Can the Mississippi Development Authority sell, auction, or donate state property in Columbus below appraised fair market value?

Plain-English summary

The Mississippi Development Authority made a loan to a Columbus manufacturer secured by the manufacturer's real estate. The company went bankrupt, and MDA ended up holding the property. 2019 Senate Bill 2810 authorized MDA to "sell, lease or otherwise dispose of, in whole or in part, in a manner as determined in the sole discretion of the authority." But subsection (3) added a critical constraint: any sale must be at not less than current fair market value, set by averaging two appraisals (one chosen by DFA, both certified by the Mississippi Real Estate Appraiser Licensing and Certification Board).

MDA wanted to know how flexible the "otherwise dispose of" language is. Specifically:

1. Can we auction the property below appraised value?
2. Can we negotiate a sale below appraised value?
3. Can we declare the property surplus and sell below appraised value?
4. Can we donate the property?

The AG addressed the four questions in turn:

1, 2, and 3: No to all three sub-appraised-value sales. An auction is a sale. A negotiated transfer for money is a sale. Surplus disposition by sale is still a sale. Section 1(3) flatly prohibits selling below appraised value, with no exceptions. Pitalo makes the "shall" mandatory.

Twist on the partial-sale path: the authority granted is to dispose of the property "in whole or in part." So if MDA finds that a portion of the property can be sold at or above its proportional appraised value, that portion can be sold, even if a sale of the whole at the same per-unit price would not work. This is the only legitimate flexibility.

4. Donation. Constitutional limit. Article IV, § 95 of the Mississippi Constitution prohibits the donation of state-controlled lands "directly or indirectly, to private corporations or individuals, or to railroad companies." So MDA absolutely cannot donate the Columbus property to a private business or person.

But the question of whether SB 2810's "dispose" language permits donation to non-private recipients (other public entities, charitable nonprofits in some configurations, etc.) is a factual statutory-construction call the AG punted to MDA. If MDA decides that "dispose" includes donation, donation is permissible only to recipients not barred by Section 95.

Practical bottom line: this property is unlikely to leave MDA's hands at any price below its full appraised value. MDA's main flexibility is to subdivide and sell off pieces.

What this means for you

MDA and its staff

The opinion holds that an auction, a negotiated conveyance, and a surplus conveyance are all sales, and that "S.B. 2810 Section 1(3) explicitly prohibits the sale of the Property below the current appraised market value," with "no exceptions to this prohibition." So MDA "may not: (1) dispose of the Property by auctioning it to the highest bidder below the appraised fair market value, (2) convey the Property on the basis of negotiation below the appraised fair market value, or (3) declare the Property to be surplus and convey the Property below the appraised fair market value."

The one piece of flexibility

The opinion notes the authority runs to the property "in whole or in part," so "if MDA determines that a part of the subject Property may be sold at auction, conveyance by negotiation, conveyance as surplus, or otherwise for a price that meets or exceeds its fair market value, that part may be sold."

On donation

The opinion holds that under art. IV, § 95 the property "may not be donated to a private corporation or individual or to a railroad company." It treats whether "dispose" in SB 2810 includes donation as "a question of fact" for MDA, and concludes that if MDA determines it does, MDA "may donate all or a portion of the Property so long as it is not donated to a private corporation or individual or to a railroad company."

Common questions

Q: Can MDA sell the Columbus property below the appraised value?
A: No. The opinion holds § 1(3) "explicitly prohibits the sale of the Property below the current appraised market value" and that the bill "provides no exceptions to this prohibition," whether the sale is by auction, negotiation, or surplus conveyance.

Q: How is "fair market value" set?
A: The opinion quotes § 1(3): the property "shall be sold for not less than the current fair market value as determined by the average of two (2) appraisals by qualified appraisers, one of whom shall be selected by the Department of Finance and Administration, and both of whom shall be certified and licensed by the Mississippi Real Estate Appraiser Licensing and Certification Board."

Q: Is there any way to sell for less?
A: Only by selling a part. The opinion reads the "in whole or in part" authority to allow selling a portion "for a price that meets or exceeds its fair market value," but the per-part price still cannot fall below appraised value.

Q: Can MDA donate the property?
A: The opinion holds art. IV, § 95 bars donating state-controlled land "to private corporations or individuals, or to railroad companies." Whether SB 2810's "dispose" includes donation is a fact question for MDA; if MDA finds it does, it may donate only to recipients not barred by § 95.

Background and statutory framework

The opinion arises from MDA's acquisition, through bankruptcy, of a Columbus manufacturer's property that had secured an MDA loan. 2019 Senate Bill 2810 § 1(1) authorized MDA "to sell, lease or otherwise dispose of, in whole or in part, in a manner as determined in the sole discretion of the authority" the listed property, and the opinion notes "[t]he bill does not define the term 'dispose.'"

Section 1(3) supplies the price floor:

In the event that any or all of the [subject Property] is sold, the real property shall be sold for not less than the current fair market value as determined by the average of two (2) appraisals by qualified appraisers, one of whom shall be selected by the Department of Finance and Administration, and both of whom shall be certified and licensed by the Mississippi Real Estate Appraiser Licensing and Certification Board.

The opinion reads "shall" as mandatory, citing Pitalo v. GPCH-GP, Inc., 933 So. 2d 927, 929 (Miss. 2006). On donation, it quotes art. IV, § 95 ("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"), cites MS AG Op., Bryant (Mar. 11, 1992) that a sale of state-agency property is governed by § 95, and cites MS AG Op., Barton (May 17, 2021) for the limit that it may only address prospective questions of law, not the factual question of whether "dispose" includes donation.

Citations and references

Constitution:

• Miss. Const. art. IV, § 95 (no donation of state land to private corporations, individuals, or railroad companies; no sale to corporations at less than the price for individuals)

Statutes:

• 2019 Mississippi Senate Bill No. 2810 (special legislation authorizing MDA to dispose of specific properties including the Columbus parcel)

Cases:

• Pitalo v. GPCH-GP, Inc., 933 So. 2d 927 (Miss. 2006) (use of "shall" indicates mandatory requirement, "may" is discretionary)

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2024/02/B.Cork-February-8-2024-Disposal-of-Property-Pursuant-to-Senate-Bill-2810.pdf

Original opinion text

February 8, 2024

Bill Cork, Executive Director
Mississippi Development Authority
Post Office Box 849
Jackson, Mississippi 39205

Re: Disposal of Property Pursuant to Senate Bill 2810

Dear Mr. Cork:

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

Background

According to your request, the Mississippi Development Authority ("MDA") made a loan for a manufacturing company located in Columbus, Mississippi, which was secured with a lien on the company's real property (the "Property"). The company subsequently filed bankruptcy, and MDA acquired the Property as part of the bankruptcy proceedings.

Under 2019 Mississippi Senate Bill No. 2810 ("S.B. 2810") Section 1(1), the Legislature authorized MDA "to sell, lease or otherwise dispose of, in whole or in part, in a manner as determined in the sole discretion of the authority" certain state property, including the subject Property located in Columbus, Mississippi. S.B. 2810 Section 1(3) further states:

In the event that any or all of the [subject Property] is sold, the real property shall be sold for not less than the current fair market value as determined by the average of two (2) appraisals by qualified appraisers, one of whom shall be selected by the Department of Finance and Administration, and both of whom shall be certified and licensed by the Mississippi Real Estate Appraiser Licensing and Certification Board.

The bill does not define the term "dispose."

Questions Presented

1. Based on the "otherwise dispose of" language, if MDA makes the appropriate findings, may MDA dispose of the Property by auctioning it to the highest bidder below the appraised fair market value?

2. If MDA makes the appropriate findings, may the agency convey the Property on the basis of negotiation below the appraised fair market value?

3. If MDA makes the appropriate findings, may MDA declare the Property to be surplus and convey the Property below the appraised fair market value?

4. Based on the "otherwise dispose of" language, if MDA makes the appropriate findings, may MDA donate all or a portion of the Property?

Brief Response

1. An auction is a type of sale, and S.B. 2810 Section 1(3) explicitly prohibits the sale of the Property below the current appraised market value without exception. However, the authority granted to sell, lease or otherwise dispose of the property applies to said Property "in whole or in part." Thus, if MDA determines that a part of the subject Property may be sold at auction, conveyance by negotiation, conveyance as surplus, or otherwise for a price that meets or exceeds its fair market value, that part may be sold.

2. See answer to question one.

3. See answer to question one.

4. Article 4, Section 95 of the Mississippi Constitution prohibits the donation of "[l]ands belonging to, or under the control of the State . . . to private corporations or individuals, or to railroad companies." However, if MDA makes the factual determination that the definition of dispose as set forth in S.B. 2810 Section 1(1) includes donation, MDA may donate all or a portion of the Property so long as it is not donated to a private company or individual or to a railroad company.

Applicable Law and Discussion

Your request concerns the meaning of S.B. 2810, specifically the phrase "otherwise dispose of" as set forth in Section 1(1). As stated supra, S.B. 2810 Section 1(1) authorizes MDA "to sell, lease or otherwise dispose of, in whole or in part, in a manner as determined in the sole discretion of the authority" certain state property, including the subject Property located in Columbus, Mississippi.

Regarding the sale of the Property specifically, S.B. 2810 Section 1(3) further mandates:

In the event that any or all of the [subject Property] is sold, the real property shall be sold for not less than the current fair market value as determined by the average of two (2) appraisals by qualified appraisers, one of whom shall be selected by the Department of Finance and Administration, and both of whom shall be certified and licensed by the Mississippi Real Estate Appraiser Licensing and Certification Board.

(emphasis added).

Put simply, S.B. 2810 Section 1(3) explicitly prohibits the sale of the Property below the current appraised market value. See Pitalo v. GPCH-GP, Inc., 933 So. 2d 927, 929 (Miss. 2006) ("Simply stated, 'shall' is mandatory, while 'may' is discretionary."). Furthermore, S.B. 2810 provides no exceptions to this prohibition. Your first three questions concern various scenarios in which MDA would be selling the Property below the current appraised fair market value. Accordingly, it is the opinion of this office that MDA may not: (1) dispose of the Property by auctioning it to the highest bidder below the appraised fair market value, (2) convey the Property on the basis of negotiation below the appraised fair market value, or (3) declare the Property to be surplus and convey the Property below the appraised fair market value. However, the authority granted to sell, lease or otherwise dispose of the property applies to said Property "in whole or in part." Thus, if MDA determines that a part of the subject Property may be sold at auction, conveyance by negotiation, conveyance as surplus, or otherwise for a price that meets or exceeds its fair market value, that part may be sold.

Regarding your fourth question, Article IV, Section 95 of the Mississippi Constitution 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.

Accordingly, it is the opinion of this office that the Property owned by MDA, a state agency, may not be donated to a private corporation or individual or to a railroad company. See MS AG Op., Bryant at *1 (Mar. 11, 1992) (providing sale of property owned by a state agency would be governed by Section 95 of the Mississippi Constitution).

Beyond this, whether donating the Property would be considered "disposing" of the Property is a question of fact, and this office may only issue official opinions addressing prospective questions of law. MS AG Op., Barton at *1 n.2 (May 17, 2021). Thus, it is the opinion of this office that if MDA determines the definition of dispose as set forth in S.B. 2810 Section 1(1) includes donation, MDA may donate all or a portion of the Property so long as it is not donated to a private corporation or individual or to a railroad company.

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/ Maggie Kate Bobo
Maggie Kate Bobo
Special Assistant Attorney General