Opinion 96 - 16


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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

IMPROVEMENT DISTRICTS -- Property (use of proceeds from sale of)

WATER DISTRICTS -- Property (use of proceeds from sale of)

TOWN LAW, §198(12); MUNICIPAL HOME RULE LAW, §10: A town may not, pursuant to either Town Law, §198 or a local law, use the proceeds from the sale to the county of all the property and facilities of a town water district for the construction of a new town hall.

This is in response to your letter concerning the proposed sale to a county of all the property and facilities of a town water district pursuant to Town Law, §198(12). You ask whether the town may use the excess proceeds from the sale for the construction of a new town hall if the town board submits a proposition on this question to referendum, or whether special legislation is necessary to use the moneys for that purpose.

Section 198(12)(b) of article 12 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[12][b])(1). When 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[12][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 (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[12][c],[d]).

Any excess moneys over and above the amount necessary to be set aside in the reserve fund, 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[12][e]). There is, however, no authority in section 198 for the town board, irrespective of whether voter approval is obtained, to transfer the excess proceeds to be used for general town purposes, such as the construction of a new town hall (see, also, e.g., McCabe v Voorhis, 243 NY 401; 1990 Opns St Comp No. 90-64, p 145, relating to the general rule that a municipality may not submit a proposition to referendum, unless expressly authorized or required to do so by State statute).

Further, it is our opinion that such a transfer may not be provided for by local law. The provisions of Town Law, articles 12 and 12-A manifest the Legislature's intent to pre-empt and preclude the adoption of local laws in the area of the establishment, operation and financing of town special districts (Coconato v Town of Esopus, 152 AD2d 39, 547 NYS2d 953 lv den 76 NY2d 701, 558 NYS2d 891; 1990 Opns St Comp No. 90-61, p 141; 1986 Opns St Comp No. 86-53, p 84; see also Municipal Home Rule Law, §10[1][ii][d][3]).

Accordingly, since the town may not use the proceeds from the proposed sale for the construction of a new town hall pursuant to either Town Law, §198 or a local law, it is our opinion that it may do so only pursuant to a special act of the Legislature (see, e.g., L 1992, ch 596; L 1983, ch 752). Our reference to special legislation is intended for informational purposes only and is not a recommendation of this Office with respect to any particular measure.

May 24, 2000
Gerald F. Wahl, Esq., Town Attorney
Town of Greece

1. 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][1], 2754[2]).

2. Although apparently not at issue here, 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.