October 18, 1985

Mr. John J. Delaney 
Lead City Attorney 
Post Office Box 898 
Lead, South Dakota 57754

OFFICIAL OPINION NO. 85-42

Resolutions subject to referendum

Dear Mr. Delaney:

You have requested an opinion from this office in regard to the following factual situation:

FACTS: 

On August 12, 1985, the Common Council of the City of Spearfish, South Dakota, adopted Resolution No. 1985-25 which approved a commercial project for which Economic Development revenue bonds would be issued by the city. The bonds were for the acquisition of land and the construction of a motel complex within the city limits.  This resolution was referred by the electorate and will be voted on in October. 

Subsequently, on August 27, 1985, the Council adopted Resolution No. 1985- 27 which has not been referred to the electorate.  This resolution elaborated on No. 1985-25 by setting forth among other things the location of the proposed project and scheduled a public hearing for September 16, 1985, on the bond proposal. 

Finally, the city adopted Resolution No. 1985-28 on September 16, 1985, which set forth the provisions necessary to qualify the bond issue under the Internal Revenue Code.  The city expects that this resolution will be referred.

Based on the above facts you have asked the following questions: 

1.  If Resolution No. 1985-25 should be approved by the voters, may the subsequent Resolution No. 1985-28, which is a substantial reiteration of the referred resolution, be referred for another special vote? 

2.  Is every subsequent action of the city in the bond issuing process subject to referendum even though the voters have approved the project on the first referendum? 

3.  If Resolution No. 1985-25 should be defeated by the voters, does the passage and nonreferral of the subsequent resolution, 1985-27, save the project?

Resolution No. 1985-25, adopted by the City of Spearfish on August 12, 1985, authorizes the issuance of Economic Revenue Bonds to finance and construct a motel complex.  In this Resolution, however, the drafters failed to call a public hearing on the proposal to issue the bonds to finance the project.  This hearing is required by the Internal Revenue Code as a condition precedent to obtaining bonds which will bear tax-exempt interest.  To correct this problem the City passed Resolution No. 1985-27 which, among other things, called for a hearing on the proposal to the held on September 16, 1985.

Instead of trying to remedy the error of failing to call the required hearing in No. 1985-25 by passing an additional corrective Resolution No. 1985-27, the City should have rescinded Resolution No. 1985-25.  The City should then have adopted Resolution No. 1985-27.  If the petition for Referendum had already been filed for a vote on 1985-25, the Council should have applied this petition to their corrective Resolution No. 1985-27.  In actuality, Resolution No. 1985-27 is the initiating Resolution because it contains all of the procedural  requirements for obtaining tax-exempt bonds and supersedes 1985-25 in time as well, as it was passed on August 27, 1985.  In order to better answer your questions and to help you proceed with this project, I will assume that Resolutions 1985-25 and 1985-27 are the legislative or initiating resolutions.

South Dakota does not differentiate for referral purposes between legislative and administrative acts but if it did, the implementing Resolution 1985-28 which executes 1985-25 and 1985-27, would probably not be subject to Referendum.

The Supreme Court in Baker v. Jackson, Civ. No. 14576 (Supreme Court of South Dakota filed July 31, 1985), however, did differentiate for referral purposes between legislative grants to the municipal governing authorities and legislative grants to the corporate entity itself.  'When the Legislature grants or vests particular power in the municipal governing authorities and not the corporate entity, such a grant of power is precluded from referendum elections.'  Examples of where the Legislature has granted such power to the municipal governing body to the exclusion of the electorate can be found in SDCL 35-2-1.1 (retail liquor licenses applications);  SDCL 9-45-14 (establishment of street grades); and SDCL 11-7-1 (housing and redevelopment commissions).  Baker at 10.

SDCL Ch. 9-54 governs the issuance of Economic Development Bonds.  To determine whether the legislative grant of authority is to the municipal  governing authorities (governing boards, commissions, etc.), or to the corporate entity (the municipality itself), one must examine the language of the statutes.  SDCL 9-54-2 states 'that any municipality may issue revenue bonds.'  This seems to imply that the grant of authority is in the municipality.  It becomes clear, however, as one reads further into the chapter that the authorizing grant of authority has been given to the governing board, here the City Council.  SDCL 9-54-7 states that 'the governing body of the municipality may, by ordinance, resolution or by a trust indenture . . . pledge the revenues of the project . . .'  It is my opinion, therefore, that pursuant to the Supreme Court's holding in Baker, Resolutions implementing the initiating Resolution are not subject to referral.

IN RE QUESTION NO. 1:

Resolution 1985-28 is an implementing Resolution.  As the authorizing grant of authority is vested in the governing board, the Resolution is not subject to referral.

IN RE QUESTION NO. 2:

Subsequent resolutions implementing and administering the Approved Initiating  Resolution are not subject to referendum.  The answer to your question is NO.

IN RE QUESTION NO. 3:

As stated, supra; Resolutions 1985-25 and 1985-27 are in effect both initiating Resolutions.  If Resolution 1985-25 is defeated, Resolution No. 1985-27 will die with it.

The Supreme Court dealt with a similar question in City of Mission v. Abourezk, 318 N.W.2d 124 (S.D. 1982).  In Abourezk, the city passed a resolution to purchase certain real estate and then entered into a contract for deed to execute the sale.  The electorate rejected the Resolution for the purchase of the real estate and thus deprived the city of its authority to enter into the contract for deed.  Should Resolution No. 1985-25 authorizing the issuance of Economic Revenue Bonds be denied, a non-referred Resolution authorizing and finalizing the project would be without effect.  If the authorizing legislation is defeated by the voters, a subsequent non-referred Resolution reiterating the contents of the original will not resurrect the project; to proceed otherwise would be to circumvent the results of a valid referendum.

Respectfully submitted,

Mark V. Meierhenry
Attorney General