September 5, 1989

Mr. Max Gruenwald
City Attorney
P.O. Box 149
Milbank, South Dakota 57252

OFFICIAL OPINION NO. 89-27

Expenditure of municipal sales tax capital outlay

Dear Mr. Gruenwald:

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

FACTS:

Milbank Municipal Ordinance No. 548 enacted a one percent sales and use tax for the stated purpose of providing additional revenue for capital improvements. Prior to the enactment of the tax, the City issued water and sewer bonds for needed water and sewer capital improvements and annual payments have been made out of general funds of the City to pay the principal and interest on these bonds.

Concerning these facts you have asked the following question:

QUESTION:

May the City of Milbank use the collections from its one percent municipal non-ad valorem tax for the purpose of payment of principal and interest on general obligation bonds previously issued for municipal water and sewer capital improvements?

Section 1 of the ordinance in question does not specify any particular type of "capital improvement" for which the money is to be used. It is my opinion therefore that the City governing body, in its discretion, may pay principal and interest on general obligation bonds heretofore issued for municipal water and sewer capital improvements.

I call your attention to the provisions of article XI, Section 8 of the South Dakota Constitution which states in part:

No tax shall be levied except in pursuance of a law, which shall distinctly state the object of the same, to which the tax only shall be applied.

This Office has previously held that money which was appropriated for one use may not be converted for another use. See in this connection 1925-26 AGR 291, 1929-30 AGR 92, 1957-58 AGR 42, and 1937-38 AGR 148.

Since the ordinance specifies that the receipts are to be used for capital improvements, it is my opinion that the expenditure for any form of capital improvement is constitutionally permissible.

Respectfully submitted,

ROGER A. TELLINGHUISEN
ATTORNEY GENERAL

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