Let’s Talk Municipal Finance – Municipal Lease Purchase Agreements

Wednesday, July 19, 2017

In the last installment of Let's Talk Municipal Finance, I discussed municipalities and governmental entities that issue bonds, a form of municipal debt. An alternative to incurring municipal debt and less onerous option for a municipality that is, for example, looking to purchase a new piece of equipment, is a municipal lease purchase agreement. 

Like ordinary lease purchase agreements, municipal lease purchase agreements require payments for a set number of years to lease a piece of equipment. While some agreements are strictly lease agreements with no option to purchase, more commonly the agreements provide an option to purchase the equipment outright for a nominal price at the end of the term. While a municipality may enter into a lease purchase agreement without a vote of the residents, the allocation to pay the annual lease payments is included as a line item on the annual budget approved by the residents. In addition to the annual appropriation, the agreement must also be duly authorized by the municipality, which commonly means certain resolutions or ordinances must be adopted by the municipality’s governing body authorizing entrance into the agreement by certain officers of the municipality. 

Since payment of the lease is subject to annual appropriation in the municipal budget, municipal lease purchase agreements must contain a provision allowing for termination in the event that the residents fail to approve the appropriation for the following year’s annual principal and interest payments.  This allows the municipality to terminate the lease without penalty. Lending institutions are willing to enter into municipal lease purchase agreements because interest on the annual lease payments is tax exempt as a result of factors such as the municipality’s status as a governmental unit and the use of the equipment being purchased for a municipal or public purpose. 

Municipalities must also consider, however, that the administrative costs of issuing a municipal lease purchase agreement are often greater than those of issuing a bond, primarily because the process is less standardized. The municipality must negotiate individually with a lending institution. Further, the municipality’s legal counsel must review and draft documents and governing body authorizations that are acceptable to the municipality’s chosen lending institution and necessary to issue the opinion of legal counsel, which opines on issues such as due authorization and tax matters. For these reasons, if you are considering entering into a municipal lease purchase agreement, it is best to retain legal counsel at the very beginning of the process to ensure each of the documents and authorizations conforms to the necessary requirements.

Ethan Anderson practices with Preti Flaherty's Municipal Law and Business Law practice groups, focusing on public finance, mergers and acquisitions, and contract matters.

Maine Superior Court Weighs in on Code Enforcement Appeal

Tuesday, July 18, 2017

Earlier this year, Maine’s Superior Court issued a decision in Blasco v. Town of Southport that provides a useful reminder for municipalities about appeals of code enforcement actions.

The case involved an 80B appeal of a notice of violation that had been issued by the Town of Southport’s code enforcement officer. The plaintiff filed the appeal pursuant to a provision in Southport’s land use ordinance that provided that all enforcement actions taken by the CEO “may be appealed by an aggrieved party only to the Superior Court pursuant to Rule 80B of the Maine Rules of Civil Procedure.” There was no dispute among the parties that the notice of violation at issue was an enforcement action within the ambit of the ordinance.

The question for the Superior Court was whether Southport’s ordinance, which allowed CEO enforcement actions to be appealed directly to Superior Court, was consistent with Maine law. The court answered that question with an unequivocal “no.” The court pointed out that, in 2013, the Maine Legislature enacted a statutory amendment that authorized enforcement orders such as a notice of violation to be appealed, unless there is clear language in an ordinance stating that such decisions are “only advisory.” However, that statute, 30-A M.R.S.A. § 2691(4), also requires that an appeal must be taken to the Board of Appeals prior to any appeal to the Superior Court. In this case, Southport’s ordinance did not state that the CEO’s decisions were only advisory, and so, it did not necessarily preclude an appeal of the notice of violation at issue. But, because the ordinance attempted to allow for appeals of CEO decisions to be taken directly to Superior Court without first being presented to the Board of Appeals, the Superior Court found Southport’s ordinance was inconsistent with Section 2691(4) and remanded the appeal to Southport’s Board of Appeals for its consideration.

For municipalities in Maine, the Blasco decision serves as a reminder to review land use ordinance provisions concerning the appeal of code enforcement actions. Municipalities should bear in mind that, absent any language stating that certain code enforcement decisions are only advisory and not appealable, a notice of violation or similar enforcement order is normally appealable. Any appeal, however, must first be presented to the Board of Appeals before it can be appealed to the Superior Court.

Update on Marijuana Progress at the Maine Legislature

Thursday, June 15, 2017

As of early June 2017, Maine’s implementation of the legalization of marijuana for adult use continues to chug along. The Maine Legislature’s Joint-Select Marijuana Legalization Implementation Committee has been meeting several times per week now for months, poring over the initiated Marijuana Legalization Act and each potential facet of the forthcoming structure it has called for.

After the MLA’s passage last November, the incoming 128th Maine Legislature submitted more than 70 marijuana-related bills pertinent to all areas of legalization and the state’s existing medical marijuana program. More than 30 of these bills have been carried over for the MLI Committee’s work later this summer, fall, and next session. However, the Committee also has the power to report out its own legislation, which it has already done, passing LD 243 (assigning licensing authority to DAFS) and a recently passed bill to mandate laboratory testing of marijuana and marijuana products and set up a licensure program for these laboratories. Both of these bills have yet to be signed by the governor and enacted into law.

In the meantime, the Committee has been engaged in in-depth discussion around everything from what cultivation, retail, enforcement, and implementation timing will look like. Amid these proceedings, the Legislature will be eager to make use of any potential revenue collected from the taxation of marijuana. Following adjournment of the First Regular Session, the Committee’s plan is to meet in July and August and report out an omnibus bill, establishing an adult use program, to a Special Session of the Legislature in the fall.

While the Legislature has been working on implementation of the Adult Use Program, the Department of Health and Human Services has been undergoing a rewrite of rules for the Maine Medical Use of Marijuana Program (MMUMP). Through this rewrite, DHHS is seeking to provide patients, caregivers, dispensaries, municipalities, and Maine citizens more clarity and guidance in the MMUMP. Participants in the MMUMP and municipalities, especially, have been seeking this guidance for quite some time, as the rules have not been amended since 2013, despite numerous statutory changes.

On June 14, DHHS held a public hearing at the Augusta Civic Center to take public comment on these rules. Fewer than 50 folks, mostly caregivers, testified at the public hearing. Most of their comments were in support of the program and in opposition to DHHS’s efforts to bring greater clarity and effective enforcement to the program. The deadline to provide written comments to DHHS is June 26.


Here is a link to further information on the rules and the rulemaking process:

Accessory Uses and Their Pitfalls

Wednesday, May 10, 2017

Municipalities put a lot of thought into comprehensive plans and zoning ordinances to make sure that no uses are allowed which will cause negative impacts on a given neighborhood. However, we often see ordinances that inexplicably allow any type of use in a district as long as it is an accessory use. “Accessory uses” are usually defined as being incidental and subordinate to the principal use of the property.

A municipality will often have a table of uses in its ordinances that allows only specific types of use in a particular zone, but allows accessory uses in all zones. Let’s think for a second about what this might mean. Consider a residential zone in which a nursing home is an allowed use, but a restaurant is not an allowed use. The nursing home has a cafeteria that is open to the general public. If “accessory uses” are allowed in all zones, the nursing home now has a back-door (yet perfectly legal) way to run a restaurant without violating the ordinance. Neighbors who thought they were living in a restaurant-free zone might complain, as might would-be restaurateurs who do not have the same opportunity.

Home occupations are also frequently given broader latitude than the same type of use conducted outside the home, even though the impacts on the neighborhood might be the same. Is that auto repair shop in someone’s home garage any less noisy than a principal use of the same type that might not be allowed in the same zone?  This matters because zoning restrictions are a limitation on property rights, and there has to be a rational basis supporting all such restrictions.

What can be done? Planning boards and staff should consider carefully their definitions and ordinance provisions pertaining to accessory uses. One simple solution is to include a provision that accessory uses are only permitted to the extent they would be permitted as a principal use in the given zone. Consider also the types of uses such as hospitals, civic centers, schools, churches and other campus-type facilities that may encompass several accessory uses. It often makes sense to include the more common elements of these facilities in the definition of the primary use, rather than trying to figure out which uses are subordinate and accessory. Generally speaking, planning officials should put the same degree of thought into the impacts of these accessory activities as they do into the impacts of their principal use counterparts.

Can the Deliberative Session of Town Meeting in a Senate Bill 2 Town Change the Intent or Purpose of a Petitioned Warrant Article?

Wednesday, April 19, 2017

Cady v. Town of Deerfield


In Cady v. Town of Deerfield, decided January 18, 2017, the New Hampshire Supreme Court dealt with the question of the extent to which the deliberative session of the Town Meeting in a Senate Bill 2 municipality may amend a warrant article.  A Senate Bill 2 town is one which has adopted the provisions of RSA 40:13 and which accordingly conducts its town meetings in two sessions:  the first session is deliberative in nature and consists of “explanation, discussion, and debate” on each proposed warrant article; and the second session involves voting by official ballot on each of the warrant articles, as amended at the first session.

In Cady, the Town of Deerfield’s deliberative session considered two petitioned warrant articles, the first of which was to make the Welfare Director an elected position at a salary no greater than $5,000 per year; and the second of which was to make the Police Chief an elected position to be paid $65,000 per year, subject to cost of living increases.  The deliberative session of the Town Meeting changed the petitioned warrant articles to “express an advisory view that the position of Welfare Director [Police Chief] be an appointed position as it is at the present time.”

RSA 40:13, IV(c) provides that warrant articles may be amended at the deliberative session, provided that “no warrant article shall be amended to eliminate the subject matter of the article.”  Cady argued that changing the petitioned articles, from making the Welfare Director and the Police Chief elected positions to having them remain as appointed positions, improperly changed or eliminated the intent or subject matter of the petitioned articles.  The Court rejected this argument, finding that the plain meaning of RSA 40:13, IV(c) prohibited only amendments that “eliminate” the subject matter of a warrant article, not amendments that change the “intent”  of a warrant article.  In addition to the plain meaning of the statute, the Court was also persuaded by a 2016 bill that was rejected by the Legislature.  That bill would have modified the language of RSA 40:13, IV(c) to provide that: “No petitioned warrant article shall be amended to [eliminate] change the subject matter or the intent of the article.”  (Words that were proposed to be added to RSA 40:13, IV(c) are in bold and words to be removed appear in brackets and are struck through.)

Thus, unless and until the Legislature amends RSA 40:13, IV(c), the deliberative session of a Senate Bill 2 “or official ballot” municipality may change warrant articles so long as the basic subject matter is not eliminated, even if the intent or purpose of the article is changed. This applies both to the deliberative session of a Senate Bill 2 town and to the traditional town meeting in a municipality that has not adopted the “official ballot” form of town meeting. 

THE ABOVE IS APPLICABLE ONLY TO NEW HAMPSHIRE MUNICIPALITIES.  MAINE HAS A SUBSTANTIALLY DIFFERENT BIFURCATED WARRANT ARTICLE PROCEDURE.

Social Media Policies and the First Amendment

Tuesday, April 18, 2017

Over the last several years, the National Labor Relations Act has driven much of the discussion around the legalities of social networking policies. Since 2011, for example, the NLRB’s Office of General Counsel has issued three reports concerning employer social media policies, all of which emphasize the importance of drafting social media policies narrowly so as not to infringe on activities protected under the NLRA.  For municipalities and other public employers, however, an equally important consideration when preparing and enforcing social media policies is the First Amendment.

Social Media Policy in the City of Petersburg


As a case in point, the Fourth Circuit Court of Appeals recently held in Liverman v. City of Petersburg that a city’s social media policy was overbroad under the First Amendment where it prohibited in “sweeping terms” the dissemination of any information that had a tendency to discredit or reflect unfavorably on the city or its employees.  The policy applied to the city’s police department and prohibited officers from making “negative comments” on the operations of the department, which the policy explained did not constitute protected speech. Another provision prohibited officers from making comments online that “disrupted the workforce” and further discouraged officers from posting any information about their off-duty activities. The policy explained that violations of the policy would be judged on a case-by-case basis. 

At issue in the case was a Facebook exchange between two officers while off-duty, which criticized the way rookie cops were being promoted to instructors based on special interests rather than experience. After the learning of the exchange, the department disciplined the officers for violating the social media policy. The discipline ultimately made the officers ineligible for promotion to open sergeant positions.  The officers subsequently sued and claimed that the city’s social media policy infringed on their free speech rights. 

The Fourth Circuit found that although social media presents novel issues, it is the scope and restriction on speech that matters under the First Amendment – not the medium of the speech. Here, the court found that there was no doubt that the social media policy regulated the officers’ rights to speak on matters of public concern, as it was effectively a “blanket prohibition on all speech critical of the government employer.” Because the policy imposed a significant burden on expressive activity, the court looked to whether it was justified by real, not merely conjectural harms to the department’s operations.  The court acknowledged that divisive social media use had the potential to undermine the department’s interest in maintaining camaraderie among officers and trust within the community, but it nonetheless found that these concerns were too speculative to justify the policy’s sweeping restrictions and chilling effect on protected speech.   Having found the policy itself unconstitutionally overbroad, the court turned to the officers’ discipline and found that it, too, was unconstitutional.   The court found the officers’ posts dealt with issues of public import and were not merely personal grievances.  According to the court, whether the officers were correct in their views was not the issue, because the issue they addressed in their posts – i.e. the risks posed by inexperienced supervisors – was a matter of public concern.

For municipalities, this decision highlights the need to consider the restrictions contained in social media policies and the potential chilling effect of those restrictions on protected speech (and, similarly, the exercise of rights under the NLRA).  Wherever possible, municipalities should avoid restrictions that are ambiguous, vague, or susceptible to interpretation, as they are more likely to be viewed as unlawfully overbroad.  Municipalities can further reduce that risk by providing examples of the specific conduct prohibited under the policy.  Although doing so provides no guarantee, it is more likely to result in a narrowly tailored policy that avoids running afoul of the law.

Maine Municipal Law Update: Biennial Budget, Marijuana Legalization & Opportunity Agenda

Friday, April 14, 2017

Maine's Biennial Budget


Legislative work continues to steadily flow in Augusta, Maine as more bills are taken up by policy committees and many of them are meeting passage or being killed. In addition, the state’s biennial budget is slowly inching forward as the Appropriations & Financial Committee has accepted non-controversial initiatives, and will soon tackle the more contentious ones.

The Marijuana Legalization Implementation Committee


In the meantime, the implementation of adult-use marijuana legalization continues to pose interesting and as-yet undecided policy questions to the Marijuana Legalization Implementation Committee (MLI) and the State House’s respective party caucuses.

The MLI has thus far held a series of public hearings allowing any and all members of the public to voice a range of opinions around marijuana policy, including the state’s preexisting medical program. However, only LD 243 has been taken up in MLI. This bill, after being extensively worked by the committee received a 16-1 “ought to pass as amended” vote.  It is now poised to establish a “hub and spokes” model of licensing that would be centered on the Department of Administrative and Financial Services (DAFS) with major “spokes” extending to the Bureau of Alcoholic Beverages and Lottery Operations (BABLO) and the Department of Agriculture, Conservation, and Forestry (DACF). BABLO, an organization that exists within DAFS, would regulate packaging and retail, while DACF would regulate cultivation. 

The Committee will continue to meet regularly through the end of session and continue through the interim period between sessions.  The Committee is likely to hold several more large public hearings throughout the spring that will cluster individual bills based on their proposals and the different aspects of legalization implementation.

Opportunity Agenda


In other news, Legislative Democrats unveiled the “Opportunity Agenda” last week, a counter-proposal to the most recent LePage biennial budget. The program is touted by Democrats as providing the largest property tax cut in history, funded partially through new revenues created by adult-use marijuana legalization.