State Ceases Enforcement of Marijuana Business Residency Requirement

The Office of Marijuana Policy issued a letter on May 11, stating that, “Following the advice of the Office of the Attorney General, DAFS and OMP will cease enforcement of the residency requirement included in the Marijuana Legalization Act and the Adult Use Program Rule.” This decision is issued in response to a lawsuit filed against DAFS, which challenged the constitutionality of the requirement under the “dormant Commerce Clause” of the U.S. Constitution.

Many Maine municipalities have adopted marijuana licensing and zoning ordinances which require business owners or applicants to be Maine residents. These were largely considered to be supportive of the existing residency requirements under state law. With OMP and DAFS having concluded that their requirements are void, similar ordinance provisions would also likely be considered unenforceable. Municipalities should work with legal counsel and consider repealing those portions of their marijuana ordinances that require residency. Such requirements will clearly be subject to challenge as local businesses learn of the state’s decision.

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.

DOL Publishes Required FFCRA Poster and Guidance

The federal Department of Labor has released the poster that all covered employers must post to inform them of emergency benefits available under the Families First Coronavirus Response Act (FFCRA). The poster can be found here. Municipalities whose employees are principally working from home during this time should plan to circulate it by email on April 1, the effective date of the Act.

The DOL has also issued helpful guidance regarding the applicability of the Act. However, uncertainty remains and we are happy to answer any questions that arise.

Maine Legislature Passes COVID-19 Omnibus Bill re Public Meetings, Finance, and Other Municipal Concerns

The Maine Legislature last night passed emergency legislation, LD 2167 (referred to as the COVID-19 Omnibus Bill), which addresses many of the concerns being faced by municipalities in this unprecedented situation. Following is our summary of the provisions of this law which impact municipal government:

Public meetings

• During the declared state of emergency, meetings of municipal boards and committees may be conducted remotely by telephone, video, or Internet. The method must be adequate to allow members to hear and speak to one another, and must allow the public to hear what is said.
• Notice must still be provided (we recommend emphasizing web and press announcements during this time, if offices are closed and physical postings are not possible). The notice must include information on how the public may watch and/or participate. Again, remember that you do not need to make provision to accept public comments unless the meeting will include a required public hearing.
• The law does not appear to require that you provide a physical space and phone, terminal, or display where the public can attend in person to watch or listen to the proceedings.
• Votes taken at a remote meeting must be by roll call.

Budget and finance

• Similar to the process for enacting school budgets, the law allows for a municipality that cannot adopt its budget at the customary time to spend according to the prior year’s adopted budget until the current year’s budget can be passed. If these delays continue to the point at which commitment becomes necessary, taxes may also be committed based upon the prior year’s budget.
• During the period of the declared state of emergency and for 30 days after, disbursement warrants may be signed by a majority of the municipal officers with no public meeting required. The implication is that the municipal officers may sign individually with no meeting required.
• If the level of state education subsidy is not finalized before June 1, 2020, the school budget meeting and validation process may be delayed until 30 days after either DOE notifies the school unit of the amount of subsidy or the state of emergency ends. If the budget is delayed under this provision, the school may operate based on the prior year’s budget between July 1 and the date the new budget goes into effect.

Elections

• During calendar year 2020, the municipal officers may postpone a municipal secret ballot election by posting a notice in a conspicuous public location at least two days prior to the election. The notice must either indicate the new date of the election or indicate that the municipal officers will schedule it at a date to be determined. Ballots already printed for that election may be reused for the rescheduled election (despite including the wrong date), and absentee ballots already cast for the election must be held by the clerk and processed on the rescheduled election date.

Employment

• If an employee is laid off as a result of the state of emergency, unemployment benefits paid to him/her will not be charged against the employer’s experience rating.
• Employees will be eligible for unemployment benefits if they are (1) subject to a quarantine or isolation requirement; (2) have been temporarily laid off due to COVID-19 related closures; or (3) are on temporarily leave due to quarantine, isolation, or need to care for dependent family members as a result of COVID-19.

Education

• The Governor and Commissioner of Education may develop a plan to waive compulsory attendance requirements and/or allow remote learning to take the place of in-person instruction requirements.
• The Governor and Commissioner of Education will also implement a plan to continue to provide nutrition services during any period of COVID-19 related school closures.

Other municipal business

• Vehicle registrations, liquor licenses, and dog licenses are deemed extended until 30 days after the end of the state of emergency.
• Vehicle registrants may use the Rapid Renewal program even if their municipality does not already participate.