Revenue-Generating “Proprietary Function” Contracts Fall Outside OCGA § 36-60-13’s Multiyear Contract Formalities

1. Introduction

This interlocutory appeal arises from the City of Albany’s attempt to defeat, at the pleading stage, a breach-of-contract suit brought by South Georgia Rails to Trails, Inc. (“SGRT”). The dispute centers on a 2015 agreement under which SGRT conveyed to the City a 13.62-mile inactive railroad corridor between Albany and Sasser for $150,000. In exchange, the City promised to develop the corridor for “public open space and recreational purposes,” including constructing a multi-use trail within five years and installing City utility lines.

SGRT alleged that the City installed and operated utilities along the corridor (increasing utility revenues and expanding service) but never approved a trail plan and never constructed the trail, even after pursuing funding mechanisms and planning efforts. SGRT sued for breach, alleging the failure also jeopardized the corridor’s status under federal railbanking law and SGRT’s role as trail manager.

The City moved to dismiss, arguing the contract was void or unenforceable for multiple reasons, chiefly noncompliance with OCGA § 36-60-13 (a) (multiyear municipal contract requirements), and also invoking (on appeal) OCGA § 36-30-3 (a), plus the Georgia Constitution’s Gratuities Clause.

2. Summary of the Opinion

3. Analysis

3.1 Precedents Cited

A. Motion-to-dismiss framework and appellate posture

• Premier Eye Care Assocs., P.C. v. Mag Mut. Ins. Co. and Parnell v. Sherman & Hemstreet, Inc.: The court reiterated the familiar pleading standard—accept well-pleaded factual allegations as true and resolve doubts in favor of the plaintiff—while rejecting any obligation to accept legal conclusions. This framing mattered because the City sought dismissal based on legal invalidity (a high bar at the pleading stage when the complaint plausibly alleges enforceability).
• Alred v. Ga. Pub. Def. Council: The court relied on the “right for any reason” doctrine to affirm on a ground fairly presented below, even though the trial court had denied dismissal on a different rationale. This allowed the appellate court to affirm based on the proprietary-function exception (raised by SGRT in response and argument) rather than the trial court’s heavy reliance on voter approval reasoning.
• Ga. Dep't of Nat. Res. v. Coweta Cnty., Pneumo Abex v. Long, and State v. Jennings: These cases supplied the preservation doctrine: appellate courts are for error correction, not first view; issues not ruled upon below (or raised below) generally are not addressed on appeal. This was dispositive for the City’s “assent,” OCGA § 36-30-3 (a), and Gratuities Clause arguments.
• Santana v. Ga. Power Co. and Regan v. State: These cases controlled the court’s refusal to decide the Gratuities Clause issue absent a distinct trial-court ruling on the constitutional question.
• Synovus Bank v. Griner: The court acknowledged that Attorney General opinions are non-binding, used to explain why the trial court’s dismissal of the City’s reliance on an AG opinion did not itself resolve the constitutional merits.

B. Governmental vs. proprietary functions (the key to OCGA § 36-60-13 (j))

• City of Atlanta v. Durham: Provided the governing distinction: activities primarily for public benefit are “governmental”; activities primarily for producing revenue are “proprietary.” The court applied this distinction to the City’s utility operations along the corridor.
• Gooden v. City of Atlanta, City of Atlanta v. Mapel, and Pollock v. City of Albany: These cases illustrate that parks and recreational amenities are typically governmental when primarily for public benefit, but can trend proprietary/ministerial when used as revenue sources. They contextualized the City’s attempt to characterize the corridor as purely recreational, counterbalanced by allegations of revenue-driven utility usage.
• Bd. of Comm'rs of Chatham Cnty. v. Chatham Advertisers: Cited to show the interchangeable historical usage of “proprietary” and “ministerial,” reinforcing that revenue-associated municipal operations can be treated as proprietary.
• City of Atlanta v. City of Coll. Park, Clayton Cnty Bd. of Tax Assessors v. City of Atlanta, Johnson v. State, and Caroway v. City of Atlanta: These cases supplied examples where municipal operations connected to revenue generation (lessor for revenue, profit-generating undertakings, electric distribution, airport terminal at substantial profit) were classified as proprietary. The court used this line to support treating the City’s corridor use for utility revenue expansion as proprietary at the pleading stage.
• Unified Gov't of Athens-Clarke Co. v. Stiles Apartments, Inc. and City of Powder Springs v. WMM Props., Inc.: Though discussed in connection with OCGA § 36-30-3 (a), these cases reinforced the doctrinal boundary: legislative entrenchment prohibitions constrain governmental functions, not proprietary ones. The court noted this as an additional reason the City’s OCGA § 36-30-3 (a) argument was weak even aside from preservation problems.

C. Multiyear public contracts and voter-approval concepts

• Greene County School District v. Circle Y Construction, Inc.: The trial court had relied heavily on this Supreme Court decision interpreting a similar statute (OCGA § 20-2-506 (b)) to conclude statutory multiyear-contract formalities did not apply when voters approved the financing via ELOST. The Court of Appeals acknowledged Greene as binding precedent (and noted the City’s preservation effort to challenge it), but ultimately affirmed on the proprietary-function exception rather than extending the voter-approval analysis.
• Wasilkoff v. Douglas Cnty.: Cited for the relationship between voter approval and “new debt,” and to situate multiyear financing statutes within Georgia’s constitutional debt framework. The opinion also flagged a timing tension in this case: the City promised in 2015 to build within five years, but the TSPLOST voter approval referenced by the trial court occurred in 2019.
• City of Decatur v. DeKalb Cnty., SPI Holdco, LLC v. Mookerji, and Fid. & Deposit Co. of Md. v. Lafarge Bldg. Materials, Inc.: These general contract interpretation principles were referenced in passing to emphasize plain-language enforcement norms; they were not the fulcrum of the holding, but reinforce that statutory invalidation is exceptional.

D. Good faith and fair dealing (contextual, not decided on merits)

• Piedmont Off. Realty Tr., Inc. v. XL Specialty Ins. Co., Pangborn, LLC v. Stonecipher, and 280 Partners v. Bank of North Ga.: These authorities supported SGRT’s allegation that refusal to consider/approve a trail plan could violate the implied duty of good faith and fair dealing. The appeal, however, turned on contract validity/enforceability at the dismissal stage, not on adjudicating breach.

3.2 Legal Reasoning

1. OCGA § 36-60-13 (a) compliance is not universally required to avoid voidness. The City argued the agreement was void because it lacked (i) an annual termination provision and (ii) annual “total obligation” statements required by OCGA § 36-60-13 (a) (1) and (3). The court accepted that the contract did not contain those clauses, but treated the statutory scheme as inapplicable where the contract “aris[es] out of” a municipality’s proprietary functions under OCGA § 36-60-13 (j).
2. The proprietary-function exception can be resolved on the pleadings when revenue production is the primary alleged purpose. Looking to the complaint and contract exhibit, the court emphasized allegations that the City used the corridor to run utility lines, increase utility revenues, and expand service even beyond City/county boundaries. That revenue-driven use was sufficient—at the motion-to-dismiss stage—to classify the City’s actions as proprietary for purposes of OCGA § 36-60-13 (j).
3. Appellate courts will not reach unpreserved issues or issues not ruled upon by the trial court. The court refused to address: (a) lack of assent to essential terms (because the trial court did not actually rule on it, instead conflating it with OCGA § 36-60-13 applicability); (b) OCGA § 36-30-3 (a) (because raised for the first time on appeal); (c) Gratuities Clause (because constitutional questions require a distinct trial-court ruling, which was absent).
4. “Right for any reason” affirmance preserved the trial court’s result while correcting its analytic path. Although the trial court focused on voter approval (TSPLOST) via Greene County School District v. Circle Y Construction, Inc., the Court of Appeals affirmed based on the proprietary-function theory that SGRT had fairly presented below.

3.3 Impact

• Municipal contract challenges under OCGA § 36-60-13 will increasingly turn on function classification. Litigants can expect more early-stage disputes about whether a municipality’s conduct is “primarily for public benefit” or “primarily for producing revenue.” Where revenue generation is plausible from the pleadings (utilities, leases, profit-oriented operations), OCGA § 36-60-13 (a) may not supply a quick “void contract” defense.
• Defendants should preserve all statutory and constitutional defenses in the trial court—and obtain rulings. The opinion is a procedural warning: even potentially powerful defenses (e.g., OCGA § 36-30-3 (a), Gratuities Clause) may be lost on appeal if not raised below or not distinctly ruled upon.
• Rails-to-trails corridor agreements may be litigated as “hybrid” municipal projects. Even if a project has an overt recreational/public-space component, a municipality’s concurrent revenue-producing use (utilities) may shift the legal characterization into “proprietary,” affecting statutory constraints and remedies.

4. Complex Concepts Simplified

• Motion to dismiss (failure to state a claim): The court assumes the complaint’s factual allegations are true and asks only whether the plaintiff could prove any set of facts entitling relief. It is not a trial on the evidence.
• Governmental vs. proprietary functions: A city acts in a governmental capacity when it provides services mainly for the public good (often linked to immunity doctrines and limits on contracting). It acts in a proprietary capacity when it behaves more like a business, primarily to generate revenue (e.g., utilities, revenue leases).
• OCGA § 36-60-13 (a) “multiyear contract” clauses: Georgia law requires certain annual termination and annual-obligation statements in many multiyear municipal contracts. But OCGA § 36-60-13 (j) says the statute does not restrict “reasonable contracts arising out of” proprietary functions.
• Issue preservation and “distinct ruling” requirement: Appellate courts generally review what the trial court decided. If the trial court never ruled on an issue—or if a party raises an argument for the first time on appeal—the appellate court typically will not address it. For constitutional questions, the trial court must distinctly rule on the constitutional point.
• Federal railbanking (as alleged context): Railbanking allows interim trail use of rail corridors while preserving potential future rail reactivation. SGRT alleged that noncompliance could jeopardize interim status—raising the stakes of the City’s alleged nonperformance.

5. Conclusion

CITY OF ALBANY v. SOUTH GEORGIA RAILS TO TRAILS, INC. reinforces two practical rules. Substantively, OCGA § 36-60-13’s multiyear-contract formalities do not necessarily void a municipal agreement when the contract arises from proprietary, revenue-producing municipal activity—here, the operation and expansion of utility services along the corridor. Procedurally, the decision underscores that appellate review is tightly constrained by preservation and trial-court rulings, particularly for new statutory theories and constitutional claims.