Can a Mississippi county use Emergency Road and Bridge Repair grant money to pay off a loan it took out for the bridge project before the grant was awarded?
Plain-English summary
A bridge in Yalobusha County washed out in February 2019. The county and MDOT agreed to rebuild it, with 80% federal reimbursement and the county responsible for the rest. To cover its share, the county borrowed $686,604.87 from Trustmark National Bank in October 2020 via a five-year general obligation note. The county made annual payments in 2022 and 2023.
In August 2022, the county and MDOT entered a Memorandum of Understanding under which the county would receive $3,140,000 in Emergency Road and Bridge Repair (ERBR) Fund money for the project. The county now wants to use those ERBR funds to pay down the bank note. Three questions:
- Can ERBR funds repay a loan the county took out before getting the ERBR grant?
- Can ERBR funds reimburse the county for the 2022 and 2023 note payments already made?
- Can the county make its remaining three note payments out of ERBR funds?
The AG drew a sharp line based on § 65-1-179(4): "Under no circumstances . . . shall Emergency Road and Bridge Repair Fund monies be used to reimburse any amount that has been expended on the project prior to the award of such monies to the recipient."
- Borrowing is not the same as expending. When the county borrowed money from the bank, it took on debt; it didn't "expend" anything on the project at that moment. The expenditure happens when the county pays the bank.
- Future note payments (after the grant award) are eligible. Each payment is an expense made on the project on the date paid. So payments that became due after August 2022 (the ERBR grant award) can be paid from ERBR funds, if the county determines as a factual matter that paying the note is an "expense on the project."
- Past note payments (before the grant award) are not eligible for reimbursement. The 2022 payment (made February 1, 2022, before the August 2022 ERBR award) and any other pre-award payments cannot be reimbursed from ERBR funds. § 65-1-179(4) blocks it.
The 2023 payment was made February 1, 2023, after the August 2022 ERBR award, and would qualify for ERBR funding (subject to the county's factual determination that it counts as an "expense on the project" and compliance with the MDOT MOU).
The opinion does not address federal-law implications of ERBR fund use; that is outside the AG's authority under § 7-5-25.
What this means for you
If you are a county attorney or county administrator handling an ERBR grant
The day you receive the grant is the cutoff. Build it into your accounting:
- Date-stamp the ERBR award. Every other date keys off this one.
- Pre-award expenses are off-limits for reimbursement. § 65-1-179(4) is absolute. Don't try to recharacterize earlier expenditures as anything else.
- Post-award payments on a pre-award note can qualify. Treat each payment as an expense incurred when paid, not when borrowed. The borrowing event itself is not an expenditure.
- Make the "expense on the project" determination in the minutes. § 65-1-179(2) and the AG's reasoning depend on a factual finding that the payment is an expense on the project. Put that finding in your minutes contemporaneously with each payment.
- Honor your MOU with MDOT. Section 65-1-179 expenditures must still comply with the project's MOU, which may have its own conditions, reporting requirements, and timelines.
If you are a county supervisor
Don't ask the staff to "make us whole" for prior-year payments. § 65-1-179(4) flatly forbids it, regardless of how legitimately the prior expenditures supported the project. Direct the focus to using ERBR funds for what's still ahead.
If you advise multiple counties on emergency disaster funding
This opinion is a useful template. The "borrow vs. expend" distinction the AG draws is broader than this one statute. Many state and federal disaster-relief programs have similar pre-award-cost prohibitions. The lesson: borrowing creates a debt that becomes an expenditure only when paid, so future debt service after a grant award can typically still qualify.
If you are a bond counsel structuring future emergency-project financing
Knowing this rule changes how you advise counties at the front end. If a county anticipates seeking ERBR or similar emergency grants, structure note payments so as much of the debt service as possible falls after expected grant award dates. Pre-payment penalties on existing notes may be worth less than the ability to use grant funds for ongoing service of the same debt.
If you are a Yalobusha County resident
The bridge is being rebuilt. The funding mix involves federal money (80%), state ERBR money, and county debt. The AG's opinion lets the county apply ERBR funds to most of the remaining note payments but not to ones the county has already made. The net effect is that the county has somewhat less ERBR money available for other unfunded costs than the supervisors hoped.
Common questions
Q: What is the Emergency Road and Bridge Repair (ERBR) Fund?
A: § 65-1-179 created a special fund in the Mississippi State Treasury. Per § 65-1-179(2), the money is used by the Mississippi Department of Transportation, with advice from the ERBR Advisory Board, to fund "emergency repairs to roads, streets and highways" and "emergency bridge repairs on public roads, streets and highways." The Mississippi Transportation Commission decides funding by majority vote.
Q: Why can't a loan payment count as an "expenditure" on the project earlier?
A: The AG used dictionary definitions. Merriam-Webster defines "expend" as "to pay out" or "to make use of for a specific purpose," and "borrow" as "to receive with the implied or expressed intention of returning the same or an equivalent." Borrowing creates a future obligation; expending pays out money. The two are not synonymous, and § 65-1-179(4) speaks to "expended" amounts, not to liabilities incurred.
Q: What if the county prepaid principal on the note before the ERBR award?
A: That would be an expenditure made before the grant award, and § 65-1-179(4) would bar reimbursement of it from ERBR funds. The pre-award/post-award split is by date of payment, not by category.
Q: Can ERBR funds be used to refinance the note (replace it with a new loan paid by ERBR)?
A: The opinion does not address refinancing directly. ERBR funds, when paid out, are expenditures on the project; using them to retire the existing note and eliminate future interest cost would be one use. Whether that is the most efficient use is a financial question, not a legal one, and the MOU with MDOT may have its own constraints.
Q: What about federal funding rules (FHWA, FEMA)?
A: The AG explicitly declined to opine on federal-law implications. § 7-5-25 limits AG opinions to questions of state law. Federal grant rules, especially Stafford Act/FEMA rules and FHWA emergency relief rules, often have their own pre-award cost prohibitions and timing rules that operate in parallel with state ERBR rules. Coordinate with your federal grants compliance team.
Q: Does the county need to amend its MOU with MDOT to use ERBR funds for note payments?
A: The AG noted that any payment must "still be in accordance with the County's Memorandum of Understanding with MDOT." If the MOU is silent on note-service use of ERBR funds, the county should engage MDOT before assuming the use is authorized. An MOU amendment may be the cleanest path.
Background and statutory framework
§ 65-1-179 sets up the ERBR Fund as a state-level emergency response mechanism for road and bridge work that overwhelms a local government's ordinary capital budget. The fund is administered by MDOT with input from an advisory board, and the Transportation Commission has final say on funding by majority vote. Grants flow to local governments via MOUs that specify the project, the amount, and the conditions.
Subsection (4) is the no-look-back rule. It says, in pertinent part: "[u]nder no circumstances . . . shall Emergency Road and Bridge Repair Fund monies be used to reimburse any amount that has been expended on the project prior to the award of such monies to the recipient." That language is unambiguous: pre-award expenditures cannot be reimbursed.
The interesting question this opinion answered was about debt service. If a county had to borrow money to keep the project moving while waiting for a grant, can later grant funds repay the loan? The AG's answer hinges on the textual meaning of "expended." Borrowing is not expending. So the borrowing date is not the expenditure date, and post-award note payments are post-award expenditures. The borrowed money the county paid out before the grant (debt service made before the grant date) was expended pre-award and is unrecoverable from ERBR funds.
The county still has discretion in two respects: it has to make a factual determination that paying the note is an "expense on the project" (the AG framed this as a question for county officials), and it must operate within whatever specific terms the MDOT MOU imposes.
Citations and references
Statutes:
- Miss. Code Ann. §§ 17-21-51 et seq. (county authority to borrow money for project costs by general obligation note)
- Miss. Code Ann. § 65-1-179(1) (creation of Emergency Road and Bridge Repair Fund)
- Miss. Code Ann. § 65-1-179(2) (use of ERBR Fund for emergency road and bridge repairs)
- Miss. Code Ann. § 65-1-179(4) (no reimbursement of amounts expended on the project before ERBR award)
- Miss. Code Ann. § 7-5-25 (AG opinions limited to state law)
Source
- Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
- Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2023/08/S.Crow-August-23-2023-Mississippi-Code-Annotated-Section-65-1-1794.pdf
Original opinion text
August 23, 2023
Shannon Crow, Esq.
Attorney, Yalobusha County Board of Supervisors
203 Wagner Street
Water Valley, Mississippi 38965
Re: Mississippi Code Annotated Section 65-1-179(4)
Dear Mr. Crow:
The Office of the Attorney General has received your request for an official opinion.
Background
According to your request, in February 2019, a bridge in Yalobusha County (the "County") suffered irreparable damage due to flooding. In August 2019, the County and the Mississippi Department of Transportation ("MDOT") entered into an agreement to construct a new bridge (the "Project"). Pursuant to the agreement, federal reimbursement for the cost of the Project would be 80%, and the County would be solely responsible for the remaining costs.
In October 2020, the County declared necessity for borrowing money, pursuant to Mississippi Code Annotated Sections 17-21-51, et seq., for the sole purpose of paying costs it incurred on the Project. The County directed that the General Obligation Note ("Note") in the principal amount of $686,604.87 be offered for sale on sealed bids, and Trustmark National Bank was confirmed and approved as the highest bidder. The note requires the County to make five (5) annual payments of $137,320.97 plus interest at 1.61%, commencing on February 1, 2022 and ending on February 1, 2026. The 2022 and 2023 payments were paid from funds budgeted by Yalobusha County Supervisory District 5 where the Project is located.
In 2021, the County and MDOT accepted a bid for the Project in the amount of $16,240,280.65. To date, the Project is ongoing, and the estimated total cost is in excess of $20 million, including necessary work outside of the construction contract.
On or about August 1, 2022, the County and MDOT entered a Memorandum of Understanding outlining the County's receipt of $3,140,000.00 in Section 65-1-179 Emergency Road and Bridge Repair funds to be used on the Project. The County desires to use these Emergency Road and Bridge Repair funds to service its debt on the Note.
Questions Presented
- May Emergency Road and Bridge Repair funds be used to repay money borrowed out of necessity by the County to pay Project costs when the money was borrowed prior to the County's award of the Emergency Road and Bridge Repair grant?
- May the County's Emergency Road and Bridge Repair funds be used to reimburse the budget of Yalobusha County Supervisory District 5 for the Note payment remitted on February 1, 2022 and/or for the Note payment remitted on February 1, 2023?
- May the County's remaining three (3) Note payments be paid from its Emergency Road and Bridge Repair funds?
Brief Response
- Borrow and expend are not synonymous. If the County makes the factual determination that payment on the subject note is an "expen[se] on the [P]roject," the County may use the Emergency Road and Bridge Repair funds to make such payments that become due after the date the County received the Emergency Road and Bridge Repair funds.
- No. Even assuming the County makes the factual determination that payment towards the Note is an "expen[se] on the [P]roject," the County may not reimburse itself for any amount that it expended on the Project prior to the date it received the Emergency Road and Bridge Repair funds.
- Please see the response to your first question.
Applicable Law and Discussion
Section 65-1-179(1) sets forth the creation of a special fund in the State Treasury known as the Emergency Road and Bridge Repair ("ERBR") Fund. Section 65-1-179(2) provides how the fund shall be utilized:
Money in the fund shall be utilized by the Mississippi Department of Transportation, with the advice of the Emergency Road and Bridge Repair Fund Advisory Board, to provide funding for emergency repairs to roads, streets and highways in this state and emergency bridge repairs on public roads, streets and highways in this state, as determined by a majority vote of the Mississippi Transportation Commission.
Relevant to this opinion, Section 65-1-179(4) provides, in pertinent part, "[u]nder no circumstances . . . shall Emergency Road and Bridge Repair Fund monies be used to reimburse any amount that has been expended on the project prior to the award of such monies to the recipient." (emphasis added).
While the statute does not define the term "expend," Merriam-Webster defines the term as "to pay out" or "to make use of for a specific purpose." MERRIAM-WEBSTER DICTIONARY, https://www.merriam-webster.com/dictionary/expend (last visited August 23, 2023). You ask whether ERBR funds may be used to repay money borrowed out of necessity by the County to pay Project costs when the money was borrowed prior to the County's award of the ERBR grant. Merriam-Webster defines "borrow" as "to receive with the implied or expressed intention of returning the same or an equivalent." MERRIAM-WEBSTER DICTIONARY, https://www.merriam-webster.com/dictionary/borrow (last visited August 23, 2023). Accordingly, "expend" and "borrow" are not synonymous.
It is therefore the opinion of this office that if the County makes the factual determination that payment on the subject note is an "expen[se] on the [P]roject," the County may use the ERBR funds to make such payments that become due after the County's receipt of the ERBR funds. This is because the expenditure occurs when the payment is made. This said, pursuant to Section 65-1-179, any payment must still be in accordance with the County's Memorandum of Understanding with MDOT.
Finally, the County's receipt of ERBR funds may implicate federal law. This opinion does not consider such implications because this office may not opine on matters of federal law. Miss. Code Ann. § 7-5-25.
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/ Maggie Kate Bobo
Maggie Kate Bobo
Special Assistant Attorney General