MS 2023-03-L-Turner-February-9-2023-Voluntary-Utility-Bill-Round-Up-Option February 9, 2023

Can a Mississippi town add a checkbox to water bills letting customers round up to the nearest dollar and donate the change to a local charity?

Short answer: No. A Mississippi town cannot add an optional 'round up your water bill' donation feature. The state's municipal utility-revenue statutes do not permit intentional collection of surplus revenue, and Article 4, Section 66 of the Mississippi Constitution prohibits municipal donations except where specifically authorized by law. Even when customers volunteer the extra amount, the town has no authority to collect it through the utility billing system and pass it to a private charity.

Disclaimer: This is an official Mississippi Attorney General opinion. AG opinions are persuasive authority but not binding precedent. This summary is for informational purposes only and is not legal advice. Consult a licensed Mississippi attorney for advice on your specific situation.

Plain-English summary

The Town of Leakesville wanted to do something popular and harmless-sounding: add a voluntary "round up to the nearest dollar" option on water and sewer bills. Customers who opted in would round their monthly bill up (so $34.27 becomes $35) and the difference would go to a local community action agency.

The AG said no. The reasoning has two parts:

Part one: Municipal utility revenue is restricted by statute. Sections 21-27-23, 21-27-47, 21-27-57, and 21-27-61 set up a closed system. Towns are supposed to set utility rates at the level needed to cover operations, maintenance, and bond debt. Surplus revenues, if any incidentally arise, must go into specific named funds (operation/maintenance, depreciation, bond and interest, contingent). The statutes use "if any" language repeatedly, signaling that municipalities should not intentionally collect more than needed. A round-up program is, in substance, intentional surplus collection.

Part two: Municipal donations are unconstitutional unless specifically authorized. Article 4, Section 66 prohibits laws granting donations or gratuities except by a two-thirds vote of the legislature. The Mississippi Supreme Court applied this in McAdams v. Perkins, 204 So. 3d 1257 (Miss. 2016). Even routing the donation through a "voluntary" customer election does not turn the municipal hand-off to the charity into something other than a donation. The town has no statute authorizing it to collect funds for a private charity through its utility bills.

Both reasons are independently fatal. The town would need legislation specifically authorizing the program before it could go forward.

What this means for you

If you're a Mississippi municipal attorney

A "voluntary round-up" structure does not solve the donation problem. The constitutional analysis under Section 66 looks at the substance: is the municipality directing public funds (or funds collected through its public-utility billing apparatus) to a private entity without statutory authority? If yes, it is an unauthorized donation regardless of customer consent.

Workable alternatives a community action agency might pursue:

The agency runs its own donation program and accepts donations directly from residents (not through the town).
The town can publicize the agency's donation program via inserts in utility bills (as long as the town is not collecting the funds).
A separate billing line item that is collected by a third-party processor and remitted directly to the charity (this still has issues; talk to counsel).
Legislation: ask local representatives to introduce a bill specifically authorizing utility-bill round-up programs for charitable purposes. Other states have such authorizing laws.

If you're a mayor or alderman

This is one of the AG's clearest "no" opinions of 2023, and the reasoning is doctrinal. Even popular and well-intentioned programs cannot operate without statutory authority. The state auditor will pick up on a town routing utility revenues (even rounded-up cents) to a private nonprofit with no enabling law, and the legal exposure is on the town and the officials who voted for it.

If you run a community action agency or local nonprofit

You can still receive donations from town residents. You just cannot have the town collect them. Set up an online donation portal, mail-in pledge cards, or point-of-sale donation buttons at participating local merchants. Some utilities run their own customer assistance programs (where customer donations help pay neighbors' overdue bills) under specific state authorizing legislation. Mississippi does not currently have that authorization for the kind of pass-through your program contemplates.

If you're a Mississippi state legislator

Round-up donation programs are common in many states. They are popular with constituents and tend to raise meaningful sums for charities at low administrative cost. If Mississippi wants to permit them, the legislature would need to enact specific authorization, define the eligible recipient categories (community action agencies, charitable nonprofits with 501(c)(3) status, etc.), and ensure the structure does not violate Section 66 by being framed as authorization rather than gratuity.

If you're a state auditor field examiner

A municipality that quietly implements a round-up donation program and routes funds to a charity is operating outside the utility-revenue statutes and Section 66. This opinion is a clean reference for closing such a program down and recovering any improperly distributed funds.

Common questions

Q: What if every cent of the round-up goes only from customers who opted in?
A: Still no authority. The opinion is clear that the constitutional problem is not whose money it originally was; it is the town's collection and distribution of it without statutory authorization.

Q: Can customers donate to a charity directly, separate from the town?
A: Yes. The opinion only addresses what the town can do. Customers can donate to any charity through any other channel.

Q: Why does the AG say towns can't collect surplus revenue intentionally?
A: Because the statutes governing utility revenues (§§ 21-27-23, 21-27-47, 21-27-57, 21-27-61) describe rate-setting as a function of cost recovery (operations, maintenance, bonds), and they reference surplus only with the "if any" qualifier. The structure presumes incidental surplus, not intentional. A round-up program is intentional collection of more than what the operating model needs.

Q: What about MS AG Op., Sanders (Jan. 25, 2013) cited in the question?
A: The AG noted that Sanders is not distinguishable. The Sanders opinion likely involved a similar restriction, and the 2023 AG simply reaffirmed the same conclusion.

Q: Could the town donate to the community action agency directly?
A: Generally no. Mississippi Constitution Article 4, Section 66 prohibits municipal donations to private entities except where state law specifically authorizes them. Some categories of donation (e.g., to certain charitable and patriotic societies under §§ 19-5-93 type provisions, or to volunteer fire departments under specific statutes) are authorized. Most general charitable donations by municipalities are not.

Q: Could the town let the agency use a town-owned facility for free?
A: That is a different question with a different answer (see MS AG Op., Hammack, Jan. 31, 2023, on private buildings). Use of town-owned community space can be authorized if the board makes a public-service finding. But that is not what was proposed here.

Background and statutory framework

Mississippi treats municipal utility revenues as restricted funds, not general-purpose money. The structure runs through several sections:

Section 21-27-23 authorizes municipalities to operate combined water and sewer systems and to "establish, maintain and collect rates for the facilities and services offered."
Section 21-27-47 instructs that revenues are to be used for paying bonds and providing for "such cost of operation and maintenance as may be necessary to keep such system at all times in good repair and working order." It also requires rate revision so that revenues match needs (no surplus, no shortfall).
Section 21-27-57 specifies that the municipality "shall set aside monthly and shall pledge the revenues" of the system into named funds: operation and maintenance, depreciation, bond and interest, contingent.
Section 21-27-61 provides that monies derived from the system go to operating expenses, bond payments, system improvements, and "the creation and maintenance of a cash working fund or surplus fund to be used for replacement, extension of systems and emergencies."

Donations to private entities are not on the authorized list. They are, in fact, broadly prohibited by Mississippi Constitution Article 4, Section 66, which states that no law granting a donation or gratuity in favor of any person or object shall be enacted except by a two-thirds vote of each chamber of the Legislature.

The combined effect: even creative, voluntary, well-meaning programs that route funds through utility billing to a private charity hit a constitutional wall.

Citations and references

Statutes and constitutional provisions:
- Miss. Code Ann. § 21-27-23 (combined water and sewer systems; rate authority)
- Miss. Code Ann. § 21-27-47 (revenue pledged to operation, maintenance, bonds)
- Miss. Code Ann. § 21-27-57 (monthly fund allocation requirements)
- Miss. Code Ann. § 21-27-61 (use of system revenues)
- Miss. Const. Art. 4, § 66 (prohibition on donations and gratuities)

Case:
- McAdams v. Perkins, 204 So. 3d 1257 (Miss. 2016), enforcing Section 66 prohibition on municipal donations

Prior AG opinions referenced:
- MS AG Op., Blocker (Mar. 28, 2003)
- MS AG Op., Sanders (Jan. 25, 2013), affirmed and not distinguished

Source

Original opinion text

February 9, 2023

Lee Turner, Esq.
Attorney, Town of Leakesville
Post Office Box 1492
Leakesville, Mississippi 39451

Re: Voluntary Utility Bill Round-Up Option

Dear Mr. Turner:

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

Background

According to your request, the town of Leakesville is considering implementing a voluntary option for a citizen to round up his or her monthly water and sewer bill to the nearest dollar with the proceeds going to a local community action agency.

Question Presented

May the town of Leakesville implement an option for a citizen to voluntarily round up his or her monthly water and sewer bill to the nearest dollar and then donate those proceeds to a local community action agency?

Brief Response

While the town of Leakesville has the authority to set rates sufficient for the maintenance and operation of a utility system and to pay any related outstanding bonds, the town does not have the authority to intentionally collect a surplus of utility system revenues. Additionally, donations by a municipality are unlawful unless otherwise prescribed by law.

Applicable Law and Discussion

Mississippi Code Annotated Section 21-27-23 authorizes municipalities to establish and operate a combined water and sewage system and the power "to establish, maintain and collect rates for the facilities and services offered" by the utility system. Miss. Code Ann. § 21-27-23(d), (e). When setting and maintaining rates, the revenues are to be pledged to the payment of any outstanding bonds issued pursuant to Section 21-27-23 related to the system "and to provide for the payment of such cost of operation and maintenance as may be necessary to keep such system at all times in good repair and working order." Miss. Code Ann. § 21-27-47. The municipality shall revise the rates from time to time to produce the necessary amounts to pay for outstanding bonds, operation, and maintenance. Id. If municipalities are charging rates that are consistently higher than needed to satisfy all expenses of the utility system, then the municipal governing authorities should reduce the rates so that there is no surplus created. See MS AG Op., Blocker (Mar. 28, 2003).

Once those rates are set, Sections 21-27-57 and 21-27-61 prescribe how the municipal governing authorities are to use the revenues collected for the utility system. Section 21-27-57 requires that the municipality "shall set aside monthly and shall pledge the revenues of the system or combined system, in separate and special funds as follows: (1) operation and maintenance fund; (2) depreciation fund; (3) bond and interest fund; (4) contingent fund." Additionally, when distributing monies into the various funds, municipal "governing authorities may prescribe a reasonable excess amount to be placed in the revenue bond and interest fund from time to time during the earlier years of maturity of such bonds so as to thereby provide and produce a cushion fund to meet any possible deficiencies" in the future. Id. Section 21-27-61 requires the following:

The governing authorities of any municipality shall devote all monies of the system derived from any source other than the issuance of bonds . . . to or for the payment of all operating expenses, including such items as are normally required of utilities for sales development; to or for the payment of all bonds and interest on outstanding revenue bonds, if any, of such system; to or for the acquisition and improvement of the system contingencies; to or for the payment of all other obligations incurred in the operation and maintenance of the system and the furnishing of service; and to or for the creation and maintenance of a cash working fund or surplus fund to be used for replacement, extension of systems and emergencies.

These sections provide the intended purposes for utility system revenues and do not contemplate or authorize the donation of those revenues which are intended for the enumerated purposes. Sections 21-27-57 and 21-27-61 specify how municipal governing authorities are to expend surplus funds, if any exist. The consistent use of "if any" regarding surplus revenues in these statutes indicates that municipal governing authorities should not intentionally collect surplus revenues when setting and collecting utility system rates but should spend them accordingly if an incidental surplus results. Therefore, because the matter turns not on the ultimate use of any surplus funds but on the intentional collection of such surplus, the opinion you reference in your request, MS AG Op., Sanders (Jan. 25, 2013), is not distinguishable.

We find no authority for municipalities to intentionally collect surplus utility system revenues and then expend those revenues for purposes other than what is mandated by these statutes. Furthermore, Mississippi Constitution Article 4, Section 66 prohibits donations by a municipality unless otherwise authorized by law. See McAdams v. Perkins, 204 So. 3d 1257 (Miss. 2016). Thus, this office is of the opinion that the town of Leakesville does not have the authority to implement a voluntary option for a citizen to round up his or her monthly water and sewer bill to the nearest dollar and donate the proceeds to a local community action agency.

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/ Abigail C. Overby
Abigail C. Overby
Special Assistant Attorney General