Can the City of Sioux Falls use its federal Community Development Block Grant funds from Public Law 93-383 to establish a direct loan or grant program for private property rehabilitation, or do state municipal-finance laws block that use?
Plain-English summary
Public Law 93-383, the Housing and Community Development Act of 1974, consolidated several previous federal urban renewal and housing programs into a single Community Development Block Grant. Cities received block grant funds and had broad federal-law authority to use them for housing rehabilitation, infrastructure, and economic development in qualifying areas. Sioux Falls, as a Community Development Block Grant entitlement city, wanted to establish a program that would loan or grant CDBG money directly to private property owners to rehabilitate their homes and rental properties.
Mr. Kean asked AG Janklow a narrow state-law question: did South Dakota municipal-finance law allow Sioux Falls to do this, or did some state-law constraint block the city from running a private-property rehab loan program with CDBG funds?
Janklow's answer was short. Two state statutes were relevant.
SDCL 9-22-1 requires all money belonging to a municipality, from whatever source, to be paid into the municipal treasury, with the governing body designating by annual appropriation ordinance which fund the money goes to. So CDBG funds, once received by Sioux Falls, would go into the municipal treasury and be earmarked through appropriation.
SDCL 9-21-9.1 implies that the municipality has authority to accept federal grants like the CDBG. The statute does not need to bless every specific federal program; it provides the general structural authority for cities to receive federal grant money.
Beyond those structural points, the use of the funds was either covered by federal law or left to the discretion of municipal authorities. Federal law (PL 93-383 and HUD regulations) sets the eligible uses of CDBG funds. Within those federal limits, the city could design its specific program (direct loans, grants, mixed structure, target neighborhoods, eligibility criteria) as it saw fit. South Dakota law did not impose additional restrictions.
The opinion is brief because the substantive design questions were federal, not state. The state-law gating question (do we have authority?) was easy: yes, with the federal money flowing through the municipal treasury under SDCL 9-22-1 and the general grant-acceptance authority in SDCL 9-21-9.1.
Currency note
This opinion was issued during AG William Janklow's tenure (1975-1979). Subsequent statutory amendments, court decisions, and changes in federal block grant law have changed the landscape. Treat this page as historical context, not current legal advice. SDCL 9-21-9.1 and 9-22-1 have been amended. The federal CDBG program continues but its rules and eligible uses have been substantially elaborated since 1974 (24 CFR Part 570). Modern questions about municipal use of CDBG funds for private property programs should be verified against current HUD regulations, current SDCL chapter 9-21 and 9-22, and any applicable municipal code provisions.
What the opinion meant at the time
For Sioux Falls, the opinion cleared the way to establish a CDBG-funded private-property rehab program. The city did not need a special state-law authorization beyond its general municipal authority and the general grant-acceptance provisions.
For other South Dakota cities receiving CDBG funds (most large cities qualified as entitlement jurisdictions), the same reasoning applied. They could design private-property rehab loan or grant programs within the federal CDBG framework.
For property owners who would receive CDBG loans or grants, the opinion was a quiet step toward the program structure that would actually deliver the federal aid. Without state-law clearance, the city would have had to find another vehicle for the rehab program.
For state legislators, the opinion was a signal that the general grant-acceptance authority in SDCL 9-21-9.1 was robust enough to accept evolving federal programs without requiring specific authorizing legislation each time.
Common questions
Q: What is the Community Development Block Grant?
A: A federal program established by PL 93-383 (1974) that gives flexible funding to cities and counties for community development activities, including housing rehabilitation, public facilities, public services, and economic development. The CDBG replaced several smaller federal programs (Urban Renewal, Model Cities, Section 312 rehab loans, etc.) with a single consolidated grant.
Q: What does "block grant" mean?
A: A block grant is federal money given to a state or local government with broad discretion over use, within a defined set of eligible activities. It contrasts with a "categorical grant" that funds a single specific purpose. The CDBG is a block grant: cities and counties decide how to allocate the money across eligible uses.
Q: Could the city require repayment of "grants"?
A: That depended on the city's program design. A grant in this context is typically nonrepayable. A loan would carry repayment terms. The city had flexibility under federal law to structure a mix of loans and grants based on property owner income, property condition, and program goals.
Q: What were eligible CDBG uses in 1974?
A: Housing rehab, public facilities, public services, economic development, and certain administrative costs, all targeted at low-and-moderate-income persons or areas of slum and blight. The detailed rules were in the federal statute and HUD regulations.
Q: Did the city need a public hearing before adopting the program?
A: Federal CDBG rules required citizen participation through public hearings on the consolidated plan and annual action plan. The opinion did not address these federal procedural requirements; the questioner's focus was state-law authority, not federal compliance.
Q: Could the city expand the program to commercial property?
A: Subject to federal eligibility rules, yes. CDBG could fund economic development activities including commercial rehab. The opinion's reference to "private property" was broad. State law did not impose additional limits beyond the federal framework.
Background and statutory framework
The Housing and Community Development Act of 1974 was a major restructuring of federal urban policy. Before 1974, federal urban renewal grants flowed through specific categorical programs each with its own administrative apparatus. The 1974 Act consolidated those programs into the CDBG. Cities and counties with populations above certain thresholds qualified as "entitlement" jurisdictions and received CDBG funds annually based on a formula. Sioux Falls was an entitlement city.
The state-law question Janklow addressed was a straightforward authority question. South Dakota's municipal corporations had the structural authority to receive federal money and to spend it through the annual appropriation process. SDCL 9-22-1 was the central treasury statute. SDCL 9-21-9.1 was the federal-grant-acceptance authorization. Together they constituted the municipal version of "we can accept this and we can spend it."
The substantive program-design questions were federal. HUD's regulations under 24 CFR Part 570 set the rules for what CDBG funds could be used for, the citizen participation requirements, the income-targeting requirements, the eligible activities, and the reporting and audit obligations. South Dakota cities operating CDBG programs operated under federal rules with state law providing the structural backbone of treasury and appropriation.
Janklow's brief opinion reflects this division of labor. Once he confirmed the state-law authority, the substantive design questions were not state-law questions, and he did not opine on them.
Citations and references
Statutes:
- SDCL 9-22-1 (municipal funds paid into municipal treasury; appropriation by ordinance)
- SDCL 9-21-9.1 (municipal authority to accept federal grants)
Federal law:
- Public Law 93-383 (Housing and Community Development Act of 1974)
Source
Original opinion text
Use of Public Law 93-383 Funds
Dear Mr. Kean:
You have asked for an official opinion as to whether or not the City of Sioux Falls can legally establish a direct loan or grant program for private property development using the federal block grant rehabilitation loan money of Public Law 93-383.
SDCL 9-22-1 provides that all money belonging to the municipality from whatever source shall be paid into the municipal treasury and the governing body by the annual appropriation ordinance shall designate to what fund or funds such money shall be applied. SDCL 9-21-9.1 certainly implies that the municipality has the authority to accept federal grant monies such as those provided under Public Law 93-383.
With respect to how these funds are to be used, the matter is either covered by federal law or left open to the discretion of the appropriate municipal authorities.
Respectfully submitted,
WILLIAM J. JANKLOW
ATTORNEY GENERAL
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