AGO 86-3.
Case Date | March 10, 1986 |
Court | Colorado |
Colorado Attorney General Opinions
1986.
AGO 86-3.
March 10, 1986Department of Law
Attorney General Opinion FORMAL OPINION
of DUANE WOODARD
Attorney General Opinion No. 86-3
AG Alpha No. LE HR AGAPB
Honorable Walter A.
Younglund
Colorado State Representative
State
Capitol, Room 242
Denver, CO 80203 RE: Investment of state funds in a limited partnership formed
to purchase, manage and sell distressed agricultural real estate for
profitDear Representative Younglund:
I am writing in response to your January 22, 1986 letter
requesting a legal opinion concerning the proposed investment of state funds in
a real estate limited partnership. Your letter did not ask a specific question.
I have reviewed the materials enclosed with your inquiry and framed specific
legal questions based upon that review and my general understanding of the
proposed investment.
QUESTIONS PRESENTED AND CONCLUSIONS
Do existing provisions of Colorado constitutional and statutory
law authorize the state treasurer to invest state funds as a limited partner in
a real estate limited partnership?
No. The state treasurer's authority to invest state funds is
limited to those specific investments approved by the General Assembly by
statute. Investment in a limited partnership interest is not at present a
permissible investment.
Do existing provisions of law authorize the state treasurer to
invest public school funds in a real estate limited partnership?
No. The state treasurer's authority to invest public school funds
is limited to specific permissible investments set out by statute. Present
investment statutes do not authorize investment in a limited partnership.
Do provisions of the Colorado Constitution prohibiting private
appropriations, joint public and private ownership and pledging of the state's
credit, preclude the General Assembly from enacting legislation authorizing
investment of public funds in a limited partnership?
In the absence of specific authorizing legislation, I am unable
to provide a conclusive opinion on this question. The application of the
relevant constitutional provisions would depend upon whether the statutory
scheme serves a sufficient "public purpose."
ANALYSIS
Statement of facts.
The materials you provided describe a proposed investment for
state funds. I have relied upon the facts as represented in those materials.
Although those facts are complex, the proposal may be summarized briefly as
follows.
It is proposed that a Colorado limited partnership (the
"partnership") be formed to acquire, operate and dispose of distressed Colorado
farms in order to profit from cash flows and long-term appreciation of the
properties. If a farmer sells his property but is able to obtain financing to
continue farming as a tenant, the partnership would attempt to retain the
farmer on the property. Prior owners would be encouraged to repurchase their
farms by a provision in the partnership agreement requiring that a small
percentage of the partnership's gross income be set aside to be used toward a
downpayment on repurchase by qualified purchasers.
Management of the partnership, including selection of properties
to be purchased, operation of the farms and disposal of the properties, would
be placed in the hands of a Colorado corporation, which would serve as general
partner. That corporation's compensation would include 6 percent of the gross
proceeds of the sale of partnership interests, a management fee during the
operating phase and real estate commissions when properties are sold by the
partnership.
It is proposed that the State of Colorado invest $10 million in
the partnership as seed money to attract...
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