Public Purpose Expenditures

Information Memo

Published: August 26, 2024

This content conveys general information. Do not use it as a substitute for legal advice. Any attorney general opinions cited are available from League of Minnesota Cities Research staff.

Criteria for valid public expenditures

For an expenditure of public funds to be lawful, it must have:

  • A public purpose.
  • Express or implied authority.

An expenditure has a public purpose when it:

  • Benefits the community.
  • Directly relates to government activity.
  • Does not mainly benefit a private interest (Visina v. Freeman, 89 N.W.2d 635 (Minn. 1958)).

Express authority is clearly stated in writing. Implied authority is not clearly stated in writing but is assumed based on other written authority.

The Minnesota Constitution allows taxation for a public purpose, but generally prohibits local taxation for a private purpose (Minn. Const. art. X, § 1). An expenditure with a private purpose may be allowed if its primary purpose is public (R.E. Short Co. v. City of Minneapolis, 269 N.W.2d 331 (Minn. 1978)). The Minnesota Constitution also generally prohibits cities from donating money or loaning state credit to a person, association, or corporation (Minn. Const. art. XI, § 2). Cities can, however, contribute to an association or a corporation if the expenditure has a public purpose and  statutory or charter authority (Minn. Const. art. XII, § 1). There are examples of statutory authority throughout this memo.

 Activities with a public purpose promote:

  • Public health.
  • Public safety.
  • General welfare.
  • Security.
  • Prosperity.
  • Contentment (City of Pipestone v. Madsen, 178 N.W.2d 594 (Minn. 1970)).

If an expenditure is challenged, courts will focus on whether the expenditure benefits the community and relates to government activity (Abrahamson v. St. Louis Sch. Dist., 802 N.W.2d 393 (Minn. App. 2011)), affirmed in part and reversed in part in Abrahamson v. St. Louis Cnty. Sch. Dist. 2142, 819 N.W.2d 129 (Minn. 2012)).

The following could result from an expenditure that is not lawful:

  • Taxpayer lawsuits. It is costly for a city council to defend itself in a lawsuit. A city council could be legally responsible for the expenditure because of the responsibility to spend the public’s money for a public purpose (Walser Auto Sales v. City of Richfield, 635 N.W.2d 391 (Minn. App. 2001)). Individual council members could also be legally responsible for the expenditure.
  • Noncompliance finding by the state auditor. This could result in future special audits and embarrassment for the city. (See generally, State Auditor’s Statements of Position (filter by public purpose category.))
  • Public mistrust. The council could lose the trust of the people in the community.
  • Changes in law. Serious violations may cause the Legislature to make more restrictive laws on city expenditures.

Seek legal advice

Cities deciding if an expenditure has a public purpose, or how a statutory or charter authority may apply, should consult their city attorneys for legal advice.  

Common questions on public spending

Many statutes limit cities’ authority to spend money based on their type (statutory or home rule charter) or population-based class (Minn. Stat. § 410.01).

The expenditures listed below mostly apply to statutory cities. Charter cities should check their charters. Generally, charter cities can use the law that gives statutory cities the authority for an expenditure when:

  • The city’s charter is silent on the specific issue.
  • No law exists that prohibits a charter city from making the expenditure.
  • No law exists that states that a city’s charter must be followed instead of the law on that specific issue (Minn. Stat. § 410.33).

Advertising

Cities have the authority to make advertising expenditures. This authority may apply only to a certain type of advertising for a specific purpose or it may vary based on the class of the city (Minn. Stat. §§ 469.187-.189).

City council members should carefully review an expenditure to make sure it is an advertising expenditure. A donation disguised as an advertising expenditure is not lawful (A.G. Op. (Jan. 30, 1930)).

First-class cities

Any first-class city can levy a tax, no more than 0.00080% of the estimated market value, and the city council can use the proceeds for city publicity. The city council can create a publicity board or bureau to manage the fund. The board must follow any conditions and limitations that the city council puts in city ordinance (Minn. Stat. § 469.187).

Second- and third-class cities

Any second- or third-class city (either statutory or home rule charter) can levy a tax to use for advertising:

  • The community’s agricultural resources.
  • The community’s industrial business.
  • All other community resources (Minn. Stat. § 469.188).

Second-, third-, and fourth-class cities

Any second-, third-, or fourth-class statutory or home rule charter city can spend money each year to advertise the city and its resources and advantages. This money must only be used to advertise the city or for cooperative programs that promote the resources and advantages of an area that includes several cities (Minn. Stat. § 469.189).

Statutory cities

Any statutory city can spend money to create a bureau of information and publicity that:

  • Gives information to tourists.
  • Advertises the outdoors.
  • Prepares, publishes, and hands out information about community recreational facilities and business and industrial resources (Stat. § 469.186).

Airports

Cities can acquire, maintain, and operate airports (Minn. Stat. § 360.032) and help other cities exercise the powers and authority they have under the aeronautics code (Minn. Stat. § 360.043), including by a gift or lease of real property, a donation or loan of personal property, or the appropriation of money.

Bridges

All statutory cities and fourth-class home rule charter cities can spend money to help improve and care for roads and bridges outside of city limits if the roads lead into the city (Minn. Stat. § 441.26; Minn. Stat. § 410.01).

All cities can acquire, buy, build, care for, and operate bridges and their approaches (the parts of bridges that carry traffic from land to the bridge). Cities must pass an ordinance that states their statutory authority to do so (Minn. Stat. § 441.48; Minn. Stat. §§ 441.47-.55).

Ports and docks

All cities with a population of 4,000 to 50,000 can acquire land on a navigable stream (a stream that is deep and wide enough for a boat) in the city. The city can buy or condemn the land (exercise its eminent domain powers to seize private property for public use) (Minn. Stat. § 458.02). The city can then build and care for:

  • Docks, quays, levees, wharves, landing places, railroads, and other transportation loading and unloading places.
  • Water freight and passenger stations.
  • Terminals and terminal buildings for carriers.
  • Necessary equipment and appurtenances (accessory objects) (Minn. Stat. § 458.02).

Businesses and economic development

Several statutes give cities the authority to give money or real property (land and buildings) for economic development.

Cities can spend up to $50,000 each year on any state incorporated development society or organization to promote, advertise, improve, or develop city economic and agricultural resources (Minn. Stat. § 469.191). This allows cities to contribute to a chamber of commerce, but it does not allow cities to become members of or pay dues to a chamber of commerce (A.G. Op. (June 27, 1997) informal letter opinion to Staples).

Common tools cities use to encourage development include:

Cities should consult with their city attorney or city bond counsel when using any of these business or economic development tools.

Get more information about economic development programs from the Minnesota Department of Employment and Economic Development (DEED) at 180 E 5th St, Suite 1200, St. Paul, MN 55101; (651) 259-7114 or (800) 657-3858.

Read about Community Development and Redevelopment in the Handbook for Minnesota Cities.

Cemeteries

Statutory cities may acquire and take care of cemetery grounds. Cities can buy cemeteries or acquire them by gift, devise (receiving real estate by the terms of a will), condemnation (exercising eminent domain powers to seize private property for public use), or other ways (Minn. Stat. § 412.221, subd. 9).

Any statutory city, town, or fourth-class home rule charter city can spend up to $10,000 each year on any public or private cemetery inside or outside of the city’s boundaries (Minn. Stat. § 471.84; Minn. Stat. § 410.01). The cemetery must be used for burial of the dead without restriction. The statute does not state how the money must be used by the cemetery.

Alternatively, a city can enter a joint powers agreement with another government entity to run  a cemetery. In addition to the joint powers agreement, neighboring cities and towns can jointly agree to take care of a cemetery, with the same $10,000-per-year limit for each city.

View the Handbook for Minnesota Cities Chapter 16: Intergovernmental Cooperation.

Community celebrations

The law allows these types of expenditures for specific events, like county fairs, Memorial Day observances, and centennial or historical celebrations.

While cities cannot fundraise or solicit donations, an outside group or organization can hold a fundraiser for this purpose and donate to the city after the event. For many cities that hold community events, it is common for the city to ask a community organization to organize and hold the event. Because cities have limited authority to host annual city festivals, cities should not collect donations or pay expenses without statutory approval.

View the Minnesota Office of the State Auditor’s Statement of Position on Public Expenditures: Donations and Dues (pdf).

County fairs

Any city or town that hosts county fairs and fairs for district agricultural societies or associations can set aside money for the agricultural society or association if both:

  • The society or association is a member of the Minnesota State Agricultural Society.
  • The fair is held within the city’s or town’s corporate limits, or within close proximity to the corporate limits (Minn. Stat. § 38.12).

Memorial Day observances

All cities can spend money for Memorial Day observances. Cities can spend up to $300 each year for each 75,000 people (Minn. Stat. § 465.50).

Centennial and historical celebrations

All statutory cities and second-, third-, or fourth-class home rule charter cities can spend money to celebrate the anniversary of important and outstanding events in city history (Minn. Stat. § 471.93; Minn. Stat. § 410.01). Cities can spend money on:

  • Collecting information and materials about the city’s history.
  • Preserving and storing information and materials about the city’s history.
  • Printing, publishing, handing out, and displaying information and materials about the city’s history.
  • Preserving historic information for future generations.

While this law does not specifically authorize city centennial celebrations, they may be considered a celebration of the anniversary of an important event in city history.

Each year, any city can set aside money from its general fund for the city, town, or county historical society to promote its historical work. The money set aside cannot be more than .02418% of estimated market value, which comes from ad valorem taxes (taxes that are proportional to the value of the underlying asset) on property or other revenue. However, the city can only set aside this money for a historical society associated with and approved by the Minnesota Historical Society (Minn. Stat. § 138.053).

Community centers

Any city can spend money to support public or private nonprofit senior citizen or youth center facilities, programs, and services (Minn. Stat. § 471.935). There is no law that allows cities to finance other community centers, but many cities do so through  state recreation laws (Minn. Stat. §§ 471.15-.191).

View the Office of the State Auditor letter on Expenditure of Public Funds to Schools and Senior Programs (pdf).

Decorations

Statutory cities can spend money on decorations, signs, plaques, and attached accessories for public streets, buildings, and parks (Minn. Stat. § 412.221, subd. 34). Cities should make sure that decorations are not religious.

Donations

To donate to any person, corporation, or private institution, an expenditure must have a public purpose and statutory or charter authority. There is no general authority for donations, but some laws allow cities to support certain organizations and causes. For example, one law permits donations to an incorporated developmental society (Minn. Stat. § 469.191), and some statutory economic development tools permit cities to contribute to city development and redevelopment.

See the Handbook for Minnesota Cities Chapter 14: Community Development and Redevelopment.

Although charities and other nonprofit organizations benefit communities, cities cannot donate to them without statutory or charter authority. Cities can, however, contract with a nonprofit organization for a particular service that cities provide but should enter into a written agreement with the nonprofit organization to document what the city will receive in exchange for the payment.

Cities can also accept gifts of real or personal property, including money, and use them following the donor’s terms (Minn. Stat. § 465.03; Minn. Stat. § 465.04). However, a city cannot accept or use gifts for religious or sectarian purposes. A resolution accepting the gift and the donor’s terms must receive an affirmative vote of two-thirds of city council members.

View the Accepting Donations model resolution (doc). 

View the Office of the State Auditor Statement of Position — Public Purpose Expenditures: Donations and Dues.

Cities cannot fundraise or solicit donations. The Office of the State Auditor has stated that cities and towns, including their departments, do not have authority to hold fundraisers (OSA Statement of Position: Fire Department and Volunteer Fire Relief Association Fundraisers and Donations). However, any city or town can, by resolution, authorize officials and staff to solicit contributions for National Night Out events or events or purposes that build positive relationships between law enforcement and the community (Minn. Stat. § 471.198).

View the Authorizing Solicitation of Contributions model ordinance (doc).

Nonprofit organizations in general

The attorney general and the state auditor have looked at whether cities can donate to different groups. Expenditures to the following groups or organizations do not have statutory authority and are not valid:

  • Supporting the Boy Scouts of America (A.G. Op. 59-a-3 (May 21, 1948)).
  • Sponsoring a local bowling team (A.G. Op. 218-r (Aug. 15, 1951)).
  • Sponsoring a local kittenball team (like softball) (A.G. Op. 59-a-22 (Aug. 7, 1951)).
  • Helping the American Legion build a Legion Hall (A.G. Op. 476-b-2 (Apr. 20, 1944)).
  • Supporting the Red Cross (A.G. Op. 218-r (Feb. 10, 1942)).
  • Supporting a campaign to stop the expansion of a neighboring city airport (A.G. Op. 476-b-2 (Apr. 29, 1954)).
  • Supporting schools (Office of the State Auditor letter on Expenditure of Public Funds to Schools and Senior Programs (pdf)).

Cities can support nonprofits in other ways. For example, cities can contract to support nonprofits, like contracting with a club to spend a Saturday cleaning up public grounds in exchange for money. Also, if a city has a fund created from gambling proceeds, those proceeds can be used for many types of charitable contributions that have a lawful purpose (Minn. Stat. § 349.213 (f)(2)).

Artistic organizations

Cities can spend money to support artistic organizations. The city council can split the money between multiple artistic organizations in amounts determined by the city council (Minn. Stat. § 471.941).

An association, corporation, or other group that gives people opportunities to participate in the creation, performance, or appreciation of artistic activities is an artistic organization. The law gives examples of artistic activities that cities can support, but this is not a complete list. These activities include music, dance, drama, folk art, architecture and allied fields, painting, sculpture, photography, graphic and craft arts, costume and fashion design, motion pictures, television, radio, tape and sound records, activities related to the presentation, performance, execution, and exhibition of the art forms, and the study of the arts and their application to the human environment.

Community food shelves

Any city can spend money to provide grants to nonprofit organizations that run community food shelves and give food to the needy without charge (Minn. Stat. § 465.039).

Prevention of cruelty to animals

If a city has a society for the prevention of cruelty to animals (SPCA), it can spend money to maintain and support the SPCA in the work it is organized to do (Minn. Stat. § 343.11). However, none of the money can pay the salary of any officer of the SPCA.

Solicitation of donations by firefighters

Any city can, by resolution, allow full-time firefighters employed by the city and while on duty, or volunteer firefighters serving the city while not on duty, to solicit charitable contributions from motorists (Minn. Stat. § 465.90).

Cities must follow the requirements in the law, including restrictions on the type of charitable organizations, the frequency and time frame of solicitations, and proof of insurance.

Surplus city equipment

Statutory and home rule charter cities can donate surplus equipment to a nonprofit organization. This includes equipment used by city public works departments, and cellular phones and emergency medical and firefighting equipment no longer needed by the city (because the phones or equipment no longer meet industry standards for emergency medical services, police, or fire departments; have minimal value; or have no resale value). Before donating, cities must adopt a policy on how the city will decide what qualifies a surplus item as eligible for donation and how the city will select the nonprofit organizations eligible to receive donations. The policy must state that cities are required to disclose to the nonprofit that the surplus equipment may be defective and cannot be relied upon for safety purposes” (Minn. Stat. § 471.3459).

View the Donation of Surplus City Equipment to a Nonprofit Organization model policy (doc).

Dues

Cities cannot join or become members of private organizations without statutory authority, even if there is statutory authority to contribute to the organization. Without authority for membership, cities do not have authority to pay membership dues (A.G. Op. (June 27, 1997) (informal letter opinion to Staples); (Office of the State Auditor, Statement of Position Public Expenditure: Donations and Dues).

All counties, cities, and towns can spend money for membership in county, regional, state, and national associations that are civic, educational, or governmental. The associations’ purpose must include the betterment and improvement of municipal government operations. Counties, cities, and towns can participate in the associations’ meetings and activities (Minn. Stat. § 471.96).

All cities and urban towns in Minnesota can spend money to pay dues to become members of the League of Minnesota Cities (Minn. Stat. § 465.58).

Elections

Cities can spend money to hold general and special elections authorized by law.

Special elections/advisory elections

Special elections, whether authorized by statute or city charter, are valid public expenditures.

Many home rule charter cities have charters with initiative and referendum provisions. These provisions give charter cities additional powers related to questions that can be put on a special election ballot. Voters in these cities often have the right to petition for special elections in specific situations.

Elections on ballot questions that the public has no statutory or charter authority to answer are considered advisory elections. Advisory elections are prohibited and expenditures on advisory elections are not valid. A.G. Op. 472-o (July 31, 1959). A.G. Op. 185-b-2 (June 28, 1962). A.G. Op. 185-b-2 (Apr. 6, 1962).

Read more on this topic in City Special Elections.  

Advocating/educating on a ballot question

Cities often ask if they can spend money:

  • For advertisements encouraging voters to support the city’s position on a local ballot question, like a “yes” vote for a special election to issue bonds or a “no” vote on a city charter issue.
  • To either support or oppose a state constitutional amendment ballot initiative.
Local ballot initiatives

Traditionally, the attorney general and the courts have allowed cities to publish and distribute publications intended only to inform the public of financial conditions and the potential effects of the passage or failure of a ballot question.

Generally, cities have not been allowed to spend money to promote or defeat passage of a local ballot question by presenting one-sided information on the issue. Elected officials can appear before citizens to orally advocate for a position if no expenditure is made (A.G. Op. 159-a-3 (May 24, 1966); Office of the State Auditor, Statement of Position: Expenditure of Public Funds on Ballot Issue Advocacy, Apr. 2014).

The Minnesota Supreme Court has questioned how much a city can  inform residents of a ballot measure or warn them of the direct financial consequences if the ballot measure succeeds or fails (Abrahamson v. St. Louis Cnty. Sch. Dist. 2142, 819 N.W.2d 129 (Minn. 2012)). While the court has not decided if cities can spend money to promote a specific ballot measure position, the court has warned that these expenditures would subject the city to campaign finance laws. The court has also said that any statement made by a city “with reckless disregard of whether it is false” could be punishable as a misdemeanor.

State constitutional ballot initiatives

Historically, the attorney general also has frowned upon expenditures made to support a position on a state constitutional ballot question. In one case, for example, the attorney general found that an expenditure to advocate for the adoption of a constitutional amendment was illegal. The attorney general stressed that the use of taxpayer money to support a specific political position was not appropriate because taxpayers can have different opinions about almost any political question (A.G. Op. 442-a-20 (July 10, 1952)).

A later opinion said that, in specific situations, spending money to support a specific position may be appropriate (A.G. Op. (June 30, 2006) (informal letter opinion)).

The attorney general and the state auditor have both stated that, where a state action or proposal could have a direct and substantial effect on a local government entity’s interests, that entity could spend money to protect or promote its interests — even by financially supporting one side of a ballot issue (Office of the State Auditor, Statement of Position: Expenditure of Public Funds on Ballot Issue Advocacy, Apr. 2014).

However, both the attorney general and the state auditor say that cities cannot spend money to advocate for a specific position if the proposed measure would indirectly affect the public at large.

City councils can make findings on whether a measure has a direct and substantial effect. Cities that want to spend money to support a specific position on a local ballot initiative should first consult with their city attorneys.

Cities that spend money to support a specific position on a state constitutional amendment must comply with campaign finance and fair campaign practice laws (Abrahamson v. St. Louis Cnty. Sch. Dist. 2142, 819 N.W.2d 129 (Minn. 2012)).

Local sales tax

State law bans cities from spending money to promote or advertise a referendum to support special legislation that imposes a local option sales tax (a special-purpose tax at the city or county level) (Minn. Stat. § 297A.99, subd. 1(d)). Cities can, however, spend money to:

  • Conduct the referendum.
  • Hand out information included in the resolution that shows the city council’s approval of the local sales tax if it includes a list of specific projects and the cost of each individual project.
  • Give notice of and hold public forums where people supporting and opposing the referendum can express their opinions.
  • Give information on the proposed local sales tax’s effect on consumer purchases.
  • Give information about the individual programs and projects to be funded with the local sales tax.

Employees/staff/public officials

Cities often ask about employee costs like:

  • Pay, expenses, and benefits.
  • Miscellaneous items like bonds, recognition events, and flowers.

Pay, expenses, and benefits

Statutory cities can create departments and advisory boards and appoint officers, employees, and agents necessary to properly manage and run city affairs. The city council can define the duties of its officers, employees, and other staff and set the pay for those positions (Minn. Stat. § 412.111).

Bonuses

A bonus for past services is considered a gratuity and is not valid, unless there is some agreement or understanding (A.G. Op. 270-d (Aug. 12, 1977); A.G. Op. 107-a-3 (Jan. 22, 1980)).

However, a bonus may be valid if it is part of a salary plan for employees who meet performance or longevity standards (A.G. Op. (Feb. 6, 1998) (informal letter opinion to Champlin)).

If a bonus comes from an earlier agreement or understanding about how or when payment of the bonus would happen, then the bonus may be valid.

Discounted or free items or services from city-owned business

There is no law that allows discounts for city employees on merchandise sold by city-owned businesses because of the city employees’ status. Discounts on merchandise to people who are not city employees or to employees for reasons other than their employment status (like any season pass holder) may be valid if the city council approves a policy outlining discounts (Office of the State Auditor, Petition Report: City of Becker).

Gift cards as compensation for board or commission service

State law allows city councils to set the pay for advisory boards unless it is set by law (Minn. Stat. § 412.111). Other laws specifically prohibit or limit pay for service on a board or commission.

The state auditor has said that if there is a prohibition or limitation on pay, then using a gift card beyond the prohibition or limitation may be an unauthorized expenditure. Where a law does authorize pay, using gift cards to provide that pay may still be an improper way of making the expenditure.

The state auditor recommends handling compensation payments through the city payroll or claim processes, with tax withholding as appropriate, not with cash or gift cards.

View the Minnesota Office of the State Auditor’s Statement of Position on Use of Gift Cards by Local Government Entities (pdf).

Insurance benefits

Cities can insure or protect city officers and employees and their dependents under group health insurance, life insurance, and accident insurance. The city can pay all or part of the premium or charges on the insurance or protection. These payments are considered additional compensation paid to the officer or employee, but are not considered income for the purpose of determining contributions or benefits under a public pension or retirement system.

Any city or town can insure or protect retired city officers and employees and their dependents under group life, health, accident, medical, and surgical benefits, or hospitalization insurance or benefits.

Cities can also contract with an insurance company for the voluntary purchase of long-term care insurance by city employees and their dependents (Minn. Stat. § 471.61, subds. 1, 2a, 5).

Mileage reimbursement

Cities can pay a mileage reimbursement to staff who travel for city business and use their own vehicles:

  • The city council sets the maximum amount to be reimbursed (Minn. Stat. § 471.665).
  • The Internal Revenue Service (IRS) sets the rate considered tax deductible for business use.
  • If a city sets its rate higher than the IRS rate, any additional amount is considered employee income.

Instead of mileage reimbursement, city councils can pay a monthly or periodic allowance to city officers or employees for using their personal vehicles for city business. Mileage allowance cannot be paid to council members unless authorized by law or city charter.

Preventive health and employee recognition (plaques, dinners, parties)

State law allows a statutory or home rule charter city to:

  • Create and run a preventive health program and employee recognition services for city employees.
  • Provide necessary staff, equipment, and facilities.
  • Spend money, as necessary, to achieve the program goals (Minn. Stat. § 15.46).

The state auditor narrowly interpreted this law, requiring the programs to be in writing and have clearly stated wellness and recognition goals. The city council must approve the program and decide the amount of money necessary to achieve the program goals (Office of the State Auditor, Statement of Position: Employee Recognition Programs and Events, Feb. 2014).

The state auditor also warns that in-kind benefits (benefits that are not money) to statutory city employees must have statutory authority. Cities should consult their city attorneys before offering in-kind benefits, like employee privileges (such as free rounds of golf) or discounts on items (like season passes) as part of wellness programs (Office of the State Auditor, Petition Report: City of Becker).

Public officials’ expenses

Statutory cities can pay expenses when council members carry out official duties. This does not include trips for lobbying or meetings and conventions not related to specific city projects (Minn. Stat. § 465.54). This also does not include paying for employees to participate in events, like golf tournaments.

Severance pay

Cities can pay severance to city employees and adopt rules for paying severance to city employees who leave employment. Severance pay cannot exceed the equivalent of one year of pay.

Severance pay does not include compensation for accumulated sick leave or other payments in the form of contributions by an employer toward premiums for group insurance policies for former employees.

The city must pay severance in a way that is agreed to by the employee and the employer, and must pay it over a period of no more than five years from retirement or termination (Minn. Stat. § 465.72).

Vacation leave

Any city council can allow paid or unpaid vacations to its regularly employed employees and officers. The city council can adopt vacation policies by ordinance or resolution, including policies that state the terms and conditions of vacations. Elected officials cannot receive payment for unused vacation or sick leave accruals (Minn. Stat. § 471.66).

Miscellaneous items

Cities often ask if they can spend money on the following items for their officers, board members, and staff.

Official performance bonds

City councils can pay the premium on a fidelity or faithful performance bond when city officers and employees are required provide them (Minn. Stat. § 415.18; Minn. Stat. § 412.111).

Flowers

There is no authority to purchase flowers for a city employee or city official who is ill or has lost a family member. Even if city employees contribute their own money for flowers, problems could arise under the state gift law if city employees purchase flowers for a supervisor. The gift law prohibits giving a gift to an elected or appointed official if the official has the power to make a decision that could affect a financial interest of the person giving the gift (Minn. Stat. § 471.895).

Many city supervisors qualify as appointed officials and often give feedback that directly affects salary raises for city employees. If a city employee gives a city supervisor a gift beyond what is authorized by law, the gift law may be violated. View Official Conflict of Interest for more details on the gift law

Entertainment (musical)

Statutory city councils can spend money to provide free musical entertainment (Minn. Stat. § 412.221, subd. 15). Many home rule charter cities have similar authority in their charters or rely on Minn. Stat. § 410.33.

Fourth-class home rule charter cities can levy a tax to provide musical entertainment to the public in public buildings or on public grounds. The maximum amount that can be spent each year is $3,500 (Minn. Stat. § 449.06; Minn. Stat. § 410.01).

Any third-class city can levy a tax to pay for free musical entertainment for the public. The annual expenditure cannot be more than $3,000 (Minn. Stat. § 449.08; Minn. Stat. § 410.01).

A more general law permits second-, third-, and fourth-class statutory cities and home rule charter cities to levy a tax to fund a band, orchestra, or chorus. To use this authority, the city council must get permission from the city’s voters (Minn. Stat. § 449.09; Minn. Stat. § 410.01; A.G. Op. No. 107, p. 188 (1949)).

To put the question on the ballot, cities must first receive a petition signed by 10% of the voters that proposes the funding. The statute provides the language the ballot question should include. Once received, the city council must put the question to the voters at the next general municipal election (Minn. Stat. § 449.10; Minn. Stat. § 449.11).

If a majority of voters who vote on the question approve it, then the city levies the tax, and the money must be kept in a special fund. The money can be used for maintenance, transportation, and employment of a band, orchestra, or chorus for city purposes. If the musical group is discontinued or the city decides by vote not to employ a band, orchestra, or chorus, the city council can transfer the tax already levied and collected to the general fund (Minn. Stat. § 449.09).

Furniture, office supplies

Statutory cities can purchase necessary office supplies like furniture, equipment, and stationery supplies, (Minn. Stat. § 412.221, subd. 1). Home rule charter cities’ charters usually have similar authority.

All statutory cities and charter cities can, by resolution, issue capital notes to purchase capital equipment, following the city debt limit. This includes computer hardware and software (either bundled with machinery or equipment or unbundled), together with application development services and training related to the use of the computer hardware and software. This also includes projects that eliminate R-22, meaning replacement of ice-making systems in existing public facilities that use R-22 as a refrigerant with systems that use alternative non-ozone-depleting refrigerants (Minn. Stat. § 410.32; Minn. Stat. § 412.301; Minn. Stat. § 240A.09, subd. (b)(2)).

Garbage

Statutory cities can adopt ordinances to regulate or provide for the disposal of sewage, garbage, and other refuse (Minn. Stat. § 412.221, subd. 22).

Home rule charter cities often have similar authority in their charters. If not, they can rely on Minn. Stat. § 410.33.

Hospitals and EMS

All statutory cities can spend money to provide hospitals (Minn. Stat. § 412.221, subd. 16). Third- and fourth-class home rule charter cities can establish, acquire, and operate hospitals. These cities can also acquire property by gift, purchase, or condemnation (exercising eminent domain powers to seize private property for public use) to use for a municipal hospital (Minn. Stat. §§ 447.05-.06).

Cities with municipal liquor stores can spend money from the liquor dispensary fund to build a community hospital. The amount that can be spent depends on the class and type of city and the type of liquor store. In some cases, a city is required to get voter approval before proceeding (Minn. Stat. § 447.045).

Any city or town can make grants for the use of a private, nonprofit, or public hospital or to an emergency medical services agency that serves the city or town. The city council or town board is required to authorize the grant after an affirmative vote of the town electors at the annual or special town meeting (Minn. Stat. § 465.037).

Cities can issue revenue bonds to finance the acquisition and improvement of nursing homes and related facilities. Cities can jointly create hospital districts with the power to own and run hospitals, nursing homes, and similar facilities (Minn. Stat. § 447.45).

Housing

Cities can adopt and develop municipal housing programs that do the following (Minn. Stat. Ch. 462C):

  • Make or purchase mortgage or rehabilitation loans to finance the acquisition or rehabilitation of single-family housing for low- and moderate-income individuals and families.
  • Make or purchase loans to finance multifamily housing developments or the rehabilitation of multifamily housing developments if the program is submitted for review.
  • Establish, by ordinance, a local housing trust fund or participate in a joint powers agreement to establish a regional housing trust fund.

To qualify, cities and participants in these programs are required to meet specific criteria. Cities can contact the League of Minnesota Cities for more information. Housing and Redevelopment Authorities (HRAs) also have authority to encourage the recovery and rehabilitation of blighted housing (Minn. Stat. §§ 469.001-.047).

A nonprofit organization can administer the local housing trust fund. The local housing trust fund can then encourage private charitable donations to the fund. Money in the local or regional housing trust fund cannot pay more than 10% of the balance of the fund for administrative expenses.

The money in this fund can also fund grants, loans, and loan guarantees for the development, rehabilitation, or financing of housing; match other funds from federal, state, or private resources for housing projects; or provide down payment assistance, rental assistance, and homebuyer counseling services (Minn. Stat. § 462C.16).

Individuals and public entities

The basic principle of valid expenditures is to spend public money for a public purpose. Generally, public money cannot be used to benefit an individual. Some limited exceptions exist, like the exceptions listed below.

Forgiving property taxes and special assessments

Generally, cities do not have authority to forgive taxes or special assessments levied to properties. However, state law allows for hardship assessment deferral in certain situations and permits cities to defer special assessments on property owned by people aged 65 or older, people retired because of permanent or total disability, or, in some cases, members of the National Guard or other military reserves called to active duty. To do so, the cities must adopt an ordinance or resolution creating standards and guidelines to determine the existence of a hardship and disability (Minn. Stat. § 435.193).

View the Special Assessment Toolkit for details of hardship deferrals and the special assessment process.

Property tax abatement is an economic development tool available to cities, counties, and school districts. Each taxing authority can abate its portion of taxes against a property identified for development for a limited number of years. Several criteria must be met to use this tool (Minn. Stat. §§ 469.1812-.1815). For further information about property tax abatement, contact the League of Minnesota Cities.

Aid to remedy emergency situations

Cities do not have authority to spend money to help individuals who suffer losses due to a natural disaster. Cities cannot donate money directly to the Red Cross or to similar organizations A.G. Op. 218-r (Feb. 10, 1942); A.G. Op. 476-b-2 (Oct. 11, 1946).

The law does allow cities to help other cities recovering from natural disasters. Emergency management statutes allow cities and political subdivisions to:

  • Provide mutual aid amongst each other (Minn. Stat. § 12.02, subd. 1(3)).
  • Enter contracts and incur obligations to fight disaster and provide emergency assistance to disaster victims. Political subdivisions can provide this assistance without complying with certain formalities, like those related to the appropriation and expenditure of public funds (Minn. Stat. § 12.37).
  • Provide personnel, equipment, and supplies to another political subdivision that requests assistance because of an emergency (Minn. Stat. § 12.331).

An emergency is unexpected circumstances that require immediate action to prevent a disaster from developing or happening. A disaster is a situation that creates an actual or likely serious threat to health and safety or that has resulted or is likely to result in catastrophic loss to property or the environment, and for which normal relief and assistance are unable to fix or prevent the injury or loss (Minn. Stat. § 12.03, subds. 2, 3).

Public entities

City councils can spend money on county extension work (Minn. Stat. § 38.345). This work includes educational programs and services provided by extension educators about agriculture, agricultural finance, economic development, nutrition, youth leadership development (like 4-H programs), leadership, and environment and natural resources (Minn. Stat. § 38.331, subd. 2).

Any public corporation can lease or convey (transfer by sale or gift) its land for a nominal amount (a small or insignificant amount of money or value) to the:

  • State of Minnesota or any government subdivision.
  • U.S. government or any agency of the federal government.
  • Another public corporation or to the Minnesota State Armory Building Commission.

This authority also allows public land to be conveyed without consideration (something of value given by each side) or for an agreed amount (Minn. Stat. § 465.035).

Any city, town, county, or school district can transfer its personal property to another public corporation for public use. This transfer can happen without consideration or for a nominal amount, but the city council is first required to authorize the transfer (Minn. Stat. § 471.85).

The attorney general concluded that this law did not authorize transferring money between a county and a city (A.G. Op. 904 (June 27, 1963)).

In a later opinion, the attorney general changed this position, saying that one public entity can donate money to another if the transferring entity complies with other legal limitations and furthers the purposes for which the money was originally obtained (A.G. Op. 1011 (Dec. 27, 1968)). The opinion warned against broadening the definition of “public purpose,” and stressed that the planned use for the donated property is required to relate directly to the public purposes of the transferring entity.

Insurance

City councils can buy liability insurance that protects the city and its officers, employees, and agents against damages. Cities can insure in amounts above the liability limits imposed by law. (Minn. Stat. § 466.06).

Cities can also insure or protect city officers and employees and their dependents, or any class or classes of officers, employees, or dependents, under a policy or contract of group insurance or benefits covering life, health, and accident for employees, and medical and surgical benefits and hospitalization insurance or benefits for both employees and dependents (including dependents of an employee whose death was due to causes arising out of and in the course of employment) (Minn. Stat. § 471.61, subd. 1).

Legal

All cities can spend money on legal costs, including hiring attorneys, defending or prosecuting lawsuits, and paying court judgments or settlements (Minn. Stat. § 412.221, subd. 5; Minn. Stat. § 465.13; Minn. Stat. § 466.08; Minn. Stat. § 466.09).

All cities are required to pay to defend and indemnify city officers and employees for damages claimed or levied against them if:

  • The damages resulted while the officer or employee acted in performance of the duties of his or her position.
  • The officer or employee did not act with malfeasance, willful neglect, or bad faith (Minn. Stat. § 466.07).

All cities can reimburse their officers and employees for the legal costs of defending them against criminal charges that come from the reasonable and lawful performance of their duties, including reasonable attorneys fees (Minn. Stat. § 465.76). Specific conditions must be met before those costs can be paid (Douglas v. City of Minneapolis, 230 N.W.2d 577 (Minn. 1975)).

Libraries

Any city or county can establish and maintain a library. The city can pass an ordinance or resolution setting aside public property for a library. All statutory cities and second-, third-, or fourth-class home rule charter cities can levy a tax each year on all taxable property to establish a library fund (Minn. Stat. § 134.07).

Local improvements

Cities can spend money to make local improvements (Minn. Stat. § 429.021). Specific steps must be followed, like notice and public hearings, if funding the project with special assessments.

View the Special Assessment Toolkit for details on local improvement procedures.

Nuisance abatement

Cities can spend money to abate public nuisances (to remove things that annoy, injure, or endanger the public’s safety, health, morals, or comfort) or to drain or fill swamps, marshes, and ponds (Minn. Stat. § 429.021, subd. 1(8)). They also may recover the costs through special assessments to the property in question.

View the Public Nuisances Information Memo.

View the Public Nuisances model ordinance (doc).

Memorials

All city councils can adopt an ordinance to spend money to make buildings, monuments, and parks in recognition of those who served in the military. If necessary, city councils can acquire a site within the city for this purpose (Minn. Stat. §§ 416.01-.06).

All cities can spend money to observe Memorial Day; see the “Community Celebrations” section.

Park and recreation

Statutory cities can spend money to establish, improve, ornament, maintain, and manage parks, parkways, and recreational facilities (Minn. Stat. § 412.491).

All cities, towns, counties, and school districts can spend money to operate public recreational facilities, playgrounds, and programs. The law also allows all cities to spend money for awards and trophies as part of these programs.

Cities, towns, counties, and school districts can jointly operate public recreational facilities and programs with other government entities, American Legions, incorporated veterans’ organizations, or nonprofit organizations. The city can issue bonds to operate these recreational facilities (Minn. Stat. §§ 471.15-.191).

Although cities can operate public recreational facilities with nonprofit organizations, cities cannot sponsor local sports teams, including bowling teams or kittenball teams (like softball) ((A.G. Op. 218-r (Aug. 15, 1951); A.G. Op. 59-a-22 (Aug. 7, 1951)) or make donations to the Boy Scouts to help with their private recreational programs (A.G. Op. 59-a-3 (July 12, 1948)).

View additional discussion of Boy Scouts donations in the Office of the State Auditor, Statement of Position on Public Expenditure: Donations and Dues.

There might be implied authority for cities to spend money for a zoo or wildlife sanctuary under cities’ authority to spend money to establish, improve, ornament, maintain, and manage parks, parkways, and recreational facilities (Minn. Stat. § 412.491). Additionally, cities may be able to partner with a nonprofit 501(c)(3) organization to receive charitable contributions for the operation of a zoo because cities can jointly operate public recreational facilities and programs with nonprofit organizations (Minn. Stat. §§ 471.15-471.191).

Parking

All statutory cities and home rule charter cities of the second, third, and fourth class may spend money to acquire or build automobile parking facilities (like parking lots or ramps). These facilities can be inside or outside the city’s corporate limits. Minneapolis and St. Paul have similar authority, but their facilities must be in the cities’ corporate limits (Minn. Stat. § 459.14).

All statutory cities can improve and operate those facilities, as well as tourist camps (Minn. Stat. § 412.221, subd. 14). Publicly owned parking facilities can be financed with tax increment revenues (Minn. Stat. § 469.176, subd. 4g(b)). The city can also acquire, by purchase or lease, parking meters or other parking or traffic-control devices (Minn. Stat. § 459.14).

Public safety

All statutory cities have the power to provide for the government and good order of the city, the suppression of vice and immorality, the prevention of crime, and the protection of public and private property (Minn. Stat. § 412.221, subd. 32).

Statutory cities can spend money to acquire or lease residential property to house volunteer firefighters or ambulance personnel or provide them with housing assistance in the city.

  • The expenditure can only be made to attract and retain the qualified personnel necessary to make sure the city has timely public safety services.
  • Cities can only approve the expenditure after the need for the expenditure has been established and approved at a public hearing (Minn. Stat. § 412.153).

Statutory cities can also create officers and employment positions necessary to properly manage and operate the city (Minn. Stat. § 412.111).

Home rule charter cities may have similar authority in their charters. If not, they can rely on Minn. Stat. § 410.33.

Police

Any city, town, or county can contract for police services with another city, town, or county (Minn. Stat. § 436.05). Adjacent cities can establish, equip, and operate joint municipal police departments, unless the cities are within a county that has a first-class city (Minn. Stat. § 436.06).

Fire

All statutory cities can create fire departments and provide equipment to prevent, control, or extinguish fires (Minn. Stat. § 412.221, subd. 17).

All cities can spend a reasonable amount of money to pay for city fire department members to attend (Minn. Stat. § 438.11):

  • The Minnesota State Fire Department Association state convention.
  • The Minnesota State Fire School.
  • Regional firefighters’ association meetings.

Ambulance

All cities, towns, hospital districts, and counties (except for Hennepin County) can provide ambulance services, either singly or jointly, by agreement, inside and outside city boundaries and to nonresidents and residents. In providing these services, the city can:

  • Purchase, rent, or lease ambulances and related equipment and supplies.
  • Contract for these services with any person, firm, corporation, or other political subdivision following agreed-on terms and conditions.
  • Employ and train personnel for these services (Minn. Stat. § 471.476).

Animal pounds

All statutory cities can establish animal pounds (Minn. Stat. § 412.221, subd. 21).

School patrols

Statutory cities can pay for the cost of training school patrol members, including attendance at any authorized school patrol camp in Minnesota (Minn. Stat. § 465.69).

Capital equipment

All statutory and charter cities can, by resolution and without public referendum, issue capital notes within the city debt limit to purchase capital equipment, identified as public safety equipment, ambulance and other medical equipment, road construction and maintenance equipment, and other capital equipment (Minn. Stat. § 410.32; Minn. Stat. § 412.301).

Cities should work with their city attorney or bond counsel to make sure that these capital notes follow any statutory requirements that apply, including the required two-thirds vote of the governing body.

National Night Out

Any home rule charter or statutory city can spend money for National Night Out events held within the city’s boundaries.

Any home rule charter or statutory city can also spend money for any event or purpose that the city council finds will build positive relationships between law enforcement and the community. Any city, town, county, or school district can, by resolution, authorize officials and staff to solicit contributions for these events (Minn. Stat. § 471.198).

View Authorizing Solicitation of Contributions model ordinance (doc).

Real property

All statutory cities can buy or lease land and buildings (Minn. Stat. § 412.221, subd. 3). Charter cities usually have similar powers in their charters.

State law permits all cities, towns, and counties to spend money to acquire hazardous buildings and real estate using eminent domain (the power of the government to take private property for public use). The statute states that this action is a public purpose (Minn. Stat. § 463.152).

Any city can acquire private property using eminent domain, either inside or outside city limits, if the city acquires that property for the same reason that the law would have allowed the city to purchase or receive it as a gift. The city can also use eminent domain to acquire a right-of-way for sewer or drainage, either inside or outside city limits.

The procedure for condemnation must follow the process prescribed by Minn. Stat. ch. 117, or the procedure stated in the city’s charter (Minn. Stat. § 465.01).

Any city can acquire building line easements by purchase, grant, or condemnation (Minn. Stat. § 463.02).

Rewards

Cities can offer rewards for information that helps to catch and arrest, charge, or convict someone who has committed a felony crime within city limits. Cities can fund the payment of a reward offered by a nonprofit organization for the same information (Minn. Stat. § 471.631). The statute does not set a dollar amount, so city councils can set an appropriate amount for the reward.

In an opinion, the attorney general stated that cities can offer rewards for information that helps to arrest and convict someone who shot at animals in the city zoo if the general welfare clause in the city charter allowed the city to take reasonable actions to protect itself and preserve its property when threatened (A.G. Op. 355-a (Aug. 23, 1972)). The language in the city charter was similar to a general welfare clause in a statutory city code (Minn. Stat. § 412.221, subd. 32), so the opinion may also apply to statutory cities.

Incentives or “thank yous” 

City officials often ask if the city can use gift cards to thank or incentivize participation in city programs. This type of payment is likely not authorized. If the person receiving a gift card has no claim or right to payment, payment to them as a “gift” may raise a public purpose expenditure issue.

If a person has a claim or right to payment, the state auditor encourages cities to handle payment like any other claim through the payroll or claim process. (Minn. Stat. § 471.38; Minn. Stat. §  412.271).

View additional discussion of gift cards as a “Thank You” for program participation in the Office of the State Auditor, Statement of Position on Use of Gift Cards by Local Government Entities (pdf).

Streets and sidewalks

Statutory cities can establish, construct, alter, and maintain city streets, sidewalks, and sewers (Minn. Stat. § 412.221, subd. 6). Charter cities usually have similar authority in their charters.

This authority includes providing lighting on streets, buildings, or grounds by gas, electricity, or other means, and contracting with anyone in the business of providing gas or electric services to supply those services to the city (Minn. Stat. 412.221, Subd. 7).

Statutory cities and fourth-class home rule charter cities can set aside and spend a reasonable amount of money to help improve or maintain roads outside city limits that lead into the city (Minn. Stat. § 441.26).

The local improvement code also authorizes cities to take on different local improvements, including street and sidewalk improvements (Minn. Stat. § 429.021). Although cities can choose to pay for these improvements, they can also assess benefited properties for these costs. The assessment cannot be more than the increase in market value of the benefited property due to the improvement.

View the Special Assessment Toolkit for details on the local improvement code.

Tourism

Any statutory city can establish and maintain a bureau of information and publicity to (Minn. Stat. § 469.186):

  • Provide information for tourists.
  • Provide outdoor advertising of tourist and city information.
  • Prepare, publish, and spread information and facts about recreational facilities and community business and industry.

All cities can establish and maintain public campgrounds. The city can get land for these campgrounds by lease, purchase, or gift, and the campgrounds can be inside or outside of the city’s or town’s corporate limits. The amount of money a city can spend each year for maintenance, improvement, or operation cannot be more than 0.00806% of the estimated market value (Minn. Stat. § 450.19).

Any city can place a lodging tax of up to 3% on the gross receipts from staying at a hotel, motel, rooming house, tourist court, or resort to fund a local convention or visitor’s bureau. The tax cannot apply to renting or leasing for a continuous period of 30 days or more. Any city, by ordinance, can also impose this tax on the camping site receipts of a municipal campground (Minn. Stat. § 469.190).

Cities are required to use at least 95% of the gross proceeds to fund a local convention or tourism bureau to market and promote the city or town as a tourist or convention center.

Also, statutory cities can spend money to acquire, improve, and operate parking facilities and tourist camps (Minn. Stat. § 412.221, subd. 14).

Utilities

Any statutory city can own and operate any utility, including waterworks, district heating systems, or gas, light, power, or heat plants (Minn. Stat. § 412.321; Minn. Stat. § 465.74).

A specific law allows cities to operate district heating systems. However, there are certain conditions and restrictions based on the city’s classification and number of inhabitants (Minn. Stat. § 465.74).

All towns and cities can build, construct, reconstruct, repair, enlarge, improve, or obtain the following types of water or sewer systems:

  • Waterworks. This includes mains, valves, hydrants, service connections, wells, pumps, reservoirs, tanks, treatment plants, and other parts of a waterworks system. Statutory cities can also provide wells, cisterns, reservoirs, waterworks, and other water supplies (Minn. Stat. § 444.075; Minn. Stat. § 412.221, subd. 11).
  • Sewer systems. This includes sewage treatment works, disposal systems, and other facilities for disposing sewage, industrial waste, and other wastes (Minn. Stat. § 444.075).
  • Storm sewer systems. This includes mains, holding areas and ponds, and other items and facilities for collecting and disposing storm water (Minn. Stat. § 444.075).

Conclusion

Cities have broad authority to make a wide variety of expenditures. To be  lawful, expenditures must have a public purpose and express or implied authority from a statute or charter.

Cities with questions about the validity of specific public expenditures may contact the League of Minnesota Cities for further information and should seek a legal opinion from their city attorneys or from the attorney general.