Opinion 2005 - 7


This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

WATER DISTRICTS -- Water Supply (service to users located outside a water district)
WATER RENTS -- Collection (by bank or trust company)
WATER SUPPLY AND DISTRIBUTION -- Water Supply (service to users located outside a water district)

GENERAL MUNICIPAL LAW §99-t; TOWN LAW §198(3)(b); ENVIRONMENTAL CONSERVATION LAW §15-1501: (1) A town may enter into an agreement with a bank or trust company, in accordance with the provisions of section 99-t of the General Municipal Law, for the collection, either by payment in person or payment by electronic funds transfer, of water rents imposed on behalf of a town water district. (2) A town water district may provide service to users located outside the district pursuant to Town Law §198(3)(b), so long as the use will not reduce the water supply so that it will be insufficient for the district or its inhabitants and all required approvals and permits are obtained. The town should contact the Department of Environmental Conservation to obtain information about any required permits and approvals.

You ask whether a town may contract with a bank to collect, either by payment in person or payment by electronic funds transfer, water rents imposed on behalf of a water district. You also ask whether a town on behalf of a water district may provide service to users located outside the district.

This Office has expressed the opinion that, as a rule, the function of collection and custody of public funds are duties that are attended with a high degree of public trust and, therefore, in the absence of express statutory authority, they may not be delegated to an independent contractor (see, e.g., 24 Opns St Comp, 1968, p 888). General Municipal Law §99-t provides the necessary express authority for municipal corporations to contract with one or more banks or trust companies, as defined in section 10 of the General Municipal Law1, for the collection of water or sewer user fees, charges, rates or rentals, or special assessments not collected together with real property taxes (see also Real Property Tax Law §996, providing similar authority for the collection of real property taxes and special assessments that are collected with real property taxes).

Under section 99-t, the bank or trust company collects these amounts in accordance with the terms of the contract (General Municipal Law §99-t[2]). The contract, at a minimum, must contain provisions relating to (1) the period during which payments may be collected, (2) any authorized prompt payment discounts, penalties and interest and the acceptance of partial payments, (3) the furnishing of receipts to each person paying the fees, charges, rentals, rates or assessments, (4) the deposit of all monies collected in the account or accounts designated by the municipal corporation, (5) the maintenance of appropriate records of deposits showing the dates and amounts of all monies collected and the individuals from whom collected, and (6) the transmission to the appropriate municipal official of a daily report of amounts collected, accompanied by a statement showing deposits credited to the account of the municipal corporation (General Municipal Law §99-t[2][a-g]).

The contracting bank or trust company, pursuant to section 99-t, is liable to the municipal corporation for loss or damage that may result from any failure of officers, employees and agents of the bank or trust company to discharge their duties, or from improper or incorrect discharge of those duties, and is required to save the municipal corporation harmless from any loss occasioned by or incurred in the performance of services under the contract (General Municipal Law §99-t[3][a]). Additionally, the bank or trust company would be liable to any person from whom it accepts payment for the failure to properly credit such payment, for the amount of the payment plus any interest and penalties imposed thereon (General Municipal Law §99-t[3][b]).

Monies deposited with a bank or trust company pursuant to section 99-t are required to be secured in the manner provided by section ten of the General Municipal Law (General Municipal Law §99-t[4]). The statutory powers and duties of the municipal officer responsible for collecting water or sewer user fees, charges, rates or rentals, or special assessments, are not to be affected by the agreement with the bank or trust company, except that the official, in addition to existing statutory duties, must (1) notify the bank or trust company of the commencement of the collection period for payments, (2) include in the appropriate notices the fact that payment may be made to the bank or trust company, (3) notify the bank or trust company of the date on which the interest-free or penalty‑free collection period expires, and (4) make the appropriate entries in the official records of the municipal corporation upon receiving the required daily report from the bank or trust company (General Municipal Law §99-t[5][a-d]). A contract entered into pursuant to section 99-t is subject to the procurement requirements of article 5-A of the General Municipal Law (§100 et seq.) (General Municipal Law §99-t[6]). In addition, the contract may be for a term not to exceed 5 years and may be canceled by the municipal corporation at any time upon 30 days’ notice to the bank or trust company (id.).

We find nothing in section 99-t that suggests that payments to the bank or trust company must be effectuated in person. In the absence of such a requirement, it is our opinion that the municipal corporation’s agreement with the bank or trust company may provide for the bank or trust company to receive either payment in person or payment by electronic funds transfer, if there is compliance with all the other statutory requirements in section 99-t, including the requirement to furnish receipts, maintain appropriate records, and properly deposit and secure all monies.2

As to the provision of water service to outside users, Town Law §198(3)(b) generally provides that a town board may permit any person or corporation owning real property outside of a town water district to use water from the district system for a rental, subject to the restrictions prescribed by the board. The town board may not permit such outside use if the use will reduce the water supply so that it will be insufficient for the district or its inhabitants (Town Law §198[3][b]). In addition, if the property to which the outside service is provided is located in a territory served by another water district, a water supply company, city, village or joint water works system, approval of the “water power and control commission” 3 must first be obtained (id.).

There are also additional permit requirements in section 15-1501(1) of the Environmental Conservation Law that must be considered with respect to the provision of service to outside users. Section 15-1501(1) generally provides that, under certain circumstances, a public corporation, including a town (Environmental Conservation Law §15-0107[2]), that is authorized and engaged in, or proposing to engage in, the acquisition, conservation, development, use and distribution of water for potable purposes or certain other purposes must first obtain a permit from the Department of Environmental Conservation (DEC ). Procedures for applying for a permit are set forth in regulations promulgated by the DEC (6[A-3] NYCRR §601.5). There are several exemptions from the permit requirement (Environmental Conservation Law §15-1501[2]; 6[A-3]) NYCRR §601.4). When a permit is required, the DEC may determine to grant or deny a permit, or grant a permit with conditions (6[A-3] NYCRR §601.6). For further information as to the need to obtain a water permit as a condition precedent to providing water to users outside the water district in the instant situation, the Department of Environmental Conservation, Bureau of Water Resources should be contacted.

Accordingly, a town may enter into an agreement with a bank or trust company, in accordance with the provisions of section 99-t of the General Municipal Law, for the collection, either by payment in person or payment by electronic funds transfer, of water rents imposed on behalf of a town water district. A town water district may provide service to users located outside the district pursuant to Town Law §198(3)(b), so long as the use will not reduce the water supply so that it will be insufficient for the district or its inhabitants and all required approvals and permits are obtained. We recommend that the town contact the Department of Environmental Conservation to obtain information about any required permits and approvals.

November 3, 2005

Thomas J. Ruda, Water Superintendent
Town of Hector Water District

 

1 Section 99-t(1) references the definitions of “bank” and “trust company” in paragraphs d and e of subdivision one of section ten of “this article” (i.e., article 5). It is obvious, however, the reference was intended to be to section ten of “this chapter”, since section 10, which contains the pertinent definitions, is contained in article 2, not article 5, of the General Municipal Law (compare General Municipal Law §99-t[4], containing the proper reference).

2 Although beyond the scope of this opinion, we note that the bank’s acceptance of payments electronically also would be subject to other laws as may be govern such payments (see, e.g., 15 USC §1693, et seq., Electronic Funds Transfer Act.; Uniform Commercial Code, article 4-A, “Uniform Commercial Code-Funds Transfers”).

3 The functions, powers and duties of the Water Power and Control Commission are now exercised by the Department of Environmental Conservation (Environmental Conservation Law §15-0317).