Date: August 2016
Counties and other political subdivisions are entering into collective ventures for cooperative delivery of services to their constituents in a response to increasing demands for new and expanded services, financial limitations and new mandates. Often the most efficient way is to join together with other public entities with mutual interests and objectives in a joint powers agreement (JPA).
Who Can Be a Part of a Joint Powers Agreement for Cooperative Delivery of Services?
Minnesota has given its political subdivisions broad authority to work cooperatively. Minnesota Statutes, Section 471.59 provides the statutory framework for joint ventures between governmental units.
The law defines “governmental unit” to include:
- every city
- school district
- independent nonprofit firefighting corporation
- other political subdivision of the state of Minnesota or another state
- another state
- federally recognized Indian tribe
- the University of Minnesota
- the Minnesota Historical Society
- certain nonprofit hospitals
- rehabilitation facilities certified by the commissioner of employment and economic development
- extended employment providers that are certified by the commissioner of employment and economic development
- certain day training and habilitation services
- an agency of the State of Minnesota or of the United States of America
- “any instrumentality of a governmental unit,” which means an instrumentality having independent policymaking and appropriating authority.
The only significant limitation in the design of a joint powers organization is that an entity not included in the definition of “governmental unit,” such as a private business, cannot become a member of the joint powers organization unless specifically authorized by limited purpose legislation.
Two or more Minnesota governmental units may create a new and distinct governmental entity whenever the existing governing boards determine that a new entity offers a better way to meet a duty or obligation.
Setting Up a Free-standing Joint Powers Entity
A joint powers entity (JPE) can be formed by governmental units that exercise a power common to the contracting power or any similar powers. This is referred to as commonality of powers. In addition, counties and other governmental units may enter into agreements with any other governmental unit to perform on behalf of that unit any service or function that the governmental unit providing the service or function is authorized to provide for itself.
The new entity has the authority to adopt policies and procedures to operate the organization effectively. The joint powers entity is a reflection of its members; therefore, it must conform to Minnesota Statutes for public entities.
Care must be exercised in drafting the joint powers agreement and organizing and operating the joint powers entity. The forming members must ensure that contractual formalities are followed and the liability issues are addressed.
When a joint powers agreement creates a new entity (JPE) with a separate operating board with independent authority to act, the joint powers entity is a separate, free-standing entity subject to liability apart from its constituent members. The fact that the constituent members are members of MCIT or have standard insurance does not automatically extend coverage; therefore, the JPE should consider procuring separate, free-standing liability coverage.
To ensure it is protected, the JPE should procure separate coverage if:
- the JPE has established a separate board that operates autonomously from the boards of the participating entities.
- The JPE could be found liable to a third party for damages caused by its activities:
- makes decisions to receive and disburse funds
- signs contracts
- hires staff and/or owns property
- the joint powers agreement makes provisions for liability coverage to cover third party claims.
- the joint powers agreement provides for the allocation of costs, dissolution and distribution of obligations and assets.
The State of Minnesota has provided its political subdivisions with broad authority for the cooperative delivery of services to the public on a cost-effective basis. More importantly, cooperation is encouraged and fostered in a form and structure negotiated by the parties, not mandated by the state.
Manage Risks of Cooperative Delivery of Services
A political subdivision entering into a venture for cooperative delivery of services should ensure the following:
- The proper statutory provisions authorizing the joint effort have been followed:
- Are all parties included in the definition of “governmental unit” in 471.59?
- What is the purpose of the joint activity?
- What is the enabling legislation that empowers the group to execute its functions?
- How will the joint powers be governed?
- How will members apportion liability, such as debts or damages?
- How will assets be divided when the group dissolves?
- The agreement is signed by the entity’s board or other entity official authorized by the entity’s board to sign that specific agreement (a county official, such as the Sheriff or Human Services Director cannot enter in a contract on behalf of the county without a resolution authorizing the official’s act).
- If the joint powers agreement creates a new entity, the entity makes provisions for liability coverage.
To secure MCIT coverage, the new entity must apply for membership with MCIT.
For more information about joint powers agreements and joint powers entities, see the Resource ABC’s of JPEs: A Joint Powers Analysis and Worksheet.