Original Reports

Council’s Illegal Off-Budget Spending Needs to Be Corrected, Not Expanded

One point of contention in the political wrangling over Tiverton’s future gambling revenue is whether the Town Council can set up restricted accounts outside of the town’s ordinary budget process (including the financial town referendum [FTR]) and put dedicated revenue into them. Town Solicitor Anthony DeSisto seems to have advised the council that it can do so.

That advice is incorrect. Tiverton’s Home Rule Charter is unambiguous that all anticipated revenue of the town must be accounted for in the budgeting process. In Section 503(1), dealing with the town administrator’s “duties and powers” in the budgeting process, the charter states:

The Municipal budget, as proposed by the Town Administrator shall include all anticipated revenues and expenditures, except those for the school purposes, and the total of such expenditures shall not be greater than the total of the anticipated revenue. He/She shall incorporate the total of these expenditures and revenues with the total he/she has arrived at for general town purposes.

According to the town’s budgeting process described in Section 301, the administrator’s budget is the starting point for the municipal budget, period. Restricted funds can be noted as such, so the council and Budget Committee know that they cannot be changed, but they must be part of the discussion.

Just as clearly, the council has no authority to create those restricted funds outside the regular budget process without a direct vote of the people. Section 1214 of the charter states:

All fees, penalties, payments and miscellaneous sources of revenue including but not limited to vending machines, copy machines, and recreational activities collected by Town Officials or agencies in their official capacities shall be transmitted to the town treasury to be deposited in the general funds of the town.

Casino revenue is just a whole lot of “miscellaneous sources of revenue” and must therefore go into the general fund. To be sure, the town government can set up restricted funds paid out of revenue, but the charter requires voter approval, at least over certain amounts. Section 203 provides the thresholds and process for expenditures outside of the operating budget:

Any major or special appropriation, other than those which are part of the annual budget, for an amount in excess of $500,000, and any proposal for the borrowing of money by the Town either by note or by the issuance of bonds in an amount in excess of $500,000, whether such appropriation or such borrowing be for school purposes or for any other Town purpose, including the issuance of special obligation bonds under Chapter 33.2 of Title 45 of the General Laws, must be approved by the electors at a referendum.

Revenue from the Twin River operation will well exceed the $500,000 maximum that the council can spend without voter approval. So, first, the casino money must be part of the budget process and deposited in the general fund, and second, the council cannot spend it without either using the budget process or securing a public vote.

Mr. DeSisto may be getting the wrong impression of the budget process because the town government is currently handling money in an illegal way, in violation of the charter. The ordinance creating the Pay as You Throw (PAYT) program for trash, which puts revenue from the town garbage bags into a dedicated account for closure of the landfill, is written as if the council has the authority to put revenue into such a fund, but somebody who wasn’t around for the 2011 financial town meeting (FTM) wouldn’t know that the program received specific voter approval.

The following quotation is from the council’s minutes for its March 28 meeting of that year:

Solicitor Teitz made note the agenda talked about implementation, and to clarify, a separate vote to forward the resolution to the Budget Committee to place on FTM docket is needed; the resolve restricts the proceeds, the language in the Charter mentions fees collected. The Solicitor cited section 1214, page 27, this is a fee, may have the effect of a tax but it is a fee.

A review of the video for that year’s FTM shows that the vote actually did take place.

The complicating factor is that the vote was taken as a resolution in the FTM docket, which should have made it valid for the duration of that year’s budget only. Resolutions have to be renewed each year, and the PAYT restricted account has not been renewed. In other words, the town has been putting that money into a restricted account illegally for six years. To avoid an annual vote, the council would have to present voters with an opportunity to write the account into the charter or provide some other vote akin to a bond approval, making clear to voters that the restricted account will go on forever, or end at some future date.

Tiverton taxpayers may have some legal recourse to force the town to return money that it spent illegally, but most residents would likely agree that what’s done is done. (The money will be needed in order to close the landfill, after all.) Going forward, however, if the town administrator submits budgets that don’t account for every penny of revenue and expenditure, he may find himself the target of charter complaints, especially if the hidden money includes gambling revenue.

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Justin Katz

Justin Katz is a writer and researcher focusing on Rhode Island policy and politics. For more about Justin, see our About page. justin@justinkatz.com (401) 835-7156.

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