June 28, 1993

Thomas H. Harmon
Deputy City Attorney
City of Fort Pierre
P.O. Box 626
Pierre, SD 57501-0626

OFFICIAL OPINION NO. 93-03

Referability of refunding bond resolution

Dear Mr. Harmon:

You have requested an official opinion from this Office based upon the following factual situation:

FACTS:

The City of Fort Pierre in the early 1980's issued several general obligation bonds of the City. The current level of interest rates for municipal bonds is significantly lower than the rate on the original bonds. The City is contemplating issuance of refunding bonds to pay off the old obligations in order to improve the debt service on the items. In order to issue refunding bonds it is necessary for the City to adopt a resolution authorizing the issuance of the bonds. Significant savings can be realized if the bonds can be sold by July 1, 1993. If the sale is postponed to allow for a theoretical referral of the resolution, the July 1 date cannot be met.

Based upon the foregoing factual situation, you have asked the following question:

QUESTION:

Is a resolution by the common council authorizing issuance of refunding bonds pursuant to SDCL ch. 6-8B subject to referendum?

IN RE QUESTION:

A necessary starting place for a discussion of this issue is SDCL 6-8B-2. The statute provides:

Unless otherwise provided, no bonds may be issued either for general or special purposes by any public body unless at an election sixty percent of voters of the public body voting upon the question vote in favor of issuing the bonds. The election shall be held in the manner described by law for other elections of the public body.

There is no question but that an election must be held for an initial funding via bonds.

The language of SDCL 6-8B-30, however, also must be examined. That statute reads, in part:

Any bonds may be refunded, whether or not the bonds have matured or are then subject to redemption, by the public body which issued them, or any successor thereof, in the name of the public body which issued the bonds being refunded, without an election, except as provided in <185> 6-8B-40. . . . [Emphasis added].

With the one noted exception (SDCL 6-8B-40, which addresses only funding sources), it is apparent that the State Legislature intended that the action of refunding municipal bonds not be a matter subject to the election process within a municipality.

It would appear to the casual reader of these two statutes from a single chapter that they are contradictory. Adequate legal analysis cannot stop at that point, however; a pair of principles of statutory construction must be applied. The South Dakota Supreme Court has said, "But, in construing statutes together, it is presumed that the Legislature did not intend an absurd or unreasonable result." Appeal of AT&T Information Systems, 405 N.W.2d 24, 27-28 (S.D. 1987). That court also has stated, "Where conflicting statutes appear, it is the responsibility of the court to give reasonable construction to both, and to give affect, if possible, to all provisions under consideration, construing them together to make them harmonious and workable." Meyerink v. Northwestern Public Service Company, 391 N.W.2d 180, 184 (S.D. 1986). Thus, it behooves us to reconcile the two statutes, if possible. A prior writing of this Office is useful toward that end.

My immediate predecessor issued Official Opinion No. 90-17. That opinion, although examining a county resolution, provides significant authority applicable to any analysis of the referability of local government actions.

First, Official Opinion No. 90-17 examined certain, relevant portions of SDCL 7-18A-1, the statute defining various terms found in county law. SDCL 9-19-1, the municipal equivalent, contains virtually identical language. It reads:

The word "ordinance" as used in this title shall mean a permanent legislative act of the governing body of a municipality within the limits of its powers.

The word "resolution" as used in this title shall mean any determination, decision, or direction of the governing body of a municipality of a special or temporary character for the purpose of initiating, effecting, or carrying out its administrative duties and functions under the laws and ordinances governing the municipality.

Opinion 90-17 then observed that the "administrative" nature of a county "resolution" is very important. Obviously, the same would hold true for a municipal resolution.

That 1990 writing also cited the case of Headley v. Ostroot, 76 N.W.2d 474 (S.D. 1956), which holds that the State Legislature is empowered to determine via statute which local government measures are referable. Thus, the Legislature was acting within its authority when it enacted the provisions of SDCL 9-20-19, as follows:

Any legislative decision of a governing body is subject to the referendum process. A legislative decision is one that enacts a permanent law or lays down a rule of conduct or course of policy for the guidance of citizens or their officers. Any matter of a permanent or general character is a legislative decision.

No administrative decision of a governing body is subject to the referendum process, unless specifically authorized by this code. An administrative decision is one that merely puts into execution a plan already adopted by the governing body itself or by the Legislature. Supervision of a program is an administrative decision. Hiring, disciplining and setting the salaries of employees are administrative decisions.

(Notably, SDCL 7-18A-15.1, the county law equivalent cited in Opinion 90-17, is virtually identical in language.) Clearly, the underlying nature of a common council's decision is the determinative factor regarding the decision's referability.

As I noted above, the State Legislature has made it clear that the act of initially issuing bonds includes the election process but, at the same time, that body does not regard municipal bond refunding as a matter generally to be delivered to a municipality's voters. SDCL <185><185> 6-8B-2 and 6-8B-30, supra. Thus, it appears that, from the Legislature's viewpoint, refunding of municipal bonds is an activity different and apart from the primary funding. Consequently, while the initial decision to issue municipal bonds remains a matter subject to election, including referendum, later refunding is an administrative decision linked to the municipality's financial administration. Such financial management (which involves only the benefit of saving money for the municipality and its taxpayers) does, in fact, appear to be an activity that is administrative in nature. Thus, for the legal reasoning cited above, including my predecessor's opinion regarding county referendum, the common council's resolution to proceed with municipal bond refinancing is not subject to the municipal referendum process. The answer to your question is "no."

MWB:WAH:nan