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0 INFORMATION MEMO ArG2U lEoIF Ln/tINNESOTA Public Purpose Expenditures CITIES Understand the general criteria for a valid public expenditure„ such as having a public purpose and having direct or implied authority in law. Find a list of commonly analyzed expenditures, including an analysis of the types of factors relied upon to determine the validity or invalidity of donations to organizations, contributions toward economic development, expenditures on certain employee expenses, and more. RELEVANT LINKS: I. Criteria for valid public expenditures In order for an expenditure of public funds to represent a lawful expenditure, it should meet both of the following standards: • Public purpose. A public purpose for the expenditure must exist. • Authority. Specific or implied authority for the expenditure must arise out of a statute or from the city's charter. Specific authority usually is fairly clear. In contrast, whether a particular statute or charter provision implicitly provides authority for an expenditure often becomes subject to interpretation. Cities should consult with their city attorneys regarding whether implied authority for a specific expenditure exists. Minn. Const. art. X, § 1. The Minnesota Constitution allows taxation to further a public purpose, Minn Const. art. XI, § 2. but generally prohibits the passing of any local or special ordinance or law authorizing taxation for a private purpose. Minnesota's Constitution also generally prohibits giving or loaning the credit of the state to specifically aid an individual, an association, or a corporation. This does not mean, Minn Const. art. XII, § 1. however, that a city can never make a contribution to an association or a corporation; but, in order to do so, the expenditure must further a public Minn. Stat. § 469.191. purpose and must be authorized by a statute or charter. For example, a specific state law allows cities to give donations (of up to $50,000 per Handbook, Community Development and year) to any incorporated developmental society or organization. Also, Redevelopment various statutory economic development tools make it possible for cities to make certain contributions toward development and redevelopment. Again, cities should consult with their city attorneys or bond attorneys regarding allowable expenditures for development. Since, as stated above, a public expenditure must always further a public purpose, analysis of what qualifies as a "public purpose" becomes crucial. Visina v Freeman, 252 The meaning of "public purpose" constantly is evolving. The Minnesota Minn. 177, 89 N.W.2d 635 (1958). Supreme Court has followed a liberal approach, generally finding a "public purpose" when the activity in question meets all of the following: This material is provided as general information and is not a substitute for legal advice. Consult your attorney for advice concerning speck situations. 145 University Ave. West www.imc.org 7/18/2016 Saint Paul, MN 55103-2044 (651) 281-1200 or (800) 925-1122 0 2016 All Rights Reserved