Transit Authority of Lexington-Fayette Urban County Government v. Amalgamated Transit Union, Local 639 ex rel. Dickerson

VANCE, Justice. The question is whether or not a clause in a collective bargaining agreement entered into between the Transit Authority of Lexington-Fayette Urban County Government and Amalgamated Transit Union, Local 639, which provides for binding interest arbitration is enforceable. Fayette Circuit Court held the contract enforceable and, upon motion, the appeal from the judgment was transferred to this court. We reverse the judgment. The Transit Authority provides a variety of transportation services to the public, including local bus service. It was created pursuant to the provisions of Chapter 96A, of the Kentucky Revised Statutes. The Transit Authority entered into a collective bargaining agreement with the union which contained the following provision: “This Agreement shall be in full force and effective from April 1,1982 to March 31, 1984, both dates inclusive, and from year to year thereafter unless changed or terminated as herein provided. Either party desiring to negotiate any changes or modifications to become effective at the end of the initial term or any extension thereof, or desiring to terminate this Agreement, shall notify the other party in writing of its desire, not less than sixty (60) days prior to the expiration date of the initial term, or any extension thereof. If such notice is given by either party, it shall also contain an offer to meet and confer with the other party for the purpose of negotiating a new Agreement. In the event the parties cannot reach an agreement on any said proposed changes or modifications, then such proposed changes or modifications as either party may desire to have arbitrated, shall be arbitrated as provided in ARTICLE 10 in this Agreement.” (Emphasis added.) Prior to March 31, 1984, the Transit Authority and the Union commenced negotiations for a new collective bargaining agreement without success. On March 28, 1984, the union invoked the arbitration clause set out above in an effort to submit to arbitration all of the terms to be included in a new collective bargaining agreement. The Transit Authority declined to submit the issue to arbitration upon the ground that it, as a municipal corporation, could not delegate its authority to determine policy and to fix wages and salaries to an arbitrator. Section 162 of the Kentucky Constitution provides: “No county, city, town or other municipality shall ever be authorized or permitted to pay any claim created against it, under any agreement or contract made without express authority of law, and all such unauthorized agreements or contracts shall be null and void.” In City of Covington v. Covington Lodge # 1, Fraternal Order of Police, Ky., 622 S.W.2d 221 (1981), we held invalid a clause in a contract entered into by the City of Covington and the Lodge, which represented members of the police department, which provided for binding arbitration in the event the parties could not agree upon the terms of a new contract. This holding was premised upon the proposition that the City Council, by statute, was given control of the police department and could not delegate its authority to determine such matters as wages, bonuses, vacations, seniority, overtime, supplemental pay, and like matters to an arbitrator. The opinion in City of Covington expressly declined to consider the impact of Section 162 of the Constitution. City of Covington deals with a unit of government which, without question, is a municipality, a city government with a legislative council. It is contended by the [522] appellee that the Transit Authority is not such a municipality, that it has no legislative authority, and that it is more in the nature of a private corporation. The real question to be decided here is whether the Transit Authority falls within the classification of a municipal corporation whose policy-making function cannot be delegated. K.R.S. 96A.020 provides that a transit authority shall constitute an agency and instrumentality for accomplishing essential governmental functions of the public body or public bodies creating and establishing the same, and shall be a political subdivision and a public body corporate. K.R.S. 96A.040 provides that the activities and affairs of a transit authority shall be managed, controlled, and conducted by a board to be appointed as prescribed by statute. K.R.S. 96A.070(6) provides that the board shall fix the salaries, wages, or other compensation of the affairs, agents, and employees of the transit authority. This court has heretofore classified agencies of government similar in nature to the Transit Authority as municipalities so as to limit the power of the governing body to delegate its powers. In George W. Katterjohn & Son v. Board of Education, 202 Ky. 690, 261 S.W. 257 (1923), a school board was held to be a municipal corporation without power to pay a bonus to a contractor for the early completion of a building. “It is fundamental and almost without exception that municipal corporations and governmental agencies created by law to aid in municipal government have only such powers as are expressly granted to them either in the Constitution or the statutory laws. Embraced within the scope of this general rule is the additional one that neither public nor quasi public corporations may pay out public moneys or contract to pay out the same without express authority of law. “In this state these general principles of law designed to protect the public from the unauthorized use of public moneys has been clearly and comprehensively stated and laid down by an express constitutional provision that— ‘No county, city, town or other municipality shall ever be authorized or permitted to pay any claim created against it, under any agreement or contract made without express authority of law, and all such unauthorized agreements or contracts shall be null and void.’ Kentucky Constitution, § 162.” Id. at 260. In Board of Park Commissioners of Ashland v. Shanklin, 304 Ky. 43, 199 S.W.2d 721 (1947), we held that the maintenance of parks by a municipality is a governmental function and that a Board of Park Commissioners created by statute to have the care, management, and custody of the parks and grounds used for park purposes was without authority to enter into a lease which would surrender its sole and exclusive control of the management of a part of the public property under its jurisdiction. We said: “The grant of public power and right imposes a corresponding public duty and responsibility. Official dominion and discretion may not be surrendered, nor public functions delegated, in whole or in part, to another person who is not answerable to the people. There is an implication not only of the withholding but of the prohibition of the exercise of other authority not necessary to the performance of that which is expressly given. Of such is the shifting or sharing of the powers granted or duties imposed. Booth v. City of Owensboro, 274 Ky. 325, 118 S.W.2d 684.” Id. at pp. 723-724. In Rash v. Louisville & Jefferson County Metropolitan Sewer District, 309 Ky. 442, 217 S.W.2d 232 (1949), we held a sewer district created under statutory authority to be a municipality: “This act deals with distinct municipal corporations. When the Metropolitan Sewer District was established under the [523] enabling statute, Chapter 76, Kentucky Revised Statutes, it became an independent body politic charged with administration of designated affairs. It was created by the sovereign power of the state as ‘a public body corporate, and political subdivision’. K.R.S. 76.010. The statute constitutes its charter. It exercises delegated powers of government which vitally affect the public health of the entire county. The Constitution in several sections recognizes the existence, present and future, of a municipal corporation other than a county, city, town or taxing district. Sections 157, 158, 159, 161, 164, 165, 180, 181. The Metropolitan District is a separate entity acting for its own purposes and possessing defined, though limited, powers of a municipal community. It meets the conventional descriptions or definitions of a ‘municipality.’ McQuillin, Municipal Corporations, Sections 126, 128; City of Covington v. District of Highlands, 113 Ky. 612, 68 S.W. 669; Gleason v. Weber, 155 Ky. 431, 159 S.W. 976; Board of Trustees of Policemen’s Pension Fund v. Schupp, 223 Ky. 269, 3 S.W.2d 606. Obviously nothing need be said concerning the character of the City of Louisville.” Id. at p. 236. In Louisville Extension Water District v. Diehl Pump and Supply Co., Ky., 246 S.W.2d 585 (1952), a water district was created under a statute which provided, as the statute provides in this case, that the water district commission shall be a body corporate for all purposes. We held that the district was a political subdivision and that in the execution of contracts with third parties it must observe the same formalities required of counties and municipalities. It seems clear that the Transit Authority is a creature of statute whose purpose is to accomplish statutorily designated essential governmental functions for the Lexington-Fayette Urban County Government. By statute its governing board is vested with management and control, and by statute the board is specifically charged with the responsibility to fix salaries and wages. The collective bargaining agreement covers a broad range of matters similar to those enumerated in City of Covington v. Covington Lodge No. 1, supra, including the fixing of wages, bonuses, vacations, insurance, holidays, leaves of absence, shift differentials, overtime, and supplemental pay, seniority, etc. It deals with the entire spectrum of matters which call for the exercise of discretion and judgment by the members of the board. The Transit Authority is charged with the performance of a public purpose. It is an agency of government, a political subdivision, and its governing board has a responsibility to the public to faithfully discharge its duties relating to the control and management of the Authority. Because these duties are specifically imposed by statute upon board members, and because they, and they alone, are charged with the control and management of the Transit Authority, we hold that their exercise of discretion in policy matters and management decisions cannot be delegated to an arbitrator. The issues covered by the collective bargaining agreement, for the most part, call for the exercise of discretion and judgment, and therefore involve policy and management decisions. Having decided that the Board of the Transit Authority cannot constitutionally delegate to an arbitrator its responsibility to fix wages, determine policy, or make decisions which are the prerogative of management, it necessarily follows that any contractual agreement to do so in the collective bargaining agreement with the union, or in an agreement with any federal agency whereby it received federal grants, is invalid. Appellee argues, in the alternative, that even if a submission to arbitration would constitute a delegation of authority, the delegation must be held to be permissible because it is one of clear necessity. We are unpersuaded by the briefs and arguments advanced by the parties that any circumstances exist in this case to warrant [524] a delegation of powers because of a clear necessity. Although K.R.S. 96A.200 requires a transit authority to assume and observe all existing labor contracts and pension obligations of any existing transit system acquired by it, we do not construe this to mean that constitutionally invalid provisions of any such labor contracts or pension systems must be assumed and observed, nor do we construe this section to constitute legislative authority for transit authority boards to delegate their management prerogatives to an arbitrator. The judgment is reversed. AKER, GANT, STEPHENSON, and VANCE, JJ., concur. STEPHENS, C.J., not sitting. LEIBSON and WINTERSHEIMER, JJ., dissent by separate opinions.