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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

MUNICIPAL FUNDS -- Capital Reserve Funds (referendum requirements where capital improvement has a period of probable usefulness of five years)

GENERAL MUNICIPAL LAW, §6-c(4), (8): There are no permissive referendum requirements either to establish a capital reserve fund for a specific capital improvement or to expend moneys from a capital reserve fund established for a type of capital improvement for a specific improvement, where the authority to issue obligations for the capital improvement would be subject to referendum only if the obligations would have a proposed maturity of more than five years, and the capital improvement has a period of probable usefulness of exactly five years.

You ask whether the permissive referendum requirements of General Municipal Law, §6-c are applicable to the establishment of a capital reserve fund to construct, reconstruct or acquire a specific capital improvement for which a period of probable usefulness of five years has been prescribed by the legislature (see Local Finance Law, §11.00). You ask the same question with respect to the expenditure of moneys from a capital reserve fund established for a type of capital improvement, to construct, reconstruct or acquire a specific capital improvement for which a period of probable usefulness of five years has been prescribed.

General Municipal Law, §6-c governs the establishment of, and the expenditure of moneys from, capital reserve funds by counties, cities, towns, villages and certain improvement districts (see General Municipal Law, §6-c, as amended by L 1989 ch 323, effective July 10, 1989). Subdivision four of section 6-c prescribes permissive referendum requirements for the establishment of a capital reserve fund to construct, reconstruct or acquire a specific capital improvement. Subdivision eight of section 6-c prescribes permissive referendum requirements for the expenditure of moneys from a capital reserve fund established to construct, reconstruct or acquire a type of capital improvement. In both cases, compliance with the permissive referendum requirements is required if an authorization to issue obligations for the particular capital improvement would be subject to either a permissive or mandatory referendum.

Subdivisions four and eight further provide that:

[i]n the event that the authorization by such governing board of the issuance of obligations for such capital improvement... is required by law to be subject to a permissive or mandatory referendum only if such obligations are to have a maturity of more than five years or not less than some other minimum period, then the authorization [to establish or expend moneys from the fund] shall be subject to a permissive referendum only if the period of probable usefulness of such capital improvement ... is equal to or more than such minimum period of maturity. [emphasis added]

Thus, 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, 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".

The evident purpose of the quoted provision is to establish a definite referendum requirement applicable in those instances when a referendum on the authorization to issue obligations for a capital improvement would be contingent upon the length of the proposed maturity of the obligations. The statute accomplishes this purpose by requiring a permissive referendum when the period of probable usefulness of the capital improvement is equal to or greater than the "minimum period of maturity" which would require a referendum.

Referendum requirements for the issuance of obligations by counties, cities, towns and villages are set forth in Local Finance Law, §§30.10 (counties), 34.00 (cities), 35.00 (towns) and 36.00 (villages). In the case of towns and villages, sections 35.00(b), and 36.00(a)(1) provide that a bond resolution is not subject to referendum where the bonds have "a proposed maturity of not more than five years...". In these instances, since the authority to issue obligations is subject to a referendum only when the obligations have a maturity of greater than five years, we believe that the "minimum period of maturity" (emphasis added) requiring a referendum is five years and one day.

Based on the foregoing, therefore, it is our opinion that if the authority to issue obligations for a capital improvement is subject to a referendum only if the obligations would have a maturity of more than five years and the period of probable usefulness prescribed for the specific capital improvement is exactly five years, the establishment of a capital reserve fund to construct, reconstruct or acquire that specific capital improvement would not be subject to permissive referendum requirements. Similarly, an expenditure of moneys from a capital reserve fund established for a type of capital improvement to construct, reconstruct or acquire a capital improvement having a five year period of probable usefulness would not be subject to permissive referendum requirements.

October 4, 1989
Cornelius F. Healy
Deputy State Comptroller