July 11, 1985
Mr. George L. Scully, Chairman
South Dakota Board of Water and Natural Resources
Joe Foss Building
523 East Capitol
Pierre, South Dakota 57501
OFFICIAL OPINION NO. 85-28
Taxation for continuing subdistrict obligations
Dear Chairman Scully:
You have requested an official opinion from this office in regard to the following factual situation:
FACTS:
The Board of Water and Natural Resources (Board), by virtue of S.L. 1984(SS), Ch. 1, § 3, is charged with the responsibility of settling 'all financial responsibilities, obligations and other contractual commitments of the dissolved subdistricts.' In that capacity the Board is currently involved in preparing a budget for fiscal year 1986 for the dissolved Oahe Conservancy Subdistrict, the only subdistrict which will have contractual obligations which extend beyond the current fiscal year. Because Oahe had contracting authority, there are several long-term obligations remaining to be satisfied. Of these, the 1979 contract with WEB Water Development Association, Inc., is the largest, requiring a tax levy of $500,000 in fiscal year 1986 alone. The WEB contract as amended on December 17, 1982, does not by its terms expire until 1990.
The WEB contract was executed prior to the December 1983
withdrawal of those areas which came to comprise the CENDAK Conservancy Subdistrict. However, the WEB contract does not directly benefit all of the counties which originally comprised the Oahe Subdistrict. The Board is concerned about whether it has the authority to levy a tax in those areas not benefited for the purpose of funding the remaining contract payments. The Board would also like to know what impact SDCL 46A-2-33 has on its ability to levy the tax.
Based on the above facts, you have asked the following questions:
QUESTIONS:
1. Can those areas of the original Oahe Conservancy Subdistrict which are not directly benefited by the WEB contract now be taxed for the purpose of funding that contract?
2. Does the Board have the authority to levy a tax in light of SDCL 46A-2-33?
IN RE QUESTION NO. 1:
The Oahe Conservancy Subdistrict as originally formed in 1960 consisted primarily of a 15 county area in north central South Dakota. The Subdistrict has the authority to execute contracts to construct, operate and maintain water resources development projects, and was vested with the power to levy a tax against all taxable property within the subdistrict to fund such contracts. Oahe Conservancy Subdistrict v. Janklow, 308 N.W.2d 559, 560 (S.D. 1981). In 1979 Oahe entered into a contract with WEB to contribute funding for the WEB project; that contract as amended in 1982 calls for payments until 1990. The WEB project is a rural water system intended to provide a safe, stable water supply to both rural and urban residents in all or parts of Walworth, Edmunds, Brown, Campbell, McPherson, Potter, Faulk, Spink, and Day counties. No direct benefit accrues to the other areas of the Subdistrict.
In December, 1983, all or portions of 7 counties withdrew from the Oahe Subdistrict and formed the CENDAK Conservancy Subdistrict. The area withdrawn from the original subdistrict consisted essentially of all or parts of the southern tier of subdistrict counties. Those withdrawn areas continued to be liable for contractual obligations existing at the time of withdrawal. SDCL 46A-3-14. (Repealed Dec. 31, 1984). That continuing liability included the WEB contract.
All conservancy subdistricts were subsequently dissolved effective December 31, 1984. S.L. 1984(SS), Ch. 1, § 2. That dissolution, however, did not affect the validity of the long-term contractual obligations of the subdistricts. AGR 1961-62, p. 100; AGR 84-02; AGR 84-25; AGR 84-32; AGR 85- 07. The Legislature specifically provided in section 3 of the special session law:
Section 3. The board of water and natural resources shall exercise the necessary power and authority, including the power to collect taxes necessary to satisfy existing financial obligations, of the directors of the subdistricts dissolved in section 2 of this Act until such time as all financial responsibilities, obligations and other contractual commitments of the dissolved subdistricts have been satisfied.
The obvious intent of section 3 was for the Board of Water and Natural Resources to assume the functions of a subdistrict board of directors at the time the dissolution of the subdistricts became effective. The Board then became bound to perform any outstanding contractual obligations to the same extent that the subdistrict would have been bound to do so. In short, the Board of Water and Natural Resources at that point possessed whatever power, authority, rights and duties with reference to subdistrict contractual obligations existing upon dissolution that the respective subdistricts would have had if the subdistricts had not been dissolved. That includes the power to levy a tax to satisfy outstanding obligations. AGR 85-07.
Thus the Board in carrying out its role of settling the outstanding obligations of the Oahe Subdistrict has the power of a subdistrict board of directors. The Oahe Subdistrict board of directors had the power to levy a general tax against all taxable property in the subdistrict, to a limit of 1 mill. SDCL 46A-3-64 (Repealed Dec. 31, 1984), because that subdistrict secured contracting authority as a result of a favorable vote of the subdistrict electorate on November 8, 1966. See, AGR 78-5; AGR 78-19; AGR 84- 32. The South Dakota Supreme Court has upheld the statutory provisions for the levy, assessment and collection of taxes, specifically in the Oahe Subdistrict, as a valid delegation of legislative power and has found those provisions consistent with the uniformity of taxation provisions of the State Constitution. In Re Oahe Conservancy Subdistrict, 185 N.W.2d 692 (S.D. 1971).
Article XI, section 10 of the South Dakota Constitution grants the Legislature the power to vest governing bodies of municipal corporations with the power to tax both for local improvements, by way of special taxation, and for corporate purposes, by way of general taxation. Special taxation or special assessments are lawful only when based upon a special benefit accruing from the local improvement for which the tax or assessment was made. Haggart v. Alton, 137 N.W. 372, 375 (S.D. 1912); City of Brookings v. Associated Developers, Inc., 280 N.W.2d 97, 99 (S.D. 1979). General taxes, on the other hand, are imposed by a governing body to raise funds for the general expenses of the particular community or district, and are levied against all taxable property without reference to special benefits to those taxed. See Ruel v. Rapid City, 167 N.W.2d 541, 544 (S.D. 1969).
Without entering the morass of whether subdistricts are municipal corporations or quasi-municipal corporations, (In Oahe Conservancy Subdistrict, supra) it is evident from an examination of the subdistrict taxing statutes that the taxation power granted to the subdistricts was the power to levy a general tax. SDCL 46A-3-42; 46A-3-43; 46A-3-63; 46A-3-64; 46A-3-65; 46A-3-67. (All repealed Dec. 31, 1984.) Indeed, it was not until 1984 that the Legislature granted to subdistricts the power to make special assessments based upon the benefits received. SDCL 46A-3-73. (Repealed July 1, 1985.) Accordingly, I am of the opinion that the power exercised by the Board in the stead of the board of directors of the Oahe Conservancy Subdistrict is the power of general taxation, and is unrelated to the benefits received. The fact that some of those areas taxed do not directly benefit from the contracts thereby funded does not affect the validity of the tax, nor does it detract from the power of the Board to levy the tax. Therefore my answer to your first question is YES.
IN RE QUESTION NO. 2:
Your second inquiry concerns the impact of SDCL 46A-2-33 on the power of the Board to levy a tax. SDCL 46A-2-33 provides as follows:
The board of water and natural resources shall have the power to exercise the necessary power and authority of a subdistrict board of directors, when such subdistrict has been dissolved under provisions of chapter 46A-3, until such time as all responsibilities, obligations and contractual commitments of such dissolved subdistrict shall have been satisfied. The board shall not levy taxes on any election district as defined in § 46A-3-8 for the continuation of any project not supported by a majority of the election district voters in a subdistrict election called by the board for that purpose unless the subdistrict's contracting authority specifically approves the project or contract and the mill levy allowable therefor.
Initially, I would point out that pursuant to the specific language of the statute, the Board would have the authority to levy a tax. As pointed out above, there was a favorable vote in the Oahe Conservancy Subdistrict granting contracting authority to the board of directors, which resulted in a maximum possible mill levy up to one mill on all taxable property in support thereof. AGR 84-32; SDCL 46A-3-64 (Repealed Dec. 31, 1984.); AGR 78-5. Further, I assume the Board has had occasion to examine and approve all of the contractual obligations of the Oahe Subdistrict in the course of exercising its authority pursuant to SDCL 46A-3-49 (Repealed Dec. 31, 1984.), and is satisfied that those contracts fall within the voter-approved contracting authority of the subdistrict. AGR 78-19.
Furthermore, S.L. 1985, Ch. 356, § 15, effective July 1, 1985, provides as follows:
Section 15. The term 'conservancy subdistrict,' whenever it is used in this code, means water development district.' The code commission in future supplements and revisions of the South Dakota Codified Laws shall substitute the term 'water development district' and derivatives thereof for the term 'conservancy subdistrict' and its derivatives.
Although I note that the 1985 Interim Supplement does not reflect the substitution of terms required by Section 15 in SDCL 46A-2-33, I am of the opinion that it was the intent of the Legislature that SDCL 46A-2-33 would now deal with dissolution of water development districts. See, e.g., 46A-2-36. Admittedly, the second sentence of SDCL 46A-2-33 becomes somewhat confusing when that particular substitution of terminology is made, because water development districts do not possess contracting authority as did the subdistricts. SDCL 46A-3C-5 also seems to have already covered the subject matter, just as Section 3, Chapter 1, S.L. 1984(SS) did for conservancy subdistricts. However, the language used by the Legislature in Section 15, Chapter 356, S.L. 1985 is clear.
Therefore, my answer to your second question is YES.
Respectfully submitted,
Mark V. Meierhenry
Attorney General
