Agenda Item 14
April 10,2012
ADDENDUM
MEMORANDUM
'.
TO:
FROM:
SUBJECT:
April 9, 2012
tf::\
Robert H. Drummer, Senior Legislative Attorney!
U\J
J
County Council
Addendum:
Bill 14-12, Economic Development Fund - Amendments
Council staff received the attached bill review memorandum from the County Attorney
1) after the public hearing packet went to print. The County Attorney opined that the Bill
violates the separation of powers provisions in the County Charter by: 1) authorizing the Council
to amend and approve the strategic economic plan developed by the Executive; and 2)
authorizing the Council to veto an Executive's decision to expend appropriated funds. The
County Attorney also pointed out that both legal issues can be resolved by amendments to the
BilL
Council staff disagrees with some, but not all of the County Attorney's conclusions. As
the County Attorney concedes, the adoption of a strategic economic plan "involves the creation
of a policy of general application." The County Attorney compares this to the adoption of a
regulation. However, it is also comparable to an act of the legislature. The difference is that the
Bill would delegate to the Executive the task of developing a proposed strategic plan for Council
approvaL Council staff agrees that an amendment requiring the Executive to adopt a strategic
plan by regulation would serve a similar purpose. However, we disagree that the Bill, as drafted,
necessarily violates the separation of powers in the Charter by delegating to the Executive the
task of proposing a strategic plan that the Council could adopt on its own as legislation.
Council staff agrees that the Council cannot reserve the right to veto the Executive's
expenditure of appropriated funds. The County Attorney suggested that the Council could
produce the same result by prohibiting expenditures greater than $500,000 in the appropriation
for the Economic Development Fund in the budget resolution. Council staff believes that this
cap could also be placed in the Bill directly. Council staff will work with the County Attorney
on amendments to address these issues for discussion at the PHED Committee worksession.
F:\LAW\BILLS\1214 EDF Amendments\ADDENDUM 4-10-12.Doc
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OFFICE OF THE COUNTY ATTORNEY
Isiah Leggett
County Executive
Marc P. Hansen
County Attorney
MEMORANDUM
April
5.
2012
TO:
Steve Silvennan, Director
Department of Economic Development
FROM: MarcHansen
i11aAG-.­
County Attorney
RE:
!I,c~
Bill No. 14-12, Economic Development Fund - Amendments
Opinion
The County Charter vests executive functions in the County Executive and establishes an
annual appropriation process that does not allow the Council to condition or control funds after
the funds have been appropriated. Bill 14-12
(Bill)
violates the separation ofpowers provisions
of the County Charter by: 1) authorizing the Council to amend and approve an economic
development strategic plan prepared by the Executive pursuant to criteria set out in the Bill; and
2) authorizing the Council to veto an executive decision
to
expend appropriated funds.
Both of these legal flaws may be avoided by amendments to the Bill. The Council may
require that the strategic economic development plan be adopted by a method (1) or (2)
executive regulation. This would preserve Council input on the details of the plan without
violating the Charter's separation of powers provisions. The Council may in the annual budget
provide that no expenditure in excess of $500,000 (or some other sum certain) may be made
from the Economic Development Fund (EDF). This, in effect, would require the Department of
Economic Development to obtain a supplemental or special appropriation to make an economic
development fund loan or grant in excess of the ceiling set in the annual budget resolution.
Background
The Bill proposes to modifY
§
20-75 of the County code and create a new
§
20-76. The
Bill would authorize the Council to exert greater control over the expenditure of funds allocated
to the EDF. Section 20-73 authorizes the Director of the Department of Economic Development
(Director) to create the EDF. The EDF is "continuing and non-lapsing" and is comprised of:
101 Monroe Street, Third Floor, Rockville, Maryland 20850
240-777-6700' (fax) 240-77-6706' clifford.royalty@montgomerycountymd.gov
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Kathleen Boucher
April 5, 2012
Page 2
(1) all
funds
appropriated to it by the County Council;
(2) all payments on any loan from the Fund;
(3) all interest earned on funds in the Fund; and
(4) all funds received from any other public or private entity.
"r.Qe Bill would require the Director to spend EDF funds "consistent with" an "economic
development strategic plan" approved by the Council under the Bill's proposed
§
20-76.
The
Executive would be required to submit the plan every 2 years, and the Council may amend and
must approve the plan. The Bill would further require the Director to provide the Council ''with
all fiscal analyses and other supporting documents for any proposed offer of assistance to a
private employer valued at more than
$100,000."
Lastly, the Bill would require COWlcil
approval for "each offer of assistance to a private employer valued at more than
$500,000."
Discussion
Article XI-A of the Maryland Constitution authorizes counties to adopt home rule
charters. As described by the Maryland courts, these charters "function as 'constitutions' for the
counties adopting them."
Montgomery County
v.
Anchor Inn Seafood Restaurant,
374
Md.
327,
331 (2003)
(internal citations omitted). Section 3 of Article XI-A ''mandates that a county
adopting a home rule charter must select one of two types of government: (1) an elective
legislative body known as the County COWlcil without an elected County Executive or (2) an
elected COWlty COWlcil plus an elected County Executive."
Id.
In
1968,
the County created the
latter form of government through the adoption of a new charter. The COWlty'S Charter
separates "the county government into legislative and executive branches."
Id.
Charter
§
101
vests "all legislative powers" in the COWlcil; Charter
§
201
vests the "executive power" ofthe
COWlty
in
the County Executive. The 1968
Commentary Upon Proposed Charter
(July
10,
1968)
states that Charter
§
201
"is intended by this provision to confer all executive power ofthe
COWlty government upon the Executive.... " (Emphasis added)
(Commentary,
p. 18).
The "compartmentalization insured by the Charter between legislation on the one hand
and administration and execution on the other is a distinction that has been acknowledged and
acted upon by legislative bodies and the courts of other States:'
Scull
v.
Montgomery Citizens
League,
249
Md.
271,282 (1968).
When tasked with differentiating a legislative act from an
executive one, the Maryland courts have cited to, or applied some variation of, a test articulated
in
Scull.
The
Scull
court described the test as follows:
A recognized test for determining whether a municipal ordinance is legislative
and so subject to referendum, or whether it is executive or administrative and is
not, is whether the ordinance is one making a new law -- an enactment of general
application prescribing a new plan or policy -- or is one which merely looks to or
facilitates the administration, execution or implementation of a law already in
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Kathleen Boucher
April 5, 2012
Page 3
force and effect.
Id.,· see also, Eggert v. Montgomery County Council,
263 Md. 243 (1971).
The Attorney General has also provided pertinent guidance.
In
2000, the Attorney
General concluded that the General Assembly was not permitted to require the Stadium
Authority to submit certain construction contracts to a legislative committee for approval.
2000
Md. AGLEXIS
19. The Attorney General wrote:
The distinction [between the right to review and comment and the right to approve or
disapprove a contract negotiated by an executive agency) is critical. A provision that
rendered the Stadium Authority's individual agreements subject to legislative approval
would establish a legislative veto over executive action. Although this Office once
concluded that a statute reserving to a legislative committee a veto over proposed
regulations was not clearly unconstitutional, 63
Opinions ofthe Attorney General
125,
127-28 and 150-51 (1978), there was little judicial authority on the subject at that time.
Subsequently, most state courts that have considered the issue have held that legislative
veto provisions violate the separation of powers provisions of their respective state
constitutions.
See generally
Rossi,
Institutional Design and the Lingering Legacy of
Anti-Federalist Separation ofPowers Ideals in the States,
52 Vand.
L.
Rev. 1167. 1201­
04
& nn.
186-90 (1999) (collecting cases and noting that, with one exception, legislative
vetoes have been found unconstitutional by every state court to consider the question).
Similarly, the United States Supreme Court has held that a provision giving Congress a
legislative veto violated the federal constitution.
INS
v.
Chadha,
462 U.S. 919 (1983).
Id.
at 25-27.
The Bill requires the Executive to create an economic development strategic plan, and
requires that the plan address certain areas such as job creation, growth in tax base, workforce
education,
etc.
But, after commanding the Executive to create an economic development plan,
the Bill provides that the Council may amend the plan and must approve the plan before
it
may
be implemented. This approach is inconsistent with the Scull test and is tantamount to a
legislative veto. Under the
Scull
test, the Council may create a law that commands the Executive
to implement a policy articulated in the law, but the Council cannot then exercise control over
the way the Executive implements that policy.
The creation of a strategic economic plan certainly carries some elements oflaw or rule
making, because it involves the creation of a policy of general application-and so the economic
development plan is analogous to a regulation. A regulation is a mechanism for an executive
branch agency to fill
in
the details of a policy adopted by the legislature. Therefore, although not
free from reasonable debate, I believe the Council could require the Executive to adopt
periodically an economic development plan by Executive Regulation. By specifying that the
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Kathleen Boucher
April 5, 2012
Page 4
regulation be a method
(1)
or (2) regulation, the Council could retain considerable (although not
complete) control over the details of the plan.
The Charter also lays out the respective roles ofthe Executive and the Council
in
enacting a budget. Under Charter
§
303, the County Executive submits a proposed budget to the
Council Under Charter
§§
304 and 305, the Council conducts a budget hearing, modifies the
budget if it so chooses, approves the budget, then appropriates the funds needed to support the
budget. The Charter allows the Council to supplement the budget (see
§§
307 and 308), but
contains no provision allowing the Council to reverse an appropriation. For nearly four decades
the Office ofthe County Attorney has consistently advised that the Charter prohibits the Council
from amending an appropriation after it is adopted (except to approve a supplemental or special
appropriation), or conditioning an appropriation on subsequent Council approval.
1
Based "on the foregoing legal analysis, the Bill by authorizing the Council to approve
offers of assistance ofmore than $500,000 violates the Charter in two distinct ways. First, the
provision trenches upon executive authority by allowing the Council a legislative veto over a
discretionary executive decision. Second, the provision permits the Council to "dis-appropriate"
funds ifthe Council has appropriated funds of $500,000 or more to the EDF and the executive
choses to expend those funds. The Charter does not authorize the Council to take back monies
that have been appropriated.
The Council, however, may
in
the annual budget provide that no expenditure
in
excess of
$500,000 (or some other sum certain) may be made from the EDF. This,
in
effect, would require
the Department of Economic Development to obtain a supplemental or special appropriation to
make an EDF loan or grant in excess ofthe ceiling set in the annual budget resolution. Through
this budget process the Council may retain approval authority for EDF loans or grants over a
specified ceiling.
Please contact me if you would like to discuss this opinion.
Cc:
Kathleen Boucher, Assistant Chief Administrative Officer
Robert
H.
Drummer, Senior Legislative Attorney
Clifford Royalty, Chief, Division ofZoning, Land Use and Economic Development
See
attached County Attorney Opinion to Robert Kendal, Director, Office of
Management and Budget (April 7, 1999)
1
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Office of the County Attorney
Montgomery County, Maryland
M.EMORANDUM
April 7, 1999
TO:
. Robert
K.
Kendal, Director
Office of Management and Budget
Charles
W.
Thompson, Jr.
C.hAr/II!'!'''; W.
"[J,"'_fI1
S
e-
County Attorney
Marc P. Hansen, Chief
fJ1
Division of General Counsel
"':..
VIA:
~
FROM:
!
~
c..
II~
SUBJECT: Authority of Council to Impose Conditions on Funds Already Appropriated
QUESTION
On May 28, 1998, the County Council adopted Resolution No. 13·1281 which
approved the FY99 Capital Budget for the Montgomery County Government. Resolution No.
13-1281 appropriated $2,202,000 to construct the Wheaton Market Place Parking Facility. This
appropriation was subject to conditions set out
in
Project Description Form No. 509955
(pDF}-the PDF is part of the six year Capital Improvements Program (CIP), which also was
approved by Resolution No. 13-1281. The PDF provided that Grandview Avenue would be
incorporated into the parking facility. On March 23, 1999, the County Council introduced
a
resolution to amend the PDF to retain Grandview Avenue. The resolution further provides, "A
construction contract must not be awarded until
at
least
60
days after the Department of Public
Works and Transportation delivers to the Council
a
revised conceptual design reflecting the
scope of work in
this
project description.
"I
You have asked: What is the legal effect of the resolution amending the PDF on the
authority of the executive branch to enter into a contract to construct the Wbeaton Market Place
Parking Facility using the
funds
appropriated by the Council in Resolution No. 13-1281.
lTIris
resolution would,
as a
practical matter, prevent the executive branch from entering
into
a contract
to
construct
t1.e
'.Vheaton
Parking
Facility during
FY 99.
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Robert K. Kendal
Re: Authority of Council to Impose Conditions on Funds Already Appropriated
April 1,
1999
Page 2
ANSWER
We conclude that the Council does not have the authority to condition or reduce an
appropriation after the Council has approved the appropriation. The Charter requires the Council
to adopt a budget that sets a fiscal plan for a fiscal year and assigns to the County Executive the
responsibility for carrying out that plan. Amending an appropriation after it has been approved
would be inconsistent with these Charter provisions.
DISCUSSION
The starting point for determining the legality of the proposed budget amendment
lies
in
an exa."1liriation of the provisions of the Charter that govern the appropriationprocess.
2
In
Montgomery County the appropriation process is governed by Article 3 of the County Charter.
Section 303 provides, liThe County Executive shall submit to the Council ... proposed capital
and operating budgets ... for
the
ensuing fiscal year .. :.." (Emphasis added). The County's
fiscal year begins On July
1
and ends on June 30 in the following calendar year.
J
Section 305
requires the Council to, "approve each budget ... and appropriate the funds therefor not later
than
June
1
of the year in which it is submitted." The County Executive may disapprove or
reduce any item
in
the budget approved by the CounciL
4
The Council may approve any item
disapproved or reduced by the County Executive by the affirmative vote of 6 Council members
prior to June 30th.s Not later than June 30th the Council must impose taxes necessary to finance
the budget.
6
Moreover, the Council must not set tax rates at a level that would create a General
Fund surplus that exceeds 5 percent of the General Fund revenue for the preceding year. 7 The
surplus is available to fimd supplemental or emergency appropriations. Section 301
lSee Mcquillin,
Municipal Corporations,
Section 39.66 ("Of course, statute or charter
provisions, if any, relating to appropriation ordinances must
be
complied with or else the
appropriation will be held void.")
3Charter Section 301.
4Charter Section 306.
SCharter Section 306.
6Charter Section
305.
7Charter Section 310.
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Ro bert K. Kendal
Re: Authority of Council to Impose Conditions on Funds Already Appropriated
April
7. 1999
Page 3
(Supplemental Appropriation) and Section
308
(Emergency Appropriation) authorize the
Council, subject to certain reStrictions, to
add
appropriation authority to the budget during the
fiscal
year.
The language of the Charter undoubtedly envisions an annual appropriation process
and circumscribes the Council's authority during the fiscal year toarnend the budget-limiting
amendments to additi0ns to appropriation authority.
Charter grants the Council no authority
to delete, reduce, or condition an appropriation after an appropriation becomes
fmal.
An
appropriation becomes final after the Council adopts the annual budget on or before June 1st or
after a supplemental or emergency appropriation has been approved.
It
is true
t.~at
Charter Section 302 authorizes the Council to amend the ClP at any
time. It has been suggested that this Charter provision authorizes the Council to impose new
donditions on a capital appropriation that
has
been previously approved. But the only legal effect
of the CIP is found in Section 303, which requires that tqe County Executive's proposed capital
and operating budgets for the ensuing fiscal year be consistent with the Executive's proposed
ClP.
In
short, the ClP creates a legally non-binding financial plan for the County. The 1968
Commentary Upon Proposed Charter, Montgomery County, MaryZGJ7.d
is consistent wiLl-t this
conclusion:
The purpose of this section
[302]
is to make more orderly and systematic the growth
. of governmental activities and to increase the coordination among programs and
finances. The approval of six-year programs by the Council as the basis for the
County budget should preclude large unantiCipated tax increases in future years.
Through lOIig-range planning it
will
be possible to adjust the
tax
program so that a
great increase should not be necessary
in
anyone year.
With respect to Section 303, the
Commentary
merely summarizes that the Executive must submit
a proposed budget that is consistent with the six-year programs.
The Charter's prohibition against conditioning or deleting an appropriation after the
appropriation has been approved advances both sound fiscal policy and the Charter's decision to
vest the County's executive power in the County Executive. If an appropriation could be
conditioned--or even deleted in its entirety-after the appropriation becomes final, the ability of
the executive branch to undertake
projects~·an
executive function-would be seriously
undermined. Moreover, the deletion of an appropriation after June 30th would undercut the
intent of the Charter to limit L,e imposition of taxes to those necessary to fund the budget plus a
surplus not exceeding five percent of the previous year's General Fundrevenue .
.
\
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Robert
K.
Kendal
Re: Authority of Council to Impose Conditions on Funds Already Appropriated
April 7, 1999
Page 4
The general
appears to be: \Vhere an annual budget is required, the budget
cannot subsequently be chaUged by the legislature absent charter authority to do so.
See
McQuillin,
Municipal Corporations,
Section 39.66 ("But if an annual appropriation ordinance is
required by statute, or charter, for the ensuing year, such ordinance cannot be changed, after the
beginning of such fiscal year, by an ordinance changing appropriations.")
For
decades the Office of the County Attorney has maintained that the
Charter prohibits
Council
from.
amending an appropriation after it is adopted except to adopt
a supplemental or emergency appropriation. As early as 1971, the Office of the County Attorney
concluded, "Again,
is clearly no authority for the Council to act on any appropriation item
. later than May 1 of any fiscal year, except as stated
in
Section 306, after executive veto, and
further exc;ept
as
provided in Sections 307 and 308 dealing with supplemental and emergency
appropriations.
"g
1n
1971 opinion, County Attorney David
L.
Cahoon went on to observe:
approval of a capital budget item and the making of an
appropriation for a budget item establishes the fiscal policy
of the legislative body for that fiscal year. The body can
specify with particularity the projects for which such funds
are to be spent. However, leases, contracts, land
acquisition, construction plans and all other actions to
implement that fiscal policy are administrative and
executive in nature and, under our Charter, are the
exclusive province of the executive branch.
9
The 1971 opinion finally concluded that the Council may not approve capital appropriations
contingent on later Council approval during the same fiscal year.
In 1975, County Attorney Richard S. McKernan-relying on David Cahoon's 1971
opinion--concluded that "once the County Council
has
appropriated funds for. a particular fiscal
year, the Council may not, during that same fiscal year restrict the expenditure of appropriated
funds."
8In
197.1 the Charter reqcired the Council to adopt
a
budget by May 1.
1:n reaching this conclusion, County Attorney Cahoon relied
on
Harmes
v.
Baltimore
County,
225 Md. 371, 170 A.2d 772 (1961); and
Anne Arundel County v. Bowen,
258 Md. 722,
267 A.2d 168 (1970).
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Robert K. Kendal
Re:
Authority of
Co~cil
to Impose Conditions on Funds Already Appropriated
April 7, 1999
PageS
In
1982,
County Attorney Paul
A.
McGuckian concluded that the Council could not
adopt a supplemental appropriation for the solid waste fund contingent on the Council
subsequently appropriating in the capital budget money for the design and construction of a
plastic liner at the
Oaks
Landfill. The opinion concluded with respect to this issue:
A Council-imposed prohibition on the County Executive's
expenditure of these appropriated funds until subsequent
Council appropriation ofFY
82
or FY
83
funds for the
plastic liner would, in the words of the Court of Appeals in
Anne Arundel County
v.
Bowen,
258 Md. 713, 267 A.2d
168 (1970),
"amount, in the light of the language of me
Charter, to an impermissible invasion of the province of the
County Executive."
Bowen
at 722, 267 A.2d at 178.
-.
In 1984,
CountY Attorney McGuckian was asked for
a~vice
concerning
a
Council
proposal to appropriate only
60
percent of the parking budget within the Department of
Transportation and only
6
months of the Cable and Management Systems budgets. The County
Attorney observed,
"It
is quite clear from the Charter language that the County Council must act
on an annual basis through the budget and appropriation process to express its fiscal policy
the coming fIscal year." The opinion concluded that the Executive must consider the funding
approved by the Council in the budget
as
the funding that is available for the entire fiscal year,
even
if
it
is
substantially less than that proposed by the Executive.
The interpretation held by the Office of the County Attorney since 1971 conceining
the County's budget process is consistent
with an
opinion
issued
by the New Hampshire Supreme
Court. The Supreme Court of New Hampshire rejected the legislative practice of requiring the
Governor to obtain approval from the legislature before appropriated money could be spent.
10
At '
issue before the New Hampshire Supreme Court were footnotes in the budget bill requiring the
Governor to obtain prIor approval of a legislative committee before the Governor could purchase
certain computer hardware or expend funds to maintain buildings and grounds under the
jurisdiction of the Department of Administrative Services. The Court began by noting that the
New Hampshire.constitution prov1des for
a
separation of powers between the legislative,
executive, and judicial branches of government. The court concluded that the New Hampshire
legislature could not, through the appropriation process,
executive functions given to the
executive branch of government. The court held that letiing contracts to purchase computer
lOIn
Re Opinion afthe
Justices,
219 New H8..t-npshire 714, 532 A.2d 195 (1987).
.(j)
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Robert
K.
Kendal
Re: Authority of Council to Impose Conditions on Funds Already Appropriated
April 7, 1999
Page
6
hardware or maintain buildings
and
grounds of state government were characteristically
an
executive function that cannot be exercised by the legislature.
Conceptually we see no difference between
an
appropriation conditioned on
obta.ini.ng further legislative approval before the money may be spent and an interpretation of the
Charter which would permit the Council, on its own initiative during the fiscal year, to add
conditions to the expenditure of funds already appropriated. Both constitute
an
impermissible
invasion of the power of the Executive as envisioned by the Charter and undermine the Charter's
vision of a financial plan that is
in
place for at least one fiscal year.
CONCLUSION
The Charter authorizes the Council to set fiscal policy for the County not later than
June 30th of each year for the ensuing fiscal year. We certainly agree with our predecessors that
the
Council may condition the expenditure offunds befo.re June 1st.
I I
But we find that the
budget process
as
established in the Charter and the Charter's provision for a separation of
powers between the legislative and executive branches of County government prevent the
Council from amending or reducing an appropriation after the appropriation
has
been approved.
We wish to be clear that the Council is authorized under Charter Section 302 to adopt the
pending resolution amending the Wheaton PDF, but the amendment will be advisory only.
Accordingly, the money appropriated for the Wheaton parking facility under Resolution No. 13­
1281 may be encumbered dwing FY 99 to fund a construction contract so long as the
construction design is consistent with the conditions imposed by the Council under Resolution
No. 13-1281.
!
MPH:plb:wmm
cc: Douglas M. Duncan, County Executive
liThe authority of the Council to condition an appropriation, however, is not without
some limitation. See
Bayne v. Secretary
a/State,
283 Md. 560, 392 A.2d 67 (1978) (legislature
may condition an appropriation if the limitation is "directly related to the expenditure of the sum
appropriated, does not, in essence, amend either
subs~antive
legislation or administrative rules
adopted pursuant to legislative mandate, and is effective only during the fiscal year for which the
appropriation is made. ")
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Robert K. Kendal
Re: Authority of Council to Impose Conditions on Funds Already Appropriated
April 7, 1999
Page 7
Isiah Legett, President, County Council
Bruce Romer, Chief Administrative Officer
Timothy Firestine, Director of Finance
Deborah Snead, Assistant Chief Administrative Officer
Michael Faden, Senior Legislative Attorney
I:\GJ\HANSEM\approp=ro=Robert Kcndal.wpd
.!
I