2013-049 THE AWORNEY GENERAL LUTHER STRANGE so: AVENUE GENERAL May 2 1 9 1 3 (334) 2427300 Honorable Jessica M. McDill Attorney, North Baldwin Utilities Chason Chason Post Office Box 100 Bay Minette, Alabama 36507 Utility Boards Real Property Investments Public Corporations Water and Gas Board Baldwin County North Baldwin Utilities may purchase real estate to provide for the temporary lodging of consultants if the Board of North Baldwin Utilities determines that such a purchase is necessary or convenient to the system. If such a purchase is made, North Baldwin Utilities may hold such real estate until the Board determines that disposal of said property is necessary or convenient to the system. There is no statutory authority for North Baldwin Utilities to purchase real estate solely for investment purposes. Dear Ms. McDill: This opinion of the Attorney General is issued in response to your request on behalf of North Baldwin Utilities. QUESTIONS (1) May North Baldwin Utilities purchase real estate to provide lodging for consultants and employees on an as-needed basis? (2) In the event that such a need is no longer present, must NBU divest itself of the ownership of such property? Honorable Jessica M. McDill Page 2 (3) May NBU purchase real estate solely for investment purposes? FACTS AND ANALYSIS According to your request, NBU is a public corporation existing pursuant to section 11?50-310 of the Code of Alabama. ALA. CODE 11-50-310 to 11? 50-324 (2008). Further, NBU regularly employs outside consultants to provide skilled technical services in the operation, expansion, and repair of its water, sewer, and gas systems. The cost of these services is substantially increased by the lack of short-term residential rental properties available Within the NBU service area. To reduce these costs, NBU is considering the purchase of real estate to provide lodging for the consultants on an as-needed basis. As a public corporation, NBU may not act outside its corporate powers granted to it by statute. Opinion to Honorable Tommy Gibson, Chairman, Gas Board ofthe City of Boaz, dated April 28, 2006, A.G. No. 2006-090, citing Ala. Hosp. Ass?rt v. Dillard, 388 So. 2d 903 (Ala. 1980). Accordingly, this Office has opined that public corporations may only make expenditures that are consistent with the purposes for which the entity was created. Id. The statutory powers of NBU are set forth in section 11-50-314 of the Code. This section authorizes the corporation to ?acquire? and ?hold? any real, personal, or mixed property ?that its board of directors may deem a necessary or convenient part of such system or ALA. CODE (2008) (emphasis added). Whether such expenditure is necessary for NBU is a factual question that must be determined by the Board of the NBU on a case-by- case basis. See Gibson at 2 (determining that utility may make donations to nonprofit organization if board determines that funds will be used for activities that are necessary, appropriate, and consistent with purposes of the board); see also, opinion to Honorable H. Dean Buttram, Jr., Attorney, Town of Cedar Bluff and The Cedar Bluff Utilities Board and Solid Waste Authority, dated March 10, 2003, A.G. No. 2003-095 (utility may not purchase property for senior center unless board determines that purchase is necessary to system). Similarly, section 11?50-314 of the Code authorizes NBU to ?hold? said property until the Board of the NBU determines that it is no longer ?necessary or convenient? to do so. ALA. CODE (2008). In the event that the Board of the NBU decides to dispose of the property by sale, lease, or otherwise, it may do so only with the consent of the governing body of the municipality in which the NBU is incorporated. ALA. CODE (2008). Honorable Jessica M. McDill Page 3 There is, however, no authority for the NBU to purchase real estate solely for investment purposes. As previously stated by this Office, ?[t]here is no section . . . in the statutory scheme . . . which would allow public funds to be risked in a venture with a profit making concern . . . Opinion to Honorable E. E. Ball, Attorney for the Bay Minette Utility Board, dated January 4, 2000, A.G. No. 2000-060, citing opinion to Honorable Jack Livingston, Attorney, Jackson County Hospital Board, dated March 12, 1985, A.G. No. 85-00242. Moreover, public utilities enjoy a monopoly for the purpose of providing essential services to the public. Any excess funds should be used for the benefit of the ratepayers. Opinion to Honorable Thomas F. Kelly, Jr., Attorney, Town of Clayton, dated June 15, 2011, A.G. No. 2011-071. CONCLUSION North Baldwin Utilities may purchase real estate to provide for the temporary lodging of consultants if the Board of the NBU determines that such a purchase is necessary or convenient to the system. If such a purchase is made, North Baldwin Utilities may hold such real estate until the Board determines that disposal of said property is necessary or convenient to the system. There is no statutory authority for North Baldwin Utilities to purchase real estate solely for investment purposes. I hope this opinion answers your questions. If this Office can be of further assistance, please contact Ben Baxley of my staff. Sincerely, LUTHER STRANGE Attorney General By: .27 BRENDA F. SMITH Chief, Opinions Division 1543404/168982