Interlocal Cooperation: Options Which Are Available
(from Maine Townsman, August 1991)
by Geoff Herman

Although municipal government is clearly superior to larger units of government with regard to efficiency and accountability, it is not always the case that a task facing municipal government is most efficiently accomplished by each town or city standing alone. Some issues of municipal concern show a complete disregard for town boundaries. A sanitary district may beg formation in just the village area of a large, rural town. Similarly, lake watersheds establish their own geographical determinates, and a comprehensive approach to watershed protection demands some level of interlocal cooperation.

With regard to other tasks or challenges facing municipal governments, it is not always easy to determine if there is an advantage offered by multi-municipal cooperation. Towns may freely choose to either independently tackle their solid waste disposal responsibilities, for example, or they may create a multi-municipal entity for that purpose through a process of districting, incorporation or interlocal agreement, or some combination of these processes. The advantages or disadvantages of working independently rather than joining forces with your neighbors are sometimes difficult to compare or compute, primarily because an essential tension exists between the value of local control versus the economy-of-scale efficiencies that are allegedly available to a multi-municipal entity. Tension also exists between the pride of ownership associated with undertakings initiated solely on the local level versus the state's growing interest in, and therefore support for, the creation of regional structures, especially for the purpose of solid waste management.

This article concerns the structural and practical differences between the various types of formal intermunicipal cooperation: simple interlocal agreements, interlocal agreements which lead to the creation of multi-municipal corporations, and special purpose districts. Enabling law provides no shortage of opportunities for two or more municipalities to cooperatively contribute their resources and administrative energies to achieve a commonly desired purpose. The element of interlocal cooperation that is sometimes in short supply is the degree of mutual trust necessary to create a legal entity with a life of its own. Multi-municipal districts are characteristically less accessible and accountable than the primary municipal subdivisions from which they are born, and history teaches us that such an offspring, without adequate parenting, can become a problem child.

To a significant degree the accountability, and therefore the trustworthiness, of a multi-municipal entity or arrangement will depend on the controls that are designed into the structure of the entity during its formation. This article surveys some of the more significant differences between two models of intermunicipal relationship: the special purpose district and the interlocal agreement-corporation. Placed in particular focus will be the differences between these models which are significant enough to rise to the level of advantages or disadvantages from a practical, political, structural or procedural perspective.

This article does not undertake a complete description of every procedural step that must be taken to create a district or develop and implement an interlocal agreement. MMA publishes a Handbook for Interlocal Cooperation Agreements in Maine which discusses in some detail the procedural and substantive issues associated with developing and implementing interlocal agreements, and district formation is so exhaustively controlled by statutory detail that its recitation yields nothing but regurgitated statute. Indeed, the successful formation of a multi-municipal relationship is not achieved by a perfunctory adherence to the details of process. The potential for success is found in the particular written details of the formal relationship as those details define and protect from subsequent alteration such primary issues as the purpose of the relationship, the vestment of power in created legal entities, the distribution of power among membership, and the opportunity for withdrawal.

Interlocal Agreements

Maine's Interlocal Cooperation Act, now found at 30-A MRSA 2201-2207, was originally enacted in 1963. In its seven elegantly brief sections of statute (as compared to the turgid density of district enabling law), the Act enables a municipality to exercise jointly with one or more other municipalities, quasi-municipal corporations or agencies of the state or federal governments, any "power, privilege or authority" the single municipality is capable of exercising. In substance, the Act expressly permits municipalities to enter into written agreements with other municipalities (or other public agencies) which have the effect of establishing a combined legal authority to administer a particular governmental function. An interlocal agreement is simply a contract between two or more municipalities or public agencies. Outside of the Interlocal Cooperation Act, Maine law occasionally either expressly or implicitly encourages the utilization of interlocal agreements, such as for the creation of River Corridor Commissions (30-A MRSA 4463) or multi-municipal General Assistance districts (22 MRSA 4304(2)).

As discussed more fully below, the written agreement must contain certain details, and the legal authority of the joint power created by the agreement is subject to certain limitations, but by and large the Act, in its sweep and brevity, openly encourages all municipalities to join together wherever, whenever and for as long as they may wish to creatively and cooperatively perform their individual responsibilities together. In fact, one subsection of the Act declares that the authority to create interlocal agreements be "liberally construed," which means that the purpose of the Act may not be frustrated by insignificant technical or procedural inconsistencies. In explanation of the reason why the Interlocal is to be liberally construed, the law states that it is the intent of the Legislature to avoid the proliferation of special purpose districts and inflexible enabling laws." The essential characteristic of the interlocal agreement is its flexibility.

Very simple interlocal agreements can be created to govern the sharing of a single municipal official, such as a code enforcement officer or general assistance administrator, between two towns. Entire municipal departments, such as a public works or fire department, can be shared under the terms of an interlocal agreement. On the other end of the spectrum, separate legal entities comprised of, for example, 25 or more municipal members (and which otherwise look very much like county-wide refuse disposal districts) could be entirely created by means of the interlocal agreement. To add to the possibilities, interlocal agreements can create legal relationships between one or more municipalities and independently created municipal corporations or districts, such as School Administrative Districts or Refuse Disposal Districts. By such a hybrid of legal relationships, towns can control their degree of involvement with a multi-municipal entity they might not entirely trust. Another "hybrid" legal relationship joining municipalities is an interlocal agreement which also acts as the articles of incorporation for a nonprofit corporation. This occurs when interlocal agreements create a separate legal entity to govern the joint undertaking. For that separate governing body to have any legal existence, it must be incorporated. The process of forming regional planning commissions or councils of government, as described at 30-A MRSA 2301 et seq., closely resembles this model of intermunicipal relation, and Regional Waste Systems, Inc., the waste incineration facility located in Portland, was created in this manner.

While interlocal agreements are flexible, every such agreement must be written and must contain certain provisions:

Any other "necessary and proper matters," and most interlocal agreements do contain other provisions concerning such issues as personnel management, remedies when commitments made by the agreement are not honored, and amendment procedures.

The precise details of each provision are left up to the municipalities drafting the agreement. As will be seen, many of these required provisions are also found in district enabling legislation, except that in the case of district enabling legislation, the details of the various components of the interrelationship tend to be prescribed.

The Two Types of Interlocal Agreement. Even though interlocal agreements can be created to accomplish any number of municipal functions, in another sense there are only two types of agreement: the type that creates a separate legal or administrative entity (the interlocal corporation) and the type that does not.

Where no separate legal entity is created, all revenue contributions and borrowing or bonding decisions will be performed by the separate legislative bodies of each participating municipality. Each municipality will also retain all rights and responsibilities regarding property ownership and legal liabilities.

If the interlocal agreement creates an interlocal corporation, that entity will have the power and rights, unless expressly limited by terms of the agreement, to borrow money; issue bonds or notes; purchase, own and sell property; and prosecute and defend in civil actions.

Interlocal agreements cannot, as a matter of law, grant taxation authority to separately created legal entities, so each member municipality retains the ability to raise and appropriate money to support the interlocal corporation. This limitation represents the principal difference between interlocal corporations and special purpose districts. Most special purpose districts have either express or potential authority to assess member municipalities for revenue contributions in much the same manner as the Treasurer of State or the counties assess municipalities for their tax obligations. There exists, therefore, a certain awkwardness in the structure of an interlocal corporation. The interlocal corporation is empowered to incur debt, at least to any limits provided in the terms of its establishment, but the willingness of the underlying municipal legislatures to honor future debt retirement obligations can never be guaranteed.

As a matter of composition and organization, the governing body designated by an interlocal agreement that creates a separate legal entity may be identical to the governing body designated by an interlocal agreement that does not. As a matter of practice, however, more financial, property and liability questions must be taken to the voters of each member municipality where no legally separate governing entity exists. In this situation, the municipal delegates on the governing board may find themselves trooping back and forth between the governing board and their municipal legislatures, seeking ratification for the property and financial decisions made by the governing board under its limited authority. Separate legal entities can more efficiently borrow and spend money, acquire property, and defend themselves in court. The downside of creating a separate corporation is that each member municipality gives up a greater degree of control over money and property.

The Interlocal Corporation. The question of whether the interlocal agreement should create an interlocal corporation must be very carefully considered. Such an agreement is both practically and politically different by several orders of magnitude from the more modest and traditional interlocal agreement that undertakes, for example, the joint sharing of a building inspector.

As discussed above, the creation of separate legal entity has little to do with which individuals make up the board governing the joint undertaking. The make-up of the governing board is a matter of negotiation during the formation of the any interlocal agreement, and the composition of the governing board could be exactly the same whether or not a separate legal entity is created. Rather than the make-up of the governing board, the primary issues surrounding the creation of a separate legal entity concern matters of financial administration and liability.

Generally, the factors which support the creation of a separate legal entity are: (1) the joint undertaking requires extensive financial and operational administration; (2) some liability is associated with the joint undertaking, so that the chain of liability should be disconnected between the interlocal corporation and the underlying municipalities; (3) the interlocal agreement involves so many municipal members that informal joint governance would be cumbersome at best; (4) the interlocal agreement describes an undertaking which will involve the acquisition, holding and disposal of a significant amount of real or personal property; and (5) the interlocal agreement includes municipalities that are very different with regard to population, demographics, industrial base, wealth, or governmental structure. There very well may be some irony associated with this last factor. Just because it is sometimes the case that very dissimilar municipalities do not completely understand or trust each other, it might appear irrational to create a separate governing entity out of such a union of misunderstanding and distrust. On the other hand, if between two distrustful municipalities any functioning relationship at all, it had better be a formal governing arrangement; the efficient administration of the joint undertaking is not likely to occur otherwise.

Interlocal Corporations and Taxation. Corporations created by interlocal agreement have no authority to assess or levy taxes. This is done by the member municipalities in accordance with the funding provision in the agreement.

The real and personal property of special purpose districts is exempt from taxation by declarations to that effect in their enabling legislation. One partial exception is the land (but apparently not other real property) of Refuse Disposal Districts, which is not exempt.

For interlocal corporations, 36 MRSA 651(1)(D) exempts from property taxation "the property of public municipal corporations of this State appropriated to public uses, if located within the corporate limits and confines of such public municipal corporations." It is this subsection of tax law which exempts purely municipal property from taxation. Similarly, the property belonging to a nonprofit corporation formed by an interlocal agreement is in all probability exempt under this subsection, provided the corporation's property was "appropriated to public uses." As an example, Regional Waste Systems enjoys an exemption from property taxes in Portland, although RWS does pay the City for services on a fee basis in lieu of taxes. Because multi-municipal corporations can be formed as profit-making entities, their exemption from property taxes is not automatic; that is, an incorporated conglomerate of entities which are all individually exempt from taxation is not itself exempt by virtue of the exempt status of its members. Its exemption comes from its purpose and function.

For sales tax purposes, 36 MRSA 1760(2) provides a sales tax exemption to The State or any political subdivision...or to any unincorporated agency or instrumentality of either of them or to any incorporated agency or instrumentality of them wholly owned by them." Therefore, the interlocal corporation would enjoy a sales tax exemption.

The nonprofit interlocal corporation would be exempt from federal income tax under federal revenue code 26 USC 501(c)(2), and the state's piggyback exemption found at 36 MRSA 5102(6).

The Distribution of Power Within Interlocal Agreements. The composition and organization of the governing board of an interlocal corporation will probably generate the hottest debates and cause the greatest amount of frustration during the development of the interlocal agreement because this determines the distribution of power among the member municipalities.

Some of the questions to be addressed during the formation stage include: Will the governing board be made up of an equal number of representatives from each member municipality, or will representation be weighted by municipal population, production, valuation or performance? Will each representative to the governing board be granted one vote, or will some municipalities be granted more than one vote, again according to some factor such as population or performance? Is the formula which yields each member's prorate financial obligations the same as the formula driving the distribution of power? What extra benefits or "perks" are granted the host municipality?

The Interlocal Cooperation Act, like the district enabling laws discussed below, only requires that each member municipality or agency be represented on a governing board, but the distribution of power on that board is subject to negotiation during the development of the agreement. Just as the final agreement should fairly allocate power throughout the member region, it is also the case that care should be taken during this negotiation to protect the distribution of power from uncontrolled shifting after the agreement has become effective.

Delegating Powers to Interlocal Corporations. Where an interlocal agreement creates a separate governing entity, a list of powers granted to that entity must be detailed.

There are three powers that may not be granted to an interlocal corporation: essential legislative powers, taxing authority, and the power of eminent domain. In consideration of these limitations, even special purpose districts have no essential legislative powers, and eminent domain is an authority that few political entities are quick to utilize, which leaves the essential difference between special purpose districts and interlocal corporations, as noted above, the district's statutory authority to raise revenues by taxing its members.

Sample interlocal agreements typically list a number of the standard powers that are necessary for any legal entity to exist, such as the right to hold and dispose of property, the right to prosecute and defend in civil actions, and so forth. Sometimes the boilerplate adopts by reference the powers granted to non-capital stock corporations at 13 MRSA 901 et. seq. Beyond the enumeration of these boilerplate powers, the agreement may list, or list with conditions, such powers as employing necessary personnel, entering into contracts, applying for and receiving grants, accepting gifts and contributions, creating rules and regulations governing the use of corporate property, and so forth. The primary "power" consideration that must be carefully addressed is the power to incur indebtedness by borrowing money or issuing bonds or notes in anticipation of revenues.

Because all municipal members of an interlocal arrangement will necessarily be responsible for their prorate share of any debt incurred while members, the details of an interlocal agreement regarding the financial authority of its governing body should be carefully reviewed to ensure (a) that any appropriate debt ceilings are put in place, and (b) that capital financing is endorsed by the affected taxpayers prior to the encumbrance of any debt.

Interlocal Agreement "Boilerplate". There are any number of model or sample interlocal agreements that a committee representing the interests of potential member municipalities might use in drafting their interlocal agreement. Just as is the case with sample or model ordinances, such "boilerplate" should be examined with a critical eye. It is, for example, not uncommon for boilerplate samples to describe the purpose of the agreement in hazy and imprecise terms, or attribute to the agreement a larger purpose than necessary. MMA's Handbook For Interlocal Cooperation Agreements in Maine goes so far as to recommend being imprecise or broad with regard to the purpose statement so as not to stifle the creative possibilities of the agreement and its governing board. With respect to modest agreements where no separate legal entity is created, perhaps this advice is warranted. Vagueness or imprecision in the areas of purpose, powers, or amendment is not advised, however, for agreements which lead to the incorporation of a separately governing entity. The absence of precision with regard to the purpose and scope of any interlocal agreement may make it difficult to later evaluate if actions of the governing board are in accordance with the purpose of the arrangement. A loosely-defined purpose statement may also lead to similar imprecision concerning the powers granted the governing body of the joint undertaking. If the municipalities that are coming together under an agreement wish only to explore and research the development of a contemplated project, the purpose section of the agreement should state that in unequivocal terms. It is probably far better to accomplish a large, complicated undertaking by way of a series of integrated interlocal agreements than it is to establish a vague, over-inclusive purpose, grant to the governing authority vague powers, and simply hope for the best.

The "Critical Mass" of Interlocal Agreements. All interlocal agreements must state their duration and detail the conditions by which members can withdraw. Herein lies another difference between interlocal agreements and special purpose districts. The special purpose district is not designed to cease to exist. In some cases there is no clear method of municipal withdrawal from such districts or district dissolution.

Typically, the duration clause in an interlocal agreement is to either a date certain or when fewer than a certain number of municipalities are members, whichever comes first. Municipal withdrawal is typically allowed provided adequate notice and the withdrawing municipality discharges its financial obligations to the corporation. Inherent in any arrangement that involves many towns is a theory of "critical mass"; that is, the required membership level from which there can be extracted the necessary resources to sustain the joint undertaking. Some interlocal agreements have provisions which trigger the dissolution of the arrangement when membership falls below a defined critical mass level. An interlocal corporation that goes out to borrow money or issue bonds or notes in anticipation of revenues or grants may kind that the borrowing leverage or the marketability of the bonds or notes will be influenced by the apparent longevity or stability of the entity created by the agreement. This could in part be reflected in the provisions of the agreement dealing with duration, withdrawal, remedies (i.e., what happens when a member fans to honor its commitments), and termination. On the basis of their taxing authority and their designed permanence, it would appear that special purpose districts have a competitive edge with regard to the marketability of their instruments of indebtedness.

Adopting an Interlocal Agreement. After the terms of an interlocal agreement have been finalized, the process of adopting the agreement begins.

All interlocal agreements must be sent to the regional council or councils within whose areas of jurisdiction any member municipalities are located. The authority of the regional councils is to render an advisory report within 30 days of receipt which describes the regional significance of the pro-posed agreement. 30-A MRSA 2342(6).

In addition to seeking the review of the regional council, the Interlocal Cooperation Act requires that any interlocal agreement which deals with "the provision of services or facilities with regard to which an officer or agency of the State Government has statutory powers of control" must be submitted to that state officer or agency for review and approval before the agreement can become effective. Interlocal agreements dealing with solid waste disposal or recycling, therefore, must be submitted the Maine Waste Management Agency. An interlocal agreement establishing a General Assistance district would be submitted to the Department of Human Services.

The state agency's review of interlocal agreements is limited to substantive matters where the agreement grants or undertakes, or fails to grant or undertake, any powers or responsibilities in conflict with the state agency's responsibilities under state law. Since interlocal agreements are primarily concerned with procedural rather than substantive matters, the state agency review and authority to disapprove an interlocal agreement will be limited in scope. A state agency reviewing an interlocal agreement could not, for example, disapprove of an agreement because the agency felt that the membership of the agreement was too small or too large, or that the agreement was not economically viable, or that power or representation within the agreement was disproportionately allocated.

The Interlocal Cooperation Act requires that before any interlocal agreement can become effective, "the governing bodies of the participating public agencies must take appropriate action by ordinance, resolution or other action under law." Therefore, in order to effect an interlocal agreement, the municipal officers of each participating town should follow the same process of adoption as they would with an ordinance. Although a public hearing is not required as a matter of law, the municipal officers should hold a public hearing after finalizing the terms of any proposed interlocal agreement of substance. This should draw out any major problems and allow them to be resolved. The proposed agreement should be then filed with the municipal clerk, posted with the town meeting warrant at least 7 days before the town meeting, and an article should be included on the warrant reading something to the effect of, "To see if the town will vote to enter into an interlocal agreement with the municipalities of such and such for the purposes of such and such."

As soon as the action of the various municipalities is sufficient to establish the agreement, the enacted agreement must be filed with the clerks of each participating municipality and the Secretary of State before it can become effective.

Special Purpose Districts

A variety of multi-municipal special purpose districts can be created by means of the process detailed in the district enabling law pertinent to the particular undertaking. District enabling law has itself evolved as an alternative, and in some cases a replacement method for the creation of special districts by Private and Special acts of the Legislature. Beyond the processes detailed in Maine law for the creation of the various types of school districts (e.g., School Administrative District or Community School District), there exists enabling law for the creation of the following multi-municipal special purpose districts:

Special purpose districts are a different animal; separate political subdivisions that are more difficult to conceive than the interlocal corporation, and more difficult to extinguish. As has already been discussed as a contrast to the interlocal corporation, special purpose districts do not have prescribed lifetimes, but are instead designed to more or less perpetually perform the functions delegated to them by law. The actual or potential authority of special purpose districts to assess participating municipalities for their revenue contributions is another characteristic which distinguishes special purpose districts from interlocal corporations. This combination of structural permanence and positive access to revenues leads to the not-unwarranted perception by lending institutions, grant-issuing entities and state and federal agencies that special purpose districts are more stable than their incorporated interlocal cousins.

District Formation, An Overview. Despite the fact that each type of special purpose district has its own district formation statutes, the process of district formation is fairly uniform. Approximately 100 pages of Maine law, in fact, could be consolidated into but a dozen or more with the simple creation of a generic district enabling law. It is a description of the generic district formation process which follows.

Unlike interlocal agreements, which are unfettered by any significant review and approval from above, special purpose districts are created when the various municipalities jointly apply to a particular state agency for permission to form as a district.

The process begins with the filing of an application to the appropriate state agency. The application describes the district organization in some detail and proposes district formation. There is some ambivalence to the role of the state agency in this formation process. In one sense the state agency is chaperone to the fledgling district, if not sponsor. In another sense, the state agency has a policy-making influence over the ultimate design of the special purpose district.

To create a Refuse Disposal District, application is made to the Maine Waste Management Agency. To create a Lake Watershed or Sanitary District, application is made to the Board of Environmental Protection. Transportation Districts are formed under the watchful eye of the Department of Transportation, and municipal Electric Districts are formed with the permission of the Public Utilities Commission.

Prior to the submission of the application to form a Refuse Disposal District, there must be a public hearing on the proposal in each participating municipality. Common sense recommends holding such public hearings prior to applying for the formation of any district, even when such hearings are not required by law.

Upon receiving an application, the agency then holds one public hearing on the proposal somewhere in the geographical limits of the proposed district. After the public hearing, the agency, according to criteria of need and feasibility referred to in the law, determines whether the proposal is sound.

In contrast to the state's limited role in approving interlocal agreements, a state agency's role in approving or disapproving an application for district formation is substantial. State agencies may use their authority of disapproval as an instrument of leverage to negotiate designed changes in special purpose districts which would conform the district more to the state agency's agenda, and which might simultaneously lead those districts in directions not naturally followed. A state agency's disapproval, then, of an application for a special purpose district would present itself as a natural opportunity for the member municipalities to reconsider their approach, and push instead for the formation of an interlocal agreement.

If the state agency determines the proposed district is sound, the agency gives notice to all participating municipalities of the date, time and place of the district formation meeting, to which each municipality can send representation. There is some variation with regard to the representation that can be sent to these district formation meetings. For Refuse Disposal Districts, each municipality can send one delegate. For Sanitary and Lake Watershed Districts, the entire board of municipal officers can represent the municipality.

The charge to the formation team is to determine the number of directors/trustees to be appointed or elected to the governing board by each municipality, and establish their initial terms of representation by staggering them in preparation for subsequent 3-year appointed (Refuse Disposal/Transportation Districts) or elected (Watershed/Sanitary Districts) terms.

For Watershed and Sanitary Districts, the distribution of power within the district is entirely determined by the designated number of directors or trustees to the district. For Transportation Districts, the allocation of representation is established by statute on the basis of population, with each municipality getting one director for every 10,000 municipal inhabitants. Refuse Disposal Districts fall somewhere between these two models. The number of directors from each municipality is a subject of negotiation, but the number of votes granted to each municipality is based on municipal population unless the formation team elects to establish a different basis for the allocation of voting power. This bifurcated allocation of representation on a Refuse Disposal District's governing board, where the number of representatives may not accurately represent the municipality's voting strength, can be misleading.

After the formation team has made its decisions on the number of directors and term length, that decision is submitted to the state agency which, in turn, orders that the question of formation be submitted to the legislative bodies (i.e., town meeting or councils) in each municipality for consideration. The wording of the articles to be placed before the various municipal legislatures is provided in the enabling statutes.

For most districts, all participating municipal legislatures must affirmatively vote to join in order for the district to be established. For Refuse Disposal Districts, however, when not all municipalities elect to join, the agency is allowed to determine that a sufficient number of municipalities voted to form a district such that a critical mass exists. When that occurs, the agency issues a certificate of organization and gives one final notice to the appointed or elected directors of the time, date and place of their first meeting.. At the first meeting, the agency formally delivers the district's certificate of organization and all district authority is then vested in the directors. The agency's direct influence on the district ends.

Special Purpose Districts and Taxing Authority. Generally, special purpose districts have an express or potential authority to assess their municipal members for revenue contributions, but for each type of district, the authority of taxation is different.

The revenues collected by sanitary districts are user based; operating revenues are earned through user fees, but the sanitary district is expressly authorized to also assess the beneficiaries of construction projects for a portion, up to 50%, of the district's capital costs. The sanitary district's ability to collect those assessments is powerful, rivaled only by the municipal authority to collect unpaid taxes.

The authority of Watershed and Transportation Districts to assess their municipal members for revenues is express, and after such districts are formed, the trustees do not need to seek approval for such authority from the voters. Revenue contributions are assessed in the same manner as the Treasurer of State assesses municipalities for taxes, or the counties assess municipalities in their jurisdiction.

The authority for a Refuse Disposal District to assess its members for revenues exists only if the voters in all the member municipalities vote affirmatively at the time of formation or at any subsequent time to grant the district such authority.

District Bonding Authority. Of all the special purpose districts, Sanitary and Refuse Disposal Districts are expressly granted the broadest possible bonding authorities. Some protections from over-indebtedness are built into this authority. The district directors are required to hold a public hearing when a proposed bond issue is greater than $150,000 for Sanitary Districts, and $1,000,000 for Refuse Disposal Districts. The public hearing is merely for the purpose of giving notice of the proposed bond issue to the affected taxpayers. A special election to approve or disapprove of the bond proposal can be forced by the voters only by submitting a petition within 7 days of the public hearing signed by 5% of the district's registered voters.

Special Purpose Districts, Withdrawal and Dissolution. The laws enabling the formation of Watershed and Sanitary Districts have no provisions for municipal withdrawal or termination of the district.

Municipalities may withdraw from Transportation Districts fairly easily. One year's written notice must be given, during which time the municipality must discharge its current indebtedness to the district. New capital expenditures or borrowing created during the term of the withdrawal notice will not become the responsibility of the withdrawing municipality. Withdrawal will occur at the end of the year's notice if the municipality has paid off all its matured debt to the district and provided a written agreement to honor any longer term debt when those payments become due.

A Transportation District is dissolved by a two-thirds vote of its board of directors, provided all its obligations have been discharged and provisions have been made to retire its long term debt.

The withdrawal and dissolution provisions governing Refuse Disposal districts are somewhat contorted. If the district has not issued any bonds or notes which mature more than a year in the future, municipal withdrawal is accomplished by a vote of the municipal legislative body, but the law requires that for the withdrawal vote to be effective, it must pass by a two-thirds margin. A statutory requirement that a two-thirds vote of a municipal legislature is necessary to take an action is unusual.

If the Refuse Disposal District has issued an instrument of indebtedness with a date of maturity greater than one year, which is very likely to be the case, a member municipality may withdraw from the district only with the district's permission and after satisfying any conditions the district may place on the withdrawal. Upon any request to withdraw, the directors must consider the impact of the withdrawal on the remaining members, and the directors may require the withdrawing municipality to mitigate that impact by agreeing to either pay the district or secure alternative waste for the district's use so that no impact is felt by the remaining municipalities for a period of five years from withdrawal. Again, after the directors vote to allow a municipality to withdraw, the voters of that municipality must vote on a question to that effect, which will pass only with a two-thirds margin.

To dissolve a Refuse Disposal District, either all participating municipalities must vote to withdraw, in the manner discussed immediately above, or the directors can recommend dissolution. Upon such a recommendation, the question is put to all the participating legislative bodies, and if two-thirds of the participating municipalities (each by a two-thirds vote) elect to dissolve the district, dissolution follows.


There are three ways that a cluster of municipalities may enter into formal relationships. The most flexible is the simple interlocal agreement, which is commonly employed when there are only two or three municipalities involved or the joint undertaking contemplated is relatively modest in scope and requires little in the way of financing or common property. The simple interlocal agreement does not create a separate legal or administrative entity, and so the substantive financial or property related policy decisions that are made to implement the agreement must be approved by the various legislative bodies of the agreement's membership. Given the extraordinary growth of the General Assistance program over the last two years, and the concomitant administrative pressures, municipalities may begin to consider using the simple interlocal agreement to create small General Assistance districts, as they are expressly allowed under General Assistance law.

The second level of complexity and status is the interlocal agreement that creates a separate legal or administrative entity - the interlocal corporation. Examples of this approach are Regional Waste Systems, Inc., in Portland, Mid-Maine Waste Action Corporation, in Auburn, and the Sandy River Waste Recycling Association, in Franklin County. Advantages to this approach are flexibility and local control over the structural design of the separate legal entity created, which can lead to a acceptable balance of the corporation's power to operate efficiently with the need of the participating municipalities and their inhabitants to have influence over corporation decision making.

The most permanent inter-municipal relationship is created with the formation of a special purpose district. Examples from the world of solid waste management include the Penobscot Valley Regional Refuse Disposal District, the Boothbay Area Refuse Disposal District, the Southern Aroostook Solid Waste Disposal District, and the newly formed refuse disposal district in Washington County. The advantage of creating a special purpose district is its power, which is also its disadvantage. Although lending institutions, grant-issuing entities, and state and federal agencies may kind greater potential or security in the special purpose district with its structural permanence and ability to guarantee revenues, these very same qualities may give the municipalities and municipal inhabitants which are served by such districts reason to pause.

Beyond these three formal arrangements, hybrid relationships can be formed between single municipalities or municipal clusters and already existing interlocal corporations or special purpose districts. The mechanism to create such a hybrid relationship is the interlocal agreement.

The act of forming a multi-municipal entity is similar to participating in a game that social psychologists call the "Prisoner's dilemma." The game is played with two or more participants, each of whom, without the benefit of communicating with the others, is asked to either inform on their fellow prisoners or remain silent. If none of the prisoners sell their colleagues out, a minor penalty is applied to all. If all the prisoners inform on each other, a severe penalty is applied to all. If some inform but others do not, the informants are rewarded and those that hold their silence are severely punished. The outcome of the prisoner's dilemma game is entirely dependent on the choices of the participants and the degree of cooperation and silent trust they display. Similarly, with respect to the formation and implementation of multi-municipal arrangements, the less trust and cooperation that exists among the participants, and the more each municipality attempts to protect or maximize its particular interests, the more likely it is that any advantage that is to be gained from the relationship will be disproportionately allocated, and the relationship will fail. Fortunately for us, and unlike the prisoner's dilemma game, towns can communicate with their participating colleagues during the formation of any interlocal arrangement and protect their legitimate interests by forging them into the terms of the agreement itself.