December 23, 1980

Mr. Tim Engelhart 
Commissioner 
Bureau of Administration 
State Capitol 
Pierre, South Dakota 57501

Official Opinion No. 80-78

Special Assessments by Municipalities Against State-Owned Property

Dear Commissioner Engelhart:

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

FACTS: 

A special assessment fund, established under the provisions of SDCL 5-14-19 and 5-14-20, is used to pay special assessments by local governments for improvements against all state-owned property except property of the Department of Game, Fish and Parks and the Department of Transportation. 

Such assessments will frequently be broken down to annual installments.  Interest is then charged on the unpaid balance at a rate set by the governing body but not to exceed 12 percent per annum.  SDCL 9-14-31, -44.  The assessed property owner has the option of making full payment in advance without interest charges. 

Because such assessments against state property frequently exceed the thirty-five thousand dollar annual appropriation, multiple year payments are necessary in many cases and interest charges are then incurred.

Based on the above facts, you have asked the following questions:

QUESTIONS: 

1.  Is the state-owned property assessable property under Chapter 9-43 of the South Dakota Codified Laws or any other statutes? 

2.  If state property is assessable property, is the State subject to the interest and penalty charges on installment payments? 

3.  If state property is assessable and subject to interest and penalty charges, does SDCL 5-14-20 provide sufficient authority for the Bureau of Administration, the State Board of Finance, and the State Auditor's Office to approve such interest payments?

IN RE QUESTION NO. 1:

Prior to the enactment of SDCL 5-14-19 to 5-14-21, all special assessments against state-owned property were paid by special appropriations on the part of the Legislature.  In 1970, in an effort to reduce the number of private bills introduced, Chapter 34 was enacted which made a limited continual special appropriation of $35,000 for the fiscal year.  Apparently at that time the amount was deemed sufficient to cover contemplated special assessments.

Special assessments are one of the methods by which the Legislature has authorized the financing of improvements by local units of government.  This grant of power to municipalities is necessarily strictly limited to the terms of the statute since municipal corporations possess only those powers which are conferred upon them by the Legislature and incidental or implied powers necessary to enable the municipality to perform the function authorized.  City of Rapid City v. Rensch, 77 S.D. 242, 90 N.W.2d 380 (1958).  

A special assessment, of course, is not a tax in the sense of the constitutional limitation against the taxing of certain property belonging to the United States, the state, counties and municipal corporations.  Whittaker v. City of Deadwood, 23 S.D. 538, 122 N.W. 590 (1909).  This office has previously held that the property of the state is not exempt from special assessments (1935-36 A.G.R. 497).  A similar result was reached in 1947-48 A.G.R. 123.  In this connection see also 1921-22 A.G.R. 328, 360, 365.

In the 1935 opinion, while holding that state property is not exempt from special assessments, the Attorney General pointed out that he could not see how the Board of Charities and Corrections could pay these claims out of current appropriations since they should be paid by special appropriation made at the next legislative session.

In 1947 the Attorney General held that the provisions of 9-43-28 (then SDC 45.2108) stating: 

All special assessments lawfully levied upon real property in any municipality are a perpetual lien thereon as against all persons except the United States and this State from the date of the filing of the certified copy of the assessment roll in the office of the Municipal Treasurer. 

do not authorize a lien against state property.  That opinion stated at page 124: 

If property belonging to the State is subject to special assessment liens for public improvement, there has been no method provided for, for the enforcement of that lien as there has been no provision made for the service of any notice upon the State in the event proceedings are had to take special assessment deeds as no person or officer has been designated upon whom any service of notice may be made.

The opinion continues: 

The fact that the title is in the State and that proceedings can not be taken against it without its consent, is a protection against the enforcement of the lien, but that immunity would not be predicated upon the invalidity of the lien.

The Attorney General finally notes, 

It has been the practice in the past for the Legislature to make specific appropriations for the purpose of paying special assessment; in fact this is the only way in which these special assessment liens can be paid and when the question comes up as to benefits to the State, that matter will be taken into consideration by the Legislature in making such appropriations.

I concur in the prior official opinions of this office.

A recently decided case, City of Brookings v. Associated Developers, et al., ---- S.D. ---- 280 N.W.2d 97 (1979), goes into the matter of special assessments.  Nothing in that case, however, reverses prior decisions.  Rather  the court continues to affirm prior holdings referred to herein.

It is my opinion that state-owned property is subject to special assessment procedures the same as any other property in the state.

IN RE QUESTION NO. 2:

The matter of interest and penalty on special assessments is a legislative determination and SDCL 9-43-37 has provided that: 

The amount owing by any county, city, town or school district on account of assessments under Plan One against property of such municipality shall be payable by the treasurer of the governmental subdivision affected and shall be paid in like installments and with like interest and penalty as provided by law for other assessable real property.

The Legislature clearly has no directed that amounts to be paid by the State are subject to interest.  The language in that section does not lend itself to inclusion of state agencies supported by general funding appropriations.  See Official Opinion 80-26.

It is my opinion, therefore, that in the absence of a legislative declaration with respect to interest, the State would not be subject to such a charge.

I am not unmindful of the decision of our Supreme Court in the case of Chicago, Milwaukee, St. Paul M & O Railway Co. v. Mundt, 56 S.D. 530, 229 N.W. 394 (1930) which has to do with the charges of interest as a result of a judgment by a taxpayer against a political subdivision.  The Court there stated: 

It seems to us the fair, just and reasonable rule that, when the sovereign submits itself to suit, unless the statute expressly provides to the contrary, it should come into court on the same basis as to liability for interest and costs in the event of adverse decision, as any other suitor. 

56 S.D. at 533.  

That ruling would, however, only be applicable if the Legislature provided a forum or means for the collection of the special assessment against the state.

IN RE QUESTION NO. 3:

In view of my answer to Question No. 2 there is no need to address Question No. 3.

The $35,000 limitation in SDCL 5-14-19 is the only payment that can be made on special assessments against state property.  It does not authorize payments of penalties and interest.  Only the Legislature could increase the $35,000 limit either through amendment of SDCL 5-14-19 or by additional special appropriations acts.

Respectfully submitted,

Mark V. Meierhenry
Attorney General