Opinion 92-32

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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

REAL PROPERTY -- Purchase (of historically significant property for immediate reconveyance to an historical society) -- Sale (on installment basis to historical society)

GENERAL MUNICIPAL LAW, §§119-aa, 119-dd; MUNICIPAL HOME RULE LAW, §10(1)(i): A town may purchase an historically significant railroad depot located within the town and immediately reconvey the depot, for fair and adequate consideration, to an historical society for restoration and preservation. The town, by local law, may authorize the purchase price to be paid to the town on an installment basis, secured by a purchase-money mortgage.

You inquire about the propriety of the use of surplus town funds to purchase an historical railroad depot located within the town, under the following circumstances. The town has determined that the depot is an historically significant structure which should be preserved as an historic site. The town, however, does not wish to hold title to the depot for historic preservation purposes. The town has contacted an historical society which is willing to acquire title and preserve and maintain the depot. The society, however, is unable to purchase the depot outright at this time. You propose, therefore, that the town purchase the depot using surplus funds and immediately reconvey the depot to the historical society for restoration and preservation. The historical society would pay the purchase price for the depot on an installment basis, without any stated interest, over a number of years. You indicate that the town would hold a purchase-money mortgage as security.

Town Law, §64(2) authorizes a town board to acquire land required for town purposes and also authorizes the sale of town real property pursuant to board resolution, subject to permissive referendum. Since town property is acquired for town purposes, the authority to sell real property is ordinarily contingent on a determination that the property is no longer needed for town purposes (see, e.g., 1981 Opns St Comp No. 81-5, p 4; 1976 Opns St Comp No. 76-1092, unreported; 31 Opns St Comp, 1975, p 89; cf. General Municipal Law, §109-b[7], relative to leases of public works in connection with installment purchase contracts). Thus, as a general rule, unless otherwise authorized by statute, a town may not purchase real property for the purpose of immediately reconveying it (1989 Opns St Comp No. 89-29, p 69; 1981 Opns St Comp No. 81-203, p 216).

Since the proposed transaction involves historical property, General Municipal Law, article 5-K (§119-aa et seq.) is pertinent here. Article 5-K, relating to historic preservation, was enacted to " ... encourage the opportunity and flexibility for the ... towns ... of the State to manage the historic and cultural properties under their jurisdiction ..." (General Municipal Law, §119-aa). Pursuant to Article 5-K, a town is authorized, after due notice and public hearing, to purchase historical or cultural property in order to further historic preservation efforts (General Municipal Law, §119-dd[3]). Further, a town is authorized to sell historic buildings or structures pursuant to section 119-dd(4) which empowers town boards to:

Designate, purchase, restore, operate, lease and sell historic buildings and structures. Sales of such buildings and structures shall be upon such terms and conditions as the local legislative body deems appropriate to insure the maintenance of the historic quality of the buildings and structures, after public notice is given at least thirty days prior to the anticipated date of availability and shall be for fair and adequate consideration ... which in no event shall be less than the expenses incurred by the municipality with respect to such buildings and structures for acquisition, restoration, improvement and interest charges. (Emphasis added)

Thus, General Municipal Law, §119-aa clearly authorizes a town to purchase an historic structure and General Municipal Law, §119-dd contemplates that the town may sell such structure upon terms and conditions to ensure the maintenance of its historic quality.

In our view, sections 119-aa and 119-dd, when read together with the intent of article 5-K to encourage opportunity and flexibility in the management of historic property, provide authority for a town, under the facts presented, to acquire the depot and immediately reconvey it to an historical society for the purpose of facilitating the restoration and preservation of the historic site. As specified in section 119-dd(4), however, the consideration furnished by the historical society for the property must represent fair and adequate consideration and in no event be less than the costs incurred by the town to acquire, restore or improve the property, including any interest charges incurred in connection therewith.

Neither article 5-K nor any other applicable statute authorizes a town to accept installment payments for the sale of real property, secured by a purchase-money mortgage (cf. e.g., Education Law, §402[3]). In previous opinions, however, we have concluded that a municipality, by local law, may authorize such a transaction (see, e.g., 1987 Opns St Comp No. 87-51, p 78; 1981 Opns St Comp No. 81-61, p 62; 1978 Opns St Comp No. 78-932, unreported; 1977 Opns St Comp No. 77-329, unreported). In enacting any such local law, the town must take into consideration the requirement of section 119-dd(4) that it receive fair and adequate consideration.

Therefore, if the mortgage is to require repayment over the term thereof without interest, the town must satisfy itself that these repayment terms, together with any other responsibilities assumed by the historical society to maintain and preserve the depot, constitute fair and adequate consideration for the property which exceeds the costs incurred by the town in connection with its acquisition of the depot.

October 20, 1992
Kevin M. McArdle, Esq., Town Attorney
Town of Croghan