Opinion 2007 - 5


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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

COUNTIES -- Fund Transfers (referendum requirements for transfer from capital reserve fund)

MUNICIPAL FUNDS -- Capital Reserve Fund (referendum requirements for transfer in counties)

REFERENDUM -- Permissive (need for transfer of monies from capital reserve fund in county)

GENERAL MUNICIPAL LAW § 6-c: With limited exceptions, a resolution of the governing board of a county for the transfer of monies from a capital reserve established for a specific improvement or specific item of equipment into another capital reserve fund is not subject to permissive referendum requirements.

You ask whether a resolution of the governing board of a county, other than Westchester County, that provides for the transfer of monies from a capital reserve established for a specific improvement or specific item of equipment into another capital reserve fund is subject to permissive referendum requirements.

General Municipal Law, article 2 (General Municipal Law § 3 et seq.) contains the provisions of law governing the establishment of reserve funds by municipalities and the use of the moneys therein. General Municipal Law § 6-c authorizes the governing boards of counties, among other entities, to establish capital reserve funds for the purpose of financing all or part of the cost of (1) the "construction, reconstruction or acquisition" of a specific or type of "capital improvement," or (2) the acquisition of a specific item or type of “equipment” (General Municipal Law § 6-c [2]). The term "capital improvement" is defined to include "[a]ny physical public betterment or improvement or any preliminary studies and surveys relative thereto," as well as the contemporaneous acquisition of related "furnishings, equipment, machinery or apparatus" (General Municipal Law § 6-c [1] [b] [1], [3]). “Equipment” is defined to include any equipment, machinery or apparatus not included in the definition of “capital improvement” and for which a period of probable usefulness has been provided by law (General Municipal Law § 6‑c [1] [c]; see Local Finance Law § 11.00 [a], prescribing periods of probable usefulness).

Pursuant to General Municipal Law § 6-c (9), the unexpended balance remaining in a capital reserve fund may be transferred to another capital reserve fund. There is no referendum requirement for a transfer from a capital reserve fund established for a type of improvement or type of equipment (see General Municipal Law § 6-c [9] [b]). Similarly, there is no referendum requirement for a transfer from a capital reserve fund established for a specific improvement or a specific item of equipment that has been completed or acquired.1 A transfer from a capital reserve fund established for a specific capital improvement or specific item of equipment that has not been completed or acquired, however, is subject to permissive referendum requirements if the authorization for the establishment of the fund was subject to permissive referendum (General Municipal Law § 6-c [9] [b]). The establishment of a capital reserve fund for a specific capital improvement or specific item of equipment is subject to permissive referendum only if the authorization of the issuance of obligations for the same purpose would be subject to referendum (General Municipal Law § 6-c [4]).2

In the case of counties, pursuant to Local Finance Law § 33.10, a resolution authorizing the issuance of obligations is subject to referendum in the following limited circumstances, none of which pertain here: (1) certain issuances in the County of Westchester; (2) certain expenditures to be financed with obligations issued by counties that operated under an alternative or optional form of government on September 1, 1945; and (3) issuances of bonds or capital notes for expenses incurred for the employment of appraisers to assist in determining just ratios for the equalization of assessed valuations. Absent a special act to the contrary (see 1980 Ops St Comp No. 80-551), those are the only circumstances when a resolution by a county for the issuance of obligations is subject to referendum requirements.

Accordingly, with respect to the county at issue here, a resolution of the governing board for the transfer of monies from a capital reserve established for a specific improvement or specific item of equipment into another capital reserve fund is not subject to permissive referendum requirements.

September 27, 2007

R. Joseph Foltz, Esq., First Assistant County Attorney
County of Niagara Falls

1 In that case, however, there must be retained in the fund an amount sufficient to satisfy all outstanding claims arising from the construction, reconstruction or acquisition of the improvement or from the acquisition of the equipment (General Municipal Law § 6-c [9] [a]).

2 Although not at issue here, in the event the authority to issue obligations for a capital improvement is subject to a referendum only when the obligations would have a proposed maturity of greater than five years or only when the obligations would have a maturity equal to or greater than some other minimum period ( see Local Finance Law §§ 35.00, 36.00 [applicable to towns and villages]), a permissive referendum is required if the period of probable usefulness of the capital improvement is "equal to or more than such minimum period of maturity" (General Municipal Law § 6-c [4]; see also 1989 Ops St Comp No. 89-36, at 87).