Does the State of Oklahoma own the Grand River Dam Authority's assets, and what would happen to the proceeds if the Legislature ordered GRDA to sell?

Plain-English summary

The Legislative Office of Fiscal Transparency asked who owns the Grand River Dam Authority's (GRDA's) assets and what happens to the proceeds if the Legislature directs a sale. The Attorney General answered that the State of Oklahoma owns GRDA and its assets. State law calls GRDA a governmental agency and designates its funds as public funds. The opinion also quotes the Oklahoma Supreme Court's conclusion that "the State of Oklahoma is the owner of and is operating the Grand River Dam Authority."

The Legislature may direct GRDA to sell or otherwise dispose of some or all of its assets. Before the Legislature spends any remaining proceeds for public purposes, however, GRDA must satisfy or discharge its outstanding debts and obligations. The opinion focuses on bond obligations and contracts with municipal power customers. Oklahoma's contracts clause and the statutory pledge to bondholders limit a sale law that would cause GRDA to default or impair bondholder rights. The Legislature must also allow GRDA to meet customer-contract obligations before redirecting proceeds.

The opinion does not determine what any particular outstanding bond document pledges. It identifies that as a factual question outside the scope of an Attorney General opinion.

What this means for you

If you hold GRDA bonds

A proposed sale does not erase GRDA's bond commitments. 82 O.S.2021, § 868 pledges that bondholders' rights and remedies will not be impaired until the bonds are "fully met and discharged." The opinion says legislation causing GRDA to violate those obligations or impair those rights would likely be unconstitutional. Review the actual bond documents to determine their specific security and payment terms; this opinion does not decide them.

If your municipality buys electricity from GRDA

The opinion says a sale directive must allow GRDA to satisfy or discharge its contractual obligations to customers before proceeds are redirected. Have counsel compare a proposal with your supply contract. The opinion does not specify whether an obligation would be performed, assumed, or discharged in any particular transaction.

If you serve on GRDA's board or are drafting legislation

The Legislature may change GRDA's powers and direct a sale. A sale plan must account for GRDA's outstanding debt, bondholder rights, and customer contracts. Section 869(A) limits the sources from which GRDA pays indebtedness; the opinion quotes that provision and cautions that bond documents may pledge particular funds. Identify those obligations before deciding what proceeds, if any, remain available for public purposes.

If you are a taxpayer

GRDA's funds are public funds under § 861A. The opinion says the Legislature may appropriate remaining sale proceeds for public purposes after GRDA's debts and obligations have been satisfied or discharged. It does not put a dollar figure on the amount that would remain.

Common questions

Is GRDA a state agency even though it has its own board and makes contracts?

Yes. Section 861 describes GRDA as a "governmental agency of the State of Oklahoma, body politic and corporate, with powers of government." The opinion says its separate board and contracting powers do not change the State's ownership conclusion.

Can the Legislature order GRDA to sell all its assets?

The opinion says the Legislature may, in its discretion, direct a sale or other disposition of some or all GRDA assets. It must respect GRDA's debts and contractual obligations when directing how proceeds are used.

Do bondholders automatically receive every dollar of sale proceeds first?

The opinion does not establish a single payment waterfall for every bond issue. It says GRDA must satisfy or discharge its debts and obligations before the Legislature expends the remaining proceeds. It quotes § 869(A)'s payment-source rules and says whether outstanding bond documents pledge particular funds is a factual question it cannot decide.

Are GRDA's contracts with municipal customers relevant?

Yes. The opinion says a sale law should not impair those contracts and that GRDA must be allowed to satisfy or discharge customer-contract obligations before remaining proceeds are redirected.

May the Legislature use what is left for any purpose?

The opinion says the Legislature may appropriate remaining proceeds for public purposes. It cites the Oklahoma Supreme Court for the statement that "public purpose" is synonymous with "government purpose." It does not analyze a particular proposed expenditure.

Background and statutory framework

The Legislature created GRDA in 1935 to manage Grand River resources and develop electric power. Section 861 identifies it as a governmental agency; § 861A says its funds are public funds. The opinion cites International Brotherhood of Electrical Workers, Local Union 976 v. Grand River Dam Authority and Sheldon v. Grand River Dam Authority for the State's ownership and GRDA's public function.

Sections 862 and 863.2 give GRDA contracting and property powers and assign business governance to its board. Article V of the Oklahoma Constitution permits the Legislature to amend GRDA's statutory powers and direct an asset sale. Article II, § 15 bars a law impairing contracts. The opinion applies that rule to GRDA bonds and customer contracts, and quotes § 868's pledge protecting bondholders until their bonds are fully discharged. Section 869(A) addresses sources of payment for GRDA obligations. The opinion's final answer puts outstanding debts and obligations ahead of legislative use of any remaining sale proceeds.

Source

• Original PDF: https://oklahoma.gov/content/dam/ok/en/oag/opinions/ag-opinions/2023/ag_opinion_2023-8_z-2.pdf
• Landing page: https://oklahoma.gov/oag/opinions/ag-opinions/2023/ag-opinion-2023-8.html

Original opinion text

GENTNER DRUMMOND
ATTORNEY GENERAL
ATTORNEY GENERAL OPINION
2023-8

Mike Jackson, Executive Director
May 25, 2023
Legislative Office of Fiscal Transparency
2300 N. Lincoln Blvd, Room 107
Oklahoma City, OK 73105

Dear Executive Director Jackson,

This office has received your request for an official Attorney General Opinion in which you ask, in effect, the following questions:

1. Does the State of Oklahoma own the Grand River Dam Authority’s assets?

2. If the Legislature directed Grand River Dam Authority to sell assets, how would the sale proceeds be distributed?

I.
SUMMARY

Because the Grand River Dam Authority (“GRDA”) is a governmental agency and created by statute, the State of Oklahoma owns its assets. Moreover, GRDA’s funds are public funds. Upon a sale of the GRDA’s assets, the Oklahoma Legislature must first satisfy all debts and obligations. Only after debts and obligations are satisfied or discharged may the Oklahoma Legislature appropriate the remaining proceeds as with any other public funds.

II.
BACKGROUND

In 1935, the Oklahoma Legislature created the GRDA for “control[ing], storing, preserv[ing], and distribut[ing] . . . waters of the Grand River and its tributaries, for irrigation, power and other useful purposes;” “conserv[ing] and develop[ing] . . . forests, minerals, land, water and other resources;” and “conserv[ing] and develop[ing] hydroelectric power and other electrical energy[.]” 1935 Okla. Sess. Laws ch. 70, art. 4, SB 395, 82 O.S.2021, § 861. From its inception, the Legislature described GRDA as a “governmental agency of the State of Oklahoma, body politic and corporate, with powers of government . . . .” 82 O.S.2021, § 861.

313 N.E. 21ST STREET • OKLAHOMA CITY, OK 73105 • (405) 521-3921 • Fax: (405) 521-6246

Mike Jackson, Executive Director
A.G. Opinion
Legislative Office of Fiscal Transparency Page 2 The Legislature granted several powers, rights, and privileges to the GRDA, including the ability to sell “any property of any kind, real, personal or mixed, or any interest therein, which shall not be necessary to the carrying on of the business of the [GRDA].” Id. § 862(9). GRDA is statutorily authorized to “make contracts and to execute instruments necessary, incidental or convenient to the exercise of the powers, rights, privileges and functions conferred upon it by the [GRDA] Act.” Id. § 862(16). The statute permits GRDA to “do any and all other acts or things necessary, incidental or convenient to the exercise of the powers, rights, privileges or functions conferred upon it by the [GRDA] Act or any other act or law.” Id. § 862(19) (emphasis added).

GRDA’s board of directors (“GRDA Board”) governs the business of GRDA and is “responsible for approving business expenses of the [GRDA] necessary to carry out the business of the
[GRDA].” Id. § 863.2(B). The Governor, the Senate President Pro Tempore, and the Speaker of the House of Representatives appoint members to the GRDA Board, much as they do other state agencies. Id. § 863.2(F) (1, 4, 5).

In support of GRDA’s statutory charge, state law mandates the GRDA Board to “produce revenue adequate . . . to fulfill the terms of any agreements made with the holders of such bonds and/or with any person in their behalf[.]” Id. § 868. GRDA’s enabling statute also empowers GRDA to fund and refund obligations by issuing new revenue bonds, using proceeds of new revenue bond sales, or exchanging new revenue bonds. Id. § 873. Additionally, state law also permits GRDA to renegotiate outstanding or contracted bonds. Id.

III.
DISCUSSION

A. The State of Oklahoma owns GRDA assets.

The State of Oklahoma owns GRDA assets for two reasons. First, as stated above, GRDA’s enabling statute defines GRDA as a government agency, and that has been the case since its establishment in 1935. Second, GRDA funds are public funds. Id. § 861A(A).

The Oklahoma Supreme Court has determined that the State owns GRDA. In International Bhd. of Elec. Workers, Local Union 976 v. Grand River Dam Auth., the Court, relying on its holding in Sheldon v. Grand River Dam Authority, 1938 OK 76, 76 P.2d 355, held:

Since the Authority is engaged in “public purposes”, and having determined in Sheldon v. Grand River Dam Authority, supra, that the Authority is “conducting a state function, which could have been accomplished by an existing state board or office”, we conclude that the State of Oklahoma is the owner of and is operating the Grand River Dam Authority.

1956 OK 24, ¶ 9, 292 P.2d 1018, 1020. The Court reasoned that the State created GRDA to “exploit, preserve, and utilize in a certain specific manner that portion of its natural resources.” Id.
¶ 8, 292 P.2d at 1020 (quoting Sheldon, 1938 OK 76, ¶ 19, 76 P.2d at 361). The Court also underscored section 861’s pronouncement that GRDA is a governmental agency. Id.

Mike Jackson, Executive Director
A.G. Opinion
Legislative Office of Fiscal Transparency Page 3 Title 82, section 861A of the Oklahoma Statutes provides that GRDA “is subject to the laws of the state as they apply to state agencies except as specifically exempted by statute.” As such, GRDA must comply with provisions in title 61 of the Oklahoma Statutes, which govern real property transactions; the Central Purchasing Act; the Oklahoma Personnel Act; article I of the Administrative Procedures Act; and the Public Competitive Bidding Act of 1974. See generally 1980 OK AG 51. Neither GRDA’s enabling act nor these other acts expressly exempt GRDA. 1 Therefore, GRDA is clearly a governmental agency.

Along with being a governmental agency, GRDA’s funds are statutorily designated as public funds. Title 82, section 861A of the Oklahoma Statutes states that “[a]ll funds generated, received and expended by [GRDA] are public funds[.]” GRDA funds are also “subject to state laws and regulations governing the receipt and expenditure of public funds in the same manner as all other state agencies except as otherwise provided by statute.” 82 O.S.2021, § 861A. An Attorney General opinion, which concluded that the GRDA’s funds could not be used to insure a private entity under a GRDA insurance policy, further supports a finding that GRDA’s funds are public money. See 2007 OK AG 41 (analyzing 82 O.S.2021, § 861A(A)). Put simply, GRDA’s funds are the State’s funds and thus must be handled in accordance with state law. Consequently, for the reasons stated above, the State of Oklahoma owns GRDA and its assets.

B. Following a legislative directive to sell GRDA assets, GRDA must first satisfy or discharge any debts or obligations prior to the Legislature utilizing any remaining proceeds for public purposes.

As previously discussed, GRDA is a creature of statute, meaning the Legislature may amend GRDA’s powers and duties through the normal legislative process as opposed to submitting the question to a vote of the people. After all, article 5, section 1 of the Oklahoma Constitution vests “[t]he [l]egislative authority of the State” in the Legislature, subject to the people’s reserved powers. The Constitution also grants the Legislature expansive authority “extend[ing] to all rightful subjects of legislation, and any specific grant of authority in this Constitution, upon any subject whatsoever, shall not work a restriction, limitation, or exclusion of such authority upon the same or any other subject or subjects whatsoever.” OKLA. CONST. art. V, § 36. Consequently, the Legislature may, in its sound discretion, direct GRDA to sell or otherwise dispose of some or all of its assets.

However, state law and obligations assumed by GRDA necessitate proper distribution of any proceeds from the sale or disposition of GRDA assets. Specifically, the Constitution prohibits the Legislature from interfering with contracts. OKLA. CONST. art. II, § 15 (“No . . . law impairing the obligation of contracts, shall ever be passed.”). This precludes the Legislature from directly or indirectly requiring GRDA to default on or otherwise breach its bond obligations. See Fortinberry Co. v. Blundell, 1952 OK 80, ¶ 23, 242 P.2d 427, 433 (holding the prohibition on interference with contracts applies to contracts when the State is a party). Additionally, the Supreme Court has determined that article II, section 15 operates to prevent the Legislature from impairing obligations because the underlying agreement between the bond issuer and the bond holder incorporates the

1
GRDA’s real property transactions prior to November 1, 2006, are not subject to the state statute governing real property transactions.

Mike Jackson, Executive Director
A.G. Opinion
Legislative Office of Fiscal Transparency Page 4 authorizing statute. Board of Cnty. Comm’rs v. Mullins, 1950 OK 95, ¶ 15, 217 P.2d 835, 840. Specifically, the Mullins Court stated:

The general rule is that the laws in effect pursuant to which bonds were voted become a part and are read into the contract between the State or municipality, as the case may be, and the bondholders, and that the legislature may not later enact any legislation which would impair the obligation of such contract.

Id. The Supreme Court also held in Wickham that the newly enacted article X, section 23 of the Oklahoma Constitution could not be applied to prevent GRDA from fulfilling its bond obligations to the federal government. Wickham v. Grand River Dam Auth., 1941 OK 346, 118 P.2d 640. The Court reasoned that it had previously held that “the law in force at the time of issuance of municipal bonds enters into the terms thereof, and the obligations of said contracts cannot thereafter be in any way impaired or the fulfillment therefore hampered or obstructed by a change in the law.” Id.
¶ 15, 118 P.2d at 643. Since 1935, the Legislature has pledged to not in any way impair the rights or remedies of the holders of the bonds until the bonds are “fully met and discharged.” 82 O.S.2021, § 868 (emphasis added). Thus, any legislation that would cause GRDA to violate its obligations to bond holders or that may impair bond holders’ rights or remedies would likely be found unconstitutional. Such legislation would also contravene longstanding Oklahoma public policy that bond holders rely on when purchasing GRDA bonds.

In issuing bonds, GRDA further undertakes certain obligations and pledges security for the bonds as a remedy in its bond documents. Title 82, section 869(A) of the Oklahoma Statutes mandates GRDA to pay for indebtedness, liabilities, or obligations solely:

(1) out of the revenues received by the district in respect of its properties, or other accounts held for the payment and security thereof, subject to any prior lien thereon conferred by any resolution or resolutions theretofore adopted as in Section 861 et. seq. of this title . . . or (2), if the Board shall so determine out of the proceeds of sale or issuance by the district of bonds or bond anticipation notes payable solely from such revenues or such other amounts, or such credit or liquidity support as may be obtained by the district for such purposes, repayable solely from such revenues or other amounts.

Further, the bond documents themselves may also pledge certain funds in GRDA’s possession for security of the bonds. 2 Thus, the Legislature must be mindful to not impair bondholders’ rights when directing GRDA to sell or dispose of GRDA assets.

Finally, as a wholesaler of electrical power to certain Oklahoma municipalities, the Legislature must be mindful of GRDA’s customers when crafting its directive to sell or dispose of GRDA assets. As noted above, no legislation should impair the contracts that GRDA has in place with its customers. See OKLA. CONST. art. II, § 15; Blundell, 1952 OK 80, 242 P.2d 427. Consequently, the Legislature must permit GRDA to satisfy or discharge its bond obligations and contractual obligations to customers before redirecting the remaining proceeds to other public purposes.

2
Whether any of the bond documents in GRDA’s outstanding issuances contain certain pledges is a question of fact, which falls outside the scope and purview of an Attorney General Opinion. 74 O.S.2021, § 18b(A)(5).

Mike Jackson, Executive Director
A.G. Opinion
Legislative Office of Fiscal Transparency Page 5

It is, therefore, the official Opinion of the Attorney General that:

1. The State of Oklahoma owns the Grand River Dam Authority and its assets.

2. Prior to the Oklahoma Legislature expending remaining proceeds for public purposes 3, GRDA must first satisfy or discharge its outstanding debts and obligations.

GENTNER DRUMMOND
ATTORNEY GENERAL OF OKLAHOMA

EMILY ISBILL
ASSISTANT ATTORNEY GENERAL

3
The Oklahoma Supreme Court has held that “‘public purpose’ is synonymous with ‘government purpose.’” State ex rel. Lacy v. Jackson, 1983 OK 122, ¶ 11, 682 P.2d 218, 220.