281 N.W. 907 | S.D. | 1938
The Board of Regents proposes to finance the erection of two dormitories on the campus of the State College of Agriculture and Mechanic Arts by using the net revenues of the dormitories, the legality of which arrangement is for determination in this proceeding. The State College Development Association, plaintiff herein, was incorporated for the purpose of assisting in erecting and equipping buildings on the campus of said college. The Board proposes to enter into a contract with the *289 association and with the First National Bank and Trust Company of Sioux Falls, hereinafter called the trustee, wherein the plaintiff association would agree to furnish fifty-five per cent of the amount required to construct and equip the dormitories and the Board of Regents would agree to repay the plaintiff by pledging the net revenues from the contemplated buildings. The plaintiff will undertake to advance fifty-five per cent of such cost by issuing under its agreement "State College Dormitory Serial Revenue Bonds" and the Public Works Administration has tentatively agreed to grant to the State of South Dakota the balance of the cost of construction. The proceeds from the sale of the bonds are to be deposited by the plaintiff with the trustee and held as a special fund to be expended as directed by the Board of Regents. A copy of these bonds is set out in the proposed contract; it recites that it is "payable solely from the revenues received and to be received from the operation of the dormitories herein above described. * * * This bond is not an obligation or indebtedness of the State of South Dakota, or any Department, Board, or Agency thereof."
The Board under the terms of this proposed contract with the association would agree "(a) To operate said buildings as student dormitories under proper rules and regulations to be prescribed from time to time by the Board; (b) To collect from the students occupying rooms therein reasonable rates and charges for the facilities furnished, which, insofar as possible, shall be sufficient to pay the cost of operation and maintenance as hereinafter provided and to provide sufficient excess or net revenues to pay the principal and interest on the bonds to be issued by the Association; (c) To keep accurate accounts of the receipts and disbursements respecting the operation of said buildings; (d) To charge as operating and maintenance cost all items properly chargeable thereto, including heat, light, water, janitor, matron, and other labor charges, and such repairs and replacements to the buildings and equipment as are necessary to keep the same in first class operating conditions and as good as originally constituted, reasonable wear and tear excepted; (e) To cause all receipts from the operation of such buildings to be paid to the State Treasurer, in accordance with Section 5582 of the Revised Code, as custodian in trust for the purposes of this contract; (f) To cause all operation and maintenance charges to be paid out of the fund in the State Treasury *290 on vouchers authenticated and approved as specified in Section 5585 of the Revised Code; (g) To cause all net revenues, as hereinafter defined, to be paid over to the Trustee as paying agent for the bonds and as Trustee for the bondholders; (h) To use its best efforts to cause the gross revenues of the buildings to be sufficiently large and the operation and maintenance charges sufficiently low so that the net revenues will be sufficient to pay principal and interest on the bonds issued as herein provided." And it is further provided: "All the charges of operation and maintenance as herein defined shall constitute a first and prior claim against the gross revenues of said dormitories. All proceeds received from the operation of said dormitories in excess of said operating and maintenance cost shall be denominated `net revenues.' Said net revenues shall be paid in amounts and at times appropriate to pay the principal and interest as it falls due to the bank designated as paying agent and trustee, and shall be used to pay the reasonable fees and expenses of such paying agent and trustee, and for the payment of the principal and interest on said bonds." Title to the sites for the buildings, the buildings and all fixtures therein would remain the property of the State under the exclusive control of the Board of Regents and the plaintiff association is forbidden "to cause any lien, encumbrance, or charge to be placed upon any such buildings or equipment."
The principal question before us is whether by entering into this proposed contract the State will incur an indebtedness in excess of the limit prescribed by Section 2, Article 13, State Constitution. Plaintiff contends that the contract under consideration pledging net revenues from operation of the buildings to pay the bonds, aggregating $154,000, will not impose a general obligation or debt on the State of South Dakota; and that an obligation of the State in excess of the debt limit will not be incurred.
This court has considered what constitutes a debt as this term is used in this section of the Constitution in an advisory opinion to the Governor, In re Opinion of the Judges,
The Supreme Court of Oregon in the case of McClain v. Regents of the University,
"The only liability is against a special fund which is to be made up exclusively of net rentals. No violation of the constitutional provision against indebtedness is involved. This principle is recognized in Brockway v. Roseburg,
"`* * * There are decisions holding that where, at the time a contract is made by a municipality, a fund on hand is appropriated for its payment, or where a fund has been provided for such payment, although not collected, or an appropriation has been made of an anticipated revenue, and the contract is made payable out of such fund or revenue, it does not create an indebtedness, within the meaning of the Constitution or charter. In such case there is no general liability against the municipality, but the holder of the warrant or other contracting party agrees to look to the special fund for payment.'"
See, also, Baker v. Carter,
[1] Counsel for defendant relies upon Hesse v. City of Watertown,
Section 5582, Rev. Code 1919, provides: "The state treasurer shall be ex officio treasurer of the board of regents and shall perform all the duties of such office, subject to such regulations as the board may adopt, not inconsistent with any law of this state, and he and his sureties shall be liable on his official bond for the faithful discharge of such duties. Such treasurer shall have authority to receive and receipt for all moneys arising from any source for the use of any of the educational institutions under the control of the board, and he shall keep such separate accounts of the several funds as it shall prescribe. All money received from rents of dormitories, tuition or other fees authorized by the board, or from articles, products or material sold by its authority, shall be collected by some person designated by the board for each institution to make such collections, under proper bonds, and such person shall transmit all money, thus received by him, to the state treasurer at the close of each calendar month or not later than the fifth day of the succeeding month; and no other person shall be permitted to collect or hold any money belonging to such institutions. * * *"
The expenditure of funds collected under section 5582 is directed by the continuing appropriation contained in section 5583: "There is hereby annually appropriated, for the exclusive use of the educational institutions under the control of the board of regents, all money received from their endowment land grant as interest or rent, all local collections from fees of any kind, or rents or authorized sales, all money received from the United States or other source for the proper and legal maintenance of the institutions under its control."
Defendant asserts that under these statutory provisions the net revenues from the contemplated dormitories cannot be used *294 for the erection of buildings for the conduct of the college; that such income may be used only to pay the current expenses of the institution.
[2] The statute refers to the "legal maintenance of the institutions" under the control of the Board of Regents. The legislature has not restricted the appropriation to the upkeep of physical properties. To maintain an institution denotes a continuous functioning or that which approaches permanency. The legislature has appropriated funds on different occasions for building dormitories at the State College of Agriculture and Mechanic Arts. The trial court found that there has been for many years a constant increase in the attendance at this institution and that there is urgent need for additional dormitory facilities to accommodate and provide for the students in attendance. The action of the board in providing necessary dormitory facilities is consistent with the policy approved by the legislature; the board is not attempting to initiate a new plan for the accommodation of students. The term "maintenance of the institutions" under the control of the board of regents we believe is sufficiently comprehensive to permit the pledging and use of the net revenues as proposed by the Board. See State v. Board of Education,
The final question presented is whether or not the Board of Regents has authority to construct a building which is not expressly authorized by the legislature. The Constitution places the State College of Agriculture and Mechanic Arts and other educational institutions under the "control" of the regents, "under such rules and restrictions as the legislature shall provide." Section 3, Article *295
14, State Constitution; Johnson v. Jones,
[3, 4] Under the extensive powers granted to the Board of Regents, it has been its duty to determine what is necessary for the betterment of educational facilities at the institutions under its control. The Board has had the responsibility of determining the location, the plan of construction of buildings and their use. Since the enactment of the provisions of section 5573 the legislature has not pretended to interfere with the discretion of the Board of Regents in these respects. Special appropriations for the erection of buildings have been made, and the only limitation imposed was that the amount appropriated be applied to the objects of expenditure. *296 Section 5573 is not restrictive in its terms. It seems to be the purpose of the provisions giving the Board of Regents supervision of construction of buildings hereafter authorized by law to make clear that the Board shall have such authority if an appropriation is made for the construction of a building at an institution under its control without specific provision for supervision of its construction. We cannot agree with the contentions of counsel that specific legislative authority for the construction of the contemplated dormitories is required. No costs to be taxed. The judgment appealed from is affirmed.
ROBERTS, P.J., and POLLEY, WARREN, and RUDOLPH, JJ., concur.
SMITH, J., disqualified and not sitting.