CONTRACTS: VIRGINIA PUBLIC PROCUREMENT ACT.
City's rental payments, derived partly from state appropriation, will be
made for health department's use of building after building is completed;
do not constitute public funding paid to contractors for planning, design or
construction of building. Such contracts are not public contracts subject to
competitive bidding requirements of Act.
The Honorable Jean W. Cunningham
Member, House of Delegates
December 18, 1996
You inquire regarding interpretation of ยง 1135(I) of the Code of Virginia,1 a
portion of the Virginia Public Procurement Act2 (Procurement Act), under
the following related facts.
The City of Richmond is considering a lease financing arrangement
whereby the city health department will use the Northside Health Services
Building (Building) to consolidate its operations.
The City of Richmond and Eggleston Development L.L.C. (Eggleston) will
form a nonprofit corporation exempt from federal taxation3 to own and
lease the Building to the city. The purposes of the corporation will be (1) to
acquire the Building site and to design, construct and equip the Building;
and (2) upon completion, to lease the Building, as lessor, to the city. The
corporation will be a Virginia nonstock corporation governed by a board
of directors that may include city officials and representatives of
Eggleston. Neither the city officials nor the Eggleston representatives shall
constitute a majority of the board members. Furthermore, the Eggleston
representatives shall not vote on matters in which Eggleston has a
pecuniary interest.
Under a trust agreement, the trustee and lessor will issue and sell
certificates of participation evidencing the certificate holders' direct and
undivided interest to the rental payments made under the lease between
the city and the lessor. The rental payment will consist of an interest
component and a principal component, similar to that of traditional
bonds.
The lessor will acquire the Building site with proceeds from the