December 2023

LEGAL BRIEFS
Capital Confusion
The 2023 Regular Session birthed two
new laws that fundamentally change the
methods by which municipalities access
capital outlay funding from state coffers.
Unfortunately, there are elements of uncertainty
surrounding each provision.
To start, Louisiana has a new Governor-Elect,
who just appointed a new
Commissioner of Administration. So, the
current approaches and interpretations
of the Division of Administration – which
processes capital outlay applications and
prepares the state’s annual construction
budget – may not be those of future DOA
administrators.
Act 82 makes various streamlining
changes to internal and external capital
outlay processes. The most profound of
those creates a new application mandate
for non-state entities regarding new
construction projects funded by capital
outlay. The requirement means that
municipalities applying for capital outlay
funding for new projects must provide
documentation evidencing their ability to
provide funding in the amount of at least
3% of the total requested funding for the
long-term maintenance of the project.
Essentially, the municipality must have a
sensible plan to ensure that new projects
are properly maintained for the long haul.
The confusion arises regarding the effective
date of this change. Under the clear
wording of the act, this proof mandate
applies to “the funding of all projects included
in the capital outlay budget for
fiscal years commencing ON OR AFTER
July 1, 2024.” That indicates that current
capital outlay applications (submitted by
November 1, 2023) would have to comply
with this provision since those projects
would be funded in FY24. However,
current DOA leaders are interpreting the
change to apply only to capital outlay applications
submitted starting in 2024 and
funded starting in 2025 (i.e., not applications
submitted in 2023).
Further complicating matters, the online
portal for submitting capital outlay applications
(eCORTS) has no option or field for
municipalities to provide their statement
of proof of funding. It is suggested that
municipal members immediately prepare
articulations of their maintenance funding
plans to be submitted with all future
applications and to be provided upon
request from DOA regarding pending applications.
While municipalities should consult with
their attorneys to perfect such statements,
here is some suggested language
for consideration:
“In accordance with a new requirement that
Act 82 of 2023 added to Capital Outlay Law,
(insert requesting entity name here) is hereby
documenting, through this Capital Outlay
Request document, that (insert requesting
entity name here) has the ability to provide
no less than three percent of the total
requested amount of funding to be used exclusively
for costs associated with the longterm
maintenance of the project. Maintenance
funding in the amount of at least
($________) will be provided through the
following means: ___________________.”
As always, the LMA will work closely with
agency leaders to stay informed of their
intentions and convey pertinent information
as timely as possible.
Act 292, by contrast, seeks to make local
government access to capital outlay less
burdensome. The new law enables the
state to waive the entire local match or a
portion thereof for a project undertaken
by a municipality under 6,000 in population
or a parish with a population under
7,500. The applicant for a match waiver
must demonstrate “its inability to provide
a local match” by submitting their two
most recent annual audits; and if the project
relates to an existing utility system,
they must submit a rate study from within
the past three years.
But this law gives rise to many unanswered
questions. By what criteria will DOA measure
eligibility for the match waiver? What
are the metrics for evaluating the ability
to provide a local match? What degree of
fiscal health are they looking for? Will they
seek a “sweet spot” of applicants who are
generally fiscally responsible, but simply
lack the match for a particular project?
What effect does the waiver request have
on the overall strength and success of the
capital outlay application? Some municipalities
dedicate more than the minimum
match in capital outlay applications to increase
the chances of their approval – is
that still a winning strategy?
Unfortunately, there is currently NO guidance
from the state to provide any answers.
DOA leaders have indicated that
only a few locals have asked for the match
waiver, and until more applicants do so,
they have no impetus to develop a written
framework for evaluation. So, we are
currently experiencing a circular dynamic
where local leaders are hesitant to submit
requests for match waivers until DOA
develops evaluation criteria; and DOA
is reluctant to develop those evaluation
protocols until more locals request match
waivers. For the time being, municipalities
are encouraged to seek advice from
capital outlay professionals to determine
the best approach for a given project. If
and when DOA formulates how it will digest
this new match waiver authority, we
will disseminate that information to LMA
members as quickly as possible using
multiple platforms.
Editor’s Note: the information provided in
this column is not a replacement for consultation
with your own municipal attorney,
and it should not be considered legal advice
for any particular case or situation.
by Karen Day
White
LMA Executive
Counsel
White is a member of the LMA Legislative
Advocacy Team and can be reached at
kwhite@lma.org.
LMR | DECEMBER 2023 Page 21