Can a Mississippi city license its logo to a private company in exchange for fees per customer the company signs up?

Plain-English summary

The City of Hattiesburg's attorney described a proposal: a private company wanted a non-exclusive license to use the City's branding on marketing and advertising sent by the company to City property owners. The company would pay all costs. The City would receive an annual license fee for each property owner who signed up for the company's services. The proposal would, in effect, have the City endorse the company.

The AG's answer split the question into two layers.

Layer one, can the City license its branding for payment? Yes, in principle. The Home Rule statute (Section 21-17-5) gives broad authority over municipal affairs, property, and finances. Prior AG opinions confirm that public entities can license intellectual property and receive funds for authorized use of their logos and marks (Poole and Arentson 2015, Logan 2013). So the basic transaction is allowed.

Layer two, are there limits? Yes, two important ones.

First, municipalities cannot engage in private enterprise or profit-making ventures. A long line of opinions (Mallette 2012, Holmes-Hines 2012, Murdock 2019, Odom 1997, Doty 1994, Shepard 1991, Allen 1990, Russell 2014) limits cities to "proper government purposes." A municipality "may not engage in private business enterprise unless granted authority by Legislature." A 2014 Shepard opinion specifically held that a sheriff's department could not allow a company to identify the sheriff's office on a calendar in return for a percentage of advertisement-sale proceeds; the AG said "such an arrangement appears to be undertaken solely as a profit making venture."

Second, the AG could not find any authority that "a municipality endorsing a private company constitutes a proper government purpose." Endorsements are categorically different from licensing. A license can be a neutral commercial transaction; an endorsement is the City vouching for a private actor's business. There is no clear municipal authority for endorsement.

Whether the Hattiesburg arrangement crosses the line into profit-making or endorsement is a factual call for the City Council. The opinion ends with a caveat: "there is nothing that would prohibit [a] municipality from accepting any 'profits' offered to it in the form of a donation made by the for-profit organization" (citing the 2013 Ringer opinion). That hedges the line: a payment that is structurally a donation might be acceptable; a payment that is structurally a profit share probably is not.

What this means for you

For Mississippi city attorneys

The opinion holds that under the Home Rule statute (Section 21-17-5) a municipality "may enter into a non-exclusive agreement that allows a private company to use its branding marks and then receive payment for that authorized use," citing prior opinions on licensing intellectual property and receiving funds for authorized use of a logo (Poole and Arentson 2015, Logan 2013). It attaches two limits: a municipality "may only engage in activities that constitute proper government purposes and may not engage in private enterprise," and the AG "find[s] no authority suggesting that a municipality endorsing a private company constitutes a proper government purpose." Whether the specific arrangement is a profit-making venture or an endorsement is, the opinion says, a factual determination for the City. The opinion also notes any agreement must comply with the laws governing municipal contracts and that funds received "should be properly accounted for and expended pursuant to all laws governing the expenditure of public funds."

For Mississippi mayors and city council members

The opinion frames two concerns the council must resolve as factual matters: whether the arrangement (here, "an annual license fee for each property owner who signs up for the company's services") is a prohibited profit-making venture or private enterprise, and whether it amounts to the City endorsing the company, which the opinion holds it found no authority to treat as a proper government purpose. The opinion leaves both determinations to the City Council.

For private companies considering municipal-branding partnerships

Under the opinion, a Mississippi city can license its branding marks for payment, but only within the limits the opinion sets: the arrangement cannot be a profit-making venture or private enterprise for the city, and the city has no authority to endorse a private company. Whether a particular proposal crosses those lines is for the city to determine.

For municipal finance officers

The opinion holds that funds a city receives for authorized use of its marks "should be properly accounted for and expended pursuant to all laws governing the expenditure of public funds," and that any agreement must comply with the laws governing municipal contracts.

Common questions

Q: Can a Mississippi city license its logo to a private company for payment?
A: Yes, in principle. The opinion holds that under the Home Rule statute a municipality "may enter into a non-exclusive agreement that allows a private company to use its branding marks and then receive payment for that authorized use."

Q: What are the limits?
A: Two. The opinion holds a municipality "may only engage in activities that constitute proper government purposes and may not engage in private enterprise," and it found "no authority suggesting that a municipality endorsing a private company constitutes a proper government purpose."

Q: Why is a per-sign-up fee a concern?
A: The opinion notes the proposed payment was "an annual license fee for each property owner who signs up for the company's services" and that the office "has repeatedly opined that municipalities may not engage in profit-making ventures." It cites the Shepard (2014) opinion, where a sheriff's office could not be identified on a calendar in exchange for a percentage of advertising proceeds because that "appears to be undertaken solely as a profit making venture." Whether this arrangement is a profit-making venture is a factual determination for the City.

Q: What is the difference between a license and an endorsement?
A: The opinion treats licensing a mark for authorized use as permissible, but found no authority for a municipality to endorse a private company as a proper government purpose. Whether the City's arrangement constitutes an "endorsement" is, the opinion says, a factual determination for the City Council.

Q: Can the city accept donations from a for-profit company instead?
A: The opinion notes that "there is nothing that would prohibit [a] municipality from accepting any 'profits' offered to it in the form of a donation made by the for-profit organization," citing the Ringer (2013) opinion.

Q: Who decides whether a specific deal is allowed?
A: The opinion assigns the key calls (whether the arrangement is a profit-making venture and whether it is an endorsement) to the City as factual determinations it cannot make in an official opinion.

Background and statutory framework

Mississippi's Home Rule statute (Section 21-17-5) gives municipalities broad authority over municipal affairs. The statute is generous, but it has long-standing limits articulated in AG opinions and case law.

The proper-government-purpose limit traces to Section 21-17-1 and Mississippi Supreme Court precedent. Cities exist to serve municipal functions: public safety, public works, parks and recreation, etc. Activities that are not municipal in nature fall outside the city's authority.

The profit-making-venture limit is a corollary. If a city is essentially in business for profit, that is private enterprise. The opinions cited (Mallette 2012, Holmes-Hines 2012, Murdock 2019, Odom 1997, Doty 1994, Shepard 1991, Allen 1990) describe this constraint across various contexts: equipment rental, calendar sales, vehicle unlocking services, ornament manufacturing.

The endorsement limit is more recent and less litigated. The 2021 PopeIII opinion is a clear statement that endorsement is not within the proper-government-purpose authority absent specific legislative authorization.

The AG's hedge is the donation pathway. A for-profit company can make a donation to the city, and the city can accept. But the structure has to be a true donation, not a disguised payment for services. The 2013 Ringer opinion drew that line.

The factual-determination framing reflects the AG's institutional limits. Whether a particular arrangement is a license or an endorsement, a flat-fee arrangement or a profit share, depends on the specific terms. The council has to assess and document.

Citations and references

Statutes:

• Miss. Code Ann. § 21-17-1, municipal authority limited to proper municipal purposes
• Miss. Code Ann. § 21-17-5, Home Rule statute

Prior AG opinions cited:

• MS AG Op., Allen (Aug. 15, 1990), rental of municipal personal property is commercial in nature, not proper municipal activity
• MS AG Op., Doty (Jan. 12, 1994), municipal fireman cannot unlock vehicles for fee; not proper governmental purpose
• MS AG Op., Holmes-Hines (June 15, 2012), municipality cannot engage in private business enterprise without legislative authorization
• MS AG Op., Logan (June 21, 2013), public entity can receive funds for authorized use of its logo or marks
• MS AG Op., Mallette (May 1, 2012), municipalities cannot engage in profit-making ventures
• MS AG Op., Murdock (Sept. 20, 2019), profit-making venture prohibition
• MS AG Op., Odom (Aug. 15, 1997), municipality cannot rent equipment to individuals as profit-making venture
• MS AG Op., Poole and Arentson (Apr. 17, 2015), authority of public entities to license intellectual property
• MS AG Op., Ringer (Nov. 8, 2013), municipality may accept donations from for-profit organizations
• MS AG Op., Russell (July 18, 2014), municipal endeavors may not result in profit
• MS AG Op., Shepard (Dec. 18, 1991), Christmas ornament manufacture and sale is unauthorized business venture
• MS AG Op., Shepard (Sept. 19, 2014), sheriff's office cannot allow company to identify it on calendar in return for proceeds; appears to be profit-making venture

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2021/12/M.PopeIII-November-29-2021-Private-Company-Using-Citys-Branding-and-or-Logo.pdf

Original opinion text

November 29, 2021

Moran M. Pope, III, Esq.
Attorney for City of Hattiesburg
Post Office Box 17527
Hattiesburg, Mississippi 39404-7527

Re: Private Company Using City's Branding and/or Logo

Dear Mr. Pope:

The Office of the Attorney General has received your request for an official opinion.

Background

The City of Hattiesburg (the "City") has been approached by a private company seeking to enter into a non-exclusive agreement with the City that would grant the company the right to use the City's branding on marketing and advertising materials sent by the company to property owners in the City. The cost of the marketing and advertising materials would be covered solely by the company leaving no cost to the City. According to your request, the City would essentially be entering into an agreement to endorse the company and would be paid an annual license fee for each property owner who signs up for the company's services.

Question Presented

May the City enter into a non-exclusive agreement whereby the City would allow a private company to use the City's branding on the company's advertisements, in return for payment by the company?

Brief Response

A municipality may enter into a non-exclusive agreement that allows a private company to use its branding marks and then receive payment for that authorized use. However, a municipality may only engage in activities that constitute proper government purposes and may not engage in private enterprise.

Applicable Law and Discussion

The municipal "Home Rule" statute grants broad authority to municipalities in adopting any orders, resolutions, or ordinances with respect to municipal affairs, property and finances that are not otherwise inconsistent with any other laws. Miss. Code Ann. § 21-17-5(1). However, "it is fundamental that cities may only engage in activities that constitute proper government purposes and may not engage in private enterprise." MS AG Op., Doty at *1 (Jan. 12, 1994) (citing Miss. Code Ann. § 21-17-1).

In previous opinions, we have noted the authority of public entities to license intellectual property. MS AG Op., Poole and Arentson at 1 (Apr. 17, 2015). We have further opined that a public entity is authorized to receive funds in exchange for the authorized use of its logo or marks so long as the funds received were properly accounted for and spent according to the law. MS AG Op., Logan at 1 (June 21, 2013). Upon review of the authority granted to municipalities by the Legislature, we similarly opine that pursuant to the municipal Home Rule statute, a municipality may enter into a non-exclusive agreement that allows a private company to use its branding marks and then receive payment for that authorized use. We note that any agreement into which the City enters must comply with all laws governing municipal contracts, and any funds received as a result should be properly accounted for and expended pursuant to all laws governing the expenditure of public funds.

According to your request, "the City would be paid an annual license fee for each property owner who signs up for the company's services." This office has repeatedly opined that municipalities may not engage in profit-making ventures or in private enterprise. MS AG Op., Mallette (May 1, 2012); MS AG Op., Murdock at 1 (Sept. 20, 2019); see also MS AG Op., Holmes-Hines (June 15, 2012) (finding municipality may not engage in private business enterprise unless granted authority by Legislature); MS AG Op., Odom (Aug. 15, 1997) (finding no authority for municipality to rent equipment to individuals in private sector as profit-making venture); MS AG Op., Doty (Jan. 12, 1994) (finding municipal fireman may not unlock vehicles for a fee as such is not a proper governmental purpose and would constitute a private business venture); MS AG Op., Shepard (Dec. 18, 1991) (finding manufacture and sale of Christmas ornaments is a business venture and is unauthorized); MS AG Op., Allen (Aug. 15, 1990) (finding rental of municipal personal property is of a commercial nature and not a proper governmental activity). In this context, we have said that an endeavor undertaken by a municipality "may not result in a profit." MS AG Op., Russell at 1 (July 18, 2014).

We have also opined that a sheriff's department could not, among other things, allow a company to identify the sheriff's office on a calendar "in return for the company agreeing to pay a percentage of the proceeds from sales of advertisements" on the basis that "such an arrangement appears to be undertaken solely as a profit making venture." MS AG Op., Shepard at 1 (Sept. 19, 2014). Whether the arrangement described in your request constitutes a profit-making venture requires a factual determination that must be made by the City. Notably, however, we have opined that "there is nothing that would prohibit [a] municipality from accepting any 'profits' offered to it in the form of a donation made by the for-profit organization." MS AG Op., Ringer at 1 (Nov. 8, 2013).

As an additional matter, your request suggests that the City's proposed arrangement with the company would constitute the City's endorsement of such company. We find no authority suggesting that a municipality endorsing a private company constitutes a proper government purpose for municipalities under Section 21-17-1. However, whether the City's actions described in your request constitute an "endorsement" is a factual determination that must be made by the City Council.

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,

LYNN FITCH, ATTORNEY GENERAL

By: /s/ Abby Overby
Abby Overby
Special Assistant Attorney General