LEGAL Q&A: Money, Money, Money

The information contained in this article is not intended as legal advice and may no longer be accurate due to changes in the law. Consult NHMA's legal services or your municipal attorney.

In February, I sat through a state Senate hearing where the State Treasurer described a rosy financial picture for New Hampshire in 2020 and 2021. In March, Covid-19 came to our state. To say the financial picture changed drastically is an understatement. Municipalities across the state suddenly found themselves rushing to acquire scarce personal protective equipment for exorbitant prices as well as financing significant upgrades in technology and technological infrastructure to enable officials and employees to stay at home while keeping municipal government open.

This issue’s legal Q&A is about money and where to find it. It is a supplement to the excellent article written by recently retired Government Finance Advisor Barbara Reid that appears elsewhere in this edition of Town and City. At the time of this writing, it is hard to know how exactly to advise you because our deadlines are several months before you will be reading this article. Undoubtedly, a fifth – and potentially sixth, seventh, and eighth - federal stimulus bill has been proposed and debated by the time you are reading this issue. While we know from our communications with the National League of Cities and our federal delegation, there is big interest in shoring up municipal finances, we’re still in the very early stages of any such legislation, so it is impossible to know what has been adopted.

Fortunately, we do know that we will continue to provide information on NHMA’s COVID-19 Resources Page: https://www.nhmunicipal.org/covid-19-resources. We have been keeping on top of the state and federal dollars slowly making way to our members, and advocating for monies for our members. To date, we have been instrumental in securing millions in funding for our members, and I am sure that by the time this is over, we’ll be instrumental in securing millions more. We have been updating our members through various channels, including our COVID-19 Resources Page, as we are successful in obtaining funding and providing guidance on the rules for that funding as it is issued from state and federal authorities.

Q: What types of federal and state dollars are available?

A: The CARES Act provided some of the first funding which became accessible to municipalities. Some of that funding, such as the “Ambulance Money,” became available through direct deposit into municipal bank accounts from the U.S. Department of Health and Human Services. Most of that money, including the state-administered “Municipal Relief Fund,” required some action to obtain it. Regardless of the method by which the money was obtained – direct deposit or through grant or loan application – governing bodies need to be sure that they follow the appropriate statutory guidance to ensure that they properly accept and expend the money.

Q:  What statutes do we need to be familiar with?

A: At this point, all municipalities must be familiar with the provisions of RSA 21-P:43 and RSA 31:95-b. RSA 21-P:43  provides that when “services, equipment, supplies, materials, or funds by way of gift, grant, or loan for purposes of emergency management” are offered to a “political subdivision,” i.e. municipality, the municipality “acting through its executive officer, city council, or board of selectmen, may accept such offer, subject to its terms.”

That statute does not have a public hearing requirement, unlike RSA 31:95-b, the default statute for accepting and expending “unanticipated revenue.” The provisions of RSA 31:95-b technically only applies to towns, but, as was the case with the $40 million in “Municipal Aid” that NHMA advocated for and was included as part of the biannual budget last year, it is conceivable that state law may authorize the utilization of the provisions of RSA 31:95-b, whether or not the municipality has adopted that statute. In that case, we would recommend that cities also follow the requirements in that statute by holding a public hearing on the proposed use of the municipal aid.

Q: Are there any deadlines that we know about now which we need to mark in our calendars?

A: Yes! The initial allocation of $32 million for the “Municipal Relief Fund” contained several dates which are important for municipalities to note. Specifically, municipalities had to apply for the available funds in accordance with the following deadlines:

• By June 1, 2020, for eligible expenses incurred from March 1, 2020, to April 30, 2020;
• By July 15, 2020, for eligible expenses incurred from May 1, 2020, to June 30, 2020; and
• By September 15, 2020, for eligible expenses incurred from July 1, 2020, to August 31, 2020.

If a municipality fails to submit a request by the applicable deadline, a reimbursement payment for expenses incurred during the applicable time period will not be made.

Most importantly, however, municipalities must estimate their Covid-19 related expenses for the remainder of the calendar year (September 1, 2020 – December 31, 2020) and submit those estimates to the Governor’s Office for Emergency Relief and Recovery (GOFERR) by September 15, 2020. We know that those estimates will determine whether further funding for municipalities will be allocated through GOFERR from the $1.25 billion allocated to the State of New Hampshire from the U.S. Treasury’s Coronavirus Relief Fund. Therefore, NHMA is encouraging all municipalities to prioritize submission of those estimates to GOFERR to ensure that the municipal need for further funding is well documented and NHMA has a good basis to advocate for that funding.

Q: How soon before any deadlines should we be pulling together the information and allocating it to specific funding sources?

A: The best course of action is probably to wait to make determinations about what funding sources should be utilized for specific expenses until as close-as-possible to the deadline. The reason for this is that the federal guidance and, to some extent, the state guidance on funds has changed over time in response to advocacy efforts.

For example, on May 19, 2020, the federal government clarified that states and local governments may use Coronavirus Relief Fund (CRF) dollars, provided under the CARES Act, to pay for FEMA’s cost share requirements under the Stafford Act. Previously, the guidance from the federal government had expressly prohibited such use of CRF dollars. This new guidance will allow for 100% of federal coverage for FEMA-eligible expenditures up-to the amount allocated to each governmental entity through the CARES Act.

Q: What funding should a municipality apply for first if there are multiple state and federal sources that appear to provide overlapping funding?

A: Ultimately, that is a local decision. NHMA understands that COVID-19 funding and reimbursement processes are confusing, and in some cases seem to be a Catch-22 in terms of what to apply for first, and we are working closely with state and federal officials and state agencies to try to gain clarity as the rules for existing funding sources are amended and new funding sources become available to help all of our members receive all of the federal funding that is made available to address the municipal costs associated with COVID-19.   

Generally, municipalities should closely track expenses and reimbursements, and maintain supporting documentation necessary for audit purposes. They should keep careful track of any deadlines, such as the ones listed above, and ensure that decisions are made regarding applying for funding from sources as those deadlines come up, and we would encourage governing bodies to think strategically about funding sources, including the likelihood of further funds come from that source and the potential use of overlapping funds available from other sources. Last, ensure that the tracking of expenses and reimburses includes an option to ensure that “double-dipping” through seeking reimbursement of the same costs from multiple sources does not occur. Doing so, even inadvertently, can result in the suspension of eligibility to receive further funding, including, in the case of the federal government, funding which is unrelated to COVID19 expenses.

Q: If our municipality has taken advantage of all state and federal funding, as well as any private funding that has been offered to us, but we’re still looking to cover some expenses, what other dollars might be available?

A: Municipalities should be careful to examine whether there may be emergency funding available at the local level through a contingency fund established pursuant to RSA 31:98-a. Contingency funds often have broad mandates that allows them to be expended by the governing body for emergency expenses. Such funds are an annual creation of the legislative body via a separate warrant article. They may contain up-to 1% of the amount appropriated by the town for town purposes during the preceding year excluding capital expenditures and the amortization of debt. RSA 31:98-a requires that when the governing body expends any funds from that contingency fund, it must keep a detailed accounting of any expenditures.

Unfortunately, not all municipalities have a contingency fund. Therefore, governing bodies may be stuck looking to their transfer authority under RSA 32:10 to shift money to where it is needed. This authority cannot be restricted by town meeting (including special town meeting). McDonnell v. Derry, 116 N.H. 3 (1976); Sullivan v. Hampton, 153 N.H. 690 (2006). However, select boards must keep in mind that some allocations of money by town meeting cannot be changed by the select board, such as funding capital reserve funds, compensating elected officials at the amount set by town meeting, or providing the library trustees with the funds allocated by town meeting.

Q: Is there anything else we should do to ensure that we are “kept in the loop” as funding sources become available?

A: Municipalities should pay attention to NHMA’s communications and our COVID-19 Resources Page: https://www.nhmunicipal.org/covid-19-resources. We will continue updating our members as funding sources become available. We will also be providing guidance on funding – and everything else COVID-19 related – as issues arise and municipalities ask us questions.

Natch Greyes is Municipal Services Counsel with the New Hampshire Municipal Association.  He may be contacted at 603.224.7447 or at legalinquiries@nhmunicipal.org.