STATE OF SOUTH DAKOTA
OFFICE OF
THE ATTORNEY GENERAL

October 6, 1966

Raymond Hieb
State’s Attorney, Edmunds County
Ipswich, South Dakota 57451

OFFICIAL OPINION NO. 67-68 pg. 59

Nursing. Cities may pay operation and maintenance costs of city nursing home even though nursing home was built with Revenue Bond.

You have requested an opinion based upon the following factual situation:

"The City of "B" has availed itself of Chapter 286 of the 1963 Session Laws and has issued revenue bonds pursuant thereto and has had erected and is operating a nursing home facility charging monthly rates to the occupants or patients residing therein. Section 1 of said act provides: 'Such revenue bonds shall be payable solely from and shall constitute a lien upon the gross revenues derived from and traceable to properties acquired by the expenditure of the proceeds of revenue bonds, or of bonds refunded thereby, as fixed and determined by the governing body in accordance with the provisions of this chapter. The credit and taxing powers of the municipality shall not be pledged for the payment of revenue bonds issued hereunder and the bond-holders shall have no right to compel the appropriation of any of the municipality's other funds, money or property for the payment of the principal thereof or interest thereon."

It appears that by reason of increased costs of construction and operation, the interest and principal payments cannot be met out of margins over and above costs of operation."

You have asked the following specific questions:

"1. May the governing body transfer funds from the City liquor store revenues which it has not otherwise pledged, its other funds for the operation, of city government being in surplus, liquor store net revenues not being moneys derived from taxing powers?

"2. If it cannot pledge or transfer funds from the City liquor store net revenues or other net revenues from either its city hospital operation or water works operation for nursing home bond or interest payment, may it transfer such funds for the purpose of operating the home, as for example payment of help, food and supplies, and thereby free the revenues it receives for patient care for bond redemption and interest payment.

"3. If it cannot permanently transfer funds under either No. 1 or No. 2, may it borrow or transfer from the surpluses in its liquor store, waterworks or hospital operation on a temporary basis, and repay any sums so borrowed when its nursing home operation begins to show a sufficient net revenue to permit such repayment."

 SDC 1960 Supp. 45.0202 (2) as amended by Chapter 140, Session Laws of 1964 reads in part as follows:

"To establish and maintain hospitals and medical dispensaries and to regulate the same; to levy a tax for the operation and maintenance of such hospital of not to exceed five mills in cities having an assessed valuation of eight million dollars or less and three mills in cities having an assessed valuation of over eight million dollars, which levies shall not be subject to any levy limitations imposed in any statute;. In this subsection, the term 'hospital' may be construed to mean hospital, a nursing home or a home for the aged…”

SDC 1960 Supp. 45.1413 as amended by Chapter 213, Session Laws of 1965 reads in part as follows:

“…if upon the expiration of any fiscal year there remains in any fund any cash balance, after paying all obligations of the municipality properly chargeable against such fund, the governing body by a unanimous vote may transfer such balance to such other fund as it may deem advisable. Provided, however, that money transferred pursuant to this section shall not be expended for any purpose not provided for in the annual appropriation ordinance;…”

 It is clear that cities have authority under SDC 1960 Supp. 45.0202(2) as amended to establish, operate and maintain a nursing home and to levy a tax outside the general tax levy limitation for such purpose.

It is my opinion that if a city elects to construct a nursing home with revenue bonds under the authority of Chapter 286, Session Laws of 1963, that such procedure does not prohibit the city from also using the provisions of SDC 1960 Supp. 45.0202(2) as amended.

It is my opinion, however, that the city may not pledge any of its taxing power for the payment of the revenue bonds and the bondholders have no right to compel the appropriation of any city funds for the payment of  such revenue bonds and interest. It is my opinion that such limitations are for the purpose of keeping the revenue bonds, as revenue bonds, and eliminating the possibility of them being classified as general obligation bonds and that such limitations do not prohibit the city from assisting with the operating and maintenance expenses of a nursing home under the provisions of SDC 1960 Supp. 45.0202(2) as amended.

As to transfer of municipal funds, see official opinion issued to the Honorable Ronald A. Leighty, State Representative, April 16, 1966, 1951-52 AGR 371 and 1953-54 AGR 283.

It is my opinion that a municipality may appropriate for specific purposes from the general fund in lieu of using special levies for specific purpose, provided the amount appropriated is within the amount that would be authorized by the special levy for such specific purpose.

In summary and without answering your specific questions as such, it is my opinion that a city may either make a special levy and an appropriation to assist their nursing home with its operating and maintenance expenses under SDC 1960 Supp. 45.0202(2) as amended or may make an appropriation from the general fund for such purpose. An additional method of assisting a nursing home is provided by SDC 1960 Supp. 12.0617 (12) as amended by Chapter 38, Session Laws of 1964.

In general the liquor store fund is not a special fund recognized by law and in reality is a part of the general fund of the municipality and may be transferred to the general fund at any time. See 1937-38 AGR 435; 1951-52 AGR 371; and 1953-54 AGR 283.