NH Governor's Emergency Order Re: Excess Expenditures

Under RSA 32:10, the governing body of a municipality may transfer an unexpended balance in one appropriation to another appropriation, provided that the total amount spent for the year shall not exceed the total amount appropriated at Town Meeting. However, RSA 32:11 provides that when "an unusual circumstance arises during the year which makes it necessary to expend money in excess of an appropriation which may result in an overexpenditure of the total amount appropriated for all purposes at the [town] meeting or when no appropriation has been made," the selectmen may apply to the Commissioner of the Department of Revenue Administration (DRA) to make such expenditure.

Section 4 of Governor Sununu's Emergency Order Number 23 relaxes a number of the requirements of RSA 32:11 which must be met prior to the actual expenditure of monies in excess of an appropriation or of the total amount appropriated at Town Meeting. Specifically:

1. RSA 32:11, I requires that before application to DRA may be made, a majority of the budget committee (or if no budget committee, the governing body) must hold a public hearing. The Governor's order waives the public hearing requirement "during the current health emergency."
2. Under the Governor’s Order, DRA must review the overexpenditure application and notify the governing body of its decision within two business days of DRA's receipt of the application. (RSA 32:11 contains no timeframe within which DRA must notify the governing body of its decision.)
3. Applications to DRA may now be submitted by email to the DRA’s Director of the Municipal and Property Division. 

The Governor’s Executive Order Number 23 may be found at https://www.governor.nh.gov/news-media/emergency-orders/index.htm.

Crazy Times, Even in the Municipal Bond Market

The last few weeks have seen the municipal bond markets feeling the effects of the COVID-19 pandemic. Today, however, the Bond Buyer reported in its “Daily Briefing” that there was some stabilization last week in the municipal bond market.

During the weeks of the worsening of the pandemic, the municipal bond markets saw less investments in municipal bonds and increased sales by holders of existing municipal bonds. With investors in mutual funds holding municipal bonds withdrawing their investments in those funds, those mutual funds in turn were selling the municipal bonds in which they were invested. Compounding this sell-off, mutual funds were not purchasing, at their historical pace, other municipal bonds. This outflow of cash from the municipal bond market, together with a reduced inflow of cash, resulted in lower prices being paid for municipal bonds, leading to increased interest rates being paid by issuers and increased yields to investors. 

Various reasons have been suggested for this change: for example, investor risk assessments associated with municipal bonds may have changed; potential increase in the cost to municipal bond issuers for public support systems; holders seeking to move into cash positions; and general uncertainty. 

Not all issuers and municipal bonds are of equal risk in the current economic environment. Consider, by way of example, that some issuers have sufficient rainy day funds to see them through the crisis; some municipal bonds are supported by a revenue stream that may be less impacted by the pandemic. 

This is all part of the new economic world we are living in and what is written here at this point in time could change by the time you read it.

Maine State Primary Postponed – What to Do About Municipal Meetings and Budgets?

With the news that Governor Mills has ordered Maine’s primary election to be postponed until July 14, many towns are facing a dilemma about whether to postpone their own town meetings and elections. For those towns that like to coincide their local secret ballot meetings with the June primary, on top of the already existing health concerns, this is more reason to push local meetings off until July 14. But what to do about the budget? The Omnibus COVID Bill (LD 2167), provides that if the annual meeting is delayed beyond the date the annual budget is customarily approved, the prior year’s approved budget is deemed the budget for the ensuing year until a final budget is approved. The municipality may even commit taxes based upon last year’s budget, if needed. Schools are also authorized to operate according to the past year’s budget until subsidy numbers are finalized and the state of the emergency is over.

We take this budget extension provision to mean that the town may make operational and administrative expenses in the same amounts, in the same categories, as approved in the prior year. It may also allocate revenues as spelled out in the prior year’s budget. If capital improvement accounts were funded within the last year’s budget and the purpose remains, the town could choose to fund them on a month-to-month basis per the last budget. Alternatively, a cash-strapped town might wait to fund capital improvement accounts and eventually ask the budget meeting to reduce or eliminate the total allocation for the year.

While the COVID bill helps alleviate the pressure to hold budget meetings, it still leaves concerns about how to bridge the gap where the spending authorization remains unchanged from the prior year but revenues may have plummeted due to extended tax deadlines or other economic pressures. Many of our clients are using tax-anticipation notes, which can be borrowed on authority of the municipal officers without the need for town meeting. Others are relying on provisions in the last approved budget which allow the municipal officers to either spend from reserve accounts or appropriate from surplus to fund emergency expenses. In this economic environment, expenditures that previously would not have counted as emergencies probably do now meet that criteria. For towns that don’t have this type of spending authority or enough funding in place, there does remain the possibility of holding a small, special town meeting to make any approvals necessary. Anticipating low turnout, such a meeting still may legally be held, although the town will obviously have to take careful precautions to ensure that attendees are adequately spaced and protected.

Are Stay at Home Orders an Unconstitutional Taking?

In the midst of the COVID-19 pandemic, a question some are asking is whether there is a risk that governments will have to deal with claims that they have unconstitutionally taken value from property owners with the various stay at home edicts, closures, and other similar responses to the pandemic. The short answer is that such claims are unlikely to be successful as long as an ordinance and the local charter are followed, but it is a worthwhile discussion to keep in mind as municipalities consider their response to the pandemic.

The Constitution separates takings into two categories: physical and regulatory. A physical taking is, just like it sounds, when a government takes property away from an owner. It is fairly easy to identify physical takings, such as when DOT or a municipality takes property to build or expand public roads. A physical taking is unlikely – I am not aware of any governmental bodies in the U.S. physically taking property in response to the pandemic – but conceivably a municipality could take a building for quarantine or medical purposes. Should that occur, the municipality would need to pay the owner fair market value of the property taken. Since most of the buildings or spaces suitable for such uses are public buildings or spaces (e.g., the tents in Central Park in New York City), it is improbable that municipalities will need to compensate in such a way. 

On the other hand, regulatory takings could, in theory, apply to certain federal, state and local responses to the pandemic. Certain businesses deemed nonessential and specifically ordered to close undoubtedly will take a financial hit. Hair salons, theaters, and gyms, among others, forced to close could make an argument for lost income as a result of government measures to curb the spread of COVID-19 by claiming governments have violated the U.S. and Maine Constitutions in doing so. The Fifth Amendment provides protection against federal takings, while the Fourteenth Amendment protects against state and local takings.

Given what the CDC, the Maine CDC, and most public and private medical professionals have stated concerning COVID-19, governmental stay at home orders, forced closures, and so on are almost certainly a “valid use of police power,” which powers are given to states under the Tenth Amendment to act for the well-being of the public. The most important thing will be to make sure any emergency actions or orders strictly follow a local emergency planning ordinance and the municipal charter.