July 18, 1984
Mr. Roger C. Rozell
Secretary-Treasurer
James River Watershed District
P.O. Box 1762
Aberdeen, South Dakota 57401
OFFICIAL OPINION NO. 84-32
Subdistrict contracting authority; liability of watershed districts
Dear Mr. Rozell:
You have requested an official opinion from this office in regard to the following factual situation:
FACTS
The James River Watershed District has agreed to sponsor a dredging program on the James River. The program is scheduled to begin this fall. The Board of Managers is considering the possibility of entering into a contract with the Oahe Conservancy Subdistrict to obtain a portion of the funding for the dredging program. Such contract would obligate the subdistrict beyond the date upon which the subdistrict ceases to exist; conservancy subdistricts are dissolved effective December 31, 1984 by virtue of Section 2 of Senate Bill 1, 1984 Special Session of the Legislature.
The Watershed District Board of Managers would like to know whether the subdistrict can by contract obligate its taxpayers for more than one year in light of the fact that the subdistrict will no longer exist as of the end of this calendar year. The Board is also concerned about the District's potential liability arising from its sponsorship and the operation of the dredging program.
Based upon those facts, you have asked the following questions:
QUESTIONS:
1. May the Oahe Conservancy Subdistrict legally enter into a long term contract which would obligate its taxpayers beyond the effective date of subdistrict dissolution?
2. Should the Watershed District procure liability insurance for itself, its officers or employees to cover errors and omissions that may arise from the dredging program?
IN RE QUESTION NO. 1:
Senate Bill No. 1 passed by the 1984 Special Session of the 59th Legislature, dissolves the nine existing conservancy subdistricts effective December 31, 1984. S.L. 1984 (SS), Ch. 1, § 2. The Act, which becomes effective on August 2, 1984, goes on to create six new water development districts, which become existing legal entities on January 1, 1985. See, AGR 84-25. To effectuate a smooth transition from conservancy subdistricts to water development districts, the Legislature provided in § 3 of the Act:
The board of water and natural resources shall exercise the necessary power and authority, including the power to collect taxes necessary to satisfy existing financial obligations, of the directors of the subdistricts dissolved in section 2 of this Act until such time as all financial responsibilities, obligations and other contractual commitments of the dissolved subdistricts have been satisfied.
Obviously, the Legislature contemplated that the subdistricts might have long-term financial obligations and contractual commitments remaining following the dissolution of the subdistricts. Those long-term contractual obligations, assuming they were properly and lawfully entered into, are not invalidated by the dissolution of the conservancy subdistricts. See 1961-62 AGR, p. 100. Therefore, the Legislature designated the Board of Water and Natural Resources as the entity responsible for satisfying those obligations.
Conservancy subdistricts are political subdivisions of the State, created to assist in meeting the goals of water resource development as set forth in Chapters 46A-2 and 46A-3 of the South Dakota Codified Laws. To accomplish those goals the subdistricts were given the power to enter into contracts for the 'planning, construction, operation or maintenance of water resources projects.' SDCL 46A-3-44. If the financial obligation created by such contract extends beyond the current fiscal year of the subdistrict, or if the proposed contract requires a tax levy greater than .5 mill, approval of the subdistrict voters is required to authorize the subdistrict to enter into the contract. See SDCL 46A-3-49; AGR 78-5; AGR 78-19.
The Oahe Conservancy Subdistrict secured contracting authority as the result of a favorable vote of the subdistrict electorate on November 8, 1966. As set forth in the resolution calling for the election, and in the explanation of the ballot, the subdistrict board of directors sought and obtained authority:
to enter into and execute contracts for the payment of all or any part of the costs incurred or to be incurred in the studies, investigations, acquisition of land, construction, operation and maintenance of desirable water development projects within the Sub-district. . . .
If contracts are within the scope of the approved contracting authority, they need not be submitted from a vote of the electorate. AGR 78-5. Such contracts must, however, be approved by the Board of Water and Natural Resources pursuant to SDCL 46A-3-49. See AGR 78-19; Oahe Conservancy Subdistrict v. Janklow, 308 N.W.2d 559 (S.D. 1981).
Therefore, it is my opinion that if the contract you refer to is in the contracting authority of the Oahe Conservancy Subdistrict, if it is otherwise properly and lawfully entered into, and if it is approved by the Board of Water and Natural Resources pursuant to ARSD 74:20:02:08, it would not be invalid simply because it will obligate subdistrict taxpayers beyond the December 31, 1984, subdistrict dissolution date. I have discovered nothing in Senate Bill No. 1 which evinces a legislative intent to deny subdistricts their statutory powers to enter into contracts pursuant to their contracting authority prior to their dissolution.
In fact, I believe it would be inconsistent with the legislative intent expressed in Senate Bill No. 1 to interpret that Act as a moritorium on water development at the subdistrict level. Had the Legislature so intended, it could have easily prohibited further subdistrict budgeting or contracting, just as it prohibited further subdistrict elections. The Legislature intended to put into place a logical, long-lasting system to facilitate orderly water development, and took steps to ensure a smooth transition from the current subdistrict structure to water development districts. AGR 84-25; AGR 84-30. To imply that by dissolving the subdistricts the Legislature intended water development to cease during the transition period is contrary to the whole thrust of the special legislative session.
Therefore, my answer to your first question is YES.
IN RE QUESTION NO. 2:
You also asked a second question based upon the following facts, some of which were identified above. The James River Watershed District wishes to contract with a conservancy subdistrict to perform the dredging of the James River. The Watershed District will receive funds from the Conservancy Subdistrict (or from the Board of Water and Natural Resources after January 1, 1985), and the District will contract for labor and materials to perform the dredging. Based upon these facts you asked whether the Watershed District should procure liability insurance for itself, its officers or employees.
In a recent opinion, AGR 84-12, I classified governmental units into state, municipal and quasi-municipal categories. Under the arrangement set out in that opinion, a watershed district is properly classified as a quasi-municipal unit of government: it can exercise substantial powers over a narrow range of activities and, further, that power may be exercised over a wide geographic area. See generally SDCL 45A-14-4; 46A-14-34.
I indicated in AGR 84-12 that a quasi-municipal unit of government is itself immune from liability under existing law.
However, I noted that under existing law officers and employees of a quasi-municipal unit of government might themselves be found liable if two conditions were met. First, the officer or employee might be liable if, somewhat paradoxically the creation or recognition of such liability on the part of the employee would create no liability on the part of the state. Second, it must also be shown that the employee's act was a ministerial act instead of a discretionary act. When these two conditions are met, and of course, when a negligent or intentional act is proven to have been committed by the officer or employee, that officer or employee may be liable individually for his act.
I also pointed out in my earlier opinion that even though the foregoing stated the existing law, it was by no means certain that the law would not be subject to further unanticipated development. I therefore advised that conservation districts, as a matter of 'good business,' purchase liability insurance to cover their officers and employees because such liability is 'probably' a matter of existing law; I also advised that it would be prudent for a conservation district itself to purchase insurance for its acts because the law might develop such as to subject the unit of government itself to liability.
I suggest, in conclusion, that the James River Watershed District would be well advised to purchase similar insurance for itself and its officers and employees. I would render this advice even if the Watershed District were not considering entering into the arrangement to dredge the James River. With that new task being undertaken the need seems all the greater.
My answer to your second question is therefore YES.
Respectfully submitted,
Mark V. Meierhenry
Attorney General
