Municipal Giving and Receiving
Thanksgiving is just around the corner. Time to be thinking of turkey (or Tofurky) and Cougar-Husky football. There are also budget hearings to hold, rates to set, and many other projects needing completion before year’s end. This time of year is also associated with giving and offering thanks for what has been received. This blog considers the extent to which a government can give and also the process by which it can receive gifts.
Is it even possible for a local government to make gifts, given the prohibition of article 8, section 7 of the state constitution? That section provides:
No county, city, town or other municipal corporation shall . . . give any money, or property . . . to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm.
This language would seem to put an end to the giving part. But wait, there are exceptions. The constitutional prohibition against giving public funds or property does not apply to transactions between public agencies. See, for example, Grant v. Evans, 163 Wash. 484, 487 (1931), concerning issuance of county bonds to help pay for a city bridge, and Rands v. Clarke [Clark] County, 79 Wash. 152, 156-157 (1914), involving an agreement between Clark County, Washington and Multnomah County, Oregon, where Clark County contributed to the cost of the bridge crossing the Columbia River.
The constitutional prohibition of gifts itself contains another important exception. Payments or reduced rates can be provided to the poor and infirm without being in violation of the prohibition against gifts. For example, reduced utility rates are commonly made available to low-income customers or people with disabilities.
Local governments are not prohibited from serving as a conduit to transfer federal funds to private entities. This exemption was recognized in AGO 1970 No. 24 where the Attorney General found no violation of article 8, section 7 when a city transferred funds from HUD to federally approved recipients, as those funds never actually became city funds. However, in AGO 1973 No. 18, the Attorney General clarified that such an exemption only applies if the federal government reserves control over either the designation of recipients or the size of grants.
Port districts may use public funds for industrial development or trade promotion and promotional hosting (article 8, section 8 of the state constitution). Government entities may, where authorized by the State legislature, issue revenue bonds to fund industrial development projects (article 32, section 1). There are other exceptions as well, although the general rule remains, gifts are prohibited (See Gift of Public Funds).
Okay, so governments can sometimes give; can they also receive? Yes, they may. See, for example, RCW 35.21.100:
Every city and town by ordinance may accept any money or property donated, devised, or bequeathed to it and carry out the terms of the donation, devise, or bequest, if within the powers granted by law. If no terms or conditions are attached to the donation, devise, or bequest, the city or town may expend or use it for any municipal purpose.
If someone offers a gift to a city, the city may accept the gift or reject it. If the gift has “strings attached,” such as when a cash donation is offered for use only at the senior center, the city may accept it only for that purpose, if it agrees with the condition, or otherwise reject it. If there are no conditions attached, the gift may be used for any municipal purpose.
Must every gift—such as a donation of $5.00—be accepted by ordinance? That’s what the statute says, but some jurisdictions handle donations differently. For example, Anacortes accepts donations as follows:
Consistent with RCW 35.21.100, which provides that the city council may accept donations of money or property by ordinance, this chapter delegates city council authority to the mayor to accept such donations in circumstances with minimal risk and long-term obligation, and reserves the city council's authority in all other circumstances.(Anacortes Municipal Code sec. 3.10.010).
For another example, see Ellensburg Municipal Code section 2.04.080 and .120.
While it is always nice to receive an unexpected gift, some jurisdictions actively encourage the public and businesses to give money or pay for needed public programs. See Moses Lake’s Parks Gifts and Memorials Catalog, Yakima’s request for donations to fund construction of a central plaza, and Renton’s Park Donation and Memorial Policy.
A question MRSC is periodically asked is whether a donation to a local government is tax deductible. It is. The IRS Code, at 26 U.S.C. §170(c)(1), defines a "charitable contribution" (which is tax deductible) to include "a contribution or gift to or for the use of:"
A State, a possession of the United States, or any political subdivision of any of the foregoing, or the United States or the District of Columbia, but only if the contribution or gift is made for exclusively public purposes.
For additional information see: Are Donations to Local Governments Tax Deductible?
If you have questions about this or any other local government issues, please use our Ask MRSC form or call us at (206) 625-1300 or (800) 933-6772. If you have comments about this blog post or other topics you would like us to write about, please email me at email@example.com.
MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.