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B-129558, DEC. 4, 1956

B-129558 Dec 04, 1956
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PARAGRAPH 5 OF THE "OPERATION AND MAINTENANCE TERMS AND CONDITIONS" INCORPORATED IN THE AGREEMENT FURTHER PROVIDED: "IF THE GOVERNMENT SHALL DETERMINE THAT ANY MONEYS ADVANCED OR PAID TO THE APPLICANT ON ACCOUNT OF THE CONTRIBUTION STATED IN THE OFFER ARE IN EXCESS OF THE AMOUNT THE GOVERNMENT IS OBLIGATED TO PAY THEREUNDER. IN MAY 1944 THE CITY'S ACCOUNTS WERE AUDITED BY REPRESENTATIVES OF THAT AGENCY AND IT WAS DETERMINED THAT THE ACTUAL EXPENDITURES FOR MAINTENANCE AND OPERATION OF SCHOOL FACILITIES DURING THE YEAR IN QUESTION AMOUNTED TO $301. WERE $295. IT WAS FURTHER FOUND THAT THE CITY HAD RECEIVED FROM THE FEDERAL PUBLIC HOUSING ADMINISTRATION THE SUM OF $63. WAS PROPERLY "AVAILABLE * * * FOR DEFRAYING SUCH COST OF MAINTENANCE AND OPERATION" OF THE SCHOOL FACILITIES WITHIN THE INTENT OF THE AGREEMENT.

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B-129558, DEC. 4, 1956

TO CITY OF SOUTH PORTLAND, SOUTH PORTLAND, MAINE:

BY LETTER DATED SEPTEMBER 24, 1956, WITH ENCLOSURES, THE GENERAL SERVICES ADMINISTRATION REFERRED TO US FOR DIRECT SETTLEMENT THE CLAIM OF THE UNITED STATES AGAINST THE CITY OF SOUTH PORTLAND, MAINE, IN THE SUM OF $5,587.50, REPRESENTING THE UNPAID BALANCE OF AN ADVANCE PAYMENT OF $15,000 MADE TO YOU BY THE FEDERAL WORKS AGENCY IN CONNECTION WITH PROJECT NO. MAINE 17-M-34.

UNDER THE ACT OF OCTOBER 14, 1940, 54 STAT. 1125, AS AMENDED BY THE ACT OF JUNE 28, 1941, 55 STAT. 361, THE FEDERAL WORKS AGENCY ENTERED INTO AN AGREEMENT WITH YOU, IDENTIFIED BY THE CITED PROJECT NUMBER, OFFERING TO CONTRIBUTE THE SUM OF $39,778 FOR THE MAINTENANCE AND OPERATION OF YOUR MUNICIPAL SCHOOL FACILITIES FOR THE PERIOD JANUARY 1 TO DECEMBER 31, 1943, IN CONNECTION WITH THE GOVERNMENT'S NATIONAL DEFENSE ACTIVITIES. THE SAID AGREEMENT PROVIDED FOR THE PAYMENT OF THE AMOUNT STIPULATED---

"* * * OR SUCH LESSER SUM AS THE FEDERAL WORKS ADMINISTRATOR SHALL DETERMINE TO BE SUFFICIENT, WITH OTHER AVAILABLE FUNDS, FOR THE MAINTENANCE AND OPERATION OF SUCH FACILITIES DURING SUCH PERIOD. IN NO EVENT SHALL THE GOVERNMENT'S CONTRIBUTION EXCEED THE EXCESS OF THE COST OF MAINTAINING AND OPERATING THE FACILITIES DESCRIBED HEREIN FOR THE SPECIFIED PERIOD OVER THE TOTAL AMOUNT (EXCLUDING THE GOVERNMENT'S CONTRIBUTION) AVAILABLE TO YOU FOR DEFRAYING SUCH COST OF MAINTENANCE AND OPERATION, ALL AS DETERMINED BY THE FEDERAL WORKS ADMINISTRATOR.'

PARAGRAPH 5 OF THE "OPERATION AND MAINTENANCE TERMS AND CONDITIONS" INCORPORATED IN THE AGREEMENT FURTHER PROVIDED:

"IF THE GOVERNMENT SHALL DETERMINE THAT ANY MONEYS ADVANCED OR PAID TO THE APPLICANT ON ACCOUNT OF THE CONTRIBUTION STATED IN THE OFFER ARE IN EXCESS OF THE AMOUNT THE GOVERNMENT IS OBLIGATED TO PAY THEREUNDER, THE APPLICANT SHALL PROMPTLY REFUND OR REPAY SUCH EXCESS OF SURPLUS MONEYS TO THE GOVERNMENT.'

PURSUANT TO THE AGREEMENT THE CITY OBTAINED AN ADVANCE OF $15,000 FROM THE FEDERAL WORKS AGENCY. IN MAY 1944 THE CITY'S ACCOUNTS WERE AUDITED BY REPRESENTATIVES OF THAT AGENCY AND IT WAS DETERMINED THAT THE ACTUAL EXPENDITURES FOR MAINTENANCE AND OPERATION OF SCHOOL FACILITIES DURING THE YEAR IN QUESTION AMOUNTED TO $301,021.96; AND THAT APPROPRIATIONS AND REVENUES AVAILABLE, EXCLUSIVE OF ANY FEDERAL CONTRIBUTIONS, WERE $295,434.46. IT WAS FURTHER FOUND THAT THE CITY HAD RECEIVED FROM THE FEDERAL PUBLIC HOUSING ADMINISTRATION THE SUM OF $63,803.62 AS A PAYMENT IN LIEU OF TAXES FOR THE YEAR ON HOUSING PROJECTS OF THE FPHA, WHICH HAD BEEN DEPOSITED IN THE GENERAL FUNDS OF THE CITY. ALTHOUGH THIS PAYMENT RESULTED IN A SURPLUS IN THE GENERAL FUNDS OF $22,732.44 AS OF DECEMBER 31, 1943, NO PART OF THE FPHA PAYMENT HAD BEEN ALLOTTED TO THE SCHOOL FUND, WHEREAS 33 1/2 PERCENT OF ACTUAL TAX RECEIPTS HAD BEEN ALLOCATED TO THE SCHOOL FUND.

CONSIDERING THAT THE SAME PERCENTAGE OF THE FPHA PAYMENT IN LIEU OF TAXES, OR AN AMOUNT OF $21,374.21, WAS PROPERLY "AVAILABLE * * * FOR DEFRAYING SUCH COST OF MAINTENANCE AND OPERATION" OF THE SCHOOL FACILITIES WITHIN THE INTENT OF THE AGREEMENT, THE FEDERAL WORKS AGENCY DETERMINED THAT THERE WAS NO EXCESS OF COST OVER AVAILABLE FUNDS, AND REQUESTED REFUND OF THE FULL AMOUNT OF THE $15,000 ADVANCE. THE CITY INSISTED THAT THERE WAS A DEFICIT OF $5,587.50 IN ITS SCHOOL OPERATIONS AND REFUNDED ONLY THE DIFFERENCE BETWEEN THAT AMOUNT AND $15,000.

IN A LETTER DATED DECEMBER 3, 1949, TO THE GENERAL SERVICES ADMINISTRATION, WHICH ASSUMED THE DUTIES AND FUNCTIONS OF THE FEDERAL WORKS AGENCY PURSUANT TO THE ACT OF JUNE 30, 1949, 63 STAT. 377, THE CITY MANAGER OF SOUTH PORTLAND STATED THAT "PURSUANT TO ITS INTERPRETATION OF ALL THE AGREEMENTS MADE WITH THE GOVERNMENT THE CITY DEDUCTED THAT AMOUNT FROM THE $15,000 PREVIOUSLY CONTRIBUTED AND RETURNED THE BALANCE ON OCTOBER 5, 1944. THE CITY CONTENDS THAT ITS INTERPRETATION OF THE AGREEMENT WAS PROPERLY ARRIVED AT BY A FAIR INTERPRETATION OF ITS TERMS WITH DUE REGARD TO MUNICIPAL INCOME AND THE SOURCE THEREOF.'

THAT CONTENTION CLEARLY APPEARS TO BE UNTENABLE. IT IS APPARENT THAT IF THE PAYMENT MADE BY THE FEDERAL PUBLIC HOUSING AUTHORITY AS IN LIEU OF TAXES HAD BEEN TREATED AS OTHER RECEIPTS FROM TAXES, NO DEFICIT FOR THE CALENDAR YEAR 1943 WOULD HAVE EXISTED IN THE SCHOOL FUND, AND THEREFORE NO AMOUNT WOULD HAVE BEEN PAYABLE BY THE GOVERNMENT UNDER THE SUBJECT AGREEMENT. ASIDE FROM THE FACT THAT THE CITY MANAGER'S LETTER PRESENTS NO LOGICAL OR LEGAL BASIS FOR SUCH CONTENTION, IT IS TO BE NOTED THAT UNDER THE ABOVE-QUOTED TERMS OF THE AGREEMENT THE RIGHT TO MAKE SUCH A DETERMINATION WAS VESTED EXCLUSIVELY IN THE FEDERAL WORKS ADMINISTRATOR. HENCE, ANY INTERPRETATION BY A CITY OFFICIAL, INCLUDING THE CITY MANAGER, AS TO THE PROPER AMOUNT PAYABLE THEREUNDER, IS WITHOUT LEGAL FORCE OR EFFECT SINCE THE CITY AGREED IN EFFECT THAT THE ADMINISTRATOR'S FINDING WOULD BE FINAL AND CONCLUSIVE AND THAT IT WOULD REFUND ANY AMOUNT DETERMINED BY THE GOVERNMENT TO BE IN EXCESS OF THE OBLIGATION UNDERTAKEN BY IT.

IT APPEARS TO HAVE BEEN THE DELIBERATE PRACTICE OF THE CITY TO TREAT THE PAYMENTS RECEIVED FROM THE FPHA IN LIEU OF TAXES IN A MANNER WHOLLY DIFFERENT FROM THAT FOLLOWED IN THE DISPOSITION OF ITS OTHER TAX REVENUES, AND TO ALLOCATE NO PART OF THOSE PAYMENTS TO ANY DEPARTMENTS FOR WHICH IT APPLIED FOR DEFICIT GRANTS FROM THE UNITED STATES. IT IS FULLY ESTABLISHED BY THE RECORD BEFORE US THAT THE CITY OFFICIALS WERE AWARE AT THE TIME OF THE ACCEPTANCE OF THE GOVERNMENT'S OFFER IN THIS INSTANCE THAT THE FWA OFFICIALS CONSIDERED ANY FPHA PAYMENTS TO THE CITY TO BE AVAILABLE FOR SCHOOL OPERATION TO THE SAME EXTENT AS TAXES; THE FIRST APPLICATION OF THE CITY FOR SOME $33,000 FOR SCHOOL FUNDS FOR THE YEAR 1943 HAD IN FACT BEEN APPROVED FOR ONLY $15,000 FOR THE SPECIFIC REASON, COMMUNICATED TO CITY OFFICIALS, THAT THE CITY'S BUDGET ESTIMATES DID NOT TAKE INTO ACCOUNT ANY FPHA PAYMENTS. IN SUCH CIRCUMSTANCES, WE DO NOT UNDERSTAND HOW THE CITY CAN IN GOOD FAITH UNDERTAKE TO JUSTIFY ITS REFUSAL TO REFUND THE AMOUNT DEMANDED; EVEN IF IT DISAGREED WITH THE FWA INTERPRETATION, IT ACCEPTED THE OFFER AND THE ADVANCE WITH FULL KNOWLEDGE THEREOF AND UPON A DEFINITE AGREEMENT TO REFUND IN ACCORDANCE WITH THE FWA DETERMINATION.

ON THE MERITS, WE ARE SATISFIED THAT THE INTERPRETATION OF THE FWA WAS CORRECT, AND THAT IN ENACTING THE ACT OF OCTOBER 14, 1940, 54 STAT. 1125, AND THE AMENDATORY ACT OF JUNE 28, 1941, 55 STAT. 361--- WHICH AUTHORIZED BOTH THE FPHA PAYMENTS IN LIEU OF TAXES AND THE FWA GRANT TO COVER THE SCHOOL DEFICIT--- CONGRESS DID NOT INTEND THE SEVERAL PORTIONS OF THE ACT TO BE SO ADMINISTERED AS TO PERMIT ANY MUNICIPALITY TO ACCUMULATE AN OVERALL SURPLUS WHILE ACCEPTING GRANTS OF FEDERAL FUNDS TO COVER DEFICITS IN PARTICULAR DEPARTMENTS. WE THEREFORE CONCLUDE THAT PAYMENTS UNDER THE AUTHORITY OF THAT ACT TO A MUNICIPALITY WHICH HAS WRONGFULLY RECEIVED OR RETAINED FEDERAL FUNDS UNDER ANOTHER PROVISION OF THE ACT ARE, TO THE EXTENT OF THE AMOUNT SO WRONGFULLY HELD, UNAUTHORIZED BY LAW.

THE UNREFUNDED NET BALANCE OF $5,587.50 WILL ACCORDINGLY BE DEDUCTED FROM THE CURRENT PAYMENT IN LIEU OF TAXES REPORTED TO BE DUE YOU FROM THE SOUTH PORTLAND HOUSING AUTHORITY.

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