Can employees of a Virginia regional partnership join the Virginia Retirement System?

Plain-English summary

Senator McWaters asked whether the Hampton Roads Partnership qualifies as a "political subdivision" under § 51.1-124.3, which would make its employees eligible to participate in the Virginia Retirement System.

The AG said no.

The VRS statute defines "political subdivision" to include "any commission, public authority, or body corporate created by or under an act of the General Assembly specifying the powers, privileges or authority capable of exercise by the commission, public authority, or body corporate." That definition requires two things: legislative creation and a grant of identifiable sovereign powers, privileges, or authority.

The Hampton Roads Partnership was formed under the Regional Competitiveness Act, which allows localities to create regional partnerships of government, business, education, and civic leaders to plan and coordinate. The Act gives partnerships a role: develop a strategic economic development plan, issue annual progress reports, identify joint activities. Existence of a partnership is a prerequisite for the region to receive incentive funds from the Department of Housing and Community Development.

But the Act does not call regional partnerships "political subdivisions." That single fact gets significant weight because the General Assembly ordinarily provides for such a designation when it intends one. The Supreme Court of Virginia made that point in the Short Pump Community Development Authority case: in a bond validation context, that authority was not a political subdivision because the General Assembly had not designated it as one.

The second strike against the Partnership is that it lacks the kinds of sovereign powers that past opinions of this office have treated as the hallmark of a political subdivision:

• Authority to issue its own debt.
• Authority to enact regulations having the force of law.

Regional partnerships are convening bodies. They coordinate, plan, and report. They do not issue debt, levy taxes, or promulgate binding regulations. They lack the sovereign attributes the VRS political-subdivision test requires.

The result: employees of the Hampton Roads Partnership are not VRS-eligible. The Partnership can provide its employees with other retirement benefits, but VRS is not one of the options the statute makes available.

Currency note

This opinion was issued in 2011. 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.

VRS eligibility rules and the political-subdivision definition in § 51.1-124.3 have been amended at various points. The Hampton Roads Partnership itself has since dissolved or reorganized. Anyone analyzing a current VRS-eligibility question for a regional or quasi-public entity should look at the current text of § 51.1-124.3 and the entity's enabling legislation.

Common questions

What's the practical difference between a political subdivision and a non-subdivision?

VRS eligibility is one practical difference. Others include sovereign immunity, the ability to issue tax-exempt debt, the power to acquire property by eminent domain, and exemption from certain state taxes. Political-subdivision status is a status that travels with many other consequences.

Why does the General Assembly bother designating some entities as political subdivisions and not others?

To signal which entities exercise pieces of the state's sovereign power. The Supreme Court relies on that designation when applying statutory schemes (like the Public Finance Act or the VRS) that hinge on political-subdivision status. The label is doing a lot of work.

Could a regional partnership eventually become a political subdivision?

Only if the General Assembly amended the Regional Competitiveness Act to designate them as such, or if the partnership were given sovereign powers (debt issuance, regulatory authority) by legislation. Without that, the AG's reasoning would apply to any regional partnership.

Are there retirement options for partnership employees?

Yes, just not VRS. The partnership can offer private retirement plans, defined contribution plans, or other arrangements an employer would normally provide. The opinion does not address those alternatives.

Does this analysis reach other "partnership" or "coalition" entities?

The reasoning applies the same way to any entity that is (a) not designated as a political subdivision by the General Assembly and (b) lacks identifiable sovereign powers. The case-by-case test turns on legislative designation plus the sovereign-powers checklist.

Background and statutory framework

The VRS political-subdivision definition:

• Va. Code Ann. § 51.1-124.3. "Political subdivision" includes any commission, public authority, or body corporate created by or under an act of the General Assembly specifying the powers, privileges, or authority capable of exercise.
• The opinion noted that eligible employees of political subdivisions may participate in VRS (without giving a section number for that point).

The Regional Competitiveness Act:

• Va. Code Ann. § 15.2-1307. "Regional partnership" definition: an organization of government, business, education, and civic leaders approved by the local governing bodies of the region.
• The Act (the opinion described these features without giving section numbers) also provides for an incentive fund administered by the Department of Housing and Community Development, and conditions eligibility on a regional strategic economic development plan, an annual progress report, identified joint activities, and broad representation.

The AG's working definition of "political subdivision":

• Created by the legislature to exercise some portion of the state's sovereignty in regard to one or more specific governmental functions.
• Independent of other governmental bodies; can act on conferred powers without superior approval.
• Employs its own consultants, attorneys, accountants, and other employees at fixed salaries.
• Often incurs debts that are not debts of the Commonwealth.

The case law:

• Short Pump Town Center Cmty. Dev. Auth. v. Hahn (Va. 2001): in a bond validation context, the community development authority was not a political subdivision because the General Assembly had not designated it as one.

The AG's two-pronged test, applied:

1. No legislative designation. The Regional Competitiveness Act does not call regional partnerships political subdivisions.
2. No sovereign powers. Regional partnerships cannot issue debt or promulgate regulations with the force of law.

Citations

• Va. Code § 2.2-505
• Va. Code Ann. § 51.1-124.3
• Va. Code Ann. § 15.2-1307
• Short Pump Town Center Cmty. Dev. Auth. v. Hahn, 262 Va. 733, 554 S.E.2d 441 (2001)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2011/11-023-McWaters.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

March 18, 2011

The Honorable Jeffrey L. McWaters
Member, Senate of Virginia
1207 Laskin Road
Virginia Beach, Virginia 23451

900 East Main Street
Richmond, Virginia 23219
804-786-2071
FAX 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

Dear Senator McWaters:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented

You ask whether the Hampton Roads Partnership ("Partnership") constitutes a "political subdivision" under § 51.1-124.3, so that the Partnership's employees are entitled to coverage by the Virginia Retirement System ("VRS").

Response

It is my opinion that employees of the Hampton Roads Partnership are not eligible for VRS coverage because the Partnership is not a "political subdivision" under § 51.1-124.3.

Applicable Law and Discussion

Eligible employees of "political subdivisions" may participate in the Virginia Retirement System. Section 51.1-124.3 includes in its definition of "political subdivision" "any commission, public authority, or body corporate created by or under an act of the General Assembly specifying the powers, privileges or authority capable of exercise by the commission, public authority, or body corporate."

The Regional Competitiveness Act ("the Act") provides for the establishment of regional partnerships by localities "to work together for their mutual benefit and the benefit of the Commonwealth." Section 15.2-1307 defines "regional partnership" as "an organization composed of government, business, education and civic leaders approved by the local governing bodies of the region to carry out the provisions of" the Act.

The Act provides for the creation and disbursement of an incentive fund to "encourage regional strategic planning and cooperation," including "regional strategic economic development planning and joint activities." The fund is administered by the Department of Housing and Community Development ("Department"). Existence of a regional partnership is a prerequisite for a region to receive incentive payments. To be eligible to receive these funds, the regional partnership must develop a regional strategic economic development plan as well as issue an annual progress report. The partnership also must identify any existing and proposed joint activities within the region. Furthermore, to be eligible to receive incentive funds, a partnership "shall include as broad a representation as is practical of local government, elementary and secondary education, higher education, the business community, and civic groups."

Whether employees of the Partnership are entitled to VRS participation hinges on whether the Partnership is a "political subdivision." Generally speaking,

A political subdivision is created by the legislature to exercise some portion of the state's sovereignty in regard to one or more specific governmental functions. It is independent from other governmental bodies, in that it may act to exercise those powers conferred upon it by law without seeking the approval of a superior authority. It employs its own consultants, attorneys, accountants and other employees whose salaries are fixed by the political subdivision, and it often incurs debts which are not debts of the Commonwealth but are debts of the political subdivision.

The Regional Competitiveness Act does not explicitly designate regional partnerships as political subdivisions. In a different context, whether the Short Pump Community Development Authority could file a bond validation action, the Supreme Court of Virginia concluded that the Development Authority was not a political subdivision because it was not designated as such by the General Assembly. The fact that the General Assembly did not designate regional partnerships as political subdivisions provides a strong indication that they do not qualify as political subdivisions, particularly when the General Assembly ordinarily provides for such a designation.

Strengthening this conclusion is the fact that regional partnerships are not given any authority to exercise a sovereign "power[], privilege[], or authority." The role of regional partnerships is to bring together stakeholders from local government, civic and educational groups and from the business community to foster prosperity and wise governance. In determining whether an entity is a political subdivision, past opinions from this office have examined whether the entity has been authorized to exercise a sovereign power. Examples include issuing its own debt, or enacting regulations having the force of law. These factors are not present here. Regional partnerships are not authorized to exercise any such sovereign "power[], privilege[], or authority."

Conclusion

Accordingly, it is my opinion that employees of the Hampton Roads Partnership are not eligible for VRS coverage because the Partnership is not a "political subdivision" under § 51.1-124.3.

With kindest regards, I am

Very truly yours,

Kenneth T. Cuccinelli, II
Attorney General