Brunini Law

U.S. Supreme Court’s Same-Sex Marriage Decision & Its Potential Impact on Employers

June 27, 2015 by Brunini Law

In a historic decision on Friday, June 26, 2015, the United States Supreme Court recognized a fundamental right for same-sex couples to marry throughout the country. In a 5-4 opinion, authored by Justice Anthony Kennedy, the Court held that both the Due Process and Equal Protection Clauses of the Fourteenth Amendment require states to license a marriage between two people of the same sex.

The Decision

The opinion (Obergefell et al. v. Hodges, No. 14-556) consolidated four federal court cases that presented two questions: first, does the Constitution require states to issue marriage licenses to same-sex couples; and second, are states required to recognize same-sex marriages performed elsewhere. The Court answered both questions in the affirmative.

On Due Process grounds, the Court stated that the Constitution guarantees same-sex couples the right to marry because: (1) “the right to personal choice regarding marriage is inherent in the concept of individual autonomy”; (2) the right to marry “supports a two-person union unlike any other in its importance to the committed individuals”; (3) the right to marry “safeguards children and families and thus draws meaning from related rights of childrearing, procreation, and education”; and (4) marriage is a “keystone of [the Nation’s] social order” for which there is no difference between same-sex and opposite-sex couples. Additionally, the Court also relied on the Equal Protection Clause to reach its decision, but with substantially less analysis.

Of note, the opinion expressly recognized the First Amendment rights of religious organizations and individuals to oppose same-sex marriage. Thus, there may be a latent conflict between the fundamental right to marry laid out in this opinion, and the expansive view of religious liberty laid out in opinions like Burwell v. Hobby Lobby Stores, Inc.

The Potential Impact

Although the tone of Friday’s decision was far-reaching, the full impact of the decision remains to be felt. For example, although it is clear that the states must recognize same-sex marriage, it is not clear that private employers are required to do so where such policies do not flow from federal or state law. (I.e., rights under employer-provided leave policies vs. FMLA leave rights). However, policies that treat opposite-sex spouses differently from same-sex spouses may become subject to legal challenge, as Friday’s decision will likely become a basis for litigation to further expand the reach of laws such as Title VII.

Of note, Friday’s ruling does not appear to impact other private employer discrimination claims. Specifically, in states that do not extend anti-discrimination protections to LGBT individuals in employment at the state level (such as Mississippi), while gay or lesbian individuals in these states are now able to lawfully wed, this ruling does not afford them employment anti-discrimination protections under Title VII. However, most legal experts expect additional litigation challenging adverse employment actions taken on the basis of sexual orientation—especially in light of the Court’s decision.

By highlighting the Court’s previous decision in Burwell v. Hobby Lobby Stores, Inc., the Court possibly foreshadowed a looming challenge between the federal government and private religious-based employers who feel recognizing same sex marriage (through the offering of employee benefits) violates their First Amendment religious protections. Can the employer opt to not provide the benefit to any “married” employee, regardless of sexual orientation? What about for mandatory federal benefits, such as the Family and Medical Leave Act? The Supreme Court’s decision in Obergefell did not resolve these questions.

The primary impact of this decision from the employer benefit plan perspective will be on health and welfare benefits.

Friday’s decision will impact some employers’ health and welfare benefits design and administration. After theUnited States v. Windsor decision in 2013 (which struck down part of the federal Defense of Marriage Act), employers who offered same-sex spouses health and welfare benefits were able to treat those benefits as non-taxable for federal tax purposes. In those states that did not previously recognize same-sex marriage, however, those benefits may have been subject to state taxes. This created a situation where some same-sex spousal welfare benefits were taxable for state tax purposes but not for federal tax purposes–resulting in the potential for participant confusion and administrative burden for the plan sponsor. After this ruling, those benefits should no longer be taxable for federal or state tax purposes which should ease administration for employers.
In addition, employers who had previously defined “spouse” for purposes of their welfare plans based on a state definition, should consider revisiting those definitions, to see if changes in administration are necessary. Employer welfare plans that continue to define “spouse” for purposes of welfare benefits to exclude same-sex marriages should expect an increased chance of potential legal challenges in light of the new ruling.

Possible changes:

Employers may need to make administrative changes to cover same-sex spouses in states where they were not previously covered.
For example, employers will need to modify enrollment processes and create or modify consent and eligibility forms.
The state income tax treatment of employer-provided benefits could change for individuals with same-sex spouses.
With anticipated changes to the state income tax treatment, workers with same-sex spouses covered by employer plans will no longer need to pay imputed income on those benefits. Further, it will eventually be unnecessary for employers to continue to calculate imputed income.
Eligibility rules for employer-provided benefits could change, which would open up eligibility to same-sex spouses in all states.
In contrast, employers might discontinue same-sex domestic partner benefits, if all employees are able to marry in their state.

This ruling may impact the number of people who are considered spouses, but should not require a qualified retirement plan change. After the United States v. Windsordecision in 2013, the IRS issued guidance providing that for federal tax purposes the IRS applied a “state of celebration” rule. As a result, qualified retirement plans, which rely on the Internal Revenue Code definition of spouse, have already been considering same-sex spouses as “spouses” for purposes of those plans.

The Supreme Court’s decision on Friday was just the latest in a recent trend of legal and legislative changes that could alter the obligations employers face in offering benefits for their employees, and complying with regulations administering these obligations. We encourage you to have your legal professional review your current employment practices and policies to ensure up-to-date compliance with this ever-changing landscape.

Related Attorneys

Christopher R. Fontan

Mississippi Environmental Quality Permit Board Summary of Meeting Held June 11, 2015

June 17, 2015 by Brunini Law

Prepared By Brunini, Grantham, Grower & Hewes, PLLC

The Environmental Practice Group of the Brunini Law Firm publishes a summary of the proceedings of each monthly meeting of the Mississippi Environmental Quality Permit Board and of the Mississippi Commission on Environmental Quality. We strive to provide, in a succinct newsletter format, the key points addressed in each meeting that will be of interest to the regulated community in Mississippi.

If you have any questions concerning the content of a newsletter it would like further information about the matters addressed in a newsletter, please contact John Milner, the Brunini Firm Environmental Practice Group leader, at jmilner@brunini.com or (601) 960-6842.

Meeting Summary

The Mississippi Department of Environmental Quality Permit Board (Board) convened its regular monthly meeting at 9:00 a.m. on June 11, 2015 at the offices of the Mississippi Department of Environmental Quality in Jackson. Ms. Leslie Royals, PE chaired the meeting. The Board approved minutes from the May meeting and all non-controversial actions/certifications by the staff since the May meeting. Following a prepared agenda, items considered were as follows:

OFFICE OF GEOLOGY

In accordance with staff’s recommendations, the Board approved the following surface mining bond releases and permit to transfer.

Surface Mining Bond Releases:

Permittee	County	Permit	Staff Recommendation
Blain Sand and Gravel Co.	Lawrence	P99-050	Final 10% Release
Green Brothers Gravel	Copiah	P96-072	Additional 20% Release
Green Brothers Gravel	Copiah	P00-026A	Additional 20% Release
Green Brothers Gravel	Marion	P02-052A	Additional 15% Release
Green Brothers Gravel	Marion	P07-003A	Final 10% Release
Green Brothers Gravel	Marion	P08-0100AAA	Initial 15% Release
Green Brothers Gravel	Copiah	P08-015AA	Initial 25% Release
Green Brothers Gravel	Copiah	P09-021A	Additional 20% Release
Green Brothers Gravel	Copiah	P09-005A	Additional 20% Release
Joe McGee Construction Co., Inc.	Madison	P06-024	No Additional Release
Joe McGee Construction Co., Inc.	Chickasaw	P07-004	Final 10% Release
Joe McGee Construction Co., Inc.	Chickasaw	P08-011	No Additional Release
Joe McGee Construction Co., Inc.	Winston	P13-015	Initial 60% Release
Joe McGee Construction Co., Inc.	Newton	P10-031	Initial 60% Release
Tanner Construction Co., Inc.	Jefferson Davis	P96-016T	No Additional Release
Tanner Construction Co., Inc.	Lawrence	P04-050	Final 10% Release
Tanner Construction Co., Inc.	Lawrence	P07-005A	Additional 10% Release
Tri-State Jackson Lands, LLC	Hinds	P06-008T	Initial 90% Release

Surface Mining Transfer:

Permittee	County	Permit
APAC-Mississippi, Inc., transfer to David Honnell with new permit number P04-021T3	Panola	P04-021T2

OFFICE OF POLLUTION CONTROL

Agricultural Branch

The Board approved the Issuance of Coverage of the AFO General Permit (MSG201818) and the Issuance of Storm Water Coverage (MSR106885) for Justin Horn Poultry in Lamar County. The proposed facility would include 6 poultry houses construction activity on 7.6 acres of property. Staff stated that upon notification by the Applicant, three nearby property owners submitted letters of concern. Three parties attended the meeting and stated their concerns to the Board: odors for the chicken houses, composting, and litter application; concerns about water quality due to runoff; decreasing property values; and aggravation of health problems. MDEQ staff noted that the Application is complete and that all required buffer zone distances between the proposed facility and neighboring property and dwellings are within the technical requirements of MDEQ Regulations. MDEQ staff performed a Site Inspection of the proposed location. Because the applicant is in compliance with all requirements, MDEQ recommended issuance of the permit. After discussion, the Board approved the proposed permits.

OTHER BUSINESS

Roy Furrh, MDEQ General Council, stated that the evidentiary hearing for tDry Asset Facility Holdings, LLC (Pearl River County) Permit Transfer application has been postponed because the facility submitted a revised application for its water quality certification. The hearing will be rescheduled after MDEQ staff review the revised application.

Upon a request by the City of Jackson, MDEQ has scheduled an evidentiary hearing for the West Rankin Utility Authority NPDES Permit No. MS0061743. The hearing is scheduled for September 1-2, 2015, beginning at 9 a.m.

The next Permit Board meeting will be held on July 14, 2015 at 9 a.m.

This Newsletter is a publication of the Environmental Department of the law firm of Brunini, Grantham, Grower & Hewes, PLLC, located in Jackson, Mississippi.

This Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.

IRS Circular 230 Notice

To ensure compliance with requirements imposed by the IRS, we inform you that, unless specifically indicated otherwise, any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed herein.

Related Attorneys

The Things We Missed While Daydreaming in College Statistics

May 26, 2015 by Brunini Law

While I love numbers and “statistics” in the baseball sense of the word, I must admit that I never sat through a class in college that I considered more worthless than Statistics. I never considered a regression analysis too hard to regurgitate on a test, but the necessity of it escaped me. Possibly it was my instructor who failed to adequately explain to me when such information could ever be worth the money my parents were paying for me to receive it, or possibly it was me who failed to pay close enough attention to him when he tried to do so (the latter is probably more likely than the former), but I could not in my wildest dreams ever foresee a time when that knowledge would have practical application to my personal or professional life.

Following college, I’m not sure the concepts I learned in statistics ever reentered my mind until I was a young lawyer and learned that Federal banking regulators were using regression analyses to decide whether or not banks were complying with Fair Lending laws. Evidently, they did not have the same college Statistics experience I did since they not only found that information useful but also considered it worthy of reliance as substantiation of the ultimate “Scarlet Letter” in banking known as discrimination. While I still consider that point debatable and often believe there are parallels between Fair Lending enforcement and “The Crucible” (I am full of college curriculum references today), I will say that age and Microsoft Excel have at least allowed me to find interesting uses for Statistics, even though their reliance may still be debatable.

For example, there is a function in Excel that allows you to calculate the correlation between one set of data points and another set of data points. You statisticians and regulators out there already know that the calculation of “r,” or “Person’s correlation coefficient,” is a measure of the linear correlation between two variables. This measurement is reflected through a value between -1 and 1, with a result of 1 meaning that the two data points are perfectly correlated in a positive way (i.e., as x moves, so does y), and a result of -1 meaning that the two data points are negatively correlated (i.e., as x moves up, so does y move down). A result of 0 implies that there is no linear relationship at all between the two data points, and a correlation of 0.80 and above is generally considered as statistically significant enough to indicate a linear relationship.

“My head is hurting,” you say. “I am not a regulator, so I can’t possibly see what any of this has to do with banking.” Well, as I implied above, Microsoft Excel has a formula function that allows you to calculate “r” for different data points. When I realized that, I thought it might be fun (or at least interesting) to analyze the linear relationships between varying bank performance ratios and the typical bank profitability ratios (i.e., ROA, Pretax ROA, and ROE) in order to see, for example, if a higher net interest margin for banks studied could be related to higher profitability for banks during a given period of time. By using the same peer group data from the last five years of UBPR reports that I have referred to in all of my previous articles, I decided to try this. What I found was even more interesting than I thought it would be.

First of all, many of the bank performance ratios and statistics that are often presumed to be primary drivers of profitability appeared to have little correlation to ROA, ROE, or pretax ROA over the last five years. For example, consistent with my earlier articles questioning the benefits of size for banks, the average total assets for all peer groups between 2010 and 2014 had an “r” of 0.21 to ROA, 0.19 to ROE, and 0.32 to pretax ROA. If 0.80 is the standard for a statistically significant correlation, then total assets seems barely correlated to profitability at all. Another commonly held position is that a bank’s loans to assets drives profitability since it obviously increases the bank’s earning asset yields; however, loans to assets had a 0.01 r to pretax ROA, a 0 r to ROE, and actually a -.05 r to ROA, indicating no correlation to a slightly negative one.

So what about Net Interest Margin, the holy grail of community banking? How many countless hours are spent by bankers around Board and ALCO meeting tables wringing hands and thinking of some way to add one more basis point to a bank’s Net Interest Margin in order to improve bank profitability? Well, Net Interest Margin had negative correlations to each of the profitability measures, with a -.23 r to ROE, -.30 r to ROA, and a -.35 r to pretax ROA. As a matter of fact, if you compare those results to the correlation results for total assets, Net Interest Margin was more negatively correlated to profitability than total assets were positively correlated to the same.

So if size, loans, and Net Interest Margin were not correlated with bank profitability over the last five years, what was? I guess it shouldn’t be a surprise after the research I documented in my earlier articles that ratios dealing with a bank’s ability to control costs exhibited the strongest correlations during the period studied. For example, the ratio of other expenses to total assets was very strongly and negatively correlated with ROA, ROE, and pretax ROA (-0.86, -0.86, and -.84, respectively), indicating that profitability often went down as this ratio increased. Efficiency ratio exhibited the next strongest negative correlation, with an “r” of -0.83 to ROA, -0.83 to ROE, and -0.84 to pretax ROA. A close third was bank Burden (i.e., non-interest expense less non-interest income), which had “r’s” to ROA, ROE, and pretax ROA of -0.77, -0.74, and -0.81, respectively. Notice that each of these “expense” centric measurements had correlation coefficients with negative correlations that were arguably statistically significant.

Chart 8: Correlation of Bank Performance Ratios to Profitability

CHART-FOR-BLOG

So what can we take from this, other than a bad reminder of college statistics? Probably nothing in and of itself since your college professors would tell you that “r” was never meant to predict causal relationships but instead merely indicate how two sets of data points may be linearly related; however, considering the evidence from my past articles, I’m not sure we can completely ignore it either. If nothing else, it seems to be further evidence of the fact that, at least during the last five years, a bank’s ability to grow or produce interest income was not nearly as important to the return their shareholders received as was the costs they incurred generating that extra dollar. The latter definitely seems like it was more harmful than the former was helpful. Would it be any different in an alternate part of the interest rate or economic cycle, though? After all, the last five years were most definitely unique in that historically low interest rates perpetuated through a historically tepid recovery. We will consider that point in my next article.

BRUNINI RECOGNIZED AMONG TOP LAW FIRMS IN MISSISSIPPI BY CHAMBERS USA

May 5, 2015 by Brunini Law

The 2015 edition of Chambers USA, which lists leading law firms and individual lawyers in an extensive range of practice areas, jointly awarded high rankings to ten Brunini attorneys and five of the firm’s practice areas.

Chambers USA ranked five of Brunini’s practices, including the firm’s Energy & Natural Resources, Environment, Real Estate, Commercial Litigation and Corporate/Commercial practices, all of which were highly ranked.

Each year, Chambers USA conducts thousands of interviews and surveys with lawyers and their clients, as well as analyzes its own database resources, to determine rankings for top law firms and individual attorneys. The qualities on which rankings are assessed include technical legal ability, professional conduct, client service, commercial astuteness, diligence, commitment and other qualities valued by clients.

“The Brunini firm is truly honored to have its practice groups and individual lawyers recognized by our clients as among the best in Mississippi through one of the nation’s most respected legal directories,” said Sam Kelly, Chairman of the firm’s Board of Directors. “Our commitment to client service and a long history of legal excellence are hallmarks that set us apart in Mississippi, and those are good reasons to earn the respect of business leaders and peers.”

A collective list of the nine Brunini attorneys recognized as among the best in their fields in Mississippi by Chambers USAinclude:

Corporate/Commercial

Louis Fuller

Walter Weems

Corporate/Commercial: Banking & Finance

Granville Tate, Jr.

Energy & Natural Resources

James L. Halford

Watts C. Ueltschey

Environment

John E. Milner

Litigation: Construction

Samuel C. Kelly

Ron A. Yarbrough

Litigation: General Commercial

R. David Kaufman

Related Attorneys

Mississippi Commission on Environmental Quality Summary of Meeting Held April 23, 2015

April 23, 2015 by Brunini Law

Prepared By Brunini, Grantham, Grower & Hewes, PLLC

Meeting Summary

The Mississippi Commission on Environmental Quality convened at 9:00 a.m. on April 23, 2015, at the offices of the Mississippi Department of Environmental Quality in Jackson. The Commission approved minutes from the previous meeting held on February 26, 2015.

Following a prepared agenda, items considered were as follows:

COMMISSION APPROVAL OF REICHHOLD ENVIRONMENTAL COVENANT

The Commission approved an environmental covenant in which Reichhold, Inc., will place in the public land records of Harrison County as part of the final EPA-approved remediation of Reichhold’s resin plant in Gulfport, Mississippi.

COMMISSION APPROVAL FOR REGULATORY VARIANCE

After a short demonstration by Tronox, LLC, the Commission approved a regulatory variance to allow Tronox to construct its proposed on-site non-hazardous solid waste landfill with a constructed clay sublayer instead of the natural geology requirement.

PILOT TRAVEL CENTERS LLC PROPOSED ORDER

The Commission adopted and approved an order proposed by the MDEQ staff to memorialize the Commission’s prior decision denying Pilot Travel Centers LLC’s request for eligibility under the Mississippi Groundwater Protection Trust Fund for assessment and remediation of Pilot’s underground storage tank (UST) site in Moss Point, Mississippi.

CERTIFICATIONS APPROVED

Asbestos: 240 certifications

Lead Paint: 141 certifications

Underground

Storage Tanks: 22 certifications

EMERGENCY CLEAN-UP EXPENSES APPROVED

Seven (7) emergency clean-up expenditures occurred since the last report.

ADMINISTRATIVE ORDERS APPROVED

Twenty (20) administrative orders were issued by the Executive Director and approved by the Commission since the last report. These include the following matters:

Program Area	Number of Orders	Penalty Range
NPDES	1	$1,500
Large Construction Stormwater	3	$5,000 – $7.500
Air	5	$4,875 – $50,000
Hazardous Waste	1	$7,425
Ready Mix Concrete	1	$2,500
Baseline Stormwater	1	$7,500

Order No. 6503 15 set the annual Title V air permit fee for fiscal year 2016 at $41/ton, with a minimum fee of $250. The Commission approved the amount at the February meeting of the Commission and subsequently issued an administrative order within a few days after the February meeting so that the matter was subject to public comment before the April meeting.

The next Commission meeting is scheduled for May 28, 2015.

This Newsletter is a publication of the Environmental Department of the law firm of Brunini, Grantham, Grower & Hewes, PLLC, located in Jackson, Mississippi.

This Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.

IRS Circular 230 Notice

Related Attorneys

Supplement to Mississippi Environmental Quality Permit Board Summary of Meeting Held April 14, 2015

April 22, 2015 by Brunini Law

Prepared By Brunini, Grantham, Grower & Hewes, PLLC

Meeting Summary

The Mississippi Environmental Quality Permit Board (Board) convened its regular monthly meeting at 9:00 a.m. on April 14, 2015 at the offices of the Mississippi Department of Environmental Quality in Jackson. The portion of the April 21 summary of this April 14 Board meeting regarding the discussion of the Board’s action relating to the West Rankin Utility Authority’s (WRUA) permit application is corrected and clarified as follows. The Board did not approve the WRUA permit in closed session. The Board members went into closed session briefly to decide if they needed to go into an executive session to discuss potential legal issues or lawsuits that may arise from the issue. However, they decided there was no need to go into an executive session at that time, so they adjourned the closed session, invited everyone back into the meeting and returned to open session. At that time, after brief discussion while in open session, they voted to issue the WRUA permit.

This Newsletter is a publication of the Environmental Department of the law firm of Brunini, Grantham, Grower & Hewes located in Jackson, Mississippi. This Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.

IRS Circular 230 Notice

Related Attorneys

Mississippi Environmental Quality Permit Board Summary of Meeting Held April 14, 2015

April 21, 2015 by Brunini Law

Prepared By Brunini, Grantham, Grower & Hewes, PLLC

Meeting Summary

The Mississippi Department of Environmental Quality Permit Board (Board) convened its regular monthly meeting at 9:00 a.m. on April 14, 2015 at the offices of the Mississippi Department of Environmental Quality in Jackson. Ms. Leslie Royals, PE chaired the meeting. The Board approved minutes from the March meeting and all non-controversial actions/certifications by the staff since the March meeting. Following a prepared agenda, items considered were as follows:

LEGAL DIVISION

Mr. Roy Furrh, MDEQ General Council, presented the Proposed Rules of Practice and Procedure for Formal Evidentiary Hearings before the Mississippi Environmental Quality Permit Board for the Board’s consideration and adoption. The Board approved the Proposed Rules upon recommendation by MDEQ’s Legal Department.

OFFICE OF GEOLOGY

In accordance with staff’s recommendations, the Board approved the following surface mining bond releases and partial permit transfer.

Surface Mining Bond Releases:

Permittee	County	Permit	Staff Recommendation
Jim Castleberry, Castleberry Trucking	DeSoto	P94-082	Final 10% Release
Jim Castleberry, Castleberry Trucking	DeSoto	P95-054	Final 10% Release
Jim Castleberry, Castleberry Trucking	DeSoto	P95-119	Final 10% Release
Jim Castleberry, Castleberry Trucking	DeSoto	P00-012	Final 10% Release
Jim Castleberry, Castleberry Trucking	DeSoto	P00-013	Final 10% Release
Jim Castleberry, Castleberry Trucking	DeSoto	P03-007	Final 10% Release
Baldwin Sand & Gravel	Lowndes	P02-029A	Final 30% Release
W.G. Yates & Sons Construction Co.	DeSoto	P14-004	Initial 10% Release
W.G. Yates & Sons Construction Co.	DeSoto	P13-004T	Initial 10% Release

Surface Mining Partial Permit Transfer:

Permittee	County	Permit
Joe McGee Construction Company, Inc., transfer to Green Earth Materials, LLC	Rankin	P06-010T1

OFFICE OF POLLUTION CONTROL

Construction Building Material Branch

MDEQ staff recommended approval of a Ready Mix Concrete General Permit for the Oscar Renda Contracting, Biloxi North Facility in Harrison County. MDEQ staff noted that the application is complete. Upon notification by the Applicant, three contiguous land owners issued letters of concern regarding stormwater, wastewater and declining property values. Tony Morrow, Project Manger for the Applicant, described the facility as temporary in nature. The contiguous landowners did not appear before the Board. After discussion, the Board approved the General Coverage Permit (MSG110313).

Agricultural Branch

MDEQ staff recommended reissuance of Animal Feeding Operation (AFO) and issuance of Storm Water Permits for JJ Farm in Newton County. Upon notification by Applicant, four landowners issued letters of concern regarding the number of poultry houses, proximity of poultry houses to residential homes, noise, and runoff issues. However, responding land owners are outside of the buffer zone. The landowners did not appear before the Board. Based on MDEQ staff recommendation, the Board approved AFO General Permit (MSG201044) and Storm Water Coverage (MSR106830).

Solid Waste Management & Mining

Staff recommended renewal of the Wastewater Pretreatment and Stormwater Permit, modification of Solid Waste Permit, and issuance of Title V Permit for Pine Belt Regional Solid Waste Management Authority in Perry County. There was no opposition by adjoining property owners. Based on Staff recommendation, the Board approved the following permits: Wastewater Pretreatment (MSP091106), NPDES Stormwater (MSS048658), Title V (2200-00025), and Solid Waste Permit (SW0560010436).

Municipal & Private Facilities

MDEQ Staff presented the West Rankin Utility Authority Wastewater Treatment Facility NPDES Wastewater Permit application, but did not make a recommendation. Roy Furrh, MDEQ General Council, noted that the presentation of the permit application was not an evidentiary hearing. Representatives of the West Rankin Utility Authority and the City of Jackson made statements regarding the permit application. After the statements, the Board approved the NPDES Wastewater Permit (MS0061743) in a closed session.

OTHER BUSINESS

Roy Furrh, MDEQ General Council, stated that MDEQ is scheduling an evidentiary hearing regarding the Dry Asset Facility Holdings, LLC (Pearl River County) Permit Transfer application. The hearing will probably be held in June or July 2015.

The next Permit Board meeting will be held on May 12, 2015 at 9 a.m.

IRS Circular 230 Notice

Related Attorneys

Sam Kelly elected as a Fellow of the Mississippi Bar Foundation

April 14, 2015 by Brunini Law

Samuel C. Kelly has been elected as a Fellow of the Mississippi Bar Foundation. He was inducted into membership at the Foundation’s recent Annual Meeting and Fellows Induction Ceremony held at the Old Capitol Inn in Jackson in April. A Fellow of the Mississippi Bar Foundation is a great honor bestowed on only a few each year. Selection as a Fellow is based not only on excellence as an attorney, but also on an attorney’s commitment to serve the Bar and the public. The Bar Foundation was organized in 1963 to improve the administration of justice. It presently administers the Interest On Lawyers Trust Accounts Program, which has awarded over eleven million dollars to public interest, law-related programs.

Related Attorneys

Samuel C. Kelly

Community Banking: The Ultimate Moneyball

March 27, 2015 by Brunini Law

When I think about my childhood, the first and most vivid memory I have is of the summer before I turned 12. Although I didn’t realize it at the time, that summer was as close as I would ever come to realizing my dream of becoming a major league baseball player. That is because it was truly my only occupation, or obsession, for those three months. Each day, I would walk out of the house around 8:00 AM heading toward my friend Bill’s back yard, where I would play baseball with a “rag” ball (thank goodness considering how many houses and windows we hit) and my friends Chip, Clint, Jeff, Michael, and whomever else wandered up that day until the sun set and we were forced to go home. My specific job in the league, besides playing, was to serve as its official scorekeeper and statistician, which allowed me to combine my first love, baseball, with my second, numbers, in a way that still makes baseball appealing to me today. As each batter would come to the plate, I was duty bound to announce their season batting average as well as other pertinent statistics, such as how many homeruns they had hit off of the roof of the house next door. This love of baseball and numbers is still the reason I have to stay up until midnight watching “Moneyball” anytime I find it on cable at 10:30 P.M. It is also a trait I have passed along to my progeny, who keep the floors of our home covered with hundreds of baseball cards that they have sorted, studied, and stacked for hours like they had a final on Manny Machado’s slugging percentage the next day. Yes, my wife is an exceptional woman.

Because I love numbers, I subscribe to the philosophy that they don’t lie. However, I’m sure we are all familiar with Twain’s adopted view of statisticians, placing them on par with liars and the damned. Considering my love of numbers and my chosen profession, I’m not exactly comfortable about what such theories may imply about my character and my eternal prospects, Nevertheless, it would not surprise Twain to find out that the Federal Deposit Insurance Corporation (“FDIC”), after conducting an extensive study regarding issues facing community banks, reached a conclusion about the profitability of community banks relative to non-community banks that is contrary to many of the conclusions I have reached in recent blog articles.

To defend myself, before I discuss the FDIC’s conclusions, I think it is important to note a couple of important distinctions between the FDIC’s study and the research I have relied upon. First of all, that study adopts a completely different definition of community banks than the one I have relied upon. For the purposes of its study, the FDIC developed a new research definition of a community bank that was partially tied to asset size (i.e., an indexed maximum asset value that began at $250 million in 1984 and increased to $1 billion in 2010), but also considered “criteria related to traditional lending and deposit gathering activities and limited geographic scope” (e.g., loans to assets > 33%, core deposits to assets > 50%, numbers of offices, and numbers of offices in MSAs and other states). My definition of a community bank for these articles, particularly my first addressing their competitive profitability, has been much more fluid and has been based solely on asset size.

Secondly, the FDIC’s study period of community bank profitability (i.e., 1985 – 2011), in addition to being primarily before the time period I considered (i.e., 2010 – 2014), was also more than five times longer. Therefore, it encapsulated many more market cycles than the data I studied. For that reason, some may argue that it is more reliable because it is more comprehensive; however, I think the counterargument would be that the last five years have been the most relevant for community banks to consider in this new world since they reflect life in the post-apocalyptic world following Dodd-Frank and the Great Recession.

Nevertheless, considering these differences, I thought it was important to address the following conclusions reached by Chapter 4[1] of the FDIC study, some of which were contrary to my analysis:

A comparison of pretax ROA[2] reveals that non-community banks (i.e., 1.31 % average pretax ROA) outperformed community banks (i.e., 1.02% average pretax ROA) during most of the FDIC study period;
Non-community banks had greater success in generating noninterest income from a variety of sources (i.e., average of 2.05 % of average assets vs. 0.8 % for community banks over that same period), explaining much of the gap in earnings;
Community banks, because of their heavy dependence on lending as a source of income and the long term trend toward lower net interest margins, also experienced a significant erosion in its traditional net interest income advantage over the last few years, which also contributed to the gap in pretax ROA; and
Even though community banks have traditionally been less efficient than non-community banks, this gap, as measured by the efficiency ratio, widened over the FDIC study period. While the gap was only 3.5% between 1985 and 1998, it ballooned to 9.2 % between 1999 and 2011. This was driven by community bank’s decreasing competitiveness in generating revenue along with their decreasing advantage from lower noninterest expenses, which is now almost non-existent despite a long-term noninterest expense advantage of 22 basis points.

That being said, there were also several points made in Chapter 4 of the Community Banking Study that supported conclusions I reached in my analysis. For example, for both community banks and non-community banks, banks headquartered in metropolitan areas had lower pretax ROAs than banks headquartered in nonmetropolitan areas. Community banks headquartered in nonmetropolitan areas averaged a pretax ROA of 1.25% compared with 0.94% for their urban counterparts, while non-community banks headquartered in rural areas averaged a very impressive pretax ROA of 1.88% compared to 1.30% for community banks headquartered in metropolitan areas. Therefore, the “city bank -country bank” dichotomy identified in my previous articles held up in the FDIC study as well. The FDIC study also noted that community banks have almost always incurred lower credit losses than non-community banks, which helped to narrow the overall earnings gap during the latter years of the study. Finally, with both sets of data, there is little argument that larger banks experienced a significant advantage with regards to net overhead and efficiency ratios.

Nonetheless, even the FDIC has concluded that that “while the results show that community banks may benefit from economies of scale, there is no indication of any significant benefit beyond $500 million in asset size, and much of the benefits from scale appear to be achieved for [community banks] as small as $100 million.” [3] Instead, the study reaching this conclusion found that community bank’s decreasing competitiveness with regards to efficiency ratios is more closely related to the growing erosion of their net interest income advantage and their inability to increase their assets managed relative to numbers of employees the same way that non-community banks have. So, once again, maybe size isn’t all that important, at least when you are talking about bank assets. However, the limited size of my buddy Bill’s yard was extremely important since it allowed me to entertain a dream of hitting similar grand slams in major league parks one day, at least for a summer.

[1] FDIC Community Banking Study (December 2012), Chapter 4, “Comparative Financial Performance: Community versus Non-community Banks.”

[2] The FDIC Community Banking Study focused on pretax ROA as opposed to ROA after tax, which was the basis of my conclusions in my first blog article. They stated that such a focus better facilitated comparisons between banks organized as C corporations (i.e., entities taxed at the bank level) and S corporations that are not taxed at the bank level. Without opining as to which measurement is better for the purposes of bank analysis, I will note that using pretax ROA instead of plain ROA for the purposes of my analysis would not have yielded much different relative comparisons among the different UBPR Peer Groups except for the fact that the largest peer group (banks larger than $3 billion) compared much more favorably, presumably because almost no S Corporations existed within that group. Notwithstanding their improved relative performance, Banks in that peer group still finished behind banks in peer group 7 (i.e., $100 million to $300 million, 2 or fewer branches, and with a non-metropolitan main office) with regards to average pretax ROA over the last 5 years (i.e., 0.97% vs. 0.87%).

[3] Paul Kupiec and Stefen Jacewitz, “Community Bank Efficiency and Economies of Scale,” FDIC, December 2012.

Kaufman and Cirilli Victorious in Mississippi Supreme Court Appeal of Chancery Court Ruling Regarding Cost for Lamar County to Withdraw from the Pat Harrison Waterway District

March 19, 2015 by Brunini Law

David Kaufman and Richard Cirilli represented Lamar County, Mississippi; the Lamar County Board of Supervisors and its president, Joe Bounds; and the Tax Collector for Lamar County in an action filed in the Chancery Court of Forrest County, Mississippi, by the Pat Harrison Waterway District. The issue involved in the lawsuit was the amount that Lamar County was required to pay the Pat Harrison Waterway District, pursuant to Section 51-15-118 of the Mississippi Code, following the County’s withdrawal from the District on September 6, 2011. An independent auditor retained by the parties pursuant to the statute determined that Lamar County owed $337,088. The auditor rejected the District’s position that Lamar County was responsible for the District’s alleged perpetual operating costs under its federal government contracts which the District claimed totaled approximately $18,000,000. The Chancery Court Judge agreed with the independent auditor and ruled in favor of Lamar County, and the District subsequently appealed to the Mississippi Supreme Court. On March 19, 2015, the Mississippi Supreme Court issued its opinion and affirmed the Chancery Court’s decision. The Supreme Court determined that the alleged perpetual operating costs of the District were not “contractual obligations” that were “outstanding” on the date of Lamar County’s withdrawal, and therefore, Lamar County was not obligated for these costs pursuant to Section 51-15-118.