Does a village board or city council have any authority to donate public funds to local non-profit organizations?

A city council or village board may appropriate public funds for the purpose of donating money to various local non-profit organizations only if the appropriations are consistent with the public purpose doctrine, which requires that a municipality’s expenditure of public funds be for a public purpose. The appropriation must also pertain to a public purpose within the donating city or village.

For an appropriation to be for a public purpose, the benefit to the public must be direct and not merely indirect or remote. However, the fact that the appropriation is made to a private agency does not render it unlawful. If an appropriation is designed in its principal parts to promote a public purpose so that its accomplishment is a reasonable probability, private benefits, which are necessary and reasonable to the main purpose, are permissible. The subject matter of the appropriation must be a public necessity, convenience or welfare. Each case must be decided with reference to the object sought to be accomplished and to the degree and manner in which that object affects the public welfare. Factors which may be considered include the course or usage of the government, the objects for which taxes have been customarily levied, the objects which have been considered necessary for the support and proper use of government, the extent to which the expenditure results in competition with private enterprise, the presence or absence of a general economic benefit, and the necessity and infeasibility of private performance.

The number of beneficiaries is also a relevant factor in determining whether an appropriation has a public purpose. However, the fact that an appropriation may benefit certain individuals or one particular class of people more immediately than other individuals or classes does not necessarily deprive the appropriation of its public purpose.

It is up to the city council or village board to determine, by applying the above-described factors, whether a proposed donation to a particular local organization is for a public purpose. Generally speaking, the appropriation will be consistent with the public purpose doctrine if any public purpose can be conceived which might reasonably be deemed to justify the expenditure.

To be lawful, the appropriation to donate public funds to a non-profit organization must comply with the requirement that a tax must be spent at the level at which it is raised. Stated another way, the purpose of a tax must be one which pertains to the public purpose of the district in which the tax is levied and raised. A donation to a city or village historical society would comply with this requirement while a donation to an organization operating at a county, regional, state or national level might not.

The above is a summary of case law.  For cites to legal authorities and a more detailed explanation of the public purpose doctrine, please see Powers of Municipalities 890.
(rev. 1/14)