CITIES AND TOWNS ‑- BUILDINGS ‑- PURCHASE OF ‑- LEASE

CITIES AND TOWNS ‑- BUILDINGS ‑- PURCHASE OF ‑- LEASE

A city of the first class may not purchase a commercial office building for the purpose of using one‑half of it for city purposes and leasing the remainder to private parties, unless it can be shown that existing or future public needs demand it or that such lease will be merely incidental to an overall public purpose.

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                                                                November 5, 1954

Honorable Cliff Yelle
State Auditor
Legislative Building
Olympia, Washington                                                                                                              Cite as:  AGO 53-55 No. 339

Attention:  Mr. A. E. Hankins, Chief Examiner

Dear Sir:

            In your letter of October 14, 1954, you asked whether a city of the first class may purchase a commercial office building and use approximately fifty percent thereof for city purposes, and lease the remainder to private parties on long term leases.

            It is our opinion that a city of the first class may not purchase a commercial office building for the purpose of using one‑half of it for city purposes and leasing the remainder to private parties, unless it can be shown that existing or future public needs demand it or that such lease will be merely incidental to an overall public purpose.

                                                                     ANALYSIS

            Municipal corporations are usually recognized as having the power to acquire,  [[Orig. Op. Page 2]] hold, and manage real property.  Sometimes this power is created by charter provisions, which, unless otherwise expressed, relate only to such property as is needed for municipal purposes.  Thus the general rule is that a municipal corporation has no authority to purchase and hold property for a purpose disconnected with a public use.  38 Am. Jur. 162, § 484.

            The general rule as to the leasing of property belonging to a municipal corporation is that such municipality has no power to rent to private persons municipal property which it holds for a public use unless there is a charter provision or statutory enactment empowering it so to do either in express terms or by necessary intendment.  City of Daytona Beach v. Dygert, 1 So. (2d) 170, 133 A.L.R. 1237; 63 A.L.R. 614.

            10 McQuillin, Municipal Corporations (3rd Edition) 99, § 28.42 provides:

            "* * * if property is held by the municipality in its corporate capacity as an ordinary proprietor, and not solely for the public use, the rule is different.  * * * if parts of public property, including a public building, are not used for municipal purposes, or are not continuously used, the municipality may permit others to use such part, provided no public use is interfered with * * * So, a building, erected for municipal purposes, may, by permission of the city, be used incidentally for other purposes, either gratuitously or for compensation.  * * *"

            When a municipal corporation erects or possibly purchases a building in good faith for municipal or public purposes, it has the right, when such building is no longer used by the municipality, when parts of it are not needed for public use, or when the whole building at intervals is not so used, and when it does not interfere with the public use, to permit the building or part of it to be used for a compensation for private purposes.  Colwell v. City of Great Falls, 117 Mont. 126, 157 P. (2d) 1013, 1019.

            However, when the city contemplates purchasing a building with intention to lease part of the building to private parties, the rule may be different.  Kingman v. Brockton, 153 Mass. 255, 258, 26 N.E. 998 at page 999, (1891), the court said:

             [[Orig. Op. Page 3]]

            "It is said that, if a city has a public building already erected which is larger than its present needs for municipal purposes require, it may allow portions of such building to be used for other purposes for the time being, either for a stipulated rent or price, or gratuitously; and, further, that in erecting a public building a city need not limit the size of it to actual existing needs, but may make a reasonable provision for probable future wants.  * * *"

            The court then stated that a city has no power to appropriate public monies for a building to be used partly for private uses.

            A Washington case,Paine v. Port of Seattle, 70 Wash. 297, 126 Pac. 628 (1912) at page 322, indicated that if the sole purpose of acquiring property was to lease it to an individual or corporation for private use, its acquisition and lease would violate Article VIII, § 7 of the Washington State Constitution.  In order for the purchase to be made it must be for a public purpose under this provision.

            "No county, city, town or other municipal corporation shall hereafter give any money, or property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm, or become directly or indirectly the owner of any stock in or bonds of any association, company or corporation."

            Paine v. Port of Seattle, supra, at page 322, in answering a contention that the acquisition of property for the purpose of leasing the same violates Article VIII, § 7 and is a private purpose, the court said:

            "* * * It has seemed to us that this contention might be dismissed with the statement that the borrowing of money for the purpose of acquiring sites for docks, wharves, and other public structures is clearly a municipal purpose as well as a public purpose, and any suggestion as to the use which may or might be made of such properties after their acquisition would not affect the validity of the bonds issued to raise the money for their acquisition or construction.  * * *"

             [[Orig. Op. Page 4]]

            It appears, therefore, that a city may always purchase or construct a building for public purposes by complying with statutory, constitutional, and charter provisions.  A city may not purchase a building for the sole purpose of leasing it to private parties.  Paine v. Port of Seattle, supra.  A city may purchase a building for public purposes and later incidentally lease part of it for private purposes.  Thus when a first class city contemplates the purchase of a building, part of which is going to be used for private purposes, some of the factors to consider are first, whether the purchase is primarily for a public purpose and the building can eventually be used entirely or almost entirely for such public purposes.  Second, whether a lease of part of the building would be consistent with the provisions of the city charter and Washington Constitution, and third, whether such a lease would be of such term, nature, and cover such part of the building that its lease would be considered more than incidental.

            It is our opinion that where a city proposes to purchase a commercial office building without indication that it fits present or future needs and when a long term lease is contemplated of approximately fifty percent of the building, on the face of it, the purchase would violate the rule prohibiting a city from spending money for other than public purposes.

            There may be circumstances, however, where the building considered is the only one which will suit the purpose or where present or future needs demand such a building, in which case the purchase may be considered primarily a public purpose and a lease of the unused portion will be considered merely incidental thereto.  In this situation, the proposed purchase would be valid.

Very truly yours,

DON EASTVOLD
Attorney General

EDWARD M. LANE
Assistant Attorney General