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Home My WebLink AboutPR 18514: EMPOLOYEE APPRECIATION DAY interoffice MEMORANDUM To: Mayor, City Council, and City Manager From: Val Tizeno, City Attorney Date: August 28, 2014 Subject: P.R. 18514 Please find attached a memorandum from Texas Municipal League regarding donations and gifts . There are two items on the agenda that deal with the use of taxpayer funds related to donations and gifts . The attached memorandum addresses the parameters for doing so and the manner in which a city council must make a decision as to whether a public purpose exists . Attorney Shobassy has written a memorandum for your review with regard to a proposed donation being made to the Southeast Texas Advisory Committee. Please review his memorandum with regard to P. R. 18492 . The attached memorandum from TML may also be reviewed by you with regard to any legal issues related to P. R. 18512, which is a proposal for expenditures related to a proposed Employee Appreciation Day. If have any questions regarding these issues, please feel free to contact us . Thank you. r l p(. ga SC_ Donations & Gifts ig e V I 4--0 Question: Can cities make donations or give gifts? Discussion: The issue is not whether it is okay to make a donation or give a gift, but whether an expenditure of public money serves a public purpose. If it is purely a charitable donation, it is prohibited by the Texas Constitution. If it is an expenditure of public funds for a public purpose, it is acceptable. As a general rule, a gratuitous donation or gift by a city is prohibited by the Texas Constitution, art. III, §52, and art.XI, §3,which, in part, states that the legislature may not authorize any county, city, or other political subdivision of the state to lend its credit or grant public money or anything of value in aid of an individual, association or corporation. The purpose of these provisions is to prevent local governments from appropriating public money for private purposes. • However,the fact that private interests are incidentally benefited by a public expenditure does not invalidate an expenditure for a legitimate public purpose. In other words, if a city determines that an expenditure accomplishes a valid public purpose, the fact that one or more individuals or corporations might benefit does not invalidate the expenditure. The key question is whether a valid public purpose is being directly accomplished by the expenditure. Numerous courts have been asked to invalidate or uphold particular expenditures based on whether a public purpose was being served. The determination of whether a particular expenditure accomplishes a public purpose must be made by the city council. Some expenditures, such as those for street repair or police protection are easily deemed to serve a public purpose,while others, such as contributing to "Meals on Wheels"or"Crimestoppers,"are more difficult. Cities may not expend public funds simply to obtain for the community the general benefits resulting from the operation of the corporate enterprise. City of Corpus Christi v. Bayfront Assoc., Ltd., 814 S.W.2d 98 (Tex. App.--Corpus Christi 1991, writ denied). The council's determination as to public purpose is subject to judicial review. However, if the council goes on record recognizing the expenditure as a valid public purpose,the courts are not likely to overturn that determination. Courts are hesitant to second guess the legislative determinations of local governments. Accordingly, in the absence of fraud on the part of the council,or a total lack of evidence that an expenditure serves a public purpose, a court is not apt to declare a particular city expenditure to be invalid. Donations&Gifts page 2 Once a legitimate public purpose is identified,the city must consider whether contractual obligations or other forms of formal control are necessary in order for the the council to ensure that the city receives its consideration --the accomplishment of the public purpose. Op. Tex. Att'y Gen.No. LO 94-008 (1994). Summary: The Texas Constitution does not absolutely prohibit cities from granting public money to private entities. The clear purpose art. III, § 52 and art. XI, § 3 is to prevent the gratuitous application of public funds for private use. Cities are free to make expenditures that incidentally benefit private interests so long as the expenditure is made for the direct accomplishment of a legitimate public purpose. In order to make such grants, city councils must determine: (1)whether a particular grant of money will serve a legitimate public purpose, and (2) whether the city has placed sufficient controls on the transaction to ensure that the public purpose will be carried out. Examples: (a)The inclusion of a single guest for each city employee at an employee awards banquet paid for by city funds is acceptable if the city determines that the goal of boosting employee morale and providing recognition to employees will be accomplished. Op. Tex. Att'y Gen.No. LO 88-94 (1994). (b) The leasing of city property to a child care facility at less than fair market value is acceptable if the council determines that the lease serves a valid public purpose, such as improving employee performance by reducing absenteeism, tardiness,and turnover. See Op. Tex.Att'y Gen.No. JM-1156 (1990). (c)The provision of fencing, portable toilets, and police protection for a festival presented by the chamber of commerce might be an acceptable exercise of a city's police powers if such items are deemed necessary for the health and safety of the people attending the festival. See Op. Tex.Att'y Gen.No. JM-1199 (1990). (d)The lighting of private streets might be acceptable if the city's purpose is to light the city's police and fire fighting easements as well as public utility easements so that residents of private streets are merely incidental beneficiaries. Op. Tex. Att'y Gen.No. LO 94-078 (1994). (e)A city can purchase small gifts, plaques, and flowers for employees if the city determines that such expenditures will enhance employee morale. Op. Tex. Att'y Gen.No. LO 96-136 (1996). (f) Cities cannot grant extra compensation to employees after their services have been rendered. Fausett v. King, 470 S.W.2d 770, 774 (Tex. Civ. App.--El Paso 0-- , Donations&Gifts page 3 1971, no writ). The fact that the city council budgets funds for merit raises does not give the council authority to make individual raises retroactive. See Op. Tex. Att'y Gen.No. JM-1113 (1989). (g)If cities want to provide a Christmas bonus, it is recommended that such expenditures be provided for in annual budgets as part of broader compensation policies that seek to encourage future productivity and increase morale. Also, cities can implement prospective longevity pay policies that base the amount of longevity pay on an employee's total service, including service before the policy was adopted. See Op. Tex. Att'y Gen.No. LO 96-007 (1996). These longevity pay policies can include varying forms of compensation, some of which could be payable in December and be referred to as a Christmas bonus. (h) Cities cannot make outright gifts and donations to private entities, including chambers of commerce. See Op. Tex. Att'y Gen.No. H-397 (1974); Kordus v. City of Garland, 561 S.W.2d 260, 261 n.1 (Tex. App.--Tyler, 1978, writ refd n.r.e:). (i) Cities cannot pay dues or provide rent-free office space to private corporations such as chambers of commerce in order to secure the general benefits that result from the encouragement of private industry. See Op. Tex. Att'y Gen. Nos. JM-716 (1 987), JM-753 (1 987). Reviewed by: TML Legal Department August 2001 P. R. No. 18514 08/27/2014 cws RESOLUTION NO. A RESOLUTION SUPPORTING AN EMPLOYEE APPRECIATION DAY, IN AN AMOUNT NOT TO EXCEED $1,000 .00; FUNDING AVAILABLE IN CITY MANAGER CONTINGENCY ACCOUNT NO. 001-1001-512 .59-00 (REQUESTED BY MAYOR PRINCE) WHEREAS, the City Council wishes to support an Employee Appreciation Day; and WHEREAS, the City Council has determined that an Employee Appreciation Day will boost employees' morale and provide recognition to employees. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PORT ARTHUR, TEXAS: Section 1 . That the facts and opinions in the preamble are true and correct. Section 2 . That the City Council supports an Employee Appreciation Day to be held in December of each year, and has determined that it will boost employees' morale and provide recognition to employees . Section 3. That the City Council authorizes expenditure in an amount not-to-exceed $1, 000. Section 4. That a copy of the caption of this Resolution be spread upon the Minutes of the City Council . s.pr18514 READ, ADOPTED AND APPROVED on this day of September A. D. , 2014, at a Meeting of the City Council of the City of Port Arthur, Texas, by the following vote: AYES: Mayor: Councilmembers : NOES: MAYOR ATTEST: CITY SECRETARY APPROVED AS TO FORM: 9/. /.e CITY ATTOR►. a Y APPROVED FOR ADMINISTRATION: CITY MANAGER APPROVED AS TO AVAILABILITY OF FUNDS: DIRECTOR OF FINANCE s.pr18514