Opinion 2005-3

This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

PARKING FACILITIES -- Construction of (by school district)
REAL PROPERTY -- Sale (leaseback of occupied building by school district)
SCHOOL DISTRICTS -- Powers and Duties (construction of parking garage); (sale and leaseback of occupied building)

EDUCATION LAW §§402, 1709(11); GENERAL MUNICIPAL LAW §§72-j, 109-b: A union free school district is not authorized to construct, or enter into a lease for the construction of, a parking garage to be used primarily for commercial purposes. In addition, a union free school district may not sell a building currently in use for school district purposes, to be reacquired by lease-purchase agreement.

This is in reply to your letter asking whether a union free school district may construct a facility that will be used primarily as a “commercial” parking garage for commuters and other members of the public at large. The garage, which would also be used for school district staff parking and may include certain student facilities, would be managed by a private firm, under a lease-management agreement. Alternatively, you ask whether a school district may lease real property to a private firm, in exchange for the construction of a commercial garage by the firm.

You also ask whether a school district may sell a “student occupied” school building to a “trust entity”. The “trust entity” would use monies loaned to it by investors to purchase the building. The district would lease the building back, with an option to purchase or with title vesting in the district after a period of years. If the district may enter into such a transaction, you further ask whether the district may invest the proceeds of the sale in a manner other than that provided in the General Municipal Law.

It is a fundamental principle of law that school districts possess only those powers expressly delegated by statute or necessarily and reasonably implied therefrom (see, e.g., Flaminio v Board of Education, 97 Misc 2d 722, 412 NYS2d 100; see also, e.g., Bassett v Fish, 75 NY 303). Pertinent here, General Municipal Law §72-j authorizes the governing board of a “municipal corporation” to, inter alia, acquire real property for or incidental to the construction or operation of “parking garages” (General Municipal Law §72-j [1]).1 Section 72-j authorizes municipal corporations to construct and operate such garages, and includes authority to use “such portion of the property for other commercial uses as may be necessary to provide revenue adequate to permit the operation of the principal portion of the property for such garages …” General Municipal Law §72-j[2][a]). The municipal corporation may charge rentals or fees for the use of the garage by the general public and make other provisions for its operation and maintenance as it may deem necessary ( id.).2

Thus, pursuant to section 72-j, a “municipal corporation” may construct, acquire and operate a parking garage to be used by the public at large. For purposes of section 72-j, however, the term “municipal corporation” as used in section 72-j includes “only a county, town, city and village” (General Municipal Law §2).3 Therefore, section 72-j does not provide authority for a school district to construct, or lease its property in exchange for the construction of, a facility to be used primarily as a commercial garage (see, gen. McKinney’s Statutes, §240, when a law expressly describes entities to which it applies, it is inferred that the exclusion of an entity is intended). Further, while a school district, as an incident to acquiring, operating and maintaining school grounds, may provide parking facilities to be used in connection with authorized uses of school district facilities (see, e.g., Education Law §§1604[4], [14], [30], 1709 [6], [9], [22], [33], 2117[3], 2801[1]; 13 Opns St Comp, 1957, p 88), we find no authority analogous to section 72-j, in the Education Law or any other statute, that would authorize a school district to construct, or enter into a lease for the construction of, a parking garage to be used primarily by the public at large for purposes unrelated to school district activities (see also, gen., 1979 Opns St Comp No. 79-475, unreported; 12 McQuillin, Municipal Corporations, §36.02).

With respect to the sale of a ”student occupied” building, Education Law §1709(11) authorizes the board of a union free school district to sell, when authorized by vote of the qualified voters of the district, “any former school site or lot, or any real estate the title to which is vested in the board, and the buildings thereon, and any appurtenances or any part thereof, at such price and upon such terms as said voters shall prescribe …” (emphasis added). Similarly, section 402 of the Education Law provides for the sale of “former” schoolhouses and sites, when the site of a schoolhouse has been changed (see Education Law §401), after an appraisal and voter approval (Education Law §402[1]; see also Education Law §403-a[1], authorizing the leasing of school district real property not currently needed for school district purposes).4

Sections 402 and 1709(11), by their express terms, authorize the sale of a “former” school site or schoolhouse and, therefore, do not authorize the sale of a schoolhouse or site that is in use. Moreover, we have expressed the opinion that, as a rule, absent express statutory authority, a prerequisite to the sale of property of a local government acquired for public purposes is a determination that the property is no longer needed for such purposes (see, e.g., 1988 Opns St Comp No. 88-1, p 1; 1971 Opns St Comp No. 71-1033, unreported; see also Lake George Steamboat v Blais, 30 NY2d 48, 330 NYS2d 336; 10 McQuillin, Municipal Corporations, §28.37). Accordingly, it is our opinion that the general authority in section 1709(11) to sell “any real estate … and the buildings thereon ..”, does not encompass a sale of property that it is currently used for school district purposes for the sole purpose of obtaining the cash value of the property (compare, e.g., Energy Law §9-103[5], authorizing leases of real property to facilitate energy performance contracts, “notwithstanding that such real property may remain useful ... for the purpose for which [it] was originally acquired or devoted or for which [it] is being used”).

Further, with respect to the component of the proposal by which the school district would leaseback the building with an option to purchase or with title vesting at the end of the lease term, we find no authority for a school district to acquire an existing building by installment or lease-purchase agreement as proposed. In this regard, we note that General Municipal Law §109-b(7) provides that a political subdivision, including a school district (General Municipal Law §100[1]), shall not have the power to enter into “installment purchase contracts” except as authorized in section 109-b or the Education Law.5 Section 109-b was amended in 1991 (chapter 413) to authorize political subdivisions to enter into installment purchase contracts to, among other things, acquire buildings. That statute, however, was further amended in 1994 (chapter 258) to repeal the authorization to acquire building by installment purchase agreement (see 1997 Opns St Comp No. 97-10, p18). Moreover, there is no provision in the Education Law that would authorize a leaseback transaction such as the one proposed (compare Education Law §1726, concerning lease-purchases of a building to be erected or placed on a site owned by a school district, subject to certain requirements, including voter approval, competitive bidding requirements and the pledge of the faith and credit of the district for the full performance of all obligations under the agreement6; Education Law §1709[42], authorizing certain lease, sublease or other agreements with the Dormitory Authority).7

Accordingly, a union free school district is not authorized to construct, or enter into a lease for the construction of, a parking garage to be used primarily for commercial purposes. In addition, a union free school district may not sell a building currently in use for school district purposes, to be reacquired by lease-purchase agreement.

April 11, 2005

Thomas Melito, President
Babylon Board of Education

1 The term “parking garage” for this purpose includes any building or facility available to the public where motor vehicles are parked or stored, with or without fee or charge and without regard to residence, business or employment of the motor vehicle owner or operator (General Municipal law §72-j[4][a]).

2 Under subdivision 3 of section 72-j, a municipal corporation also may sell, lease for term not exceeding 99 years or otherwise dispose of any real property or interest therein owned by it or acquired by it pursuant to section 72-j to any person, firm or corporation at the highest marketable price or rental at public auction or by sealed bids pursuant to the provisions of any general, special or local law, for the purpose of the construction or establishment of public parking garages and for the maintenance and operation thereof. Subdivision three also prescribes certain terms and conditions to be included in the deed, lease or instrument by which real property or any interest therein is disposed of or conveyed.

3 but see Schulz v Cobleskill-Richmondville CSD, 197 AD2d 247, 610 NYS2d 694, applying the definition of “municipal corporation” in General Construction Law §66 to General Municipal Law §51, for purposes of standing.

4 Subdivision 3 of section 402 provides that, when a credit is directed to be given upon the sale “for the consideration money”, the board may take back a bond and mortgage for the payment.

5 An installment purchase contract for this purpose means any lease purchase agreement, installment sales agreement or other similar agreement providing for periodic payments between a corporation, person or other entity and a political subdivision which has as its purpose the financing of equipment, machinery and apparatus (General Municipal Law §109-b[1][b]).

6 Section 1726 does not apply here for several reasons. Section 1726 applies only to the placement or erection of a building, not to the lease-purchase of an existing building. Further, it appears that the district does not contemplate a competitive bidding process or a pledge of its faith and credit for the leaseback payments.

7 Although our conclusions render the remaining question on investment of the proceeds from the sale of the building academic, we note, in passing, that General Municipal Law §11 constitutes the exclusive authority for the investment of the proceeds of the sale of real property by a school district (see Education Law §1723-a; General Municipal Law §6-l[6]).