Opinion 2010 - 2


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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

 

PERSONAL PROPERTY – Disposition of (procedures for selling unneeded vehicles by town water district)

WATER DISTRICTS -- Property (sale of unneeded vehicles)

TOWN LAW §§ 198 (8), (12) (a): A town water district with a separately elected board of commissioners is not required to sell vehicles that are no longer needed for district purposes pursuant to a competitive bidding process. The method of sale chosen, however, should be the one that local officials believe will yield the best price or maximum financial benefits.

You ask whether a water district with a separately elected board of commissioners, to which Town Law, article 13 (§ 210 et seq.) applies, 1 is required to sell vehicles that are no longer needed for district purposes pursuant to a competitive bidding process.

Town Law § 215 (8) provides that separate boards of commissioners of improvement districts, with the approval of the majority of the town board and subject to public hearing requirements as prescribed in Town Law § 198 (12) (a), may sell or lease any real or personal property owned by, but not needed for the purposes of, the district. The receipts from the sale or lease must be paid to the town supervisor and credited to the district, to be expended for any district purpose permitted by law, as the board of commissioners may direct. Town Law § 198 (12) (a) requires that a public hearing be held if the unneeded district property to be sold or leased has a value in excess of $1,000. Neither Town Law §§ 198 (12) (a) nor 215 (8), nor any other statute, however, requires that the sale or lease of such unneeded district personal property be undertaken pursuant to a competitive bidding process (see e.g. 1992 Ops St Comp No. 92-23, at 57).

In describing a local government's responsibility in selling unneeded property when competitive bidding is not required by statute, the courts generally have stated that local officials have a fiduciary duty to secure the best price obtainable in their judgment or the most beneficial terms in the public interest for any lawful use (see e.g. Orelli v Ambro, 41 NY2d 952, 394 NYS2d 636; Ross v Wilson, 308 NY 605; Davis v Board of Education of the Hewlett-Woodmere Union Free School District, 125 AD2d 534, 509 NYS2d 612, appeal denied 69 NY2d 613, 517 NYS2d 1028; Matter of New City Jewish Center v Flagg, 111 AD2d 814, 490 NYS 560, affd 66 NY2d 980, 499 NYS2d 395; Merritt Meridian v Gallagher, 96 AD2d 933, 466 NYS2d 381; 1999 Ops St Comp No. 99-14, at 31; 1993 Ops St Comp No. 93-21, at 36; 1990 Ops St Comp No. 90-37, at 84; 1986 Ops St Comp No. 86-78, at 124; see also Square Parking v MTA, 92 AD2d 782, 459 NYS2d 774, lv dismissed 59 NY2d 608, 60 NYS2d 586; Madison Square Garden v MTA, 7 Misc 3d 1030A, 801 NYS2d 236, affd 19 AD3d 284, 799 NYS2d 186, appeal dismissed 5 NY3d 878, 808 NYS2d 138). The method of sale chosen is within the sound discretion of the appropriate local officials, but generally should be the one that those officials believe will yield the best price or maximum financial benefits (see e.g. Feldman v Miller, 151 AD2d 755, 542 NYS2d 777; 1999 Ops St Comp No. 99-14, supra; 1993 Ops St Comp No. 93-21, supra; 1990 Ops St Comp No. 90-37, supra; 1986 Ops St Comp No. 86-78, supra; but see Matter of Toussie v County of Suffolk, 26 AD3d 506, 809 NYS2d 573, lv denied 7 NY3d 711, 823 NYS2d 770; Creole v Guiliani , 167 Misc 2d 810, 636 NYS2d 547, affd 236 AD2d 272, 653 NYS2d 576, lv denied 90 NY2d 802, 660 NYS2d 712). 2To fulfill this fiduciary duty, the local government should take appropriate measures to ensure that the sale price is upon the best or most beneficial terms (see e.g. 1999 Ops St Comp No. 99-14, supra; 1993 Ops St Comp No. 93-21, supra; 1990 Ops St Comp No. 90-37, supra; 1986 Ops St Comp No. 86-78, supra).

Accordingly, a town water district with a separately elected board of commissioners is not required to sell vehicles that are no longer needed for district purposes pursuant to a competitive bidding process. The method of sale chosen, however, should be the one that local officials believe will yield the best price or maximum financial benefits.

November 10, 2010

Jack Easa, Esq., Attorney at Law
West Hempstead - Hempstead Gardens Water District

1 Article 13 of the Town Law applies to any improvement district that adopted a proposition pursuant to Town Law § 341 (10) to have article 13 apply to the district (Town Law § 210). Under Town Law § 341 (10), property owners within certain types of town districts were authorized to file a petition, not later than June 29, 1933, requiring the submission of such a proposition to the qualified electors. Town Law § 61, enacted by chapter 634 of the Laws of 1932, abolished all separate boards of commissioners for town improvement districts, except those districts that adopted a proposition pursuant to Town Law § 341 (10) and certain other specified districts, and vested in the town board all powers previously exercised by the separate boards of commissioners.

2Creole v Giuliani, supra, and Matter of Toussie v County of Suffolk, supra, each held that factors other than best price or maximum financial benefits were properly taken into account by the municipality. Creole v Giuliani, supra involved somewhat unique facts. In that case, the City of New York was selling two public radio stations. The City's decision to sell the stations to a foundation, rather than to seek the highest bid, was held not to be arbitrary and capricious. The Appellate Division noted that the City had discretionary authority to sell the stations in any manner that served the public interest and, while the public interest often means getting the highest price, it did not preclude, in this case, consideration of assurances made by the foundation that it would perpetuate the “unique character and value of the radio stations by providing precisely the same non-commercial mix of programming as had been done for many years” (236 AD2d at 272, 653 NYS2d at 576). In Matter of Toussie v County of Suffolk, supra, the County had conducted an auction for the sale of several parcels of surplus real property. Under the County's Administrative Code, and as stated in the terms and conditions of the auction, the execution and delivery of a deed for such a sale was subject to the express approval of the County Legislature. In this instance, the County Legislature, in effect, rejected petitioners' apparent highest bids based on a concern that the purchasers would convey the properties to a related party who had been convicted of a crime. The court held that the County Legislature's refusal to deliver the deeds was rationally based on legitimate concerns about petitioners' past and present business practices and the County Legislature was allowed to exercise its discretion under the Administrative Code “based on factors other than the buyer's fiscal qualifications ….” (26 AD3d at 508, 809 NYS2d at 575). Notwithstanding these two holdings, when selling unneeded property in the absence of a statutory competitive bidding requirement, the weight of authority is that local officials generally have a fiduciary duty to secure the best price obtainable in their judgment or the most beneficial terms in the public interest for any lawful use.