Supplemental Opinion

CIRCUIT COURT OF FREDERICK COUNTY

Lee Jackson Motel, Inc., et al

v.

Industrial Development Authority of the County of Frederick, et al

Law No. 4157

October 3, 1983

By Judge Robert K. Woltz

This opinion letter is supplemental to that rendered in this case August 16, 1983. Afterwards further argument resulted from the plaintiffs' assertion the Court in its first opinion covered two points raised by them only by implication, obliquely or not at all.

The first point is that action of the Authority in authorizing the bond issue was invalid for failure to comply with ß2.1-344(c) appearing in the Freedom of Information Act. That section as a whole deals with executive or closed meetings. Subsection (c) provides that no resolution or the like adopted in executive meeting shall:

become effective unless the public body . . . reconvenes in open meeting and takes a vote of the membership on the resolution . . . Nothing in this section shall be construed to require the board of directors of any [industrial development] authority to identify a business or industry to which subsection (a)(4) of this section applies. However, such business or industry must be identified as a matter of public record at least thirty days prior to the actual date of the board's authorization of the sale or issuance of such bonds.

Subsection (a)(4) of ß2.1-344 permits executive meetings for "discussion concerning a prospective business or industry when no previous announcement has been made of the business' or industry's interest in locating in the community."

As noted in the original opinion, there was no evidence that the Authority adopted the inducement resolution in other than an open meeting. The final sentence of subsection (c) requiring identification "as a matter of public record" thirty days prior to authorization of the bond issue refers to "such business or industry," i.e., the business or industry the identity of which was not known because discussion of it took place in an executive meeting. Here there was no discussion or action in executive meeting and hence there was no "such business or industry" whose identity is required to be made on the public record thirty days prior to "authorization of the sale or issuance of such bonds," or to which subsection (a)(4) could apply.

Further, the identity of the business has been a matter of public record for months and the evidence does not disclose that "authorization of sale or issuance" has yet taken place.

Now to the second point the plaintiffs say was not resolved by the original opinion: The tract to be purchased is not reasonably necessary for the project described in the application to the Authority.

The intervening Partnership as part of its application filed "A Brief Overview" which set forth that it had a contract to purchase a twelve-acre tract at a named price, that as a first step three parcels of this tract would be sold and on the remainder of the tract a motel and office complex were to be constructed. The second or corrected inducement resolution of the Authority defined the project as "a motel and office complex." Later in the overview the Partnership indicated sources of financing for "the enterprise," namely, capital of the partnership, proceeds from the sale of the three parcels mentioned above and Authority bonds.

The Partnership's description of the proposed project and its description in the inducement resolution make the identify of the project to which the issuance of bonds relates clear. It is obvious that the entire tract was not necessary for the particular project as portions of it were to be sold off to help finance the project. This does not mean that the bonds in this case could not be validly issued. It is not unusual for a purchaser to be faced with the necessity of buying a piece of land larger than he needs in order to get a smaller area necessary to his purposes. If plaintiffs' contention were correct, then no project involving the purchase of real estate could qualify under the Act unless the square area of the real estate was no greater than the precise amount needed to carry out the proposed project.

Plaintiffs' concern may be that because the Partnership intends to buy land in excess of the needs of its project the proceeds of the bonds may be devoted to some purpose other than those of the project. This overlooks a fair presumption from usual and ordinary business practices that the Authority's resolution authorizing sale and issuance of the bonds, conditions contained in the bonds and related documents and fiscal controls on the disbursal of bond proceeds, will be designed to prevent diversion of those proceeds for any purpose other than the described project. The Court is constrained to indulge this reasonable presumption, especially where public bonds are involved, else the proceeds from any issue might be devoted to unauthorized purposes.

In summary, the procedure used in this case was not in contravention of the Freedom of Information Act, and under the circumstances here the size of the real estate involved being excessive to the needs of the project will not invalidate the proposed issue.