Can a Virginia town give a nonprofit free water, sewer, and trash service as a charitable donation?

Plain-English summary

The Town of Gate City had since 1996 provided free water, sewer, and garbage collection to a property operated by a nonprofit serving battered women. The Town Attorney asked the AG whether that arrangement, an exemption from utility charges as a charitable donation, was lawful. The AG said yes.

Virginia is a Dillon Rule state: localities have only the powers the General Assembly grants. Towns get their general powers from §§ 15.2-1100 through 15.2-1133, and § 15.2-1102 authorizes towns to exercise powers pertinent to municipal government not expressly prohibited. The Virginia Constitution (art. IV, § 16) authorizes the General Assembly to allow counties, cities, and towns to make appropriations to charitable institutions. Va. Code Ann. § 15.2-953(A) implements that authority and was amended in 2007 to add "and donations" and a new subsection (E) clarifying that "donations" include in-kind resources for events sponsored by the donee.

A 2002 AG opinion had said towns could not contribute in-kind resources for ordinary nonprofit operations. The 2007 amendment broadened things: the AG read "donation" plainly to mean a gift, including free utility service to a nonprofit's operating property, provided the charity meets the statutory eligibility (located within or serving residents of the locality, and not controlled by a church or sectarian society). The opinion notes a transparency caveat: appropriations of money have to be re-made periodically (annual, semi-annual, quarterly, or monthly under § 15.2-2506), while a standing utility exemption avoids that periodic review and is therefore less transparent. But the statute permits it.

Currency note

This opinion was issued in 2010. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: What does § 15.2-953 actually authorize?
A: Appropriations of public funds, personal property, real estate, and donations to charitable institutions or associations either located within the locality or providing services to residents of the locality. The charity must not be controlled by a church or sectarian society.

Q: Does the statute cover in-kind services?
A: Yes, since the 2007 amendment. The General Assembly added "and donations" to subsection (A) and added subsection (E) clarifying that "donations" include in-kind resources for events sponsored by the donee. The AG read the term broadly, applying ordinary-meaning principles, to include other in-kind donations like the exempt utility service.

Q: Doesn't a free utility service avoid the periodic re-appropriation transparency built into the annual budget?
A: Yes, the opinion flags this. Appropriations of money have to be made annually (or more often) under § 15.2-2506, so they get periodic review. A standing exemption from utility charges does not get that periodic review, making it less transparent. The opinion notes the concern but concludes the plain language of § 15.2-953 still permits it.

Q: What if the charity stops qualifying?
A: The opinion's footnote warns that if the charitable institution ceases to qualify (e.g., no longer provides services in the locality making the donation), the locality is precluded from continuing the donation. The qualification must be ongoing.

Q: Could a locality donate in-kind labor to a private business or civic association's annual event?
A: A 2002 AG opinion said no, that fell outside § 15.2-953's authority. The 2007 amendment changed that for in-kind resources for events sponsored by the donee, but the donee must still be a qualifying charity. Pure for-profit beneficiaries are out.

Background and statutory framework

Va. Const. art. IV, § 16 lets the General Assembly authorize localities to appropriate funds to charitable institutions. Section 15.2-953 implements that authority. The Dillon Rule (Commonwealth v. Arlington County Bd., 217 Va. 558 (1977)) limits Virginia localities to expressly granted powers, so § 15.2-953 is the entire source of authority for charitable donations.

The 2007 amendment (2007 Va. Acts ch. 292) added the words "and donations" to subsection (A) and added subsection (E)'s in-kind language. The opinion gives those changes their plain meaning to support free utility service to a qualifying charity.

Citations

• Va. Code Ann. § 15.2-953 (charitable appropriations and donations)
• Va. Code Ann. §§ 15.2-1100 to 15.2-1133 (general powers of towns)
• Va. Code Ann. § 15.2-2506 (annual or sub-annual appropriations of money)
• Va. Const. art. IV, § 16 (constitutional authority for charitable appropriations)
• Commonwealth v. Arlington County Bd., 217 Va. 558, 232 S.E.2d 30 (1977) (Dillon Rule)
• 2002 Op. Va. Att'y Gen. 70 (pre-amendment limit on in-kind contributions)
• 2007 Va. Acts ch. 292 (amending § 15.2-953)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2010/10-024-Carrico.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II, Attorney General
October 29, 2010

Michael F. McClellan Carrico, Esquire
Town Attorney for the Town of Gate City
101 East Jackson Street, Suite 103
Gate City, Virginia 24251

Dear Mr. Carrico:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented

You inquire whether it is lawful for a municipality to enact an ordinance exempting a nonprofit organization from all charges on utilities (e.g., water, sewer, garbage collection) provided by the municipality as a charitable donation of money or in-kind services to that nonprofit organization pursuant to § 15.2-953.

Response

It is my opinion that the Town may enact an ordinance exempting a charitable institution or association from the payment of utility charges as a donation of money or in-kind services pursuant to that provision.

Background

You relate that the Town of Gate City provides fee-based utility services of water, sewer and garbage collection to its residents. You also state that the Gate City Town Council on August 20, 1996, approved a motion to provide free water, sewer and garbage collection services to a property within the Gate City town limits that is operated by a nonprofit organization that provides essential services to battered women. Since the approval of this ordinance in 1996, the organization has enjoyed an exemption from all charges on utilities provided by the Town of Gate City.

Applicable Law and Discussion

Under the Dillon Rule, localities have only those powers that the General Assembly grants them.[1] Towns, in particular, have all the powers conferred upon them by their charters and those set forth in §§ 15.2-1100 through 15.2-1133.[2] Section 15.2-1102 authorizes towns to exercise all necessary "powers pertinent to the conduct of the affairs and functions of the municipal government, the exercise of which is not expressly prohibited by the Constitution and the general laws of the Commonwealth."

The Constitution of Virginia provides that the General Assembly may "authorize counties, cities, or towns to make . . . appropriations to any charitable institution or association."[3] Section 15.2-953(A) of the Code of Virginia implements this constitutional provision and authorizes localities to make "appropriations of public funds, of personal property or of any real estate and donations" to "any charitable institution or association, located within their respective limits or outside their limits if such institution or association provides services to residents of the locality; however, such institution or association shall not be controlled in whole or in part by any church or sectarian society."[4]

A 2002 opinion of the Attorney General previously concluded that a town may not contribute or donate in-kind resources to a nonprofit organization pursuant to the authority granted in § 15.2-953(A).[5] Subsequently, the General Assembly in 2007 amended § 15.2-953, inserting "and donations" in subsection A and adding what is now subsection E to provide that for purposes of this section, "'donations' shall include the lawful provision of in-kind resources for any event sponsored by the donee."[6]

Section 15.2-953(A) expressly authorizes localities to make appropriations to charitable entities of "public funds, of personal property or of any real estate and donations." The term "donation" should be construed according to its plain language.[7] A donation simply means "a gift."[8] The General Assembly has not limited its definition of the term "donation." Therefore, although the statute does not specifically reference providing utility services without charge to properties maintained by such nonprofit entities, there is no reason donations of utility services should be excluded from the scope of donations that may be made.[9]

Appropriations of funds must be made only on an annual, semi-annual, quarterly, or monthly basis,[10] prompting the locality to periodically review the issue. A donation that consists of an exemption of utility charges is not subject to the same requirement of periodic re-appropriation. Consequently, an ordinance that simply exempts a non-profit organization from payment of utility charges on a permanent basis is less transparent and reduces accountability compared the procedures required for an appropriation of money. The plain language of the statute, however, authorizes a locality to make such donations.[11]

Conclusion

Accordingly, it is my opinion that municipalities may enact an ordinance exempting a charitable organization or association from the payment of utility charges as a donation pursuant to § 15.2-953.

With kindest regards, I am
Very truly yours,
Kenneth T. Cuccinelli, II
Attorney General

1. See Commonwealth v. Arlington County Bd., 217 Va. 558, 573-75, 232 S.E.2d 30, 40-41 (1977) ("[T]he Dillon Rule is applicable to determine in the first instance, from express words or by implication, whether a power exists at all. If the power cannot be found, the inquiry is at an end.").
2. See VA. CODE ANN. §§ 15.2-204; 15.2-1102; 15.2-1103 (2008).
3. VA. CONST. art. IV, § 16.
4. Section 15.2-953(A) (Supp. 2010).
5. See 2002 Op. Va. Att'y Gen. 70 (the express language of § 15.2-953(A) did not contemplate the contribution of the in-kind services described, i.e., a town council's decision to direct town employees to assist in the setup for an annual festival held by the local business and civic association).
6. 2007 Va. Acts ch. 292.
7. See 2002 Op. Va. Att'y Gen. 214 ("in the absence of a statutory definition, a term should be given its plain and ordinary meaning").
8. MERRIAM WEBSTER'S COLLEGIATE DICTIONARY 344 (10th ed. 1997).
9. A nonprofit organization's ongoing operation of a property would not constitute an "event" to which a municipality may make a donation of in-kind resources. The word "event" is not defined in the statute and, thus, should be given its plain and ordinary meaning. See 2002 Op. Va. Att'y Gen. 214 ("in the absence of a statutory definition, a term should be given its plain and ordinary meaning"). See also MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY 401 (10th ed. 1994) (defining "event" as "a social occasion or activity").
10. See § 15.2-2506 (Supp. 2010) ("No money shall be paid out or become available to be paid out for any contemplated expenditure unless and until there has first been made an annual, semiannual, quarterly or monthly appropriation for such contemplated expenditure by the governing body").
11. If the charitable institution ceases to qualify under § 15.2-953, for example because it no longer provides services in the locality making the donation of in-kind services, the locality would be precluded from continuing to make the in-kind donation.