Can an Arkansas county trade in used equipment toward a lease-purchase of new equipment without going through bidding?

Plain-English summary

Pike County had traded in four used graders toward what the parties called a lease-purchase of four "new" graders (the AG's footwork showed the replacement graders were actually used, each with over 500 hours of prior operation). The total value was $890,000, with $291,750 in trade-in credit and a net of $589,250 paid as monthly lease payments plus a balloon. The Legislative Auditor asked whether the trade-in qualified for the bidding exemption at A.C.A. § 14-16-105(f)(2)(A), and whether the lease-vs-sale character of the underlying contract mattered.

AG Dustin McDaniel concluded the right statute was not § 14-16-105 at all. The county purchasing chapter (Title 14, Chapter 22) directly addresses trade-ins in connection with both straight purchases and lease-purchases, and exempts used-goods transactions from bidding. Under the chapter's unusually broad definition, "purchase" includes lease-purchase agreements and rental-purchase agreements with options to buy. So the lease-vs-sale characterization is essentially moot: either way, the trade-in fits within § 14-22-106.

Section 14-16-105 (the general sale-of-county-property statute) governs straightforward sales of county property by sealed bid. Its subsection (f) carves out trade-ins, but does so ambiguously (the text first says "new or used equipment," then says "new equipment" only). The AG flagged the ambiguity as needing legislative clarification, but said it did not have to be resolved because the more specific Chapter 22 controls anyway. Two canons supported that conclusion: a specific statute prevails over a general one (Donoho v. Donoho), and a later-enacted statute prevails over an earlier one in conflict (Daniels v. City of Fort Smith). Chapter 22's trade-in provisions came in 1989; § 14-16-105(f) came in 1963.

The AG declined to construe the actual Lease-Purchase Agreement, noting the office's longstanding rule against acting as a finder of fact or construing individual contracts. That work belongs to county counsel or the courts.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Does the county have to bid out the disposal of used equipment if it's being traded in?
Per this 2014 opinion, no. A.C.A. § 14-22-106 exempts used-goods trade-ins from bidding when they accompany a "purchase" (broadly defined to include lease-purchase). The traded-in property does not separately have to be auctioned to the highest bidder.

What about the underlying "purchase" itself?
That depends on the full purchase price. A.C.A. § 14-22-104(1) requires formal bidding "in each instance in which the estimated purchase price shall equal or exceed twenty thousand dollars ($20,000)." A.C.A. § 14-22-113(a) clarifies that "the full purchase price shall govern the classification or purchase procedure," meaning the bidding threshold looks at the full price without trade-in credit. But the used-goods exemption at § 14-22-106 can take the whole acquisition out of bidding if the replacement equipment is itself used.

Why does it matter that the replacement graders were used?
Because § 14-22-106 lists "used or secondhand motor vehicles, machinery, or equipment" among the commodities that may be purchased without soliciting bids. "Used" means machinery operated for at least 500 hours. The replacement graders cleared that bar, so the underlying acquisition fell within the exemption from formal bidding.

Could the county have sold the traded-in equipment outright instead?
Yes, and the AG noted that under A.C.A. § 14-22-113(b), the purchasing official can decide whether trade-in or outright sale is in the county's best interest. An outright sale would then run through § 14-16-105's bidding procedure.

What was the ambiguity in § 14-16-105(f)?
The exemption text says it applies when county personal property is traded in on "new or used equipment," but the very next clause says credit must be given toward the purchase price of "new equipment." Read literally, the second clause limits the exemption to new-equipment purchases. Read with the first clause, the exemption covers both new and used. The AG called this an irreconcilable internal conflict and asked the legislature to fix it.

Background and statutory framework

A.C.A. § 14-16-105 is the general county property-disposal statute. The county court has the power to sell county real estate or personal property, appropriate the proceeds to county use, and follow the bidding procedure in subsections (b) through (e). Subsection (f) carves out exemptions, including the ambiguous trade-in clause at (f)(2)(A).

Title 14, Chapter 22 (A.C.A. §§ 14-22-101 through -115) governs county purchases. The chapter defines "commodities" broadly to include all county-purchased goods, services (other than personal services), and equipment. It defines "purchase" to include lease-purchase, rental-purchase, and any acquisition where the county has an option to buy and to apply rental payments to the purchase price. Section 14-22-106 lists categories of commodities that may be purchased without bidding, including used or secondhand machinery (operated at least 500 hours). Section 14-22-113 handles trade-ins specifically: the full purchase price (without trade-in allowance) governs the bidding threshold, but the trade-in itself is part of the "trade-in purchase" structure rather than a separate sale subject to bidding.

The opinion's resolution rests on two canons of statutory construction. Donoho v. Donoho, 318 Ark. 637 (1994), holds that a specific statute on a particular subject controls over a general one. Daniels v. City of Fort Smith, 268 Ark. 157 (1980), holds that a later-enacted statute repeals an earlier one to the extent of conflict. Both pointed to Chapter 22 controlling over § 14-16-105 for this transaction.

Citations

• A.C.A. § 14-16-105 (Supp. 2013) (general county property disposal)
• A.C.A. § 14-16-105(f)(2)(A) (trade-in exemption, ambiguous)
• A.C.A. § 14-22-101 through -115 (county purchasing chapter)
• A.C.A. § 14-22-101(4) (broad "purchase" definition including lease-purchase)
• A.C.A. § 14-22-101(8)(A) ("used" defined as 500+ hours)
• A.C.A. § 14-22-106 (used-goods bidding exemption)
• A.C.A. § 14-22-113 (trade-in procedure)
• Donoho v. Donoho, 318 Ark. 637, 887 S.W.2d 290 (1994) (specific over general)
• Daniels v. City of Fort Smith, 268 Ark. 157, 594 S.W.2d 238 (1980) (later over earlier)
• Op. Att'y Gen. 91-276 (intent of § 14-16-105 to make all dispositions public)
• State ex rel. Miller County v. Eason, 219 Ark. 36, 240 S.W.2d 36 (1951)

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Official summary

Can a county trade in equipment, under A.C.A. § 14-16-105(f)(2)(A), in the context of what appears to be a lease transaction, or do the terms of such a transaction preclude use of this Code provision?

RESPONSE: In my opinion, regardless of whether the underlying transaction involves a lease or a sale, determining the propriety of a trade-in of used equipment in all likelihood involves applying not the statute recited in your request, but rather Arkansas Code title 14, chapter 22, which deals with county purchasing procedures. Specifically, under A.C.A. § 14-22-106 as read within the context of this Code chapter, a trade-in of used county equipment is permissible as consideration supporting either an installment purchase of replacement equipment or a lease of such equipment with an option to purchase. Because this chapter directly addresses the issue raised in your request, I believe its provisions will control even if they conflict with the bidding requirements of A.C.A. § 14-16-105.

Original opinion text

STATE OF ARKANSAS

THE ATTORNEY GENERAL
Dustin McDaniel

Opinion No. 2014-092

December 18, 2014

The Honorable Roger A. Norman
Legislative Auditor
Division of Legislative Audit
172 State Capitol
Little Rock, Arkansas 72201-1099

Dear Mr. Norman:

I am writing in response to a question you have posed relating to four transactions involving Pike County's "trad[ing] in an existing piece of equipment toward the cost to 'lease' a new grader." You offer the following factual summary:

Essentially, Pike County traded in four existing pieces of equipment in order to acquire four new graders. The total value of the new graders was $890,000, and Pike County was credited with traded equipment in the amount of $291,750, leaving a net amount of $589,250. The lease purchase agreement calls for thirty-five (35) monthly lease payments of $1,906, and a final lease payment of $531,906. Although these documents pertain to Pike County, other counties appear to be entering into this same type of transaction.

Notwithstanding your description of the acquired graders as "new," my inquiries reveal that they were used, having in fact been operated by prior owners in excess of 500 hours each when conveyed to Pike County. Without here reviewing the terms of the written contract, I will further note that both parties to the contract reportedly perceive the contract as being a lease with an option to buy. Pike County's acquisition of the graders was reportedly undertaken as an open-market transaction without going through any bidding process.

You offer the following provisional observation regarding this transaction:

[T]he transaction documented does not appear to be a purchase; rather, given the appreciable residual remaining at the end of the term, the transaction appears to be a lease.

Against this backdrop, you have posed the following question:

Can a county trade in equipment, under A.C.A. § 14-16-105(f)(2)(A), in the context of what appears to be a lease transaction, or do the terms of such a transaction preclude use of this Code provision?

RESPONSE

In my opinion, regardless of whether the underlying transaction involves a lease or a sale, determining the propriety of a trade-in of used equipment in all likelihood involves applying not the statute recited in your request, but rather Arkansas Code title 14, chapter 22, which deals with county purchasing procedures. Specifically, under A.C.A. § 14-22-106 as read within the context of this Code chapter, a trade-in of used county equipment is permissible as consideration supporting either an installment purchase of replacement equipment or a lease of such equipment with an option to purchase. Because this chapter directly addresses the issue raised in your request, I believe its provisions will control even if they conflict with the bidding requirements of A.C.A. § 14-16-105, which focuses primarily on straightforward sales of county property, mentioning trade-ins only in the course of reciting exemptions to the statute's requirements, including bidding. Moreover, even though the subsection (f) exemption for trade-ins is, in my estimation, ambiguous and in need of legislative clarification, I do not believe its ambiguities need be resolved in order to judge the propriety of the transaction at issue. Rather, because Code title 14, chapter 22 directly addresses the requirements for trading in equipment in conjunction with both leases and sales of replacement equipment, I believe this chapter will control. I am reinforced in this conclusion by the fact that this chapter's pertinent provisions are more recent than any possibly conflicting provisions of the statute you have recited.

You have attached to your request a document captioned "Governmental Equipment Lease-Purchase Agreement" (the "Agreement"), which apparently sets forth the terms relating to the conveyance of all four graders. Although I am statutorily directed to render formal opinions on questions of state law submitted by specified officials, I am neither authorized nor equipped to construe such individual contracts. As I have noted generally with respect to the construction of contracts involving political subdivisions:

[T]his office cannot serve as a finder of fact and cannot construe either municipal [or county] ... contracts. Accordingly, such questions must be left to the city [or county] attorney or, in the event of litigation, the courts.

I can, however, both review what I consider the pertinent Code sections and suggest how these might bear on a court's analysis of the Agreement itself.

Before addressing specifically the statute addressed in your request, I will briefly address the chapter of the Code dealing with county purchasing procedures, which I believe bears directly on the transaction you have described. Specifically, this chapter provides in pertinent part:

The following listed commodities may be purchased without soliciting bids: ... (11) Used or secondhand motor vehicles, machinery, or equipment.

With respect to machinery of the sort here at issue, the Code defines the term "used" as including machinery "used a minimum of five hundred (500) hours." The Code further defines the term "purchase" as follows:

"Purchase" means not only the outright purchase of a commodity but also the acquisition of commodities under rental-purchase agreements or lease-purchase agreements or any other types of agreements whereby the county has an option to buy the commodity and to apply the rental payments on the purchase price thereof.

The Code defines the term "purchase price" as used in this statute to mean "the full sale or bid price without any allowance for trade-in."

Finally, the Code defines the term "trade-in purchases" as follows:

"Trade-in purchases" means all purchases where offers must be included with the bids of each bidder for trade-in allowance for used commodities.

Presumably this definition applies to any "purchase" involving a trade-in, meaning that the property traded in will not be subject to an independent bidding requirement even if the underlying purchase is.

Implicit in the definition of "trade-in purchases" is the following corollary: if a "purchase" transaction is subject to bidding under this chapter, the recited value of used trade-in equipment in a "trade-in purchase" need not be the highest trade-in value recited among all bids. The county, after all, might accept the lowest overall responsible bid despite the fact that the trade-in value allowed under that bid is lower than that offered in other bids. Unlike A.C.A. § 14-16-105, then, which requires that property falling within its scope be conveyed to the highest responsible bidder, this chapter countenances the possibility that a county might dispose of property by trade-in without necessarily realizing the maximum potential return on that disposition of property.

As should be apparent from the foregoing, the Code chapter devoted to county purchasing procedures directly addresses a transaction of the sort referenced in your question, which involved a trade-in of used county equipment in conjunction with a used-equipment "purchase" under the unusually broad definition in the statute recited above. Accepting as accurate the facts as reported to me from various sources, namely, that used equipment was traded in as partial consideration for the receipt of other used equipment, the used-goods exemption to the bidding requirements of A.C.A. § 14-22-106 would clearly apply.

The question remains, of course, whether A.C.A. § 14-16-105 might be read as likewise applicable, thus possibly creating a tension among various statutory provisions. In this regard, you imply in your question that if the trade-in was made in connection with a "purchase," the disposition would be exempt from a bidding requirement, whereas if the trade-in was made in connection with a "lease," the exemption would not apply.

In addressing this question, the first issue is whether the statute should be read as applicable only to the direct disposition of county property, as opposed to its trade-in as part of a purchase of new or used property. Stated differently, the question initially is whether this statute's exemption simply excludes from the statute's bidding provisions any disposition of county property made in the form of a trade-in on purchased "commodities", a category that includes equipment of the sort conveyed to the county in this case.

Section 14-16-105 sets forth various appraisal, notice and bidding requirements applicable to the sale of county property. As noted by one of my predecessors, the obvious intent of this statute is "to make public all dispositions of county property." Subsection (f) specifically exempts the county from these requirements, however, with respect to certain transactions that involve what amounts to an in-kind equipment exchange. Specifically, the subsection provides for an exemption under the following circumstance:

When personal property of the county is traded in on new or used equipment and credit approximating the fair market price of the personal property is given to the county toward the purchase price of new equipment.

This exemption is confusing in two respects, one obvious and one not. First, as reflected in my highlighted excerpts, the statute is internally inconsistent on its face in that it initially purports to apply to the "purchase" of either "new or used equipment," whereas it subsequently purports to apply only to the "purchase" of "new equipment." Notwithstanding your contrary suggestion, the equipment conveyed to the county in this case was used, meaning that if the final highlighted phrase were applied in isolation, the conveyance, being of "used" not "new" equipment, would fall outside the exemption. The first highlighted phrase, however, clearly indicates that the exemption applies to both new and used equipment. I cannot reconcile this outright internal conflict. Legislative clarification is warranted on this score.

The trade-in property would likewise not fall within the scope of the exemption if the underlying transaction were characterized as something other than a "purchase," as that term is used in the statute. As noted above, the term "purchase" is very broadly defined in A.C.A. § 14-22-101(4) to include any variety of transaction that might result in the county's finally obtaining title to the property conveyed to it. In boilerplate fashion, however, the Code expressly provides that this broad definition applies only "[a]s used in this chapter," and A.C.A. § 14-16-105 does not define the term. I lack any basis to speculate whether the legislature intended this term to be read as broadly in this statute as in the chapter of the Code devoted to county purchases of property. Again, legislative clarification is warranted.

Given these uncertainties, I cannot opine definitively whether a trade-in on a county's acquisition of used equipment would be subject to bidding under A.C.A. § 14-16-105. I can, however, offer an opinion that may resolve your concerns on this score. In my opinion, even if the traded-in property fell outside the subsection (f) exemption, meaning that the statute's bidding requirement might be deemed to apply, the trade-ins would nevertheless be exempt from the bidding requirement under the provisions of A.C.A. § 14-22-106. I base this opinion on two accepted principles of statutory construction: first, that a general statute does not apply where there is a specific statute governing a particular subject matter; and, secondly, that the provisions of an act adopted later in time ordinarily repeal the conflicting provisions of an earlier act. As noted above, A.C.A. § 14-16-105 deals with the outright sale of properties, mentioning conveyances-by-trade-in only to point out, albeit ambiguously, that they fall outside the statute's restrictions. Section 14-22-106, by contrast, is squarely on point, exempting from its chapter's bidding requirements all trade-ins associated with either an outright purchase agreement or a lease-purchase agreement entered into by the county. Moreover, A.C.A. § 14-22-106 was enacted later in time than was A.C.A. § 14-16-105(f). Accordingly, even if A.C.A. § 14-16-105 were read as applicable on its face, I do not believe its provisions should be given effect to the extent they conflict with those of A.C.A. § 14-22-106.

Finally, I should note the inapplicability of the case law and Attorney General opinions you recite as having given rise to your concerns. Although each of these authorities addressed the status of a contract as either a lease or sale, none did so in a context that bears on your request.

By contrast, identifying the Agreement as either a conditional-sales contract or a lease-purchase contract is not necessary, in my opinion, to determine what statutory requirements apply to a trade-in of equipment on a "purchase" as defined in A.C.A. § 14-22-101(4). As discussed above, when a county disposes by trade-in of property it clearly owns in connection with either a sale or a lease, A.C.A. § 14-22-106 will control, meaning no bids need be taken on the traded-in property.

Assistant Attorney General Jack Druff prepared the foregoing opinion, which I hereby approve.

Sincerely,

DUSTIN McDANIEL
Attorney General

DM/JHD:cyh