Can a regional planning and development district charge a percentage administrative fee on grants it disburses?

Plain-English summary

State Representative Brandt Smith asked whether an Arkansas planning and development district (one of the eight regional multi-county districts created by Ark. Code Ann. § 14-166-201 et seq.) could require a grant recipient of state General Improvement Funds to pay an administrative fee, either a percentage (4%) or a fixed amount. He also asked whether, if not, the district could apply to itself for an administrative grant out of the funds it administers.

AG Leslie Rutledge said no on all three. Planning and development districts are creatures of statute. They have only the powers expressly conferred or necessarily implied from the statute, and substantial doubt is resolved against them (Philips v. Town of Oak Grove; City of Little Rock v. Cash). The express designation of certain powers implies denial of the non-described ones (Cook v. Ark.-Mo. Power Corp.). The governing statutes do not give districts the power to charge an administrative fee on grants they disburse. Nor can a district unilaterally allocate to itself a portion of the General Improvement Fund appropriation it receives for distribution; Arkansas Constitution Article V, Section 29 requires that the appropriation specifically state the purpose, and using GIF money for the district's own overhead (rather than for economic development purposes within the district) without specific authority would risk loss of state financial support under Ark. Code Ann. § 14-166-203(c)(2).

The practical answer the AG flagged: districts should build operational costs into their budgets and seek funding from permissible sources (state appropriations, federal Public Works and Economic Development Act funds, local sources), keeping in mind any restrictions on each source.

Currency note

This opinion was issued in 2016. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What is a planning and development district?
A multi-county regional body created by the General Assembly under Ark. Code Ann. § 14-166-201 et seq. to assist local governments and private organizations in obtaining federal grants and loans, and to coordinate private and public programs across counties. There are eight in Arkansas. The legislature established a financial-assistance program for these districts in furtherance of their statutory purposes.

Why can't a district charge a percentage of the grants it processes?
The doctrine of limited statutory powers. A district can only do what the legislature has expressly or necessarily impliedly authorized. The governing statutes are silent on administrative fees on disbursed grants, so the power does not exist.

Why can't a district just give itself a grant for overhead?
Because Arkansas's appropriations clause (Article V, Section 29) requires that legislative appropriations specifically state their purpose. The General Improvement Fund appropriation channeled through districts is for economic development within the district, not for the district's general overhead. Diverting it would also risk forfeiting future state support under § 14-166-203(c)(2)'s consequences clause.

What can a district do to cover its operating costs?
Build operating costs into the district's budget, draw from all permissible income sources (state legislative appropriation, federal Public Works and Economic Development Act funds, local contributions), and rely on amounts the legislature itself designates for overhead.

What if the General Improvement Fund appropriation expressly permits administrative use?
Then the district could use that portion for overhead. The opinion's "no" answer is conditional on the appropriation not expressly authorizing the use. Sponsors of the appropriation control that question.

Background and statutory framework

Eight planning and development districts were established by the General Assembly under Ark. Code Ann. § 14-166-201 et seq. (Repl. 1998 and Supp. 2015). § 14-166-201(a)(1) declares the legislative purpose: to assist local governments and private organizations in obtaining federal grants and loans and to coordinate private and public programs in the multi-county districts. § 14-166-201(a)(2) authorizes a state program of financial assistance to enable districts to continue and expand their activities. § 14-166-205(a)(2)(B) requires a district to certify a proposed budget to DFA's Disbursing Officer to receive state payments. § 14-166-203(c)(2) terminates state financial support to a district that uses state funds for purposes not within the subchapter's intent until it makes restitution and proves future compliance.

The doctrine of limited statutory powers comes from Philips v. Town of Oak Grove, 333 Ark. 183 (1998) (statutory entities have no inherent powers, only those expressly conferred or necessarily implied), and City of Little Rock v. Cash, 277 Ark. 494 (1982) (substantial doubt resolved against the power). Cook v. Ark.-Mo. Power Corp., 209 Ark. 750 (1946), supplies the affirmative-description-equals-denial rule.

Arkansas Constitution, Article V, Section 29 governs appropriations: no money out of the treasury except in pursuance of a specific appropriation whose purpose is distinctly stated in the bill.

The federal Public Works and Economic Development Act (42 U.S.C. § 3121 et seq.) is a permitted funding source for districts, separate from state appropriations.

Citations

Statutes: Ark. Code Ann. §§ 14-166-201 et seq.; 14-166-201(a)(1); 14-166-201(a)(2); 14-166-203(c)(2); 14-166-205(a)(2)(B) (Repl. 1998 and Supp. 2015); Ark. Const. art. V, § 29; 42 U.S.C. § 3121 et seq.

Cases: Philips v. Town of Oak Grove, 333 Ark. 183, 968 S.W.2d 600 (1998); City of Little Rock v. Cash, 277 Ark. 494, 644 S.W.2d 229 (1982); Cook v. Ark.-Mo. Power Corp., 209 Ark. 750, 192 S.W.2d 210 (1946).

Regulations: Code Ark. R. 006.09.2 (DFA Rule 2005-3, Implementation of Accountability Provisions for Disbursements from the General Improvement Fund).

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinfon No. 2015-137
May 20, 2016
The Honorable Brandt Smith
State Representative
3501 Ridgeway Circle
Jonesboro, AR 72404-5005
Dear Representative Smith:
STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE
This is in response to your request for an opinion regarding the administration of
General Improvement Fund grants by planning and development districts. Your
specific issue is whether a planning and development district has authority to
require a successful grant recipient of General Improvement Funds to pay an
administrative fee to the district upon award of the grant.
Your specific questions are as follows:

1. Can a planning and development [district] charge a four percent
   (4%) administrative fee to the successful grant applicant?
2. If you conclude that a four percent (4%) fee cannot be charged,
   can a reasonable fixed fee be charged to the successful grant
   applicant instead?
3. If you conclude that a planning and development district cannot
   charge any such fee, then can the planning and development
   district apply for a General Improvement Fund grant from the
   General Improvement Funds that it receives and administers in
   order to pay the cost and expenses it incurs with respect to the
   administration of such grant funds?
   323 CENTER STREET, SUITE 200 · LITTLE ROCK, ARKANSAS 72201
   TELEPHONE (501) 682-2007 · FAX (501) 682-8084
   ARKANSASAG .GOV The Honorable Brandt Smith
   State Representative
   Opinion No. 2015-137
   Page2
   RESPONSE
   The answer to each of your first two questions is "no," in my opm10n. The
   applicable state statutes do not expressly authorize multi-county economic
   planning and development districts to charge a grantee an "administrative fee," nor
   is such authority necessarily implied under the statutes. I take your third question
   to be asking whether a planning and development district can allocate to itself a
   portion of the general improvement funds it receives from the State via legislative
   appropriation. In my opinion, the answer to that question is "no," unless the
   appropriation expressly permits using a portion of its share of the general
   improvement fund for administrative overhead costs.
   DISCUSSION
   Question 1: Can a planning and development {district] charge a four percent
   (4%) administrative fee to the successful grant applicant?
   Question 2: If you conclude that a four percent (4%) fee cannot be charged, can
   a reasonable fvced fee be charged to the success[ ul grant applicant instead?
   The eight economic planning and development districts ("Districts") in the State
   were established by the legislature, 1 in part, "to assist local governments and
   private organizations in obtaining federal grants and loans," and "to coordinate
   private and public programs in the multi-county districts."2 In order to encourage
   these organizations in their efforts, the General Assembly established "a program
   of providing financial assistance to the associations to enable them to continue and
   expand their activities in furtherance of the purposes of this subchapter."3
   Thus, it is unquestionable that the Districts are creatures of statute. As such,
   following well-established law, the Districts have no inherent powers, but only
   powers expressly conferred upon them by statute or necessarily implied from
   statute. 4 Any substantial doubt concerning the existence of a District's power
   1 Ark. Code Ann.§ 14-166-201 et seq. (Repl. 1998 and Supp. 2015).
   2 Ark. Code Ann.§ 14-166-20l(a)(l) (Repl. 1998).
   3 Id. at§ 14-166-20l(a)(2).
   4 Cf Philips v. 'Town of Oak Grove, 333 Ark. 183, 189, 968 S.W.2d 600, 603 (1998). The Honorable Brandt Smith
   State Representative
   Opinion No. 2015-137
   Page 3
   must be resolved against it. 5 Furthermore, generally speaking, "a 'legislative
   affirmative description' [of powers] implies denial of the non-described powers."6
   I can find no express or necessarily implied power in the governing statutes that
   would support a District charging a grantee of funds an administrative fee. That
   being said, in order to receive payments from the State pursuant to an
   appropriation, a District's governing board, among other requirements, has to
   certify to the Department of Finance and Administration's Disbursing Officer that
   the District has established a proposed budget for the expenditures of State and
   local funds.7 It is my understanding that such budgets take into account all
   sources of a District's income (including federal government sources pursuant to
   the Public Works and Economic Development Act8). Accordingly, because a
   District has no express or necessarily implied statutory power to charge an
   administrative fee, as stated above, prudence would suggest that a District's
   budget include appropriate amounts for operational expenses from all permissible
   sources, keeping in mind all relevant State and federal laws regarding the use of
   the funds it receives.
   Question 3: If you conclude that a planning and development district cannot
   charge any such fee, then can the planning and development district apply for a
   General Improvement Fund grant from the General Improvement Funds that it
   receives and administers in order to pay the cost and expenses it incurs with
   respect to the administration of such grant funds?
   I take this question to be asking whether a District may allocate to itself a portion
   of the State general improvement fund-which it receives via legislative
   appropriation-to cover such administrative costs. If this interpretation of your
   question is correct, it is my opinion that the answer is "no," unless the District's
   appropriation specifically allows for such. 9 Any use of appropriated general
   5 Cf City of Little Rock v. Cash, 277 Ark. 494, 644 S.W.2d 229 (1982).
   6 Cookv. Ark.-Mo. Power Corp., 209 Ark. 750, 192 S.W.2d 210 (1946).
   7 Ark. Code Ann.§ 14-166-205(a)(2)(B).
   8 42 U.S.C. § 3121 et seq.
   9 See Ark. Const. art. V, § 29 ("[N]o money shall be drawn from the treasury except in pursuance
   of specific appropriation made by law, the purpose of which shall be distinctly stated in the
   bill .... "). Accord Code Ark. R. 006.09.2 (Department of Finance and Administration Rule 2005-The Honorable Brandt Smith
   State Representative
   Opinion No. 2015-137
   Page 4
   improvement funds for reasons other than to foster economic development within
   the District-which is the legislative intent of the governing statutes 10-without
   specific authority, could put that District's continued State support at risk.11
   Sincerely,
   ~~
   Attorney General
   3 "Implementation of Accountability Provisions for Disbursements from the General
   Improvement Fund by the Department of Finance and Administration Disbursing Officer")
   (defining "appropriation" as "a legislative act authorizing the expenditure of a designated amount
   of public funds for a specific purpose.") (emphasis added).
   10 See Ark. Code Ann.§ 14-166-20l(a)(l).
   11 See id. at § 14-166-203( c )(2) ("Continued state financial support of organizations as provided
   in this subchapter shall terminate with respect to any organization that uses state funds for any
   purpose not within the intent and purposes of this subchapter until the organization shall make
   restitution for any misused funds and furnishes proof of compliance with respect to future
   operations.").