May 16, 1988
Eugene J. Irons
Canton City Attorney
P.O. Box 348
Canton, South Dakota 57013-0348
Official Opinion No. 88-19
Canton water and sewer contract
Dear Mr. Irons:
You have requested an official opinion from this Office regarding the validity of a certain contract entered into by the city of Canton on February 19, 1982, with a contractor who had installed a water and sewer line in a city street adjacent to an area under development.
Under the facts, as you have presented them, a mortgagor of the property in the development area contracted with an individual to install a water and sewer line for the developer. This line was installed in the right-of-way which was dedicated for public use as a public street. The sewer and water line was constructed under the authority of and pursuant to the specifications of the City of Canton. The mortgagee foreclosed on the property and took over the development. The contractor did not file a lien for an amount which he claimed to be due him for his work in installing the lines. He did, however, enter into a contract with the City of Canton, by which contract it was agreed that the city should be the absolute owner of the sewer and water lines, but with the proviso that the city would require the payment of a certain sum by any person who wished to connect any property in the development to the city sewer and water system and that this amount would be paid to the contractor or his heirs or assigns.
Concerning this you have asked the following questions:
QUESTIONS:
1. Was the City of Canton within its authority to enter into the enclosed contract?
2. Does the enclosed contract constitute a valid obligation on the part of the City of Canton?
3. Does anyone have the legal right to make connections to said water line or sewer line without the payment of the connection charges stipulated by said contract, together with such other hookup charges as may be normally collected by the City of Canton?
4. Is any party required to make use of the existing water line or sewer line by virtue of the enclosed agreement?
5. Does the enclosed agreement constitute any type of lien or encumbrance against any property adjacent to said water line or sewer line?
General Discussion:
This is somewhat similar to a situation that arose in 1974 and was the subject of Official Opinion 74-1. There the State's Attorney of Lincoln County asked whether the City of Canton might acquire ownership of an existing water main extending to a point outside the city limits and whether it could be acquired under a contract to purchase or lease purchase arrangement. In that opinion this office pointed out that SDCL 9-12-1(2) provided that the municipality shall have the power to:
To acquire by lease, purchase, gift, condemnation, or other lawful means and hold in its corporate name or use and control as provided by law both real and personal property and easements and rights of way within or without the corporate limits for all purposes authorized by law or necessary to the exercise of any power granted;
The opinion also pointed out that SDCL 9-40-1 constituted authority for the municipality to purchase the water line in question. That section dealing with utility revenue bonds was held not to be mandatory but, in fact, gave the necessary authority with respect to the general powers conferred by § 9-12-1. It further pointed out that § 9-40-5 allowed the municipality to defray the costs of erecting or acquiring or establishing a utility such as a water works system through the bond procedure, but that § 9-40-5 was not mandatory. The opinion concluded that the city might purchase the water main presently owned by the private company regardless of the manner in which it acquired the property so long as the property purchased was authorized by law or necessary to the exercise of any power granted.
SDCL 9-47-9 and 9-48-16 authorize municipalities to purchase privately owned pipes, mains and sewers. Those sections read as follows:
9-47-9. Whenever there has been constructed by any person or persons within any street or alley, within the limits of the municipality, a private water pipe or main as defined by statute, the municipality may purchase such water pipe or main or any part thereof at a cost not in excess of the cost of constructing a similar water pipe or main similarly situated.
The section relating to private sewers is substantially the same and permits purchase at a cost not in excess of the cost of constructing a similar sewer.
9-48-16. Whenever there has been constructed by any person within any street or alley a private sewer or sewers which shall be wholly or partly within any district subsequently established as provided in this chapter, the municipality may purchase such sewer or sewers or any part thereof at a cost not in excess of the cost of constructing a similar sewer similarly situated, and assess such cost to the property fronting or abutting upon the sewer so purchased in the same manner as for construction of service sewers.
Following the acquisition of the water and sewer system there is a provision made for the governing body to require property which may be benefited by that system to pay its proportionate share of the cost of the construction, without interest, according to the benefits which accrue to such property before the property may be served by the facilities. The statute provides, "The governing body shall make an investigation as necessary and shall find and determine the amount to be paid, which amount so paid shall be apportioned by the governing body as it determines among the persons, including the municipality paying the original cost." SDCL 9-47-16; 9-48-15.
Although you have stated that the adjacent property is not obligated to make use of the water or sewer lines, I believe that would depend upon the nature of the development and whether this water or sewer system is itself now a part of the Canton municipal water and sewer system.
It is my view that if the system is part of the municipal water and sewer system, the city may, within its lawful authority, require that system be used to the exclusion of any other system which might seek to use the dedicated public streets.
You have pointed out that the mortgage foreclosure by the bank related only to the platted lots and did not include the streets which have been dedicated to the public use.
For the purposes of this opinion I presume the recorded plat as a conveyance of dedication has been properly filed in accordance with SDCL 11-3-12. I would point out that under that section, although there is a dedication, the governing body shall not be required to open, improve or maintain any such streets or alleys solely by virtue of having approved a plat or having partially accepted any such dedication, donation or grant. With this general discussion of the law your questions are answered as follows.
IN RE QUESTION NO. 1:
The City of Canton was within its authority to enter into the contract you have furnished.
IN RE QUESTION NO. 2:
There is no obligation on the part of the city in the contract to anyone except that if it permits a person to connect his property to the city owned lines, the city has agreed that the cost which may be assessed under § 9-47-16 and 9-48-15 will be the amount agreed to in the contract. I should also like to point out here that the city may set a higher amount to be paid and may apportion that amount among the city or other persons as well as the contractor or his heirs.
IN RE QUESTION NO. 3:
The water and sewer lines belong to the City of Canton and it may require persons connecting to them to pay the appropriate charges as have been determined under the law.
IN RE QUESTION NO. 4:
It is not so much the existing agreement which would require the use of the city water lines but the ordinance and power of the city to manage its water and sewer system.
IN RE QUESTION NO. 5:
I find nothing in the contract which constitutes a lien or encumbrance against the property adjacent to the water or sewer line.
Respectfully submitted,
Roger A. Tellinghuisen
Attorney General
