Can a Mississippi town add a checkbox to water bills letting customers round up to the nearest dollar and donate the change to a local charity?

Plain-English summary

The Town of Leakesville wanted to do something popular and harmless-sounding: add a voluntary "round up to the nearest dollar" option on water and sewer bills. Customers who opted in would round their monthly bill up (so $34.27 becomes $35) and the difference would go to a local community action agency.

The AG said no. The reasoning has two parts:

Part one: Municipal utility revenue is restricted by statute. Sections 21-27-23, 21-27-47, 21-27-57, and 21-27-61 set up a closed system. Towns are supposed to set utility rates at the level needed to cover operations, maintenance, and bond debt. Surplus revenues, if any incidentally arise, must go into specific named funds (operation/maintenance, depreciation, bond and interest, contingent). The statutes use "if any" language repeatedly, signaling that municipalities should not intentionally collect more than needed. A round-up program is, in substance, intentional surplus collection.

Part two: Municipal donations are unconstitutional unless specifically authorized. Article 4, Section 66 prohibits laws granting donations or gratuities except by a two-thirds vote of the legislature. The Mississippi Supreme Court applied this in McAdams v. Perkins, 204 So. 3d 1257 (Miss. 2016). Even routing the donation through a "voluntary" customer election does not turn the municipal hand-off to the charity into something other than a donation. The town has no statute authorizing it to collect funds for a private charity through its utility bills.

Both reasons are independently fatal. The town would need legislation specifically authorizing the program before it could go forward.

What this means for you

If you're a Mississippi municipal attorney

Under this opinion, framing the program as a "voluntary" customer round-up does not cure the problem. The AG gives two independent reasons. First, the municipal utility-revenue statutes (§§ 21-27-23, 21-27-47, 21-27-57, 21-27-61) tie rates to cost recovery and refer to surplus only "if any," which the AG reads to mean the town "should not intentionally collect surplus revenues." Second, Article 4, Section 66 of the Mississippi Constitution prohibits donations by a municipality unless otherwise authorized by law (McAdams v. Perkins (Miss. 2016)). The AG concluded the town has no authority for the program.

If you're a mayor or alderman

Under this opinion, the town cannot implement the round-up donation feature. The AG rests that on two grounds, each sufficient on its own: the town has no authority to intentionally collect surplus utility revenue, and a municipal donation to a private entity is unlawful unless authorized by law (§ 66). The opinion notes the town would need authority "otherwise prescribed by law" before it could go forward.

If you run a community action agency or local nonprofit

Under this opinion, the limit is on what the town can do, not on what residents can do. The AG addressed only whether the town may collect the rounded-up amounts through its utility billing and pass them to the agency, and concluded it may not. The opinion does not restrict residents from donating to your organization through other channels, and it does not address or approve any particular alternative.

Common questions

Q: What if only customers who opt in are rounded up?
A: Under the opinion, that does not solve the problem. The AG's reasoning turns on the town's lack of authority to intentionally collect surplus utility revenue and on the constitutional bar on municipal donations, not on whose money it originally was.

Q: Why does the AG say towns can't collect surplus revenue intentionally?
A: Because the utility-revenue statutes (§§ 21-27-23, 21-27-47, 21-27-57, 21-27-61) describe rate-setting as cost recovery (operations, maintenance, bonds) and refer to surplus only with an "if any" qualifier. The AG reads "[t]he consistent use of 'if any'" to mean municipalities "should not intentionally collect surplus revenues" but should spend an incidental surplus as the statutes direct.

Q: What about the Sanders (2013) opinion cited in the request?
A: The AG said that because the matter "turns not on the ultimate use of any surplus funds but on the intentional collection of such surplus," the Sanders (2013) opinion the request referenced "is not distinguishable." In other words, the AG reaffirmed it.

Q: Can the town donate to the community action agency directly instead?
A: The opinion says municipal donations are "unlawful unless otherwise prescribed by law," citing Article 4, Section 66 and McAdams v. Perkins. It does not identify any statute authorizing a donation here, so under the opinion the town has no authority to do so.

Background and statutory framework

Mississippi treats municipal utility revenues as restricted funds, not general-purpose money. The structure runs through several sections:

• Section 21-27-23 authorizes municipalities to operate combined water and sewer systems and to "establish, maintain and collect rates for the facilities and services offered."
• Section 21-27-47 instructs that revenues are to be used for paying bonds and providing for "such cost of operation and maintenance as may be necessary to keep such system at all times in good repair and working order." It also requires rate revision so that revenues match needs (no surplus, no shortfall).
• Section 21-27-57 specifies that the municipality "shall set aside monthly and shall pledge the revenues" of the system into named funds: operation and maintenance, depreciation, bond and interest, contingent.
• Section 21-27-61 provides that monies derived from the system go to operating expenses, bond payments, system improvements, and "the creation and maintenance of a cash working fund or surplus fund to be used for replacement, extension of systems and emergencies."

Donations to private entities are not on the authorized list. They are, in fact, broadly prohibited by Mississippi Constitution Article 4, Section 66, which states that no law granting a donation or gratuity in favor of any person or object shall be enacted except by a two-thirds vote of each chamber of the Legislature.

The combined effect: even creative, voluntary, well-meaning programs that route funds through utility billing to a private charity hit a constitutional wall.

Citations and references

Statutes and constitutional provisions:

• Miss. Code Ann. § 21-27-23 (combined water and sewer systems; rate authority)
• Miss. Code Ann. § 21-27-47 (revenue pledged to operation, maintenance, bonds)
• Miss. Code Ann. § 21-27-57 (monthly fund allocation requirements)
• Miss. Code Ann. § 21-27-61 (use of system revenues)
• Miss. Const. Art. 4, § 66 (prohibition on donations and gratuities)

Case:

• McAdams v. Perkins, 204 So. 3d 1257 (Miss. 2016), enforcing Section 66 prohibition on municipal donations

Prior AG opinions referenced:

• MS AG Op., Blocker (Mar. 28, 2003)
• MS AG Op., Sanders (Jan. 25, 2013), affirmed and not distinguished

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2023/03/L.Turner-February-9-2023-Voluntary-Utility-Bill-Round-Up-Option.pdf

Original opinion text

February 9, 2023

Lee Turner, Esq.
Attorney, Town of Leakesville
Post Office Box 1492
Leakesville, Mississippi 39451

Re: Voluntary Utility Bill Round-Up Option

Dear Mr. Turner:

The Office of the Attorney General has received your request for an official opinion.

Background

According to your request, the town of Leakesville is considering implementing a voluntary option for a citizen to round up his or her monthly water and sewer bill to the nearest dollar with the proceeds going to a local community action agency.

Question Presented

May the town of Leakesville implement an option for a citizen to voluntarily round up his or her monthly water and sewer bill to the nearest dollar and then donate those proceeds to a local community action agency?

Brief Response

While the town of Leakesville has the authority to set rates sufficient for the maintenance and operation of a utility system and to pay any related outstanding bonds, the town does not have the authority to intentionally collect a surplus of utility system revenues. Additionally, donations by a municipality are unlawful unless otherwise prescribed by law.

Applicable Law and Discussion

Mississippi Code Annotated Section 21-27-23 authorizes municipalities to establish and operate a combined water and sewage system and the power "to establish, maintain and collect rates for the facilities and services offered" by the utility system. Miss. Code Ann. § 21-27-23(d), (e). When setting and maintaining rates, the revenues are to be pledged to the payment of any outstanding bonds issued pursuant to Section 21-27-23 related to the system "and to provide for the payment of such cost of operation and maintenance as may be necessary to keep such system at all times in good repair and working order." Miss. Code Ann. § 21-27-47. The municipality shall revise the rates from time to time to produce the necessary amounts to pay for outstanding bonds, operation, and maintenance. Id. If municipalities are charging rates that are consistently higher than needed to satisfy all expenses of the utility system, then the municipal governing authorities should reduce the rates so that there is no surplus created. See MS AG Op., Blocker (Mar. 28, 2003).

Once those rates are set, Sections 21-27-57 and 21-27-61 prescribe how the municipal governing authorities are to use the revenues collected for the utility system. Section 21-27-57 requires that the municipality "shall set aside monthly and shall pledge the revenues of the system or combined system, in separate and special funds as follows: (1) operation and maintenance fund; (2) depreciation fund; (3) bond and interest fund; (4) contingent fund." Additionally, when distributing monies into the various funds, municipal "governing authorities may prescribe a reasonable excess amount to be placed in the revenue bond and interest fund from time to time during the earlier years of maturity of such bonds so as to thereby provide and produce a cushion fund to meet any possible deficiencies" in the future. Id. Section 21-27-61 requires the following:

The governing authorities of any municipality shall devote all monies of the system derived from any source other than the issuance of bonds . . . to or for the payment of all operating expenses, including such items as are normally required of utilities for sales development; to or for the payment of all bonds and interest on outstanding revenue bonds, if any, of such system; to or for the acquisition and improvement of the system contingencies; to or for the payment of all other obligations incurred in the operation and maintenance of the system and the furnishing of service; and to or for the creation and maintenance of a cash working fund or surplus fund to be used for replacement, extension of systems and emergencies.

These sections provide the intended purposes for utility system revenues and do not contemplate or authorize the donation of those revenues which are intended for the enumerated purposes. Sections 21-27-57 and 21-27-61 specify how municipal governing authorities are to expend surplus funds, if any exist. The consistent use of "if any" regarding surplus revenues in these statutes indicates that municipal governing authorities should not intentionally collect surplus revenues when setting and collecting utility system rates but should spend them accordingly if an incidental surplus results. Therefore, because the matter turns not on the ultimate use of any surplus funds but on the intentional collection of such surplus, the opinion you reference in your request, MS AG Op., Sanders (Jan. 25, 2013), is not distinguishable.

We find no authority for municipalities to intentionally collect surplus utility system revenues and then expend those revenues for purposes other than what is mandated by these statutes. Furthermore, Mississippi Constitution Article 4, Section 66 prohibits donations by a municipality unless otherwise authorized by law. See McAdams v. Perkins, 204 So. 3d 1257 (Miss. 2016). Thus, this office is of the opinion that the town of Leakesville does not have the authority to implement a voluntary option for a citizen to round up his or her monthly water and sewer bill to the nearest dollar and donate the proceeds to a local community action agency.

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,

LYNN FITCH, ATTORNEY GENERAL

By: /s/ Abigail C. Overby
Abigail C. Overby
Special Assistant Attorney General