When a South Dakota city is closing its old sanitary landfill and building a new solid waste transfer station, can it pay for the transfer station by issuing utility revenue bonds under SDCL 9-40-1, or are those bonds limited to traditional sewage systems?

Plain-English summary

The City of Hot Springs was in the middle of closing its existing sanitary landfill and building a new solid waste transfer station. The transfer station was a multi-million-dollar capital project, and the city wanted to fund it with utility revenue bonds (bonds repaid from the user fees the utility collects, not from general property taxes). The question for the AG was whether SDCL chapter 9-40 (the municipal utility revenue bond statutes) covered a solid waste transfer station, or whether the chapter was limited to traditional sewer systems.

The AG read the statute broadly. SDCL 9-40-1 lets a municipality "purchase, construct or otherwise acquire, establish, equip, maintain, operate, extend or improve" various utility systems, including "any system or part of system for the collection, treatment and disposal of sewage and other domestic, commercial and industrial wastes." The classic municipal waste utility is a sewage treatment plant. But the statute's "other domestic, commercial and industrial wastes" language was the key. If "other" meant "other things that also flow through sewers," it added nothing to the sewage reference. The Legislature is presumed not to insert surplus language. So "other domestic, commercial and industrial wastes" had to mean something distinct from sewer-borne sewage.

The AG looked at how the South Dakota Code defined "solid waste" in SDCL 34A-6-1.3(17): "any garbage, refuse, sludge from a waste treatment plant, water supply treatment plant or air pollution control facility and other discarded materials, including solid, liquid, semi-solid or contained gaseous material resulting from industrial, commercial and agricultural operations, and from community activities..." That solid-waste definition closely paralleled and overlapped with SDCL 9-40-1's "domestic, commercial and industrial waste" phrase. Reading the two together, a solid waste transfer station handles exactly the kind of waste SDCL 9-40-1 covers.

So the answer to Hot Springs' question was yes: under SDCL 9-40-1, 9-40-2, and 9-40-5, the city could issue utility revenue bonds to fund the new solid waste transfer station.

Currency note

This opinion was issued in 1993. 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 9-40 and the solid waste provisions in SDCL chapter 34A-6 may have been amended since 1993, and other financing routes for solid waste facilities may exist under current law. Cities financing transfer stations today should consult current SDCL provisions and bond counsel.

What the opinion meant at the time

For Hot Springs, the opinion cleared the path. The transfer station could be funded by utility revenue bonds backed by transfer-station user fees, not by general obligation bonds requiring voter approval and counting against the city's debt limit.

For other municipalities closing landfills and building transfer stations, the opinion was helpful: being able to use revenue bonds for transfer station construction (with user fees paying back the debt) kept the project off the general tax base.

For municipal bond counsel, the opinion clarified that SDCL 9-40-1's "domestic, commercial and industrial wastes" language reached beyond sewer systems. That broader reading expanded the revenue-bond authority for solid waste capital projects.

For municipal finance officers, the opinion meant that revenue-bond debt for a transfer station was treated like other utility revenue bonds under chapter 9-40, payable from the utility's user fees rather than from general tax revenues.

Common questions

Q: What is a solid waste transfer station?
A: A facility where collected solid waste is temporarily aggregated and then loaded into larger trucks for hauling to a distant landfill or processing facility. Hot Springs was building one to replace its closing sanitary landfill.

Q: How is a utility revenue bond different from a general obligation bond?
A: A revenue bond is repaid from the revenues the financed facility generates (user fees, tipping fees, etc.), not from general tax revenues. General obligation bonds are repaid from general taxes and require voter approval; revenue bonds typically do not.

Q: Did this opinion allow voter approval to be skipped for the transfer station?
A: SDCL chapter 9-40 has its own procedural framework. The AG opinion addressed only whether the project qualified as a utility under the chapter. Specific voter-approval or notice requirements would be governed by the procedural sections of chapter 9-40 and any applicable home-rule provisions.

Q: Could a city combine sewer and solid waste under a single utility revenue bond?
A: SDCL 9-40-1 includes language about "any combination of such light, heat and power, waterworks, sewerage or flood and drainage control systems." Combining utility systems under a single bond would require analysis of whether the combination falls within the statutory authorization for combined utility issuance.

Q: What if my city's transfer station serves regional users beyond city limits?
A: SDCL 9-40-1's authority runs to municipalities for their own utility purposes. This opinion addressed a city-level transfer station; a facility serving multiple jurisdictions would call for separate analysis under whatever statute authorizes the regional arrangement.

Q: Was the AG worried that "other domestic, commercial and industrial wastes" might mean more than just solid waste?
A: The opinion did not directly explore other categories (hazardous waste, infectious waste, etc.). The reasoning was specific to solid waste because SDCL 34A-6-1.3(17) provided a parallel statutory definition. Other waste categories would require separate analysis.

Q: What canons of construction did the AG rely on?
A: Two: read the law to give effect to all provisions if possible (Nelson v. School Board of Hill City), and presume that the Legislature did not insert surplus language (Revier v. School Board of Sioux Falls). Both pointed to reading "other domestic, commercial and industrial wastes" as a distinct category from sewer-borne sewage.

Background and statutory framework

South Dakota municipalities derive their utility authority from SDCL chapter 9-40. SDCL 9-40-1 authorizes a municipality to acquire, build, operate, and improve a range of utility systems: light, heat and power; waterworks; sewerage; flood and drainage control; and combinations of those. The statutory language includes a system for "the collection, treatment and disposal of sewage and other domestic, commercial and industrial wastes."

SDCL 9-40-2 defines "utility" by reference back to the systems described in SDCL 9-40-1. SDCL 9-40-5 authorizes the municipality to issue revenue bonds to defray the cost of acquiring, constructing, or establishing a utility; the bonds are repaid from the utility's revenues.

The opinion arose because Hot Springs was closing its existing sanitary landfill and setting up a new solid waste transfer station, and needed to borrow money to fund the project.

The 1993 AG's statutory-construction reasoning was straightforward. The Legislature could have written SDCL 9-40-1 to cover only "sewage." It did not. It added "other domestic, commercial and industrial wastes" to the sewage reference. That added phrase had to mean something distinct from sewage. SDCL 34A-6-1.3(17)'s solid-waste definition provided the natural reading. Solid waste transfer stations were utility systems within SDCL 9-40-1, and revenue bonds were available under SDCL 9-40-5.

Citations and references

Statutes:

• SDCL 9-40-1 (municipal authority to acquire and operate utility systems)
• SDCL 9-40-2 (definition of utility within chapter 9-40)
• SDCL 9-40-5 (issuance of revenue bonds to defray cost of utility)
• SDCL 34A-6-1.3(17) (definition of "solid waste")

Cases:

• Nelson v. School Board of Hill City, South Dakota, 459 N.W.2d 451 (S.D. 1990) (read law to give effect to all provisions)
• Revier v. School Board of Sioux Falls, 300 N.W.2d 55 (S.D. 1981) (Legislature presumed not to insert surplusage)

Source

• Landing page: https://atg.sd.gov/OurOffice/OfficialOpinions/opinionhtml.aspx?id=121

Original opinion text

OFFICIAL OPINION NO. 93-13

Utility revenue bonds

Dear Mr. Ortner:

You have requested an official opinion of this Office regarding the following facts.

FACTS:

The City of Hot Springs presently is involved in closing its existing sanitary landfill and setting up a new solid waste transfer station. The City will need to borrow money to fund this project.

Based on these facts, you have asked the following question:

QUESTION:

Can a municipality, under the provisions of SDCL 9-40-1, issue utility revenue bonds to fund the solid waste transfer station?

SDCL 9-40-5 provides for issuance of revenue bonds for the purpose of defraying the cost of erecting, acquiring or establishing a utility. Further, SDCL 9-40-2 provides, in pertinent part, that "the term 'utility' as used in this chapter shall mean any such system or part of system as referred to in § 9-40-1."

SDCL 9-40-1 provides municipalities with the authority to acquire and operate utility systems:

"Any municipality may purchase, construct or otherwise acquire, establish, equip, maintain, operate, extend or improve . . . any system or part of system for the collection, treatment and disposal of sewage and other domestic, commercial and industrial wastes; . . . or any combination of such light, heat and power, waterworks, sewerage or flood and drainage control systems, together with extensions, additions, and necessary appurtenances. . . ." (Emphasis added.)

The "classic" municipal waste utility is, of course, a sewage treatment facility. Your specific issue raised within the confines of this statute is whether the phrase "other domestic, commercial and industrial wastes" includes solid waste not disposed of in sewerage systems.

In order for the phrase "and other domestic, commercial and industrial wastes" to have meaning within the statute, it must be defined as something other than sewage or that which is disposed of in sewerage systems. "The law must be so construed as to give effect to all of its provisions, if possible." Nelson v. School Board of Hill City, South Dakota, 459 N.W.2d 451, 455 (S.D. 1990). Additionally, the Legislature must not be presumed to have inserted surplusage in its enactments. Revier v. School Board of Sioux Falls, 300 N.W.2d 55, 57 (S.D. 1981). In this instance, "sewage" encompasses domestic and nondomestic or industrial waste passing through sewers; consequently, to limit the definition of "other domestic, commercial and industrial wastes" to material flowing through sewerage systems would be to presume that the Legislature intended to make those terms mere surplusage. Since the canons of statutory construction do not so allow, the phrase in question must be given wider meaning in order to give effect to its language.

Having concluded that the statute encompasses more in the way of utilities than the routine sewage treatment plant, one then must determine if the statutory phrase I highlighted above includes "solid waste." Though the Code does not define "domestic, commercial and industrial waste," it does provide a definition for "solid waste." Subdivision (17) of SDCL 34A-6-1.3 reads, in part:

"'Solid waste,' any garbage, refuse, sludge from a waste treatment plant, water supply treatment plant or air pollution control facility and other discarded materials, including solid, liquid, semi-solid or contained gaseous material resulting from industrial, commercial and agricultural operations, and from community activities. . . ."

It is clear that South Dakota's definition for "solid waste" closely parallels and, in fact, includes the Legislature's "other domestic, commercial and industrial waste." Consequently, the material anticipated by the statute is the material anticipated by the definition. I conclude that the terms in question do, in fact, encompass solid waste transfer stations. Those clearly are systems designed to handle "domestic, industrial or commercial waste" in the larger sense of that phrase.

In my opinion the City may issue utility revenue bonds to fund this transfer station. The answer to your question is "yes."

MB:SB:mjj