Can a Mississippi county use Emergency Road and Bridge Repair grant money to pay off a loan it took out for the bridge project before the grant was awarded?

Plain-English summary

A bridge in Yalobusha County washed out in February 2019. The county and MDOT agreed to rebuild it, with 80% federal reimbursement and the county responsible for the rest. To cover its share, the county borrowed $686,604.87 from Trustmark National Bank in October 2020 via a five-year general obligation note. The county made annual payments in 2022 and 2023.

In August 2022, the county and MDOT entered a Memorandum of Understanding under which the county would receive $3,140,000 in Emergency Road and Bridge Repair (ERBR) Fund money for the project. The county now wants to use those ERBR funds to pay down the bank note. Three questions:

1. Can ERBR funds repay a loan the county took out before getting the ERBR grant?
2. Can ERBR funds reimburse the county for the 2022 and 2023 note payments already made?
3. Can the county make its remaining three note payments out of ERBR funds?

The AG drew a sharp line based on § 65-1-179(4): "Under no circumstances . . . shall Emergency Road and Bridge Repair Fund monies be used to reimburse any amount that has been expended on the project prior to the award of such monies to the recipient."

• Borrowing is not the same as expending. When the county borrowed money from the bank, it took on debt; it didn't "expend" anything on the project at that moment. The expenditure happens when the county pays the bank.
• Future note payments (after the grant award) are eligible. Each payment is an expense made on the project on the date paid. So payments that became due after August 2022 (the ERBR grant award) can be paid from ERBR funds, if the county determines as a factual matter that paying the note is an "expense on the project."
• Past note payments (before the grant award) are not eligible for reimbursement. The 2022 payment (made February 1, 2022, before the August 2022 ERBR award) and any other pre-award payments cannot be reimbursed from ERBR funds. § 65-1-179(4) blocks it.

The 2023 payment was made February 1, 2023, after the August 2022 ERBR award, and would qualify for ERBR funding (subject to the county's factual determination that it counts as an "expense on the project" and compliance with the MDOT MOU).

The opinion does not address federal-law implications of ERBR fund use; that is outside the AG's authority under § 7-5-25.

What this means for you

County attorneys and county administrators handling an ERBR grant

The opinion draws the line at the date the county received the ERBR funds, based on § 65-1-179(4)'s bar on using ERBR money "to reimburse any amount that has been expended on the project prior to the award." It holds that "borrow" and "expend" are not synonymous: the expenditure occurs when a payment is made, not when the money was borrowed. So if the county makes the factual determination that paying the note is an "expense on the project," it may use ERBR funds for note payments that come due after it received the funds, but it may not reimburse itself for payments it made before that date. The opinion adds that any payment "must still be in accordance with the County's Memorandum of Understanding with MDOT."

County supervisors

The opinion answers "no" to reimbursing the county for the pre-award note payment: § 65-1-179(4) bars using ERBR funds to reimburse any amount expended on the project before the grant award. Post-award payments are a different matter and can qualify, subject to the county's factual finding and the MDOT MOU.

Yalobusha County residents

The opinion lets the county apply ERBR funds to note payments coming due after it received the grant (around August 2022) but not to the payment it already made before then (the February 1, 2022 payment). It expressly does not address any federal-law implications of using the funds.

Common questions

Q: What is the Emergency Road and Bridge Repair (ERBR) Fund?
A: § 65-1-179 created a special fund in the Mississippi State Treasury. Per § 65-1-179(2), the money is used by the Mississippi Department of Transportation, with advice from the ERBR Advisory Board, to fund "emergency repairs to roads, streets and highways" and "emergency bridge repairs on public roads, streets and highways." The Mississippi Transportation Commission decides funding by majority vote.

Q: Why can't a loan payment count as an "expenditure" on the project earlier?
A: The AG used dictionary definitions. Merriam-Webster defines "expend" as "to pay out" or "to make use of for a specific purpose," and "borrow" as "to receive with the implied or expressed intention of returning the same or an equivalent." Borrowing creates a future obligation; expending pays out money. The two are not synonymous, and § 65-1-179(4) speaks to "expended" amounts, not to liabilities incurred.

Q: What if the county prepaid principal on the note before the ERBR award?
A: That would be an expenditure made before the grant award, and § 65-1-179(4) would bar reimbursement of it from ERBR funds. The pre-award/post-award split is by date of payment, not by category.

Q: What about federal funding rules?
A: The opinion explicitly declined to opine on federal-law implications, noting that the county's receipt of ERBR funds "may implicate federal law" but that the AG "may not opine on matters of federal law" under § 7-5-25.

Q: Does the MOU with MDOT still matter?
A: Yes. The opinion stresses that any payment from ERBR funds "must still be in accordance with the County's Memorandum of Understanding with MDOT." It does not analyze the MOU's specific terms.

Background and statutory framework

§ 65-1-179 sets up the ERBR Fund as a state-level emergency response mechanism for road and bridge work that overwhelms a local government's ordinary capital budget. The fund is administered by MDOT with input from an advisory board, and the Transportation Commission has final say on funding by majority vote. Grants flow to local governments via MOUs that specify the project, the amount, and the conditions.

Subsection (4) is the no-look-back rule. It says, in pertinent part: "[u]nder no circumstances . . . shall Emergency Road and Bridge Repair Fund monies be used to reimburse any amount that has been expended on the project prior to the award of such monies to the recipient." That language is unambiguous: pre-award expenditures cannot be reimbursed.

The interesting question this opinion answered was about debt service. If a county had to borrow money to keep the project moving while waiting for a grant, can later grant funds repay the loan? The AG's answer hinges on the textual meaning of "expended." Borrowing is not expending. So the borrowing date is not the expenditure date, and post-award note payments are post-award expenditures. The borrowed money the county paid out before the grant (debt service made before the grant date) was expended pre-award and is unrecoverable from ERBR funds.

The county still has discretion in two respects: it has to make a factual determination that paying the note is an "expense on the project" (the AG framed this as a question for county officials), and it must operate within whatever specific terms the MDOT MOU imposes.

Citations and references

Statutes:

• Miss. Code Ann. §§ 17-21-51 et seq. (county authority to borrow money for project costs by general obligation note)
• Miss. Code Ann. § 65-1-179(1) (creation of Emergency Road and Bridge Repair Fund)
• Miss. Code Ann. § 65-1-179(2) (use of ERBR Fund for emergency road and bridge repairs)
• Miss. Code Ann. § 65-1-179(4) (no reimbursement of amounts expended on the project before ERBR award)
• Miss. Code Ann. § 7-5-25 (AG opinions limited to state law)

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2023/08/S.Crow-August-23-2023-Mississippi-Code-Annotated-Section-65-1-1794.pdf

Original opinion text

August 23, 2023

Shannon Crow, Esq.
Attorney, Yalobusha County Board of Supervisors
203 Wagner Street
Water Valley, Mississippi 38965

Re: Mississippi Code Annotated Section 65-1-179(4)

Dear Mr. Crow:

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

Background

According to your request, in February 2019, a bridge in Yalobusha County (the "County") suffered irreparable damage due to flooding. In August 2019, the County and the Mississippi Department of Transportation ("MDOT") entered into an agreement to construct a new bridge (the "Project"). Pursuant to the agreement, federal reimbursement for the cost of the Project would be 80%, and the County would be solely responsible for the remaining costs.

In October 2020, the County declared necessity for borrowing money, pursuant to Mississippi Code Annotated Sections 17-21-51, et seq., for the sole purpose of paying costs it incurred on the Project. The County directed that the General Obligation Note ("Note") in the principal amount of $686,604.87 be offered for sale on sealed bids, and Trustmark National Bank was confirmed and approved as the highest bidder. The note requires the County to make five (5) annual payments of $137,320.97 plus interest at 1.61%, commencing on February 1, 2022 and ending on February 1, 2026. The 2022 and 2023 payments were paid from funds budgeted by Yalobusha County Supervisory District 5 where the Project is located.

In 2021, the County and MDOT accepted a bid for the Project in the amount of $16,240,280.65. To date, the Project is ongoing, and the estimated total cost is in excess of $20 million, including necessary work outside of the construction contract.

On or about August 1, 2022, the County and MDOT entered a Memorandum of Understanding outlining the County's receipt of $3,140,000.00 in Section 65-1-179 Emergency Road and Bridge Repair funds to be used on the Project. The County desires to use these Emergency Road and Bridge Repair funds to service its debt on the Note.

Questions Presented

1. May Emergency Road and Bridge Repair funds be used to repay money borrowed out of necessity by the County to pay Project costs when the money was borrowed prior to the County's award of the Emergency Road and Bridge Repair grant?
2. May the County's Emergency Road and Bridge Repair funds be used to reimburse the budget of Yalobusha County Supervisory District 5 for the Note payment remitted on February 1, 2022 and/or for the Note payment remitted on February 1, 2023?
3. May the County's remaining three (3) Note payments be paid from its Emergency Road and Bridge Repair funds?

Brief Response

1. Borrow and expend are not synonymous. If the County makes the factual determination that payment on the subject note is an "expen[se] on the [P]roject," the County may use the Emergency Road and Bridge Repair funds to make such payments that become due after the date the County received the Emergency Road and Bridge Repair funds.
2. No. Even assuming the County makes the factual determination that payment towards the Note is an "expen[se] on the [P]roject," the County may not reimburse itself for any amount that it expended on the Project prior to the date it received the Emergency Road and Bridge Repair funds.
3. Please see the response to your first question.

Applicable Law and Discussion

Section 65-1-179(1) sets forth the creation of a special fund in the State Treasury known as the Emergency Road and Bridge Repair ("ERBR") Fund. Section 65-1-179(2) provides how the fund shall be utilized:

Money in the fund shall be utilized by the Mississippi Department of Transportation, with the advice of the Emergency Road and Bridge Repair Fund Advisory Board, to provide funding for emergency repairs to roads, streets and highways in this state and emergency bridge repairs on public roads, streets and highways in this state, as determined by a majority vote of the Mississippi Transportation Commission.

Relevant to this opinion, Section 65-1-179(4) provides, in pertinent part, "[u]nder no circumstances . . . shall Emergency Road and Bridge Repair Fund monies be used to reimburse any amount that has been expended on the project prior to the award of such monies to the recipient." (emphasis added).

While the statute does not define the term "expend," Merriam-Webster defines the term as "to pay out" or "to make use of for a specific purpose." MERRIAM-WEBSTER DICTIONARY, https://www.merriam-webster.com/dictionary/expend (last visited August 23, 2023). You ask whether ERBR funds may be used to repay money borrowed out of necessity by the County to pay Project costs when the money was borrowed prior to the County's award of the ERBR grant. Merriam-Webster defines "borrow" as "to receive with the implied or expressed intention of returning the same or an equivalent." MERRIAM-WEBSTER DICTIONARY, https://www.merriam-webster.com/dictionary/borrow (last visited August 23, 2023). Accordingly, "expend" and "borrow" are not synonymous.

It is therefore the opinion of this office that if the County makes the factual determination that payment on the subject note is an "expen[se] on the [P]roject," the County may use the ERBR funds to make such payments that become due after the County's receipt of the ERBR funds. This is because the expenditure occurs when the payment is made. This said, pursuant to Section 65-1-179, any payment must still be in accordance with the County's Memorandum of Understanding with MDOT.

Finally, the County's receipt of ERBR funds may implicate federal law. This opinion does not consider such implications because this office may not opine on matters of federal law. Miss. Code Ann. § 7-5-25.

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/ Maggie Kate Bobo
Maggie Kate Bobo
Special Assistant Attorney General