Number 14 December 21, 1972

Number 14 December 21, 1972 Mr. Gordon A. McGill, Secretary Emergency Finance Board State House Boston, Massachusetts 02133 Dear Sir: You have requested my opinion on the following question: ''Is . . . [the Emergency Finance] Board required to act upon loan authorizations for approved school projects, under the provisions of Section 8 of Chapter 645 of the Acts of 1948, when the estimated school construction grant — as de- fined in Section 7 of said Chapter 645 of the Acts of 1948, as amended by Chapter 1010 of the Acts of 1971 — equals or exceeds the amount of the loan authorization?" It is my opinion, for the reasons stated hereinafter, that your question must be answered in the negative. Section 8 of Chapter 645 of the Acts of 1948 provides in pertinent part: "Any city or town which has received, in accordance with the provisions of the preceding section, notice of approval and an estimate of the amount of school construction grant to 68 P.D. 12 which such city or town may be entitled, may, during the time this chapter is in effect, borrow from time to time for said approved school project an amount not exceeding said estimated grant, or such larger amount as may be approved by the emergency finance board ..." Section 7 of Chapter 645 of the Acts of 1948, as amended by Chapter 1010 of the Acts of 1971, provides, in pertinent part: "Any city, town, regional school district or county may apply to the [school building assistance] com.mission for a school construction grant to meet in part the cost of an ap- proved school project. Such cost shall include interest paid or payable by such city, town, regional school district or county on any bonds or notes to finance such project." The Emergency Finance Board's responsibility is clearly spelled out in section 8 of Chapter 645 of the Acts of 1948. A city or town that bor- rows a sum of money less than or equal to the amount of the authorized school construction grant need not request the approval of the Board. The Board is required to act upon a loan authorization only when the authorization exceeds the school construction grant. This procedure reflects the long standing legislative and judicial con- cern with respect to municipal finance and indebtedness. Section 10 of c. 44 of the General Laws, the municipal finance law, prohibits a city from authorizing indebtedness in excess oflVi^c of its equalized valuation and a town from authorizing indebtedness exceeding 5% of its equalized val- uation, without the approval of the Emergency Finance Board. More than half a century ago, the Supreme Judicial Court said: "The manifest purpose of the framers of the [Municipal Finance] act was to set rigid barriers against expenditures in excess of appropriations, . . . and in general to put cities upon a sound financial basis so far as these ends can be achieved by legislation." Flood v. Hodges, 231 Mass. 252 at 256. Flood v. Hodges was later cited with approval in Rich & Son Construc- tion Co., Inc. V. Saugiis, 335 Mass. 304, at 307. Chapter 645 of the Acts of 1948 is not a departure from this policy. Section 8 of that chapter (as amended by St. 1951. c. 447) provides that "[i]ndebtedness incurred under this act shall be in excess of the statu- tory limit, but shall, except as herein provided, be subject to the applic- able provisions of chapter forty-four of the General Laws ..." Any community incurring indebtedness for school construction is subject to all the requirements of Chapter 44, with one exception. The debt ceiling is not controlled by the inflexible 2l/2%-5% standard, but the Emergency Finance Board assumes the responsibility of reviewing each community's ability to meet its proposed obligation when the bond issue exceeds the estimated grant. Chapter 1010 of the Acts of 1971 amended section 7 of Chapter 645 of the Acts of 1948 by including the interest charges on any bond issue in the cost of the school construction. Chapter 1010 also amended section 9 of Chapter 645 of the Acts of 1948 by fixing the grant for all com- P.D. 12 69 munities, except those within designated depressed areas, at 50% of the final approved cost. Cities and towns within designated depressed areas are allowed a maximum grant of 65% of the school cost. 1 note in passing that the Legislature has not been unwilling to modify Chapter 645 of the Acts of 1948 where the same was required. There have been no less than six amendments to Chapter 645 in the last four years and more than a dozen since 1962. Each amendment has given the Legislature ample opportunity to correct any inconsistencies in the Act as previously amended. Accordingly, it is my opinion that the Emergency Finance Board must continue to follow the unequivocal legislative mandate of Chapter 645 of the Acts of 1948. as most recently amended, and pass only on those school bond issues which exceed the estimated school construction grant. Very truly yours, ROBERT H. QUINN Attorney General