My county is negotiating with several counties to house the other counties inmates. The parties would entire into an interlocal agreement under Section 791 of the Government Code. The counties would like to sign long term agreements (for more than one year). Can an interlocal agreement have a term for longer than one year? If the interlocal agreement can only be for one year, can it be drafted to automatically renew annually?

I've always written interlocal agreements to allow for a termination in the event that either a commissoner's court or city council fails to fund the project in the budgeting process. I think you get into a million other issues if you try to bind counties (and their funds) longer than a one year period.

I agree. Since one commissioners court cannot bind the next, those contracts get really tricky. I have drafted some interlocals such that the commissioners court must act in order to end the contract; failure to act renews it.

If the contract will commit the county to expending public funds, it must have a "funding out" clause to satisfy art. 11, sec. 7 of the Constitution. Otherwise, it's void. Plus all the other stuff upon which my learned colleagues have opined.

I realize this is a very old string, but I am reviewing all our old contracts and we have a million different versions of funding-out provisions which attempt to get around the one-year issue with county contracts. Could someone please send me a sample of their termination/funding out provision that they think works? I'm trying to become a little more uniform. Thanks!

Meredith L. Kennedy
Civil Chief
Wichita County DA's Office

Welcome to the forum. An interlocal by statute limits its use to current funds. Of course Article 11, section 7 has the same prohibition. The funding out provision gives some comfort to vendors by expressing the county good will to continue a contract from year to year unless the county lacks funds to continue the contractual arrangement. For the most part I do not like the clauses, although having drawn many and approved most of the ones you are looking at. Why? They tend to try to tie my client's hands by expressing opinions that we are out of money or require me or some other county official to provide a letter that the county is out of money. Or that the county will not buy another one of these items from the vendor's competitors at a better price. In all instances more complex clauses lead to promises by the Commissioners Court that they might not want to keep and does the clause really stand up to legal attack if (1) the clause requires a future Commissioners Court to not buy from someone else, or (2)requires a seperate official, the district attorney or auditor, to write opinion letters to a vendor about county financing. Also, i have seen these clauses in contracts containing no fault terminations clauses. why would one need funding out if I have a thirty day no fault or at will termination? On the other hand;
Are you seeking a clause to create a sinking fund or create a work around of Article 11, Section 7 by trying to comply with that constitutional requirement? If so, that is another kettle of fish best cooked by reading Brown v. Jefferson County. If you want you can email me, the folks at TDCAA have my email address here in Tarrant.

Although, I think he would take offense to that since he's quite a bit younger than I am.

All of the issues you point out are nagging issues I have been trying to discuss with my county officials about these contract provisions that attempt to extend the life of a contract for more than one year. I don't like the language we have been using, nor the language the vendor requested. I agree with you about the no fault 30-day termination. That is a whole lot safer and palatable to me than saying the County can't fund your contract next year. Although at least one version I reviewed seems to provide an out for non-appropriation that is no fault ("In the event the County does not appropriate sufficient funds from its current revenue in a future fiscal year during the term of the Agreement for whatever reason the County deems appropriate in its discretion, the Agreement shall terminate on the last day of the fiscal year for which funds were appropriated, and neither party shall have further liability under the Agreement). This might alleviate the need to prepare something that discusses the state of the County's finances; although, I'm not completely convinced of that. I am considering all the drafts I have received so far. I wish this was an easy answer, but obviously it's not. Thanks for the assistance!!

quote:

why would one need funding out if I have a thirty day no fault or at will termination?

What about a 90 or 180 day no fault termination? My gut is a termination clause longer than 30 days would result in a debt beyond the current budget. Any thoughts?