April 19, 1977

Mr. Craig D. Grotenhouse 
Lawrence County State's Attorney 
Lawrence County Courthouse 
Deadwood, South Dakota 57732

Official Opinion No. 77-33

FHA financing for West River Mental Health office building

Dear Mr. Grotenhouse:

You have requested an official opinion from this office based upon the following facts:

FACTS: 

West River Mental Health, a private, nonprofit corporation with headquarters in Rapid City, South Dakota, intends to build an office building and facility in Spearfish, South Dakota.  To do this they have requested Farmer's Home Administration financing.  FHA is unwilling to loan any money for the construction of this office building and facility without a contract between Lawrence County and West River Mental Health whereby Lawrence County would guarantee a portion of the normal yearly allocation as going towards the finance charges on the construction loan.  Lawrence County has for the past number of years made an annual contribution to West River Mental Health of approximately $10,000.00 per year.  The amount of money needed on a yearly basis to amortize the loan is less than this $10,000.00. FHA requires a ten year commitment before their approval for financing.

Based on the above facts you ask the following question:

QUESTION: 

Can the County Commissioners of Lawrence County enter into a ten year contract guaranteeing West River Mental Health and the Farmer's Home Administration that the County shall contribute enough money each year to cover the yearly amortization costs for the construction of the facility in Spearfish?

SDCL 7-32-9 provides general authority for counties to contribute to corporations such as the West River Mental Health Center Corporation.  SDCL 27A-5-9 provides additional authority in this regard.

It is clear, in my opinion, that Lawrence County can make contributions to the West River Mental Health Center.  It is another matter, however, whether they can obligate the county to make such payments over a ten-year period in the future as contemplated by the above factual statement.  SDCL 7-21-25 and 7-21-29 are relevant statutes in this regard: 
    
7-21-25. It shall be unlawful for the board of county commissioners or any member thereof, or for any officer of any county or any employee thereof in charge of any institution or agency of a county, to contract any indebtedness or incur any liabilities for or in behalf of the county, in any manner whatsoever, either for a purpose, object, or item for which no appropriation is provided in the budget of such county for the fiscal year in which such indebtedness is attempted to be contracted or liability attempted to be created, or in excess of the amount of any specific appropriation for any purpose, object, or item set forth in the budgets of such county, for the fiscal year in which such indebtedness is attempted to be contracted or liability attempted to be created. 
    
7-21-29. In all cases where appropriations of money have heretofore or may hereafter be made for periods longer than one year, it shall be unlawful for the person or persons whose duty it is to expend such appropriation to audit, expend, or contract to pay more money in any one year than a prorata share thereof; that is, the expenditures for one year shall never exceed the proportion which one year of time bears to the whole time unless otherwise expressly provided.

The law recognizes specific ways in which the county can make obligations binding with an impact into future years, through issuing bonds or through a procedure under SDCL 7-21-29.  There is no authority, however, for a county to enter into a contract such as contemplated here whereby the present county commissioners would be attempting to obligate future revenue funds ten years into the future.  Such a provision would violate SDCL 7-21-25 and would impose the officers to liability under SDCL 7-21-27 and 7-21-28.

Respectfully submitted,

William J. Janklow
Attorney General

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