In re Opinion of the Judges

• Decision Date: 20 May 1920
• Citation: 177 N.W. 812,43 S.D. 635
• Parties: In re OPINION OF THE JUDGES.
• Court: South Dakota Supreme Court

177 N.W. 812

43 S.D. 635

In re OPINION OF THE JUDGES.

Supreme Court of South Dakota

May 20, 1920

To His Excellency, Peter Norbeck, Governor of the State of South Dakota-Sir:

On May 13, 1920, you presented to the Judges of the Supreme Court the following communication:

To the Honorable Judges of the Supreme Court of the State of South Dakota:

I desire to call upon you for an opinion on an important question of law which is involved in the exercise of my powers as chief executive of the state of South Dakota. The Legislature has been called to meet in special session on May 24th next, and it is my duty, under the Constitution of the state, to communicate to the Legislature by message information of the condition of the state and to recommend measures that I deem expedient.

The Legislature which met in regular session in the year 1919, by chapter 225 of the laws of that session, created the hydro-electric commission and authorized such commission to employ engineers to make an engineering survey of the power sites upon the Missouri river in this state, and to recommend the selection therefrom of the one most available for immediate development, and to make a survey of the probable cost of such development and the cost of the distribution of electric current throughout the state. Such commission proceeded with its work and the report of the engineers employed by the commission has been filed in the office of the Governor. Such report selects a site for the development of power and makes an estimate of the cost of development and transmission of such power.

It appears from such report that it is feasible to develop power upon said river within the state of South Dakota, and that the cost thereof is not prohibitive if the people of this state shall determine that it is expedient to engage in such enterprise. In order to develop a power plant it will be necessary that an indebtedness be created by the state for substantially the cost of the plant which is estimated by the engineers, at present prices, to be $16,147,000.

It is my view that the creation of an indebtedness of this size for this special purpose should be made only by a vote of the people therefor.

In order that there may not be delay and wasted effort and expense in the submission of the proposition to the people it is important that the executive and the Legislature know whether the Constitution of the state permits the state to proceed with this enterprise, or whether the Constitution of the state must first be changed before attempting to proceed with same.

At the general election in 1918, the people amended the Constitution by adopting sections 12 and 13 of article 13 of the Constitution. This amendment is as follows:

"Sec 12. The manufacture, distribution and sale of electric current for heating, lighting and power purposes are hereby declared to be works of public necessity and importance in which the state may engage, and suitable laws may be enacted by the Legislature to empower the state to acquire, by purchase or appropriation, all lands, easements, rights of way, tracks, structures, equipment, cars, motive power implements, facilities, instrumentalities, and material incident or necessary to the acquisition, ownership, control development and operation of the water powers of this state, and to carry this provision into effect: Provided, however, that no expenditure of money for the purposes enumerated in this section shall be made except by a vote of two-thirds of the members elect of each branch of the Legislature.

"Sec. 13. The state may pledge such plants and all of the accessories thereto, and may pledge the credit of the state, to provide funds for the purposes enumerated in section 12 of this article, any provision in this Constitution to the contrary notwithstanding."

At the same election, the people amended section 1 of said article 13 of the Constitution so as to provide that-

"For the purpose of developing the resources and improving the economic facilities of South Dakota, the state may engage in works of internal improvement, may own and conduct proper business enterprises, may loan or give its credit to, or in aid of, any association, or corporation, and may become the owner of the capital stock of corporations, organized for such purposes. *** The limit of indebtedness contained in section 2 of this article shall not apply to the provisions of this section, but the indebtedness of the state for the purposes contained in this section, other than for rural credits, shall never exceed one-half of one per cent. of the assessed valuation of the property of the state."

Also, the provision limiting the indebtedness of the state to $100,000 contained in section 2 of said article 13 of the Constitution has not been expressly removed from the Constitution. Furthermore, section 1 of article 11 of the Constitution provides as follows:

"And for the purpose of paying the public debt, the Legislature shall provide for levying a tax annually, sufficient to pay the annual interest and the principal of such debt within ten years from the final passage of the law creating the debt; provided, that the annual tax for the payment of the interest and principal of the public debt shall not exceed in any one year two mills on each dollar of the assessed valuation of all taxable property in the state, as ascertained by the last assessment made for the state and county purposes."

Practical business experience clearly demonstrates that an enterprise of the magnitude of the development of a power plant upon the Missouri river cannot be undertaken upon a credit of one-half of 1 per cent. of the assessed valuation of the property of the state. The state, through its Legislature, has already authorized the issue of bonds for highway and other purposes which largely consume the amount allowed under this limit. Likewise, it will be impracticable for the state to issue bonds maturing in so short a period as 10 years, and to require that money be raised by taxation in that period to discharge same. It will require at least 5 years to construct such a plant and to get it in operation. As a successful business proposition it should be financed and maintained by the revenues from the plant. Manifestly, 10 years is too short a time within which to construct, put in operation and finance an enterprise of this magnitude.

Likewise, in order to secure funds for the enterprise by the sale of bonds, it must be clear that the state is authorized to pledge its credit to the full extent of discharging the obligations of such bonds. The plants and the revenues therefrom may be pledged in the first instance, but beyond this the purchaser of the state's obligations will require the credit of the state to be pledged. Any other plan will make the obligations unsalable. Any limitations in the Constitution which restrict the right of the state to pledge its credit, or restrict the state in discharging its obligations by limiting the rate of tax levy or otherwise, will make it correspondingly difficult for the state to conduct the enterprise.

It is my understanding that sections 12 and 13 of article 13 of the Constitution was drafted, submitted to the Legislature and adopted by the people as a special amendment to the Constitution of the state, whereby the state might engage in an enterprise of this kind and pledge its credit without being limited by the other provisions of the Constitution, relating to other works of internal improvement. If such was not its purpose, it had no special purpose, since the state by section 1 of said article 13 had the power generally to engage in such enterprise.

In order that I...