STATE OF SOUTH DAKOTA
OFFICE OF
THE ATTORNEY GENERAL
October 24, 1969
George Weisensee, State's Attorney
Minnehaha County Courthouse
Sioux Falls, South Dakota 57102
OFFICIAL OPINION NO. 69-87
Special tax levy for urban renewal projects cannot be used to pay principal and interest on revenue bonds
Dear Mr. Weisensee:
You have requested my official opinion in answer to this question:
"If a municipality levies the special mill levy for urban renewal projects in pursuance to Ch. 193 of the Session Laws of 1969, may it apply the proceeds of such tax to the income and revenue of an urban renewal project being financed by a 'revenue' bond issue authorized by SDCL 1967 Sections 11-8-66 through 11-8-72?"
As you have stated, the practical effect of such application would be to use such taxes as collected under such special tax levy to pay the principal and interest on such bond issue. You also have pointed out that there may be some question if such tax levy were so applied, such might amount to transforming such "revenue" bond to a "general obligation bond" of the city, which cannot be issued without the prior approval of the electorate.
The Urban Renewal Law, SDCL 1967, 11-8, originated in Chapter 149 of the Session Laws of 1966. It consists, with amendments of the original act, of some 77 separate sections and presents a comprehensive enactment on the subject. The act itself provides for a master plan, for hearings thereon, for plans, inspections and surveys. It provides for the acquisition of property for such projects. The Urban Renewal Law itself provides for the issuance of "General Obligation" bonds of the city (SDCL 1967, 11-8-37). In such case, 11-8-38 requires the approval of the electorate as a condition precedent to issuing such bonds. It also provides for the issuance of "revenue bonds," which statutory provisions are encompassed within SDCL 1967, 11-8-66 through 11-8-72, inclusive. Such bonds are issued upon the resolution of the governing body of the city in question and the principal and interest to retire such bonds must be paid from the proceeds, revenue and funds of the particular project. 11-8-71 points out that such bonds issued under such statutes are not indebtedness of the city within the constitutional debt limitation.
This stated object that such bonds are not within the debt limitation must be considered along with many pronouncements of our court. See: State College Development Corp. v. Nissen, 66 S.D. 287, 281 N.W. 907; Mettet v. City of Yankton, 71 S.D. 435, 25 N.W. 2d 460; Clem v. City of Yankton (SD 1968) 160 N.W. 2d 125; and McFarland v. Barron (SD 1969) 164 N.W. 2d 607, that these projects which themselves retire a bond issue for their construction, and under the "special fund" doctrine no debt of the public corporation issuing such bonds. As our court pointed out in Boe v. Foss, 76 S.D. 295, 77 N.W. 2d 1, the special fund doctrine is not without limitation and when it is provided that such bonds are to be retired from proceeds of the project in question and in addition from existing structures or projects, the whole bond issue is a debt of the municipality. This distinction and the special fund doctrine existed at the time Section 11 of Chapter 149 of the Session Laws of 1966 (now SDCL 1967 11-8-71) was adopted, and it is presumed the Legislature was cognizant thereof.
SDCL 1967 11-8-64 provides that until sold to a non-tax-exempt entity, urban renewal property held by the municipality is exempt from all taxation.
Chapter 193 of the Session Laws of 1969 provides:
"Every municipality shall have power to levy a tax not exceeding one mill each year on each dollar of taxable property within the municipality for the purpose of creating a fund to finance the undertaking of any urban renewal project as authorized by Chapter 149 of the Session Laws of 1966, as amended . . ."
This provision, as I have said, was adopted when the Legislature was presumed to have been cognizant of all the statements heretofore made.
It is well settled in interpreting statutes that where the language of a statute is susceptible of any reasonable construction which is consistent with the Constitution, such interpretation will be given it rather than a construction repugnant to the Constitution. See Peterson Oil Co. v. Frary, 46 S.D. 258, 192 N.W. 366 (and cases therein cited). This case was affirmed in 264 U.S. 570, 44 S. Ct 334, 68 L. Ed. 854.
To construe Chapter 193, Laws of 1969 to authorize the use of such moneys as collected upon all taxable property within the county (when such urban renewal project is exempt from taxation) can be used to pay interest and principal of a bond issue which was specifically issued to be paid solely from the moneys derived from the project itself, raises the constitutional question of whether or not such project would then be considered outside of the debt limitation of the municipality. Likewise, such raises another constitutional question of whether or not a tax may be levied upon property, but the proceeds used for purposes other than for the benefit of those subject to such tax.
It is my opinion that a proper construction of Chapter 193, Laws of 1969, consistent with constitutional principles, requires me to answer your specific question as follows:
The proceeds from such special tax cannot be applied to payment of the principal and interest of bonds issued in accordance with SDCL 1967 Section 11-8-66 through 11-8-72, inclusive. The specific question presented is answered NO.
Respectfully submitted,
Gordon Mydland
Attorney General
