This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.
LOCAL LAWS -- Municipal Funds (authority to supersede village budget procedures)
MUNICIPAL FUNDS -- Budget Procedures (authority to supersede in village); (authority to establish fund for annual payments under ambulance services agreement)
REAL PROPERTY -- Sale (use of proceeds to establish fund for annual payments under ambulance services agreement)
VILLAGE LAW §§5-506, 5-532; MUNICIPAL HOME RULE LAW §10(1)(ii)(e)(3): A village may not hold the proceeds of the sale of unneeded village real property in a separate fund to be used over the course of several fiscal years to fund annual appropriations to pay consideration under ambulance services agreements.
You ask whether a village may hold the proceeds of the sale of unneeded village real property in a separate fund to be used over the course of several fiscal years to finance appropriations for the consideration due under annual ambulance services agreements.1
The village budget process (see Village Law §5-500, et seq.) generally requires that, upon receipt, all revenues generated by a village function, including proceeds from the sale of village property, must be credited to the appropriate village budgetary fund, usually the village's general fund (see Village Law §5-506[1][b]; 1996 Opns St Comp No. 96-4, p 7; 9 Opns St Comp, 1953, p 374; 5 Op St Comp, 1949, p 500; see also 1982 Opns St Comp No. 82-238, p 299; 1980 Opns St Comp No. 80-784, p 214; 18 Opns St Comp, 1962, p 362; cf. General Municipal Law §6- l 2). The village budget process also requires moneys in the general fund to be used to finance appropriations for the current fiscal year (Village Law §§5-508[4], 5-520[1]-[4], 5-522 3).
Fund balances estimated to be on hand at the close of the current fiscal year must be appropriated for the ensuing fiscal year’s budget, except for amounts “ reserved for stated purposes pursuant to law” and a “reasonable amount” of unappropriated, unreserved fund balance4 (emphasis added; Village Law §5-506[1][c]; see also Opn No. 96-4, supra; Korn v Gulotta, 72 NY2d 375, 534 NYS2d 108; 1980 Opns St Comp No. 80-280, p 79; 1970 Opns St Comp No. 70-393, unreported).
Thus, under these budget provisions, revenues received in one fiscal year may be reserved and carried over into an ensuing fiscal year only “for stated purposes pursuant to law”. Article 2 of the General Municipal Law contains a series of provisions that authorizes villages and certain other local governments to establish reserve funds for various stated purposes (General Municipal Law §§6-c through 6-r). None of these provisions, and no other statute, however, authorizes a village to reserve monies for the payment of amounts due on the annual ambulance service contracts at issue here (see, e.g., 1979 Opns St Comp No. 79-398, unreported; compare General Municipal Law §6-o, solid waste management facility reserve fund).
Moreover, a village may not, pursuant to its home rule power, provide for the proposed reserve fund by local law. A village may not adopt local laws "changing, amending or superseding" the statutory village budget process (see Municipal Home Rule Law §10[1][ii][e][3]; Village Law §5-532), or authorizing the establishment of reserve funds not authorized by State statute (see Opn No. 96-4, supra; 1980 Opns St Comp No. 80-710, p 195; see also 1980 Opns St Comp No. 80-302, p 89).
Accordingly, a village may not hold the proceeds of the sale of unneeded village real property in a separate fund to be used over the course of several fiscal years to fund annual appropriations to pay consideration under ambulance services agreements.
March 20, 2007
Wayne D. Esannason, Esq., Village Attorney
Village of Scarsdale
1 See General Municipal Law §122-b, authorizing villages to enter into contracts for emergency medical service, general ambulance service or a combination of those services.
2 General Municipal Law §6-l generally requires, inter alia, that municipal corporations establish a mandatory reserve fund, upon the cash sale of a capital improvement, which was financed with the proceeds of obligations that remain outstanding at the time of the sale. Monies in the reserve fund must be used to pay debt service on the outstanding obligations or for certain other specified purposes. We are informed that the real property in question herein was not financed by the proceeds of any obligations that were outstanding at the time of the sale and therefore, section 6-l is not applicable here.
3 Village Law §5-522 provides that, except for appropriations for capital projects, each appropriation, to the extent that it has not been expended or obligated, lapses at the close of the fiscal year for which it is made.
4 The amount of unappropriated, unreserved fund balance retained must be “consistent with prudent budgeting practices” and be “necessary to ensure the orderly operation of village government and the continued provision of services, taking into account factors including, but not limited to, the size of the fund, cash flows, the certainty with which the amounts of revenues and expenditures can be estimated, and the village’s experience in prior fiscal years.” (Village Law §5-506[1] [c]).