The following is a decision of the Merrimack County Superior Court. Please note that (a) superior court opinions are not binding on the New Hampshire Supreme Court, and (b) at the time this summary went to print, it was still possible for this opinion to be appealed to the New Hampshire Supreme Court.
Several cities have amended their charters to enact “tax” or “spending” caps, which limit the amount by which the city council or board of aldermen may increase appropriations from year to year. (Towns without charters cannot impose spending caps on themselves because any policy adopted by a town meeting is automatically modified or repealed by any inconsistent vote at a subsequent town meeting.) These charter amendments vary in their details but typically contain a formula that regulates increases in appropriations with reference to some version of a consumer price index.
Voters in Concord submitted a petition under RSA 49-B, the statute controlling charter procedures, to amend the City of Concord charter to impose a spending cap. The proposal would limit the annual budget to an amount equal to what could be appropriated using the tax rate for the previous fiscal year, adjusted by a factor equal to the change in the National Consumer Price Index-Urban for the previous fiscal year. The restriction could be overridden by a two-thirds vote of the city council. Under RSA 49-B:5-a the municipal clerk submits a proposed charter amendment to the Secretary of State, Attorney General and Commissioner of Revenue Administration for review “to insure that it is consistent with the general laws of this state.” The decision is subject to appeal to the Superior Court. In this case, the State agencies determined that the amendment was not unlawful, and the City, pursuant to vote of the city council, appealed, claiming that the amendment was not authorized by RSA 49-B or RSA 49-C, which prescribes the contents of city charters. Petitioners intervened in support of the amendment.
In its analysis, the Court first noted the basic principle of municipal law: municipalities have only such powers as the State grants them. Girard v. Allenstown, 121 N.H. 268, 270 (1981). The Court then cited recent New Hampshire Supreme Court decisions that have narrowly construed the scope of power that may be exercised through charter amendment:
•Appeal of Barry, 143 N.H. 161 (1998) (city’s retirement system not subject to change by charter amendment)
•Hooksett v. Baines, 148 N.H. 625 (2002) (charter could not impose term limits on elected officials)
•Manchester School District v. Manchester, 150 N.H. 664 (2004) (charter could not make school district a city department)
The Court next turned to RSA 49-C:23, which addresses the city budget process and fiscal control in detail. The statute requires that a charter budgetary process have the following features: (1) dates for submission and final adoption by the legislative body, failing which the budget submitted by the chief administrative officer (manager or mayor) is deemed adopted; (2) at least one public hearing on the annual budget with published notice; (3) procedures for supplemental appropriations, after public hearing, which require a two-thirds vote; and (4) periodic financial reports and a process for reducing appropriations as necessary to keep total expenditures within anticipated revenues. RSA 49-C:23 also deals with transfers, audits, bonding of officials, deposit of funds and a fiscal control function administered by a qualified professional.
The Court found that “in adopting RSA 49-C:23 the legislature has created a comprehensive statutory scheme for the budget process,” and “the legislature has not authorized municipalities to regulate the budget process.” The proposed amendment is, therefore, not permitted. The Court also found that the proposed amendment was inconsistent with the role of the city manager by giving the voters unauthorized control over the contents of the original budget.
An appeal to the New Hampshire Supreme Court is anticipated, as New Hampshire cities and towns with charters consider the implications for their existing or proposed spending cap amendments.