September 14, 1982

Mr. Gordon K. Milbrandt 
Auditor General 
Department of Legislative Audit 
435 South Chapelle 
Pierre, South Dakota 57501

Official Opinion No. 82-48

Disposition of Proceeds From Sale of Municipal Utilities

Dear Mr. Milbrandt:

You have requested an official opinion from this office in regard to the following factual situation:

FACTS: 

In 1981, City A sold its municipal electric operation, consisting of real and personal property, to a private corporation.

Based on the above factual situation, you ask the following questions:

QUESTIONS: 

1.  Should the proceeds of the sale of the municipal electric operation be transferred to the general fund? 

2.  If the answer to Question No. 1 is No, can the city continue to indefinitely retain the proceeds of the sale of the electric operation in the inactive Electric Fund without considering this cash as a means of financing other municipal operations?

IN RE QUESTION NO. 1:

In part, SDCL 9-39-36 states: 

Every municipality shall have the power to sell, convey, and dispose of the plant or equipment of any public utility owned by that municipality.

SDCL 9-27-17 states: 

Real property which is now or may hereafter be held by any municipality, the title to which has been or may be obtained from any source and not owned and held for public use, or which is about to be abandoned for public purposes, may be sold and conveyed by the governing body in the manner and upon the terms provided in § §  9-27-18 to 9-27-28, inclusive.

SDCL 9-27-28, in pertinent part, provides for the following: 

All the money accruing from the sale of property under § § 9-27-17 to  9-27-27, inclusive, shall be paid into the treasury and credited to the general fund.

By reviewing these statutes, it is clear that the proceeds from the sale of real property involved with the municipal electric operation must be credited to the municipality's general fund.  The statutes are less clear with respect to the personal property involved in the sale of the electric operation. Because of the sale of the municipal electric operation, the need for an Electric Fund, or any type of municipal fund related to the operation of the municipal electrical plant, ceases to exist.  With no Electric Fund, the only fund in which to place the proceeds from the sale of the personal property involved in the municipal electric operation is the General Fund.  Therefore, it is my opinion that the answer to your first question is YES, the proceeds from the sale of a municipal electric operation must be transferred to the  general fund.

IN RE QUESTION NO. 2:

Because the answer to Question No. 1 is Yes, there is no need to answer your second question.

Respectfully submitted,

Mark V. Meierhenry
Attorney General