APPEAL FROM THE CIRCUIT COURT OF THE SECOND JUDICIAL CIRCUIT MINNEHAHA COUNTY, SOUTH DAKOTA THE HONORABLE PATRICIA C. RIEPEL Judge
The opinion of the court was delivered by: Konenkamp, Justice
ARGUED ON AUGUST 24, 2011
[¶1.] The City of Sioux Falls enacted a zoning ordinance controlling the location of new on-sale alcoholic beverage businesses seeking to place video lottery machines in their establishments. In a declaratory action, the circuit court ruled that the City exceeded its authority when it enacted the ordinance. The court concluded that South Dakota's constitutional and statutory scheme indicated that the State intended to fully occupy the field of video lottery, to the exclusion of municipal regulation. We affirm.
[¶2.] On February 8, 2007, Rick Law filed an application with the City of Sioux Falls to be on its waiting list for an on-sale alcoholic beverage permit under SDCL 35-4-2(4). On July 10, 2009, the City offered Law a liquor license. Between the time Law was placed on the waiting list and when the City offered him a license, the City adopted Zoning Ordinance 60-80, Section 6, to become effective June 5, 2008. This ordinance modified certain sections of Appendix B of the Sioux Falls Code of Ordinances related to conditional use permits for on-sale alcoholic beverage establishments.*fn1 In particular, the ordinance required that an on-sale alcoholic beverage business seeking to place video lottery machines in the establishment must meet certain location requirements and apply for a conditional use permit with the City Planning Commission. [¶3.] Aware of this new ordinance, Law conditionally accepted the license, but did not apply for a conditional use permit because he believed each of his proposed locations would fail under the requirements of Ordinance 60-80. Law brought a declaratory action against the City to determine the constitutionality of Ordinance 60-80. He alleged that the City exceeded its authority when it enacted the ordinance, as the State had fully occupied the field of video lottery regulation, preempting any municipal regulation. The City countered that Ordinance 60-80 does not regulate video lottery, but is a zoning ordinance, enacted through a valid exercise of the City's police powers. The South Dakota Lottery, a Division of the Department of Revenue and Regulation, was permitted to intervene in the action.
[¶4.] After a hearing, the circuit court issued a memorandum opinion and findings of fact and conclusions of law. The court ruled that the City exceeded its authority when it enacted Ordinance 60-80, because the Legislature intended that the State "occupy the field of video lottery regulation to the exclusion of municipal regulations as shown by the Constitution and the broad statutory scheme regarding video lottery regulation." The City appeals.
[¶5.] Interpretation of an ordinance and related constitutional provisions present questions of law, reviewed de novo. City of Marion v. Schoenwald , 2001 S.D. 95, ¶ 8, 631 N.W.2d 213, 216-17 (citations omitted). We must decide anew whether Ordinance 60-80 is a valid exercise of municipal power. [¶6.] The City advances multiple reasons why the court erred in deeming Ordinance 60-80 unconstitutional. First, it argues that Ordinance 60-80 is valid because South Dakota law authorizes municipalities to adopt zoning ordinances regulating and restricting the location and use of buildings for the "purpose of promoting health, safety, or the general welfare of the community[.]" See
SDCL 11-4-1. In the City's view, Ordinance 60-80 does not regulate video lottery, but controls, through zoning, the location and use of buildings housing video lottery machines in order to protect the health, safety, and general welfare of City residents. Along the same lines, the City also asserts that because Ordinance 60-80 does not undermine or conflict with the Legislature's video lottery statutory scheme, it is a valid municipal regulation under the concept of home rule, whereby a home-rule chartered municipality may impose stricter standards than those imposed by state law. See
SDCL 6-12-5. Third, the City argues that although there is a comprehensive legislative scheme regulating video lottery, the Legislature enacted no law controlling the specific location of video lottery machines. Therefore, according to the City, it is unreasonable to infer that the Legislature intended to occupy the entire field of video lottery regulation, preempting any municipal regulation restricting the location of video lottery machines. Finally, the City maintains that if this Court finds that the Legislature has occupied the field of video lottery to the exclusion of municipal regulation, the Legislature violated article III, section 26 of our constitution when it delegated control of video lottery machine location within a municipality to a special commission, the South Dakota Lottery Commission.
[¶7.] In response, Law asserts that the only reasonable interpretation of the South Dakota Constitution and the video lottery legislative scheme is that the Legislature intended to solely occupy the field of video lottery, preempting any municipal regulation. Law points out that until 1986, video lottery was illegal in South Dakota. See S.D. Const. art. III, § 25. When our constitution was amended to allow gambling, the constitution made clear that it would be "regulated by the state of South Dakota[.]" Id.
Law points to the statutes enacted by the Legislature related to video lottery. See SDCL ch. 42-7A. In his view, those statutes give only state agencies the power to control, manage, and regulate video lottery. Thus, relying on the constitution and SDCL ch. 42-7A, Law maintains that the Legislature made no room for supplementary municipal regulation.
[¶8.] The Lottery, in agreement with Law's arguments, further points out that the Legislature intended to fully occupy the field of video lottery regulation because the "Legislature has crafted only two exceptions that allow a municipality to influence video lottery machine placement." See SDCL 42-7A-64. When issuing an on-sale alcoholic beverage license under SDCL 35-4-2(12) and (16), a municipality may consider certain criteria related to video lottery placement. See
SDCL 42-7A-64. In light of the "narrow circumstances (i.e. two types of alcohol licenses) in which a municipality may assert its influence upon video lottery location," the Lottery contends that the Legislature understood "that the regulation of video lottery - including its location - is a field occupied by the State." The Lottery also argues that the Legislature did not improperly delegate power to a "special commission" in violation of article III, section 26: the Lottery is a division of the South Dakota Department of Revenue and Regulation, not a special commission. Moreover, it contends that by delegating control of video lottery to the Lottery, the Legislature has not interfered with any municipal function, as municipalities maintain their zoning authority to control the location of alcoholic beverage establishments. [¶9.] A municipality may exercise any power or perform any function not prohibited by our constitution and laws. S.D. Const. art. IX, § 2. Yet we have repeatedly noted that 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; Elkjer v. City of Rapid City , 2005 S.D. 45, ¶ 9, 695 N.W.2d 235, 239; Olesen v. Town of Hurley , 2004 S.D. 136, ¶ 15, 691 N.W.2d 324, 328; City of Rapid City v. Rensch , 77 S.D. 242, 246, 90 N.W.2d 380, 383 (1958). Therefore, while a municipality clearly has the power to enact zoning ordinances, SDCL 9-19-3; SDCL ch. 11-4, no municipality may enact a law regulating a subject where the State has wholly occupied the field of that subject, to the exclusion of any local regulation. See Minn. Agric. Aircraft Ass'n v. Twp. of Mantrap , 498 N.W.2d 40, 42 (Minn. Ct. App. 1993). It is of no consequence that a municipality's regulation coincides with or is complementary to the state law; a municipality is precluded from enacting any regulation related to the subject preempted. Id. [¶10.] Field preemption by state law can be either express or implied. Sarasota Alliance for Fair Elections, Inc. v. Browning , 28 So. 3d 880, 886 (Fla. 2010); Fogle v. H & G Rest., Inc. , 654 A.2d 449, 464 (Md. Ct. App. 1995); Minn. Agric. Aircraft Ass'n , 498 N.W.2d at 42. Express preemption occurs when there is a specific ...