Can a Mississippi city pay back a homeowners' association that mistakenly paid electric bills for a sewer pump station the city actually owns?

Plain-English summary

When a new neighborhood is built in Clinton, the developer constructs the infrastructure (water lines, sewer lines, pump stations, streets) and dedicates it to the city. The developer is supposed to transfer all electrical accounts associated with that infrastructure to the city.

In this case, that handoff broke down. A sewer pump station was dedicated to and accepted by the city. But the electrical account for the pump station was apparently transferred to the homeowners' association (HOA) instead of to the city. For an unspecified period, the HOA paid the pump station's electric bills. Now the HOA wants reimbursement going back to the date the city accepted the pump station.

The city attorney asked whether the city has authority to reimburse. The AG said the city "may settle a claim in accordance with Mississippi Code Annotated Section 25-1-47 if it makes the factual determination that it is legally obligated for the claim." Drawing on its prior Dailey opinion, the AG noted that "the filing of a lawsuit is not required to trigger a municipality's authority to settle a claim, but the claim must be bona fide and just," and "the municipality must make a factual finding that it is legally obligated for the claim and such claim is not exempt from liability."

The opinion supports this with two prior opinions: Taylor (2011), for the point that there is "no statutory prohibition against a municipality refunding a customer for erroneously paid charges made to the municipality," and Thomas (2015), where the office allowed a municipality to use § 25-1-47(2) to satisfy a negotiated settlement of a refund claim. It concludes that "if the City determines that a bona fide claim exists for the electrical bills for the referenced pump station, it may pay the claim in accordance with Section 25-1-47(2)." Because the question deals with the expenditure of public funds, it suggests contacting the Technical Assistance Division of the Office of the State Auditor.

What this means for you

City attorneys, mayors, and councils

The opinion holds that a municipality "may settle a claim in accordance with Mississippi Code Annotated Section 25-1-47 if it makes the factual determination that it is legally obligated for the claim." Applied to these facts, "if the City determines that a bona fide claim exists for the electrical bills for the referenced pump station, it may pay the claim in accordance with Section 25-1-47(2)." The opinion leaves the bona fide, legal-obligation, and not-exempt findings to the city.

Homeowners' associations

The opinion describes the HOA's request as reimbursement "of the bills back to the date of acceptance of the pump station by the City." Whether to pay is, under the statute's text, "within the discretion of [the city's] governing authorities," and is conditioned on the city's factual findings.

State Auditor

Because the question involves the expenditure of public funds, the opinion suggests contacting the Technical Assistance Division of the Office of the State Auditor for further guidance.

Common questions

Q: Can a city pay back an HOA for bills on city-owned infrastructure?
A: The opinion says the city "may pay the claim in accordance with Section 25-1-47(2)" if it determines a bona fide claim exists, and that it is legally obligated for the claim.

Q: Does the HOA have to sue first?
A: No. The opinion quotes its Dailey opinion that "the filing of a lawsuit is not required to trigger a municipality's authority to settle a claim, but the claim must be bona fide and just."

Q: Has the office allowed § 25-1-47 to be used for refund-type claims before?
A: Yes. The opinion cites Taylor (2011), finding "no statutory prohibition against a municipality refunding a customer for erroneously paid charges," and Thomas (2015), where a municipality used § 25-1-47(2) to satisfy a negotiated settlement of an auction company's refund claim.

Q: Does the city have to pay?
A: No. Section 25-1-47(2) acts "within the discretion of its governing authorities," and the opinion conditions payment on the city's own determination that a bona fide claim exists and that it is legally obligated.

Background and statutory framework

The opinion arises from a subdivision dedication. Per the request, when the City of Clinton approves a new neighborhood, the developer constructs the infrastructure and dedicates it to the City, and "the developer is responsible for transferring any electrical accounts related to the infrastructure to the City." Here the infrastructure (including a sewage pump station) was dedicated and accepted, but the pump station's electrical account "was never transferred to the City" and was instead assumed by the HOA, which now seeks reimbursement back to the date the City accepted the pump station.

The opinion grounds its answer in § 25-1-47(2):

Any municipality of this state is hereby authorized and empowered, within the discretion of its governing authorities, to pay and satisfy any negotiated settlement of a claim or any judgment, fine, or penalty which may be made, assessed, or levied by any court against any municipal agent, officer, servant, employee, or appointee as a result of any actions of such municipal agent, officer, servant, employee, or appointee while acting as such.

It reads that authority, through Dailey, Taylor, and Thomas, to reach a refund-style claim like the HOA's, provided the city makes the required factual findings, and it points the city to the State Auditor's Technical Assistance Division on the public-funds question.

Citations and references

Statutes:

• Miss. Code Ann. § 25-1-47 (municipal settlement authority)
• Miss. Code Ann. § 25-1-47(2) (municipality authorized to pay and satisfy any negotiated settlement of a claim)

Prior AG opinions referenced:

• MS AG Op., Dailey (Feb. 24, 2022): filing a lawsuit is not required to trigger settlement authority; claim must be bona fide and just; municipality must make factual finding of legal obligation.
• MS AG Op., Taylor (Apr. 29, 2011): no statutory prohibition against refunding a customer for erroneously paid charges to the municipality.
• MS AG Op., Thomas (Nov. 13, 2015): § 25-1-47 used to settle a refund claim from an auction company that paid for stolen equipment later recovered.

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2023/11/W.Purdie-November-3-2023-Reimbursement-of-Electricity-Bills.pdf

Original opinion text

November 3, 2023

William C. Purdie, Esq.
Attorney, City of Clinton
Post Office Box 156
Clinton, Mississippi 39060

Re: Reimbursement of Electricity Bills

Dear Mr. Purdie:

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

Background

According to your request, when a new neighborhood is approved by the city of Clinton ("City"), the developer constructs all necessary infrastructure and ultimately dedicates that infrastructure to the City. At that time, the developer is responsible for transferring any electrical accounts related to the infrastructure to the City. In this particular instance, a developer dedicated the infrastructure for a neighborhood to the City, and it was accepted by the City. However, the electrical account associated with a sewage pump station that was a part of the accepted infrastructure was never transferred to the City, and the account was apparently assumed by the neighborhood homeowners' association ("HOA") during the transfer from developer to the HOA. The HOA now seeks reimbursement of the bills back to the date of acceptance of the pump station by the City.

Question Presented

Does the city of Clinton have the authority to reimburse a homeowners' association for electricity bills related to a sewage pump station that is owned by the City?

Brief Response

A municipality may settle a claim in accordance with Mississippi Code Annotated Section 25-1-47 if it makes the factual determination that it is legally obligated for the claim.

Applicable Law and Discussion

Section 25-1-47(2) provides:

Any municipality of this state is hereby authorized and empowered, within the discretion of its governing authorities, to pay and satisfy any negotiated settlement of a claim or any judgment, fine, or penalty which may be made, assessed, or levied by any court against any municipal agent, officer, servant, employee, or appointee as a result of any actions of such municipal agent, officer, servant, employee, or appointee while acting as such.

"[T]he filing of a lawsuit is not required to trigger a municipality's authority to settle a claim, but the claim must be bona fide and just. Additionally, the municipality must make a factual finding that it is legally obligated for the claim and such claim is not exempt from liability. . . ." MS AG Op., Dailey at *1 (Feb. 24, 2022) (internal citations omitted).

This office has previously opined that there is no statutory prohibition against a municipality refunding a customer for erroneously paid charges made to the municipality. MS AG Op., Taylor at 1 (Apr. 29, 2011). In Thomas, a prior opinion by our office, an auction company hired by a municipality paid the municipality for loss of equipment that was stolen after the auction and before the equipment could be picked up by the purchasers. MS AG Op., Thomas at 1 (Nov. 13, 2015). The stolen equipment was later recovered, and the auction company requested a refund of the money paid to the municipality since the municipality had recovered the equipment and would sell it again. Id at *1. Our office opined that "[p]rovided that a bona fide and just claim has been made, the municipality may satisfy any negotiated settlement of a claim for damages, pursuant to Mississippi Code Annotated Section 25-1-47(2)." Id. Similarly, it is the opinion of this office that if the City determines that a bona fide claim exists for the electrical bills for the referenced pump station, it may pay the claim in accordance with Section 25-1-47(2).

Because your question deals with the expenditure of public funds, you may wish to also contact the Technical Assistance Division of the Office of the State Auditor for further guidance.

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/ Beebe Garrard
Beebe Garrard
Special Assistant Attorney General