May 8, 1987
Mr. Maurice C. Christiansen
Auditor General
435 South Chapelle
Pierre, SD 57501-3292
OFFICIAL OPINION NO. 87-15
Authority of school districts to enter into exclusive contracts with vendors in exchange for non-monetary consideration
Dear Mr. Christiansen:
You have requested an official opinion from this Office in regard to the following factual situation:
FACTS:
The Milbank School District No. 25-4 has received two offers from soft drink companies who will purchase scoreboard equipment for the school district in return for a fifteen-year binding contract allowing the soft drink company exclusive rights to sell its products to the school and at all school events where soft drink or soft drink juices are sold.
It appears, if the school district enters the contract, it will receive the scoreboard equipment valued at approximately $5,000 without cost. In both contracts, the soft drink distributors have agreed to sell soft drinks to the school district at a price identical to those charged to other soft drink accounts in the area.
Based upon the foregoing facts, you have asked the following question:
QUESTION:
Whether a school district can enter into a contract with a soft drink distributor for a fifteen-year exclusive requirements contract on the sale of soft drinks in exchange for receiving scoreboard equipment?
It is my opinion that a school district does not have legal authority to enter into a fifteen year requirements contract with soft drink distributors for exclusive rights to all soft drink and/or soft drink juice vending rights and sales at the school or at manned concessions for all school events. There is no statutory authority for a school district to enter into this type of contract.
A long-standing principle of government known as "Dillon's Rule" provides that governmental entities can only do those things specifically authorized by statute or necessarily implied therefrom and may do those things only in the manner authorized by statute. Application of this generally accepted rule for determining a governmental entity's authority to act to the present facts supports this opinion.
There is no authority for a school district to enter into the contract proposed by the soft drink vendors. First, there is no authority for a school district to enter into a long-term requirements contract for the purpose of supplying soft drink goods and services. In my opinion, a school district could only enter into this type of exclusive requirements contract for a period of one fiscal year. The present school district board has no authority to bind future school boards in future fiscal years. This one-year limitation on school district contracts is supported by the existence of special exceptions for multi-year contracts such as three year teacher contracts SDCL 13-43-6, and five year transportation contracts-SDCL 5-18-1.
In addition, a school district cannot, without bidding, enter into a contract for the purchase of a scoreboard if the total cost of the scoreboard and installation would exceed $5,000. SDCL chs. 5-18 and 13-20 require competitive bids for scoreboard equipment if the value exceeds $5,000. Though school districts are empowered under SDCL 13-14-5 to accept gifts, it is my opinion the scoreboard is not a gift from the soft drink distributor, but rather is a payment to the school district for an exclusive contract.
Based upon the foregoing, it is my opinion, that any school district that enters into the type of contract discussed above would be entering into a void contract under SDCL 5-18-19.
Sincerely,
Roger A. Tellinghuisen
ATTORNEY GENERAL
