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AGO Opinion 97048

Legality of Leasing State Right of Way Space Above Interstate 80 for Development of an Archway
Opinion 97048

DATE: September 16, 1997

SUBJECT: Legality of Leasing State Right of Way Space Above Interstate 80 for Development of an Archway

REQUESTED BY: Allan L. Abbott

State Engineer/Director of Department of Roads

WRITTEN BY: Don Stenberg, Attorney General

Steve Grasz, Deputy Attorney General




You have requested an Attorney General's Opinion "as to the

legality of the State of Nebraska Department of Roads permitting .

. . [an] archway to be constructed in the airspace above Interstate

80."




Background




The Great Platte River Road Memorial Foundation has requested

that the State of Nebraska Department of Roads permit construction

of an archway in the airspace above the Interstate 80 right-of-way

near Kearney. In 1973, an opinion from former Attorney General

Clarence Meyer concluded the legality of a similar proposed project

over Interstate 80 was "very doubtful" and that "the State may not

lease or permit for use a part of the highway right-of-way for the

construction of the Pioneer Monument, as proposed." 1973-74 Rep.

Att'y Gen. 8, 11 (Jan. 22, 1973).




This opinion will examine current Nebraska statutes governing

state right-of-way, and will reexamine the constitutional issue

addressed in the 1973 opinion.




Analysis




Nebraska law prohibits physical encroachments and structures

within the state's right-of-way, except by written consent: "The

rights-of-way acquired by the department shall be held inviolate

for state highway and departmental purposes and no physical or

functional encroachments, structures, or uses shall be permitted

within such right-of-way limits, except by written consent of the

department." Neb. Rev. Stat. Ann. § 39-1359 (Michie 1995).




Nebraska law also authorizes the Department of Roads to lease,

rent, or permit for use any area or land acquired for highway

purposes:




The Department of Roads, subject to the approval of

the Governor, and the United States Department of

Transportation if such department has a financial

interest, is authorized to lease, rent, or permit for

use, any area, or land and the buildings thereon, which

area or land was acquired for highway purposes. The

Director-State Engineer, for the department, and in the

name of the State of Nebraska, may execute all leases,

permits, and other instruments necessary to accomplish

the foregoing. Such instruments may contain any

conditions, covenants, exceptions, and reservations which

the department deems to be in the public interest,

including, but not limited to, the provision that upon

notice that such property is needed for highway purposes

the use and occupancy thereof shall cease. If so leased,

rented, or permitted to be used by a municipality, the

property may be used for such governmental or proprietary

purpose as the governing body of the municipality shall

determine, and such governing body may let the property

to bid by private operators for proprietary uses. All

money received as rent shall be deposited in the state

treasury and by the State Treasurer placed in the Highway

Cash Fund, subject to reimbursement, if requested, to the

United States Department of Transportation for its

proportionate financial contribution.




Neb. Rev. Stat. Ann. § 39-1323.01 (Michie 1995).




As used in the statute above, "any area, or land" would

include the air space above the right of way pursuant to common

law. See United Masonry, Inc. v. Jefferson Mew, Inc., 237 S.E.2d

171, 181 (Va. 1977).




Therefore, under these Nebraska statutes and the applicable

common law, the Department of Roads owns the airspace above land it

has acquired for highway purposes and may lease, rent, or permit

for use such airspace to others except insofar as such lease or use

would be prohibited by some other provision of law.




In 1973-74 Rep. Att'y Gen. 8 (Jan. 22, 1973), a previous

Attorney General examined the same statutes set forth above and

concluded they would, if constitutional, "authorize the transaction

contemplated in connection with the Pioneer Monument." Id. at 10.

However, the opinion went on to discuss Neb. Const. art. XIII, § 3

which provides "The credit of the State shall never be given or

loaned in aid of any individual, association, or corporation." The

opinion quoted State ex rel. Beck v. City of York, 164 Neb. 223, 82

N.W.2d 269 (1957) and the court's discussion therein of the "credit

of the state" provision as well as the prohibition against the

expenditure of public funds for private purposes. Id. at 11.

Without explaining exactly how the proposed archway violated these

provisions, the opinion concluded, "The language in the Beck and

Meyer cases is quite broad, and leads to the conclusion that the

State may not lease or permit for use a part of the highway right-

of-way for the construction of the Pioneer Monument, as proposed."

Id. at 11.




Whatever the validity of the 1973 opinion at the time, it is

clearly not valid today. In 1991, the Nebraska Supreme Court

clarified the test for addressing alleged violations of Article

XIII, § 3, and the Court ended the confusion between the

prohibition against loaning the credit of the state and the

prohibition against expending state funds for private purposes.

The Court held that to establish a violation of Article XIII, § 3,

three elements must be proved: (1) the credit of the state (2) was

given or loaned (3) in aid of any individual, association, or

corporation. Haman v. Marsh, 237 Neb. 699, 719, 467 N.W.2d 836

(1991). See also Callan v. Balka, 248 Neb. 469, 536 N.W.2d 47

(1995).




The first determination to be made, then, is whether leasing

state right-of-way to private entities would involve the credit of

the State. "There is a distinction between the loaning of state

funds and the loaning of the State's credit. When a state loans

funds, it is in the position of creditor, whereas the state is in

the position of debtor upon a loan of credit." Haman v. Marsh, 237

Neb. at 719-729. In short, the "credit of the state" provision in

Article XIII, § 3 was "designed to prohibit the state from acting

as a surety or guarantor of the debt of another." Id. at 718; id.

at 722.




In Haman, the Court found that under the legislation under

review in that case "the state would be forever liable for the

losses of industrial company depositors. . . ." Id. at 720. "The

stated purpose of the act is redemption of the guarantees of a

private corporation to depositors by obligating present and future

taxes from the state's general fund." Id. In contrast, the

leasing of state right-of-way pursuant to Neb. Rev. Stat. § 39-

1323.01 in no way involves the credit of the state. The State is

not in the position of a debtor nor in the position of a surety or

guarantor of the debt of another. Consequently, the credit of the

state is not being given or loaned under a lease of state right of

way.




The constitutional analysis does not end here, however.

"Closely related to the prohibition against the giving or lending

of the state's credit . . . is the principle of law that public

funds cannot be expended for private purposes." Haman v. Marsh,

237 Neb. 699 at 721-22. This constitutional principal involves the

expenditure of state funds in contrast to the extension of credit.

Id. at 722.




It is a longstanding principle of constitutional law in

Nebraska that public funds cannot be expended for private purposes.

Haman v. Marsh, 237 Neb. 699, 722 (1991); State ex rel. Douglas v.

Nebraska Mortgage Finance Fund, 204 Neb. 445 (1979); State ex rel.

Douglas v. Thone, 204 Neb. 836 (1979); State ex rel. Beck v. City

of York, 164 Neb. 223 (1957); Oxnard Beet Sugar Co. v. State, 73

Neb. 66 (1905). The Constitution of Nebraska contains no express

provision against expending funds for essentially private purposes.

This principal "is grounded on the `fundamental concepts of our

constitutional system.'" Douglas v. Thone, 204 Neb. at 842

(quoting Beck v. City of York, 164 Neb. 223). The Nebraska Supreme

Court has said this principal "emanates" from Article XIII, § 3.

Haman v. Marsh, 237 Neb. at 722.




A lease of state right-of-way to a private entity would not

involve an expenditure of public funds for a private purpose unless

the lease was for less than fair value. The Department of Roads

cannot give away property acquired for highway purposes. See Op.

Att'y Gen. 91056 (June 18, 1991). However, the contemplated

transaction is a lease, and not a transfer of title. Furthermore,

the area in question is simply airspace.




In sum, the proposed transaction does not involve the "credit

of the state" as it does not place the State in the position of a

debtor. Furthermore, provided the lease is for fair market value,

there is no expenditure of public funds for a private purpose.




Consequently, the proposed use of Interstate 80 right-of-way

airspace for an archway is both statutorily authorized and

constitutional.




Sincerely,




DON STENBERG

Attorney General






Steve Grasz

Deputy Attorney General