Am I the only one that believes counties are limited to one year electricity purchase contract because we can't bind future Commissioners Courts? We would like to enter into a longer term and the salesmen assure me that many counties do it. I know they wouldn't attempt to mislead me.

I'm with you, and we do NOT sign multi-year electric service contracts. What I am willing to do is insert wording to the effect that the parties acknowledge that no Commissioners Court may bind another; that either party may terminate the contract with X number of days notice prior to a specified date (end of the budget year); absent such notice, the contract shall be presumed to continue in effect.

Lisa L. Peterson
Nolan County Attorney

If the agreement obligates the county to spend money it doesn't currently have in its "pocket," the contract needs a "funding out" or "fiscal funding" clause to satisfy art. 11, sec. 7 of the constitution. Unless the commissioners want to expressly dedicate a portion of tax revenue to the contract or create a 2 percent interest and sinking fund. Of course, those alternatives merely address the constitutional debt preclusion; they do nothing to rectify the problem of binding successive courts.

Lisa - I have attempted to use cancellation language as you suggested, but the companies are not willing to give the reduced rates of a multi-year contract with that language. If your company will, please pass along the company name. Thanks for your input.

Scott - I'm having a difficult time finding info on the proper method for establishing a sinking fund for a long term commitment. Do you believe this literally requires the deposit into a seperate account an amount equal to the total multi-year commitment? Such action would effectively be the payment of the total contract in advance - at least as far as the county cash flow is concerned.

It's a commitment of future tax revenues. In form, it will probably entail the creation of a new "fund" (whether that's a separate account or simply a segregated accounting entry) to be filled with dedicated tax receipts each year sufficient to meet the constitutional requisite (a calculation that would assuredly be far beyond my accounting or mathematical skills).

More importantly, when you tie up future tax revenues on something as mundane as an electricity contract, that money will be unavailable to do things that make people want to vote for y... I mean, that serve the citizens of the county.

Constalation (sp) energy accepted it, but I have been given to understand that they no longer do.

While I was out at the Juvie Law seminar, my commissioners agreed in theory to a contract with an electric company for 3 years. The counsel for the company is of the opinion that a funding out clause covers the county.

I don't think so, do you?

Lisa L. Peterson
Nolan County Attorney

Depends on the non-funding language. I think it works if on an annual basis Commissioners Court can vote to not fund that contract, thereby ending the contract. On the other hand, I recently saw one that said that to opt out the county could not buy electricity from ANY provider. Not so good.

I have always been of the understanding that a clause that the continuation of the contract each fiscal year is subject to an appropriation being made from then-currently-available revenue is enough to get around the debt prohibition. I also always include a provision that the County will notify the other party if the upcoming budget will not contain funding for the County's obligation.

Going back to the "you can't bind a future commissioners court" issue, doesn't this type of clause handle that as well? the future court can vote not to budget the funds. I always thought that issue had more to do with the creation of a debt than anything else.

Jim, I am really having an issue with our proposed electrical provider not wanting to budge on this issue. Do you have a copy of the language you are using that i can borrow.
thanks
Mike
scurryca@suddenlinkmail.com