One viable alternative for municipalities is to seek out a private, third-party nonprofit organization that specializes in administering funds of the nature held in trust by the municipality and seek approval from the Consumer Protection Division of the Office of the Attorney General to transfer the funds. Depending on certain factors, the funds held in trust may be subject to the Maine Uniform Trust Code, 18-B M.R.S.A. § 101 et seq., which prescribes certain rules for matters such as the creation, validity, modification, or termination of a trust. In this particular situation, the municipality may need to seek approval from either the Probate or Superior Court to modify or terminate the trust in question on the basis of circumstances not anticipated by the settlor of the trust, with consideration being given to the settlor’s probable intent. Although in some cases, decedents of the original settlor may object to such modification or termination, as a practical matter, the Consumer Protection Division is often the only party in a position to challenge such action. Therefore, approaching the Division prior to petitioning the court to obtain their informal approval is advisable.
Our firm has previously assisted with seeking court approval of similar transfers of trusts, including the relocation of Cony High School in Augusta, Maine, in 2007, which drew significant community attention, but ultimately resulted in a favorable outcome.
Municipalities that choose to administer funds independently or are unable to identify a viable private third-party recipient of such funds are subject to certain statutory guidelines regarding the management and disbursement of trust funds held by the municipality for charitable public purposes. Under Maine law, two different laws appear to govern such activities, which appear to create ambiguities and practical difficulties for municipalities; however, after working with the Consumer Protection Division, we have determined that Maine’s Uniform Prudent Management of Institutional Funds Act, 13 M.R.S.A. § 5101 et seq. (“UPMIFA”), is a proper authority under which to manage and invest such funds.
While Subchapter 3-A of Chapter 223 of Title 30-A of the Maine Revised Statutes Annotated, regarding municipal investments, also applies to public purpose funds held in trust by a municipality, the Division recently stated informally that they would not object to a municipality managing and investing funds held by the municipality for public purposes under UPMIFA because it is both more recent than Subchapter 3-A and specifically applies to charitable funds held by government institutions. UPMIFA additionally offers a standard of prudence by negative inference with regard to the expenditure of funds. UPMIFA provides, in part, that any appropriation for expenditure of an amount greater than 7% of the fair market value of the fund, calculated over certain time periods, creates a rebuttable presumption of imprudence.
UPMIFA is also the statute applicable to municipalities managing and investing charitable funds for private purposes, meaning that management under UPMIFA could be consistently applied to funds designated for both public and private purposes, an additional benefit to municipalities with limited resources to manage those funds under different statutory schemes.
