Can a Mississippi city legally pay a $27,000 water-tap fee for a nonprofit-owned building?

Plain-English summary

Calling Panther Heritage, a nonprofit, owns the historic Millsaps Hotel building in Hazlehurst, which now houses the local Boys and Girls Club. The nonprofit has been renovating the building with grant money. Adding a fire suppression system required upgrading the building's water-supply tap to the city, at an estimated cost of $27,000. Calling Panther Heritage asked the City of Hazlehurst to pay that cost. The city's attorney asked the AG whether that was lawful.

The starting point in Mississippi is a constitutional bar on government donations. Miss. Const. § 66 prohibits any law granting a donation or gratuity except by a two-thirds legislative supermajority and never for sectarian purposes. The Mississippi Supreme Court applied that prohibition to municipalities in McAdams v. Perkins (2016), and AG opinions have followed the same line. Generally, then, a city paying for a nonprofit's water tap looks like a prohibited donation.

But the home-rule statute, Miss. Code § 21-17-5, includes an exception: a municipality may make a donation if "such actions are specifically authorized by another statute or law." That exception works through specific donation-authorizing statutes, two of which are relevant here.

Section 21-19-65 authorizes municipalities to expend general-fund money "to match any other funds for the purpose of supporting social and community service programs" administered by government bodies or by 501(c)(3) tax-exempt nonprofits. The city's contribution must (1) match other funds and (2) be tied to a finding that the recipient is a "social and community service program" of the type the statute contemplates. The Boys and Girls Club use of the Millsaps Hotel building has a strong claim to that category, but the determination is for the city to make.

Section 21-17-1(8) is the broader companion authority. It allows a municipality to "expend municipal funds to match any state, federal or private funding for any program administered by . . . any nonprofit organization that is exempt under 26 USCS Section 501(c)(3) from paying federal income tax." This is the cleaner fit for the Hazlehurst situation: Calling Panther Heritage is a 501(c)(3), the renovation is grant-funded, and the city's $27,000 would be a match.

The mandatory matching requirement is real. Both statutes require the donation to match other funding; AG opinions have repeatedly emphasized that point (citing Hopson and Bruni). A bare gift would not satisfy either statute. The city has to identify the matching funding and tie its contribution to it.

If the city makes the required factual findings on the record and the matching condition is met, the payment is lawful. If not, Section 66 of the Constitution and the McAdams line of cases stand in the way.

What this means for you

If you are a Mississippi mayor or alderman: A nonprofit asking for direct municipal funding is not automatically a no, but it is also not a yes by goodwill alone. You need a vote of the governing body that finds (1) the recipient is a 501(c)(3) (under § 21-17-1(8)) or operates a social/community service program (under § 21-19-65), AND (2) the city's contribution matches other state, federal, or private funding. Document both findings in the minutes.

If you are a nonprofit asking a Mississippi city for help: Lead with the matching-funds story. Show the grant or pledge that the city is matching against, in writing. Show your 501(c)(3) determination letter. The city's attorney will need both before signing off. A request that is just "we need money" without a matching-funds anchor probably will not get past Section 66.

If you are the city attorney reviewing the request: Confirm the 501(c)(3) status with a current IRS letter (a determination letter from years ago is not enough if status has lapsed). Confirm the matching-funds calculation, dollar for dollar. Identify the specific subsection authority on which the resolution rests. Build the resolution to recite the findings expressly so a later challenger cannot say the city skipped them.

If you are a Boys and Girls Club director or other nonprofit operator in Mississippi: This is good news for fire-suppression upgrades and similar capital costs that have a clear nonprofit-program connection. But the funding is not automatic. Plan as if the city might say no, and structure your funding stack to keep the project alive even without the municipal match.

If you are a citizen or journalist watching municipal spending: The matching-funds requirement is the audit trail. If a municipal donation does not point to specific other funding, it is procedurally vulnerable. Public records requests for the resolution and supporting documents will tell you whether the city did the homework.

Common questions

Why does Mississippi treat this as "donation" law and not just normal contracting?

Because Section 66 of the state constitution drew a hard line in the post-Reconstruction era against state and local financial gifts to private parties. The line has been softened by statutes that authorize specific kinds of contributions, but the constitutional baseline still treats most direct municipal-to-nonprofit transfers as suspect.

Could the city instead just contract with the nonprofit for services?

Maybe. The opinion does not address service-contract structures, but Mississippi cities can buy services from nonprofits at fair value. The donation analysis is triggered by gratuitous transfers; a paid contract for actual services delivered is a different question.

What kinds of nonprofits qualify under § 21-19-65?

Section 21-19-65 covers "social and community service programs." That category has been read to include youth programs, mental health and disability services, food and shelter programs, and similar community-benefit operations. Each request requires a fact-specific finding by the city.

What kinds of funding sources count for the "match"?

State funds, federal funds, and private funds. The matching dollar can come from a federal grant, a state appropriation, foundation grants, corporate sponsorships, or individual donations to the nonprofit. The opinion does not address whether the city's own existing prior contributions can serve as a match (probably not, in the AG's framing).

What if there's no matching funding available?

Then neither § 21-19-65 nor § 21-17-1(8) authorizes the payment, and the constitutional prohibition applies. The city would have to find some other authority (like a contract for services) or decline.

Is this just a Mississippi rule?

Mississippi's anti-donation framework is one of the strictest in the country, but several states have similar constitutional or statutory bars (Texas, Arkansas, Louisiana, and others). The matching-funds-as-savior approach is also seen in those states, with variations. Across-the-board generalization is not safe; check each state's framework separately.

Background and statutory framework

Mississippi Constitution § 66 establishes the baseline: "No law granting a donation or gratuity in favor of any person or object shall be enacted except by the concurrence of two-thirds of the members elect of each branch of the Legislature, nor by any vote for a sectarian purpose or use." That language applies to legislative grants and, through Mississippi Supreme Court case law, governs municipalities as well. McAdams v. Perkins, 204 So. 3d 1257, 1265 (Miss. 2016).

Miss. Code Ann. § 21-17-5 is the municipal home-rule statute. Section 21-17-5(2) allows a municipality to grant a donation if "such actions are specifically authorized by another statute or law of the State of Mississippi." That subsection is the gateway through which donations can be made; without specific statutory authorization, Section 66 controls.

The two specific authorizing statutes the opinion identifies:

Section 21-19-65 grants municipalities the power "to expend monies from the municipal general fund to match any other funds for the purpose of supporting social and community service programs" administered by state or federal government bodies or by tax-exempt nonprofits. Two factual findings are required: that the recipient is a "social and community service program . . . of the same type and nature as those outlined in Section 21-19-65," and that there are matching funds. Cited prior opinions: MS AG Op., Hopson (May 1, 2025); MS AG Op., Cook (Sept. 17, 2010).

Section 21-17-1(8) is broader: "[t]he governing authority of any municipality, in its discretion, may expend municipal funds to match any state, federal or private funding for any program administered by the State of Mississippi, the United States government or any nonprofit organization that is exempt under 26 USCS Section 501(c)(3) from paying federal income tax." Cited as authority for the proposition that this section "overrides the general prohibition against municipal donations": MS AG Op., Kirk (Nov. 29, 2023).

Both statutes carry the matching-funds mandate as an absolute condition: "any donation made pursuant to either of these two statutes must comply with the requirement for matching funds." MS AG Op., Hopson at 3 (citing MS AG Op., Bruni at 2 (Nov. 19, 2024)).

Citations

The constitutional prohibition: Miss. Const. § 66. The Supreme Court application to municipalities: McAdams v. Perkins, 204 So. 3d 1257, 1265 (Miss. 2016). The home-rule gateway: Miss. Code Ann. § 21-17-5(2). The two specific authorizations: Miss. Code Ann. §§ 21-19-65 and 21-17-1(8). The federal tax-exempt category: 26 U.S.C. § 501(c)(3). Prior AG opinions on matching funds: Hopson (May 1, 2025); Cook (Sept. 17, 2010); Kirk (Nov. 29, 2023); Bruni (Nov. 19, 2024); Ladner (Feb. 20, 2024).

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2025/11/T.-Rutland-November-12-2025-Municipal-Donation-to-Nonprofit-Organization.pdf

Original opinion text

November 12, 2025

Timothy L. Rutland, Esq.
Attorney, City of Hazlehurst
Post Office Box 899
Hazlehurst, Mississippi 39083

Re: Municipal Donation to Nonprofit Organization

Dear Mr. Rutland:

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

Background

Calling Panther Heritage, LLC ("Heritage"), a nonprofit organization, owns the Millsaps Hotel building. Through grants, Heritage has secured funding to renovate the building, which houses the local Boys and Girls Club. In the process of adding a fire suppression system to the building, it was determined that the building will require a larger tap to the city's water supply system, the cost of which is estimated to be $27,000.00.

Heritage has approached the City of Hazlehurst ("City") to pay the cost of the water tap.

Question Presented

May the City lawfully pay the cost of the water tap for the nonprofit organization?

Brief Response

If the City makes the requisite factual determinations under certain statutes authorizing municipal contributions to nonprofit organizations, then the City may lawfully pay the cost of the water tap.

Applicable Law and Discussion

Section 66 of the Mississippi Constitution provides: "No law granting a donation or gratuity in favor of any person or object shall be enacted except by the concurrence of two-thirds of the members elect of each branch of the Legislature, nor by any vote for a sectarian purpose or use." Therefore, municipalities generally are prohibited from donating public funds. McAdams v. Perkins, 204 So. 3d 1257, 1265 (Miss. 2016); MS AG Op., Ladner at *2 (Feb. 20, 2024). However, Mississippi Code Annotated Section 21-17-5, the "home rule" statute, provides that municipalities may grant a donation if "such actions are specifically authorized by another statute or law of the State of Mississippi. . . ." Miss. Code Ann. § 21-17-5(2).

In this case, there are two potentially applicable statutes providing such specific authorization: Sections 21-19-65 and 21-17-1(8).

Section 21-19-65 grants municipalities the specific "power to expend monies from the municipal general fund to match any other funds for the purpose of supporting social and community service programs" administered by the state or federal government or by a tax-exempt nonprofit organization. Miss. Code Ann. § 21-19-65 (emphasis added). Accordingly, if the City 1) makes the factual determination that Heritage is a "social and community service program . . . of the same type and nature as those outlined in Section 21-19-65[,]" and 2) there are matching funds for the municipal contribution, then the City may make the contribution under Section 21-19-65. MS AG Op., Hopson (May 1, 2025) at 2 (citing MS AG Op., Cook at 1 (Sept. 17, 2010)).

Section 21-17-1(8) provides:

In addition to the authority to expend matching funds under Section 21-19-65, the governing authority of any municipality, in its discretion, may expend municipal funds to match any state, federal or private funding for any program administered by the State of Mississippi, the United States government or any nonprofit organization that is exempt under 26 USCS Section 501(c)(3) from paying federal income tax.

"The authorization in Section 21-17-1(8) overrides the general prohibition against municipal donations. . . ." MS AG Op., Kirk at *1 (Nov. 29, 2023). Therefore, if the City determines 1) that Heritage is a federally tax-exempt nonprofit organization, and 2) that the amount of the $27,000.00 contribution matches existing state, federal, or private funding, then the City may make the contribution under Section 21-17-1(8).

It is mandatory that "any donation made pursuant to either of these two statutes must comply with the requirement for matching funds." Hopson at 3 (citing MS AG Op., Bruni at 2 (Nov. 19, 2024)).

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/ Caleb A. Pracht
Caleb A. Pracht
Special Assistant Attorney General