Opinion 95 - 29
IMPROVEMENT DISTRICTS -- Dissolution (when assets are sold to a public authority)
WATER DISTRICTS -- Dissolution (when assets are sold to a public authority)
TOWN LAW, §§198(12), 202-c: The governing board of a town water district may, subject to a mandatory referendum, sell all the property and facilities of the water district to a public authority and dissolve the district. Moneys received from the sale of the property and facilities of the water district must be placed in a reserve fund for the purpose of retiring the outstanding debt on behalf of the district.
You ask whether the facilities of a town water district, for which indebtedness remains outstanding, may be sold to a water authority, and the district then dissolved.
As a general rule, in the absence of a special act of the State Legislature, a town water district may be dissolved only if three years has elapsed since the establishment of the district, no improvement has been constructed and no indebtedness has been incurred for any purposes of the district (Town Law, §202-c; 12 Opns St Comp, 1956, p 430). Town Law, §198(12), however, contains an exception to this general rule.
Section 198(12)(b) of the Town Law provides that the governing board of a town improvement district may sell all or any part of the property and facilities of the district to a county, city, village, town, joint water works system or a public authority, subject to mandatory referendum (Town Law, §198[b])(1). If all of the property or facilities of the district is sold, the proposition submitted to referendum must also provide for dissolution of the district (Town Law, §198[d]; 15 Opns St Comp, 1959, p 396).
If the proposition is approved, the moneys received from the sale must be placed in a reserve fund to amortize any outstanding obligations issued on behalf of the district to finance the cost of the property and facilities sold or leased (see also General Municipal Law, §6-l)(2). In general, moneys in the reserve fund may be expended only for the purpose of retiring the outstanding debt (Town Law, §198[c], [d]). Any excess moneys, together with any other remaining moneys of the district, must be disposed of to the credit of the real property within the district by any equitable method described in the proposition (id.). If the proposition is silent with respect to the distribution of excess proceeds, then the excess proceeds are to be apportioned on the basis of assessed valuation among the property within the district, as shown in the last completed assessment roll, and credited to each parcel in reduction of county and town taxes (Town Law, §198[e]).
Accordingly, all of the property and facilities of a town water district for which debt is outstanding may be conveyed to a water authority, and the district dissolved, pursuant to the provisions of Town Law, §198(12).
May 24, 2000
1. Although not applicable in the instant situation, note that enabling legislation for certain public authorities provides that transfers of property by a municipality to the authority are exempt from referendum requirements (see, e.g., Public Authorities Law, §§2050[dd], 2754).
2. Town Law, §198(12)(b) provides that, in the case of purchase of district property and facilities by a county, city, village or town, the governing board may, by agreement with the purchaser, provide that payment of the purchase price, in whole or in part, be made by having the principal and interest on obligations issued to finance the cost of the property and facilities sold assumed by the purchaser. This alternative, however, does not apply in the case of a sale to a public authority.