Municipal corporations are created to aid state governments in the regulation and administration of local affairs. A municipality is wholly a creature of the legislature and possesses only such powers as are conferred upon it by the legislature.
For the purpose of executing governmental powers properly and efficiently, municipal corporations are given the power to acquire, hold, and manage property. The property includes personal and real property[i]. Some municipal corporations are expressly authorized to acquire and hold real and personal property for corporate purposes. Additionally, a municipal corporation can acquire property by gift, deed, or devise.
In order to acquire property, a municipality must be satisfied that the acquisition is necessary and suitable for the municipality in order to:
- perform its functions;
- accommodate its municipal court;
- conduct public business;
- be used by municipal departments; or
- perform any other public purpose[ii].
Generally, the law prohibits the expenditure of public money for private purpose. Public money cannot be used for the purpose of acquiring property for the benefit of a private concern[iii]. Thus, a municipality cannot acquire property for the use of a private person or individual use of officers.
A municipality in its corporate capacity, as a fictitious person, acts as a representative of inhabitants. In such a capacity, a municipality holds property only as a trustee and administers property as an agent for the use and benefit of the public. Property is held by a municipal corporation in its governmental, private or proprietary capacity. However, property over which a municipality has acquired absolute ownership as an agency of the state, and holds strictly for public uses, is subject to legislative control. The state is empowered to reclaim property any time without compensation. When a municipality holds a property in proprietary capacity, the municipality stands upon the same footing as any other property owner. Such property can be appropriated to public use in the same way as any other privately-owned property upon just compensation[iv].
Where property is held by a municipal corporation purely as an agent of state in the exercise of its governmental functions, the municipality holds title as trustee for public and governmental purposes. The state is empowered to change the trustee and can transfer property to another governmental agency for the same purpose. The transfer can be without compensation to the municipality and without imposing upon the new agency any obligation to pay debts incurred by the municipality in acquiring the property[v].
The power to hold property includes the power to erect buildings. A vast number of powers and duties are imposed upon a municipal corporation. The officers and departments of administration in charge conduct its affairs for the benefit of inhabitants. The requirement to erect a building suitable for the accommodation of town officers and records and for the preservation of its necessary property is a reasonable want. The right to erect such a structure is incidental to the powers expressly granted and is essential to carry out the objects of the corporation[vi].
When a municipality holds property for its own private purposes, the municipality is regarded as a constituent in state government. In such cases, the municipality is entitled to protection of its property rights like any natural person.
A municipality in the lawful possession of a property is empowered to manage the property for its own benefit. So long as a municipality uses a property for its benefit without any fraud or abuse, the municipal authorities have wide latitude in the exercise of control over such public property.
Statutes confer power on municipalities to exchange, sell, or alienate property. The transaction can be made generally, or under certain prescribed circumstances. Where a statute confers general powers, a municipality can sell to an individual or corporation for private use, any property it holds in its private or proprietary capacity. However, property held by a municipality for strictly governmental purposes or which has been devoted to a special public use can be disposed of only under express legislative authority.
A municipality holds property in a fiduciary capacity. The discretionary power of use and disposal does not include the authority to donate or devote municipal property to a strictly private use. The reason is that transfer or release of such property by a municipality to a private ownership without receiving in return some consideration of reasonably equivalent value would amount to a breach of trust[vii].
A municipal corporation has the right to rent its property to private persons when such right is conferred, either expressly or by necessary implication, by charter or by statute.
Generally, a municipal corporation cannot mortgage or pledge property it owns. However, when a statute empowers a municipality to do so, the municipality can pledge a property. But, the statute must specify the particular property to be pledged.
Additionally, a municipality can lease a building erected in good faith. A municipality has the right to permit it to be used gratuitously or for compensation for private purposes. Such building should no longer be used by a municipal corporation and its private use should not interfere with its public use.
By leasing instead of selling, a municipality retains the ability to convert a property into a public use upon expiration of lease[viii].
[i] Board of Education v. Stoddard, 49 N.Y.S.2d 38, 40 (N.Y. Sup. Ct. 1944).
[ii] Wilson Coalition v. Mayor and Common Council of City of Summit, 245 N.J. Super. 616, 621-622 (Law Div. 1990).
[iii] State v. North Miami, 59 So. 2d 779, 785 (Fla. 1952).
[iv] State Highway Com v. Elizabeth, 102 N.J. Eq. 221, 226 (Ch. 1928).
[v] Shirk v. Lancaster, 313 Pa. 158, 164 (Pa. 1933).
[vi] State ex rel. Jordon v. Haynes, 72 Mo. 377, 379 (Mo. 1880).
[vii] Sloan v. Greenville, 235 S.C. 277, 282-283 (S.C. 1959).
[viii] L’Esperance v. Town of Charlotte, 167 Vt. 162, 167 (Vt. 1997).