If a South Dakota city signed a ten-year contract for water tower and tank painting in year one plus annual inspections and maintenance in following years at total cost exceeding $150,000, was the city required to put the contract out to competitive bid as a public improvement, or could it skip bidding under either the professional services exemption or the equipment repair contract exemption?

Plain-English summary

The City of Beresford owned a water tower and tank that needed painting at an estimated cost over $150,000. A company in the water tower industry pitched the city on a ten-year contract: paint the tower in year one, then inspect and maintain annually through year ten. The total cost would exceed $150,000 but would be spread across ten annual payments.

The company argued the contract could skip South Dakota's competitive bidding requirements under either of two exemptions:

1. SDCL 5-18A-14 exempts professional services from bidding.
2. SDCL 5-18A-22(4) exempts equipment repair contracts from bidding.

The Beresford City Attorney asked the AG three questions to decide whether the city had to bid the contract under SDCL chapter 5-18A.

The AG concluded that bidding was required:

1. Is painting and maintenance of a water tower a public improvement requiring bidding? Yes. SDCL 5-18A-1(22) defines "public improvement" broadly to include "the process of building, altering, repairing, improving, or demolishing any public infrastructure facility, including any structure, building, or other improvements of any kind to real property, the cost of which is payable from taxes or other funds under the control of the purchasing agency..." A water tower is part of the city's public infrastructure. Painting and maintaining it falls under "altering," "repairing," or "improving." SDCL 9-42-5 reinforces this by specifically requiring competitive bidding for contracts for "the construction or repair of public buildings or for public works or improvements." The contract was a public improvement under both general and specific provisions.

2. Does spreading payments over ten years let the city avoid the $50,000 threshold? No. The AG cited Fonder v. City of South Sioux Falls (1955) for the rule that total contract cost, not payment schedule, controls. The South Dakota Supreme Court in that case said: "it is inconceivable that the lawmakers intended to provide a lawful means by which its prime objective to require that the major needs of the public for materials, supplies or equipment be met through competitive lettings could be circumvented by multiple small open-market purchases."

3. Does the professional services exemption apply? No. SDCL 5-18A-1(19) defines professional services as services from a "vocation, calling, occupation, or employment involving specialized knowledge, labor, or skill, and the labor or skill involved is predominantly mental or intellectual, rather than physical or manual." Water tower painting is physical or manual work, not predominantly mental or intellectual. The AG also cited Rapid City Area School District and Bak v. Jones County for the principle that bid statute exemptions should not be construed broadly to swallow the rule; they should be read narrowly to preserve the legislature's intent. Clem v. City of Yankton identified the purpose of competitive bidding as guarding against "undue and excessive costs which might otherwise be imposed on the taxpayers." Skipping bidding for water tower painting would undercut that protection.

4. Does the equipment repair contract exemption apply? No. SDCL 5-18A-22(4) exempts "any equipment repair contract" without defining "equipment." Looking at dictionary definitions and the South Dakota real property statute (SDCL 43-1-3, defining real property as including "that which is affixed to land"), the AG concluded that a permanent structure affixed to land is real property, not equipment. The water tower and tank are real property, not equipment. The equipment repair exemption does not apply.

The bottom line: the City of Beresford had to put the water tower painting and maintenance contract out for competitive bid under SDCL chapter 5-18A.

Currency note

This opinion was issued in 2018. 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 bidding thresholds and exemptions before applying this opinion to a present contract.

What the opinion meant at the time

For the City of Beresford, the opinion required competitive bidding for the proposed water tower painting and maintenance contract because it was a public improvement costing more than the statutory threshold.

For other South Dakota cities considering similar long-term sole-source contracts for water tower painting, paint sealing, or other infrastructure work, the opinion was a clear no. Spreading the cost over years was not a workaround. The total contract cost was what counted for the bidding threshold.

For contractors proposing similar work, the opinion rejected both the professional-services and equipment-repair exemptions for this water tower contract. Spreading payments over years did not change the bidding requirement.

For taxpayers, the opinion applied the statutory bidding requirement to a city-owned tower and tank. The AG cited a South Dakota case describing the purpose of bidding as protection against undue and excessive taxpayer costs.

For city attorneys generally, the opinion illustrates the analysis the bidding statutes require: is the contract a public improvement under SDCL 5-18A-1(22)? does the total cost exceed the statutory threshold (regardless of payment schedule)? and do any of the narrow statutory exemptions actually apply?

Common questions

Q: Is this opinion still good law?
A: The opinion describes the statutes as they stood in 2018. Check current SDCL provisions and case law before using its thresholds or exemptions for a present contract.

Q: What is the bid threshold for public improvements?
A: At the time of the opinion, $50,000 for public improvements under SDCL 5-18A-14. The threshold for services (other than professional services) was twenty-five thousand dollars. Current thresholds should be checked against current SDCL provisions.

Q: What would qualify as a professional services exemption?
A: The opinion quoted SDCL 5-18A-1(19): the labor or skill must be predominantly mental or intellectual rather than physical or manual. It held that painting and maintaining this water tower did not qualify, but did not classify the other occupations listed here.

Q: What would qualify as an equipment repair exemption?
A: The AG concluded that this water tower and tank were real property improvements rather than equipment under SDCL 5-18A-22(4). The opinion did not decide whether repairs to vehicles or other movable items would qualify.

Q: Could the city break the contract into smaller pieces to avoid the threshold?
A: No. Fonder v. City of South Sioux Falls held that the city cannot circumvent competitive bidding through multiple small open-market purchases. Breaking a single project into pieces to dodge the threshold is exactly the kind of evasion the case warned against. The total cost of the project controls.

Q: What if the city already had a longstanding relationship with a particular vendor?
A: The opinion did not address a prior vendor relationship. It required competitive bidding for the proposed water tower painting and maintenance contract based on its nature and total cost.

Background and statutory framework

The opinion applied SDCL chapter 5-18A's public-improvement bidding provisions and SDCL 9-42-5's requirement concerning municipal public works or improvements. It also cited chapter 5-18B in the quoted text of SDCL 9-42-5.

The framework has several core components:

1. Public improvement bidding: Any contract for a public improvement (broadly defined) with total cost over the threshold must be advertised for bids.

2. Service bidding: Any contract for services other than professional services with total cost over a separate threshold must be advertised for bids.

3. Statutory exemptions: SDCL 5-18A-22 enumerates specific exemptions (emergency repairs, equipment repair contracts, etc.). These are read narrowly.

4. Award rule: SDCL 9-42-5 requires award to the lowest responsible bidder in accord with chapters 5-18A and 5-18B.

The proposed contract covered painting in year one and annual inspections and maintenance afterward. The company suggested professional-services and equipment-repair exemptions. The AG rejected both for this contract.

The opinion explained why the proposed water tower work had to be bid and why the two suggested exemptions did not apply. It did not discuss immunity for officials who rely on an AG opinion.

Citations and references

Statutes (as cited in the opinion):

• SDCL ch. 5-18A (public improvement bidding)
• SDCL 5-18A-1(19) (professional services definition)
• SDCL 5-18A-1(22) (public improvement definition)
• SDCL 5-18A-14 (bidding required for public improvements over $50,000 and services over twenty-five thousand dollars)
• SDCL 5-18A-22(4) (equipment repair contract exemption)
• SDCL 9-42-5 (municipal public works contracts)
• SDCL 43-1-3 (real property includes that affixed to land)

Cases (as cited in the opinion):

• In re Estate of Ricard, 2014 S.D. 54, 851 N.W.2d 753
• In re Wintersteen Revocable Trust Agreement, 2018 S.D. 12, 907 N.W.2d 785
• In re Taliaferro, 2014 S.D. 82, 856 N.W.2d 805
• Fonder v. City of South Sioux Falls, 71 N.W.2d 618 (S.D. 1955)
• Rapid City Area School Dist. No. 51-4 v. Black Hills and Western Tours, Inc., 303 N.W.2d 811 (S.D. 1981)
• Bak v. Jones County, 210 N.W.2d 65 (S.D. 1973)
• Clem v. City of Yankton, 160 N.W.2d 125 (S.D. 1968)

Dictionaries (as cited in the opinion):

• Black's Law Dictionary (10th Ed. 2014) (definitions of "Public Works" and "Equipment")
• Merriam-Webster's Collegiate Dictionary (10th Ed. 1993) (definition of "Equipment")

Source

• Landing page: https://atg.sd.gov/OurOffice/OfficialOpinions/opinionhtml.aspx?id=1695

Original opinion text

Official Opinion No. 18-02

Re: Competitive bidding requirements for water tower painting and maintenance contract

Dear Mr. Frieberg,

In your capacity as City Attorney for the City of Beresford, you have requested an official opinion from the Attorney General's Office based on the following questions:

QUESTIONS:

1. Is the City required to publicly bid a water tower painting and maintenance contract pursuant to SDCL ch. 5-18A?

2. Is a water tower painting and maintenance contract exempt from public bidding as a professional service under SDCL 5-18A-14?

3. Is a water tower painting and maintenance contract exempt from public bidding as an equipment repair contract under SDCL 5-18A-22(4)?

ANSWERS:

• Painting and maintenance of a water tower should be considered public improvements under SDCL 5-18A-1(22). Contracts for public improvements over $50,000 must be submitted for public bid regardless of payment schedule.

• The professional services exemption of SDCL 5-18A-14 does not apply to the proposed water tower and tank paint and maintenance contract.

3. Real property improvements are not equipment for the purposes of qualifying for the exemption found under 5-18A-22(4).

FACTS:

The City of Beresford owns and operates a water distribution system which includes a water tower and tank. Both the tower and tank require painting estimated to cost more than $150,000. The City wishes to enter into a contract for work on the water tower which includes painting and annual maintenance. The overall cost of this contract will be spread over a ten-year period. Painting would occur in year one of the contract, with annual inspections and maintenance occurring in all following years.

A company in the water tower/tank industry has given a preliminary proposal to the City. This company believes the painting of the tank and tower is exempt, under SDCL 5-18A-14, from the state public bidding requirements as a professional service. Alternatively, the company has suggested multi-year agreements for maintenance of the tower and tank are exempt from public bidding requirements, under SDCL 5-18A-22(4), as equipment repair contracts.

IN RE QUESTION 1:

You have asked whether the City of Beresford is required to bid the proposed painting and maintenance contract described above under the provisions of SDCL ch. 5-18A.

SDCL 5-18A-14 states, "[i]f the purchasing agency intends to enter into a contract for any public improvement that involves the expenditure of fifty thousand dollars or more . . . the purchasing agency shall advertise for bids or proposals." (emphasis added). A "[p]ublic improvement" has been defined as:

the process of building, altering, repairing, improving, or demolishing any public infrastructure facility, including any structure, building, or other improvements of any kind to real property, the cost of which is payable from taxes or other funds under the control of the purchasing agency, and includes any local improvement for which a special assessment is to be levied.

SDCL 5-18A-1(22).

The purpose of statutory construction is to discover a statute's true intent primarily through an analysis of its language. In re Estate of Ricard, 2014 S.D. 54, ¶ 8, 851 N.W.2d 753, 755-56. When interpreting statutes, the state Supreme Court has explained:

'[W]e begin with the plain language and structure of the statute.' ... 'When the language in a statute is clear, certain and unambiguous, there is no reason for construction, and the Court's only function is to declare the meaning of the statute as clearly expressed.' ... 'When we must, however, resort to statutory construction, the intent of the legislature is derived from the plain, ordinary and popular meaning of the statutory language.'

In re Wintersteen Revocable Trust Agreement, 2018 S.D. 12, ¶ 12, 907 N.W.2d 785, 789 (citations omitted). The intent of a statute "must be determined from the statute as a whole, as well as enactments relating to the same subject." In re Taliaferro, 2014 S.D. 82, ¶ 6, 856 N.W.2d 805, 806-07.

The definition of "public improvement" in SDCL 5-18A-1(22) is very broad. The process of painting and maintaining a city-owned water tower and tank involves the alteration, repair, or improvement of a part of the public infrastructure of the city. SDCL 5-18A-1(22). It is my opinion that the contract offered to paint and subsequently maintain the water tower and tank is a public improvement contract that must be bid under the requirements of SDCL ch. 5-18A.

This conclusion is consistent with the directive of SDCL 9-42-5 which requires, in pertinent part, that "contract[s] for the construction or repair of public buildings or for public works or improvements... shall be let to the lowest responsible bidder in accord with the provisions of [SDCL chs.] 5-18A and 5-18B." "Public Works" are defined as "[s]tructures (such as roads or dams) built by the government for public use and paid for by public funds." Public Works, Black's Law Dictionary (10th Ed. 2014). The water tower and tank are part of the public infrastructure or public works of the City, and a contract for their repair and maintenance must be bid under the requirements of the state competitive bidding statutes.

The above conclusion is not altered when considering the painting and maintenance contract proposes to spread the cost of the contract over a period of years. The Supreme Court has held that it is the total cost of a particular supply or task that invokes the state competitive bidding requirements, not simply the amount paid at any one time. Fonder v. City of South Sioux Falls, 71 N.W.2d 618 (S.D. 1955). The Court there stated, "it is inconceivable that the lawmakers intended to provide a lawful means by which its prime objective to require that the major needs of the public for materials, supplies or equipment be met through competitive lettings could be circumvented by multiple small open-market purchases." Id. at 621.

The proposed contract for painting and maintenance of a city-owned water tower and tank is a public improvements contract. Painting and maintenance alter, repair, and improve the value of pieces of the public infrastructure of the City of Beresford. Regardless of the payment schedule, the contract exceeds $50,000, and the City is required to let the contract in accord with statutory competitive bidding procedures.

IN RE QUESTION 2:

You have also asked whether the proposed painting and maintenance contract is exempt from the public bidding statutes as a professional service.

SDCL 5-18A-14 states, in relevant part, "[i]f the purchasing agency intends to enter into . . . a contract for the purchase of supplies or services, other than professional services, that involves the expenditure of twenty-five thousand dollars or more, the purchasing agency shall advertise for bids or proposals." (emphasis added). SDCL 5-18A-1(19) defines professional services as "services arising out of a vocation, calling, occupation, or employment involving specialized knowledge, labor, or skill, and the labor or skill involved is predominantly mental or intellectual, rather than physical or manual."

The rules of statutory construction require me to give effect to the "clear, certain, and unambiguous" intent of a statute through an analysis of the "plain, ordinary and popular" meaning of a statute's language. Wintersteen Revocable Trust, 2018 S.D. 12, ¶ 12.

It should be noted that bidding requirements "'ought not to be frittered away by exceptions but'", should be construed in a manner that will "'reasonably effectuate ... their true intent and purpose....'" Rapid City Area School Dist. No. 51-4 v. Black Hills and Western Tours, Inc., 303 N.W.2d 811, 813 (S.D. 1981) (quoting Bak v. Jones County, 210 N.W.2d 65, 69 (S.D. 1973)). The purpose of competitive bidding requirements is to guard against "undue and excessive costs which might otherwise be imposed on the taxpayers." Clem v. City of Yankton, 160 N.W.2d 125, 134 (S.D. 1968). A contract should be let without public bidding only in those instances that clearly and definitively fall within an exemption's terms.

The painting of, and subsequent maintenance work on, a water tower or tank is generally understood to involve skill that is manual or physical in nature rather than predominantly mental or intellectual in nature. Because of this, it is my opinion that the proposed contract to paint and then maintain the City's water tower and tank does not fall under the terms of the professional services exemption found in SDCL 5-18A-14.

IN RE QUESTION 3:

Finally, you have asked whether the proposed contract qualifies as an equipment repair contract exempt from the public bidding requirements by operation of SDCL 5-18A-22(4). This statute states in pertinent part that, "[t]he provisions of this chapter and chapters 5-18B, 5-18C, and 5-18D do not apply to: . . . (4) [a]ny equipment repair contract."

The rules of statutory construction discussed above apply to an analysis of SDCL 5-18A-22(4). See Wintersteen Revocable Trust, 2018 S.D. 12, ¶ 12; Taliaferro, 2014 S.D. 82, ¶ 6; and Estate of Ricard, 2014 S.D. 54, ¶ 8.

"Equipment repair contracts" are not defined by statute, nor has SDCL 5-18A-22(4) been discussed by the state Supreme Court. "Equipment" is most commonly understood to be the articles or implements used by a person in a specific operation or activity. See Equipment, Black's Law Dictionary (10th Ed. 2014); Equipment, Merriam-Webster's Collegiate Dictionary (10th Ed. 1993). Permanent structures on real property that make up part of the public works or infrastructure of a municipality are not commonly considered equipment. See SDCL 43-1-3 (defining real property as including "that which is affixed to land"). For purposes of the exemption found in SDCL 5-18A-22(4), it is my opinion that the water tower and tank at issue do not meet the common and ordinary meaning of the term "equipment." As such, the proposed contract for painting and maintenance of the water tower and tank is not an equipment repair contract exempt from the state public bidding requirements.

CONCLUSION

It is my opinion that the proposed contract for painting and maintenance of the City of Beresford's water tower and tank is not exempt from the state public bidding requirements as a professional services contract or an equipment repair contract. Under existing law, the proposed contract is a public improvement contract in excess of $50,000. According to SDCL 5-18A-14 this contract must be publicly bid.

Sincerely,

Marty J. Jackley

ATTORNEY GENERAL

MJJ/SRB/JH/lde