Can a South Dakota town that has never adopted a comprehensive zoning plan or any zoning ordinances create a business improvement district under SDCL chapter 9-55 to fund downtown improvements?
Plain-English summary
The Town of Keystone, the small Black Hills town at the base of Mount Rushmore, wanted to create a business improvement district to fund downtown improvements. SDCL chapter 9-55 lets municipalities form a BID and assess properties within it to pay for shared improvements (streetscape, signage, marketing, security, that kind of thing). The catch was that Keystone had never adopted a comprehensive zoning plan or any zoning ordinances at all.
The 2017 AG read SDCL 9-55-4 literally and said no. The statute says a BID "shall be within the boundaries of an established business area of the municipality zoned for business, public, or commercial purposes." If no part of the town is zoned, there is no "established business area zoned for business, public, or commercial purposes" to lay the BID over. The statutory prerequisite is missing. Without it, the town has no power to form the BID.
The legal logic is short. Municipalities have only the powers the Legislature gives them. The Legislature wrote the word "zoned" into 9-55-4 on purpose, and SD courts read statutes by their plain meaning (citing In re Taliaferro and In re Estate of Ricard). When the Legislature says "zoned," it means zoned. A town that has not exercised its zoning power has not produced a zoned area, and 9-55-4 cannot be satisfied by pointing to land that simply happens to host businesses.
The AG ended with the practical path forward. If Keystone wants a BID, it has to adopt zoning ordinances that designate a business area, or it has to ask the Legislature to amend 9-55-4 to drop the zoning prerequisite. The AG closed by reminding the Town that the AG's role is to interpret the statute as written, not to fashion a workaround.
Currency note
This opinion was issued in 2017. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. SDCL chapter 9-55 has been amended in the years since 2017, and the BID prerequisites in current SDCL 9-55-4 should be read directly before relying on the rule stated here.
What the opinion meant at the time
For the Town of Keystone's governing body in 2017, the opinion meant the BID effort could not proceed on the existing zoning posture. The town's choices were to adopt zoning ordinances designating a business area (a substantial municipal undertaking with public hearings, plan adoption, and ongoing administration), or to ask the Legislature to change SDCL 9-55-4. There was no shortcut through the statute as written.
For city attorneys advising other small SD municipalities that had skipped zoning, the opinion provided clear precedent: BID formation is conditioned on zoning, and a municipality without zoning ordinances was disqualified. Some small SD towns operate without comprehensive zoning, and this opinion told their attorneys that funding improvements through a BID required addressing zoning first.
For downtown businesses and chambers of commerce pushing BID proposals as a way to organize and fund common improvements, the opinion meant getting the municipality to adopt zoning was a prerequisite political step, not just an administrative formality.
For the state legislature, the opinion identified a real policy question. The zoning prerequisite was the Legislature's choice, and the AG flagged that if it produced unwanted results for small towns, amending the statute was the appropriate response.
Common questions
Q: What is a business improvement district?
A: A defined area within a municipality where property owners (often plus the municipality itself) jointly fund shared improvements through special assessments levied on the included properties. Typical uses include streetscape work, signage, parking, marketing, additional security, and events. SDCL chapter 9-55 sets out the framework in SD.
Q: Why was the 2017 AG asked about Keystone?
A: Keystone's city attorney wanted to know whether the town could form a BID despite never having adopted zoning ordinances. The factual premise that no zoning existed framed the legal question.
Q: What exactly does SDCL 9-55-4 require?
A: That the BID lie within an established business area of the municipality "zoned for business, public, or commercial purposes." The opinion reads the word "zoned" literally.
Q: Can a town just declare an area to be a "business area" without zoning?
A: Under SDCL 9-55-4 as the 2017 AG read it, no. The statute requires the area to be zoned. Without zoning ordinances, the prerequisite cannot be met.
Q: What if the town has businesses but no formal zoning code?
A: Having businesses in an area is not the same as the area being "zoned" for business. The opinion treats the statutory text strictly.
Q: Did the AG suggest a workaround?
A: The AG declined to fashion one. The opinion's only suggestions were (a) adopt zoning ordinances that designate a business area, or (b) ask the Legislature to amend SDCL 9-55-4.
Q: Does this affect municipalities that do have zoning?
A: No. The 2017 opinion targets the specific defect of having no zoning at all. Municipalities with adopted zoning that includes a business, public, or commercial district have no problem under SDCL 9-55-4.
Q: What about home rule cities?
A: The opinion addresses statutory authority under SDCL chapter 9-55 generally and does not separately analyze home rule. A home rule city should consult counsel about whether its charter and the relevant statutes interact differently.
Background and statutory framework
SDCL chapter 9-55 is SD's enabling statute for municipal business improvement districts. The chapter lets a municipal governing body, on petition or its own initiative, lay out a BID, appoint a board, and levy special assessments on properties within the district to fund improvements that benefit the included area. The framework is similar to BID statutes in other states. It is a specialized form of special-assessment finance bolted onto municipal authority over a defined commercial area.
SDCL 9-55-4 is the gateway provision. It defines where a BID may be located. The relevant sentence requires the BID to be within "an established business area of the municipality zoned for business, public, or commercial purposes." The 2017 amendment to that section (referenced in the opinion's italicized quote) also allowed noncontiguous property within the municipality "that has a common zoning designation" to be included.
Both halves of 9-55-4 turn on zoning. The first half says the underlying business area must be zoned for business, public, or commercial use. The second half says noncontiguous additions must share a common zoning designation. A municipality without any zoning code has no zoning designations at all, so neither half can be satisfied.
The 2017 AG's reading rests on a stable line of SD statutory-construction cases. In re Estate of Ricard and In re Taliaferro both repeat the rule that plain statutory language controls. State ex rel. Department of Transportation v. Clark adds the canon that the Legislature is presumed not to use surplusage, so every word (including "zoned") must be given effect. State ex rel. Jackley v. City of Colman applies the longstanding rule that municipal corporations have only the powers the Legislature has granted them. Together, those cases say: if the statute requires zoning, and the town has no zoning, the town has no power.
The opinion is the kind of short, structured response that AGs issue when the legal question turns on a single statutory reading and the facts are stipulated. There is no extended treatment of policy because the AG is not the policymaker. The Legislature could change the rule by amending 9-55-4. The Town could change its zoning posture by adopting a code. Until one of those happens, the BID cannot be formed.
Citations and references
Statutes:
- SDCL chapter 9-55 (business improvement districts)
- SDCL 9-55-4 (BID location prerequisites)
Cases:
- In re Estate of Ricard, 2014 S.D. 54, 851 N.W.2d 753
- In re Taliaferro, 2014 S.D. 82, 856 N.W.2d 805
- State ex rel. Department of Transportation v. Clark, 2011 S.D. 20, 798 N.W.2d 160
- State ex rel. Jackley v. City of Colman, 2010 S.D. 81, 790 N.W.2d 491
Source
- Landing page: https://atg.sd.gov/OurOffice/OfficialOpinions/opinionhtml.aspx?id=1690
- Original PDF: https://atg.sd.gov/OfficialOpinions/Official%20Opinion%2017-04.pdf
Original opinion text
QUESTION:
Whether a municipality may, under SDCL ch. 9-55, create a business improvement district when that municipality has not established a comprehensive zoning plan or passed any zoning ordinances?
ANSWER:
No, SDCL ch. 9-55-4 sets forth the required prerequisites to form a business improvement district. A municipality that lacks zoning ordinances does not have the statutory authority to establish a business improvement district.
FACTS:
The town of Keystone aspires to create a business improvement district (BID) pursuant to the authority granted municipalities by SDCL ch. 9-55. Keystone, however, lacks a comprehensive zoning plan and zoning ordinances of any type.
IN RE QUESTION:
Under SDCL 9-55-4:
A business improvement district may only be created as provided by this chapter and shall be within the boundaries of an established business area of the municipality zoned for business, public, or commercial purposes. For the purposes of this chapter, an established business area, may also include noncontiguous property within the incorporated municipality that has a common zoning designation. Any business improvement district that includes noncontiguous property pursuant to this section, may by resolution of the governing body, add qualifying property to the business improvement district. (emphasis added).
The South Dakota Supreme Court has continually reiterated that the purpose of statutory construction is to discover a statute's true intention primarily through an analysis of its language. In re Estate of Ricard, 2014 S.D. 54, ¶ 8, 851 N.W.2d 753, 755-56 (citations omitted). As a result, "[w]ords and phrases in a statute must be given their plain meaning and effect." In re Taliaferro, 2014 S.D. 82, ¶ 6, 856 N.W.2d at 806-07 (citations omitted). A statute that has clear, certain, and unambiguous language does not need interpretation; rather, a court need only declare the Legislature's clearly expressed intentions. Id. Further, we are to assume that the Legislature "'never intends to use surplusage in its enactments, so where possible the law must be construed to give effect to all its provisions." State ex rel. Department of Transportation v. Clark, 2011 S.D. 20, ¶ 10, 798 N.W.2d 160, 164.
The town of Keystone has not established a comprehensive zoning plan and lacks any municipal zoning ordinances. The Legislature's conscious use of the word "zoned" in SDCL 9-55-4 is clear, certain, and unambiguous. Taliaferro, 2014 S.D. 82, ¶ 6. The statute restricts the creation of a BID to an established business area of the municipality "zoned for business, public, or commercial purposes." Municipal corporations possess only those powers given to them by the Legislature. State ex rel. Jackley v. City of Colman, 2010 S.D. 81, ¶ 5, 790 N.W.2d 491, 493 (citations omitted). None of the property located in Keystone is specifically "zoned for business, public, or commercial purposes" and thus, cannot meet the statutory requirements for the creation of a BID. A municipality that lacks zoning ordinances does not have the statutory authority to establish a business improvement district.
CONCLUSION:
I conclude that SDCL 9-55-4 requires a municipality to have an area specifically zoned for business, public, or commercial purposes before the municipality may establish a BID. To conclude otherwise would fail to give full effect to each word of the statutory grant of authority. As Attorney General, it is my duty to interpret the meaning and intent of the law as written by the Legislature. If a different conclusion is desired, the Legislature must be asked to amend the statute, or the municipality must satisfy the zoning plan requirements.
Sincerely,
Marty J. Jackley
ATTORNEY GENERAL
MJJ/SRB/ZAM/lde