., Bobo (Feb. 2, 2007), leases voidable beyond board term

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2022/07/B.Moak-July-11-2022-Disposal-of-Surplus-Municipal-Property-under-Section-57-7-1.pdf

Original opinion text

July 11, 2022

Bobby Moak, Esq.
Attorney, City of Brookhaven
402 Monticello Street
Bogue Chitto, Mississippi 39629

Re: Disposal of Surplus Municipal Property under Section 57-7-1

Dear Mr. Moak:

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

Background

According to your request, property located within the City of Brookhaven (the "City") is currently being used as a refuse location as well as a refuse transfer station. However, the City wants to designate the property as surplus and improve it for sale or lease for commercial or industrial purposes under Mississippi Code Annotated Section 57-7-1.

Question Presented

May the City designate property currently being used as a refuse location and refuse transfer station as surplus to be disposed of in accordance with Section 57-7-1?

Brief Response

The City may only dispose of property under Section 57-7-1 for industrial and commercial purposes if it determines that the property is no longer needed for governmental purposes.

Applicable Law and Discussion

Section 57-7-1 governs the disposal of surplus airport land or other lands no longer needed for other governmental purposes and states, in pertinent part:

In the event that any municipality . . . shall have surplus . . . lands which are not needed for . . . 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 . . . shall prescribe.

In order to provide for the improvement of such property for industrial and commercial purposes, the municipality . . . 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.

The authority granted in Section 57-7-1 is limited to a sale or lease of surplus property for commercial or industrial purposes. MS AG Op., Manley at *2 (Sept. 10, 2014).

A municipality must determine whether the property in question is surplus, i.e., no longer needed for municipal purposes, before a sale or lease can take place. Id.; MS AG Op., Turnage at 3 (July 28, 2017). Therefore, the City must determine whether municipal property currently in use for refuse disposal and transfer is indeed surplus and no longer needed for governmental purposes. Such determinations "are ultimately factual ones to be made by the municipality itself subject to review by the Office of the State Auditor." Turnage at 3.

If the City determines that the subject property is indeed surplus as contemplated by Section 57-7-1, it has discretion as to the sale or lease price. The determination of such consideration should be reflected in the municipal minutes. MS AG Op., Flaggs at 2 (Nov. 24, 2020). "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.'" Flaggs at 2 (quoting MS AG Op., Crowell at 2 (July 26, 2002)). When leasing surplus property, while any such lease may exceed the term of the current municipal board, such lease would be voidable at the option of successor boards because there is no authority to bind successor boards to the terms of a proposed lease. MS AG Op., Bobo at 1 (Feb. 2, 2007).

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/ Misty Monroe
Misty Monroe
Assistant Attorney General