Title: Clean Water Coalition v. M Resort

State: nevada

Issuer: Nevada Supreme Court

Document:

421 Nev, Advance Opinion 24
IN THE SUPREME COURT OF THE STATE OF NEVADA

CLEAN WATER COALITION, A No. 57649
NEVADA JOINT POWERS
AUTHORITY,
Appellant/Cross-Respondent,

‘THE M RESORT, LLC, A NEVADA
LIMITED LIABILITY COMPANY: PH
METRO, LLC, A NEVADA LIMITED
LIABILITY COMPANY; OVATION
DEVELOPMENT CORPORATION, A
NEVADA CORPORATION; JET
HANGARS, LLC, A NEVADA LIMITED
LIABILITY COMPANY; SUN CITY
SUMMERLIN COMMUNITY |
ASSOCIATION, INC., A NEVADA
NON-PROFIT CORPORATION; AND
HENDERSON CHAMBER OF
COMMERCE, INC., A NEVADA NON-
PROFIT CORPORATION,
Respondenta/Cross-Appellants,

STATE OF NEVADA, EX REL. THE
LEGISLATURE OF THE 26TH
SPECIAL SESSION OF THE STATE
OF NEVADA; THE HONORABLE
BRIAN E. SANDOVAL, IN HIS
OFFICIAL CAPACITY AS GOVERNOR
OF THE STATE OF NEVADA; THE
HONORABLE KATE MARSHALL, IN
HER OFFICIAL CAPACITY AS
‘DREASURER OF THE STATE OF
NEVADA; AND THE HONORABLE,
KIM R. WALLIN, IN HER OFFICIAL
CAPACITY AS CONTROLLER OF THE
STATE OF NEVADA,
Respondents/Cross-Respondents,

 

 

 

 

om a 1r1ssos.

 
ome

 

Appeal and cross-appeal from a district court summary
judgment, certified as final under NRCP 54(b), declaring constitutional
an Assembly Bill section that requires monies to be transferred from an
entity created by agreement among local Clark County governments to
the State's general fund for the State's unrestricted general use. Eighth
Judicial District Court, Clark County; David B. Barker, Judge.

Reversed.

Parsons Behle & Latimer and Michael R. Kealy and Robert W. DeLong,
Reno,
for Appellant/Cross-Respondent.

Catherine Cortez Masto, Attorney General, and C. Wayne Howle,
Solicitor General, and Blake A. Doerr, Deputy Attorney General, Carson
City,

for Respondents Brian Sandoval, Kate Marshall, and Kim Wallin.

Legislative Counsel Bureau Legal Division and Brenda J. Erdoes,
Legislative Counsel, and Kevin C. Powers, Senior Principal Deputy
Legislative Counsel, Carson City,

for Respondent Legislature of the State of Nevada.

Kaempfer Crowell Renshaw Gronauer & Fiorentino and Jason Woodbury,
Christopher L. Kaempfer, and Severin A. Carlson, Las Vegas; O'Reilly
Law Group and John F. O'Reilly and ‘Timothy R. O'Reilly, Las Vegas,

for Respondents/Cross-Appellants Henderson Chamber of Commerce,
Ine; Jet Hangers, LLC; Ovation Development Corporation; PH Metro,
LLC; Sun City Summerlin Community Association, Inc.; and The M
Resort, LLC.

Blizabeth Macias Quillin, City Attorney, and Michael J. Oh, Assistant
City Attorney, Henderson,
for Amicus Curiae City of Henderson.

Nicholas G. Vaskov, Acting City Attorney, and Jeffrey F. Barr, Deputy
City Attorney, North Las Vegas,
for Amicus Curiae City of North Las Vegas.

 
John J. Kadlic, City Attorney, and Jonathan D. Shipman, Deputy City
‘Attorney, Reno,
for Amicus Curiae City of Reno.

BEFORE THE COURT EN BANC.

OPINION

By the Court, HARDESTY, J.:

Confronting a statewide budget crisis, the Nevada Legislature,
during the 2010 special session, undertook several revenue-adjustment
and cost-cutting mea:
which resulted in the enactment of Assembly Bill 6 (A.B. 6), 26th Special
Session (Nev. 2010), Section 18 of A.B. 6 mandates the transfer of $62

ires in an effort to balance the State's budget,

 

million in securities and cash from a political subdivision of the State
created by interlocal agreement into the State's general fund for the
State's unrestricted, general use.

In this appeal, we are asked to consider whether A.B. 6,
section 18 violates the fundamental law of the state—the Nevada
Constitution. We recognize that the Legislature is endowed with
considerable lawmaking authority under Article 4, Section 1 of the
Nevada Constitution. But that authority is not without some restraints,
‘Two such restrictions are contained in Article 4, Section 20, which
prohibits, among other things, local and special laws for the “assessment
and collection of taxes for state . . . purposes,” and Article 4, Section 21,

which requires laws to be “general and of uniform operation throughout

the State” in all cases “where a general law can be made applicable.”

 

 
om ae

 

We conclude that A.B. 6, section 18 violates both. A.B. 6,
section 18 converts $62 million collected by the Clean Water Coalition
(CWO) as user fees into a tax that is contrary to Article 4, Section 20's
prohibition against local or special taxes. Because A.B. 6, section 18
applies only to the CWC, and a general law could have applied, it also
violates Article 4, Section 21's mandate that all laws shalll be general and
operate uniformly throughout the state in all cases where a general law
can be made applicable. For those reasons, we reverse the district court's
judgment declaring A.B. 6, section 18 constitutional.

FACTS AND PROCEDURAL HISTORY
‘The Clean Water Coalition

The Clean Water Coalition was created pursuant to an
interlocal cooperative agreement among four Nevada political
subdivisions, all located in Clark County: the Clark County Water
Reclamation District and the cities of Henderson, Las Vegas, and North
Las Vegas. In accordance with NRS 277.080-.180, the four members
agreed to form the CWC based on their “common environmental,
economic and regulatory interest in the efficient and responsible

collection, treatment, reuse and discharge of municipal [e}ffluent.”* The

'The agreement forming the CWC became effective November 20,
2002. It was amended in September 2006 to add the City of North Las
Vegas as a member and to establish a regional fee schedule. It was
amended a second time on January 4, 2008, to provide for regional water
quality and annual operating plans. As relevant here, the second
amended agreement sets forth the CWC's creation, functions, powers,
management, membership, administration, operation, and limitations,

 

"The Nevada Legislature recognized that interlocal agreements may
further such common objectives by enacting the Interlocal Cooperation
continued on next page

 

 
os Be

 

agreement lists the CWC’s conferred functions, the first of which is to
implement the Systems Conveyance and Operations Program (SCOP),
which involves planning, designing, financing, constructing, operating,
and maintaining a regional system to convey effluent from existing and
future wastewater treatment facilities to its ultimate outfall location in
the Colorado River system. The interlocal agreement recognizes that the
SCOP may include physical facilities such as pipelines and real and
personal property, including leases of such property, permits, and
licenses. Other CWC functions include managing effluent flowing
through CWC facilities and contracting to sell or lease power produced
from energy recovery facilities that might be constructed.

The CWC’s powers include, among others, preparing,
reviewing, approving, and implementing regional water quality plans;
adopting and amending operating and capital improvement plans and
budgets; financing facilities that may be needed to carry out its conferred
functions, including funding all aspects of the SCOP; assessing members

continued

Act, codified at NRS 27.080-.180 (1965). ‘The Act permits local
governments to cooperate with each other to provide services and
facilities in a way that accords “with geographic, economic, population
and other factors influencing the needs and development of local
communities.” NRS 277.090. Under the Act, any one or more local
governments may contract with each other to jointly perform any
governmental service, activity, or undertaking, including sewer systems,
and they may jointly use county and city personnel, equipment, and
facilities to do so. NRS 277.180. The members of the interlocal
agreement may support the administrative board created to operate the
joint undertaking by, among other things, appropriating funds. NRS
277.170.

 

 
for their agreed share of administration, operation, maintenance, and
capital costs; and establishing and adjusting regional sewer connection
and user fees to defray CWC costs. Each of the CWC’s members collected
sewer connection and usage fees from households and businesses,
including The M Resort and other cross-appellants, in their respective
localities, and then paid the CWC with the funds from the collected fees,
in part to finance the building of the SCOP. The CWC had been
collecting the fees since approximately November 2002,8 but by October
2010, it stopped collecting. It is unclear whether the SCOP project has
been put on hold indefinitely or terminated altogether.*

"Between November 2002 and June 2007, the members charged
sewer service users regional sewer fees to defray the cost of the CWC's
activities and obligations. The members funded the CWC’s operating and
capital budgets on a pro rata basis from the collected fees. As of July 1,
2007, the CWC implemented “regional fees” for the purpose of funding
CWC activities, operating costs, and debt reserves and funding, at which
time the members’ obligation to contribute their pro rata shares stopped,
and they instead paid the CWC the fees set forth in the regional fees
schedule, which were assessed as a $400 connection charge per
equivalent residential unit, and a sewer usage charge of $0.105 per
thousand gallons of untreated wastewater. Each member was permitted
to choose a method to raise the funds needed to satisfy its regional fee
obligation,

 

“The State has filed an addendum to its answering brief, which
contains newspaper articles; meeting notices, agenda, and minutes from
the hearings on the state budget before the interim finance committee:
and minutes from CWC management board meetings, none of which were
filed in the district court. The CWC requests that the addendum be
stricken in part because the material therein was not before the district,
court. Having considered the request to strike, we grant it. See Carson
Ready Mix v. First Nat'l Bk., 97 Nev. 474, 476, 635 P.2d 276, 277 (1981).

 

 
sr

 

Litigation over A.B. 6, section 18

A.B. 6 was adopted and approved as part of the Legislature's
effort to balance the state's budget during its 2010 special session.
Section 18 of that bill requires the Clean Water Coalition, an entity
created pursuant to interlocal agreement by the Clark County Water
Reclamation District and the Cities of Henderson, Las Vegas, and North
Las Vegas, to “transfer to the State of Nevada securities and cash which
together total $62,000,000, for deposit in the State General Fund for
unrestricted State General Fund use.” In adopting A.B. 6, section 18(1),
the Legislature found and declared that:

(a) The transfer of money from the Clean Water
Coalition to the State General Fund is necessary
to ensure that the government of this State is able
to continue to operate effectively and to serve the
residents, businesses and governmental entities of
this Stat
(b) The transfer of money from the Clean Water
Coalition to the State General Fund will promote
the general welfare of this State; and

(©)A general law cannot be made applicable to the
provisions of [Section 18] because of special
circumstances.

Section 18 became effective on March 12, 2010, and that same day, the

 

CWC filed a district court complaint against the State seeking
declaratory and injunctive relief, challenging section 18's,
constitutionality on numerous grounds, including that it violated Nevada
Constitution Article 4, Section 20, prohibiting local and special laws for
the assessment and collection of taxes, and Article 4, Section 21,

prohibiting local and special laws where a general law can be made

 
on Be

applicable. ‘The M Resort also filed a district court complaint against the
State and the CWC, seeking injunctive and declaratory relief and
damages, also based on allegations that section 18 is not constitutionally
permissible legislation.” The two actions were consolidated, and the
parties stipulated to other businesses (cross-appellants in this matter)
intervening in the actions. ‘The State answered the complaints and filed
4 counterclaim against the CWC, seeking a declaration that section 18 is
constitutional and an order compelling the CWC to transfer the $62
million to the State's general fund, as mandated under the bill.
Subsequently, on cross-motions for summary judgment, the
district court entered an order declaring A.B. 6, section 18 constitutional.
‘The court made eight conclusions of law, all but one of which would

support a determination that section 18 is unconstitutional as a tax upon

"In resolving the complaint, the district court did not specifically
address the CWC’s argument that A.B. 6, section 18 unconstitutionally
impaired the CWC’s interlocal agreement with its members, or its
arguments that section 18 violated Nevada Constitution Article 1, Section
16 and Article 10, Section 1. By declaring the statute constitutional,
however, the district court implicitly rejected these arguments,

‘The M Resort also alleged breach of contract against the CWC as a
third-party beneficiary of the interlocal agreement, and it requested
imposition of a constructive trust. Those causes of action remain pending
in the district court and are not part of the NRCP 54(b)-certified
judgment. ‘The district court properly certified its summary judgment
declaring A.B. 6, section 18 constitutional, as the summary judgment
completely removed the State as a party to the action and the district
court determined that there was no just reason for delay. NRCP 54(b);
Aldabe y, Evans, 83 Nev. 135, 425 P.2d 598 (1967).

 

 
om

 

only certain Clark County residents and businesses, or as a local or
special law where a general law could have applied. Nonetheless, the
court upheld the bill section because it could not conclude without a
reasonable doubt that section 18 plainly conflicted with the Nevada
Constitution, given its ultimate determination that “each political
subdivision remains subject to the overriding sovereign control of statutes
enacted by the Legislature.” The court certified its judgment as final
under NRCP 54(b) and, pursuant to the parties’ stipulation, stayed
enforcement of the judgment pending appeal. This appeal and cross-
appeal followed.”
DISCUSSION

‘The CWC and The M Resort and other Clark County business
cross-appellants (hereinafter The M Resort) challenge A.B. 6, section 18
on two grounds: that it impermissibly converts funds assessed as user
fees and exacted on a local basis into a tax for distribution on a statewide
basis in violation of Nevada Constitution Article 4, Section 20; and that it
is a local or special law that operates over a particular locality, and is
directed at funds obtained from wastewater treatment users in Clark
County, in violation of Nevada Constitution Article 4, Section 21, which

requires laws to be general and to operate uniformly throughout the

 

sspondent in this appeal, the CWC filed an
answering brief, indicating that it did not object to The M Resort's
opening brief because its interest is aligned with the cross-appellants’
interest on the issue of A.B. 6, section 18's constitutionality. The cities of
Reno, Henderson, and North Las Vegas have filed amicus curiae briefs in
this matter. NRAP 29(a).

 

 
om

 

‘The State, on the other hand, maintains that the CWC and its
members are subject to the overriding sovereign control of legislatively
enacted statutes and that A.B. 6, section 18 is within the Legislature's
authority to enact. ‘That conclusion, however fails to address the
principle that the State's sovereign control over its political subdivisions
is not absolute, but rather subject to specific constitutional limitations,
including Article 4, Sections 20 and 21, which explicitly limit the
Legislature's authority to enact local and special laws. Although the
district court extended unqualified deference to the Legislature's law-
making authority in upholding section 18, the Legislature's authority to
enact a local or special law is constrained by Nevada Constitution Article
4, Sections 20 and 21. A.B. 6, section 18 must, therefore, be analyzed
under that constitutional framework.

‘The Legislature's aut! wact_laws_binding upon _political
subdivisions is subject to constitutional limitations:

Although the Legislature's law-making authority is
considerable, it is not unlimited. Galloway v, Truesdell, 83 Nev. 13, 20,
422 P.2d 237, 242 (1967). Under constitutional checks and balances
principles, courts are obligated to enforce the limitations that the
constitution imposes upon legislative acts, and in that regard, the district
court erred by essentially concluding that A.B. 6, section 18 is insulated
from judicial review based on the Legislature's overriding sovereign
authority over political subdivisions. The Nevada Constitution is the
“supreme law of the state,” which “control[s] over any conflicting
statutory provisions.” Goldman v. Brvan, 106 Nev. 30, 37, 787 P.2d 372,
37 (1990). ‘Thus, although the State argues that the CWC has no

10

 
authority to disregard A.B. 6, section 18's mandate to transfer the $62
million to the State's general fund, the State admits that political
subdivisions are not bound by a statute that “violates a specific
constitutional limitation.” Article 4 of the Nevada Constitution both
confers law-making authority on the Legislature, see Nev. Const. art. 4, §
1, and limits that authority in order to protect Nevada citizens from
unequal treatment under the laws. See Nev. Const. art. 4, §§ 20, 21.

In determining whether A.B. 6, section 18's mandate requiring
the CWC to turn over $62 million to the State for its unrestricted general
use is permissible under the Nevada Constitution’s local and special law
proscriptions, we first analyze whether section 18 is local or special
legislation. In so doing, we examine the origin of the Nevada
Constitution's proscriptions on local and special laws, as that history
provides a framework for our analysis. Since, as explained below, we
conclude that A.B. 6, section 18 is both a local and special law, we next
analyze whether it violates Nevada Constitution Article 4, Section 20,
which prohibits local or special laws that assess and collect taxes for state
purposes, and Article 4, Section 21, which otherwise prohibits local or
special laws in cases where a general law could apply. As discussed
below, we determine that AB. 6, section 18 violates both Article 4,

Sections 20 and 21, and it therefore fails under the Nevada Constitution,

 

Nev: nal provisions proscribing local and specis
‘The Nevada Constitution provides that “[tJhe legislature shall
not pass local or special laws... [fJor the assessment and collection of

art. 4, § 20,

 

taxes for state, county, and township purposes,” Nev. Cons

 

and it further requires that “[iJn all cases enumerated in [Section 20], and

 

 
om ae

 

in all other cases where a general law can be made applicable, all laws
shall be general and of uniform operation throughout the State.” Nev.
Const. art. 4, § 21. This court has explained the prohibition against local
and special laws under Article 4, Sections 20 and 21 as follows:

[If a statute be either a special or local law, or
both, and comes within any one or more of the
cases enumerated in section 20, such statute is
‘unconstitutional; if the statute be special or local,
or both, but does not come within any of the cases
enumerated in section 20, then __ its
constitutionality depends upon whether a general
law can be made applicable.

Conservation District v. Beemer, 56 Nev. 104, 116, 45 P.2d 779, 782
(1938).

Because history instructs the analysis that follows, wo first
explain the origins of the Nevada Constitution’s proseriptions on such
laws and the constitutional framers’ purpose in adopting provisions
limiting the Legislature's authority to enact local and special laws before
delving into why A.B. 6, section 18 fits within the proscribed local and
special laws set forth under Nevada Constitution Article 4, Sections 20
and 21.

History leading to the adontion of Nevada Constitution Ariide 4,

During Nevada's Constitutional Convention in 1864, the
delegates, in structuring Article 4, Section 20 for adoption into the
Nevada Constitution, used as a guide Indiana's constitutional provisions
prohibiting special legislation. See Debates & Proceedings of the Nevada
State Constitutional Convention of 1864, at 466, (Andrew J. Marsh off.
rep. 1866); Hess v. Pegg, 7 Nev. 23 (1871) (noting that the language in

12

 
cn

Nevada's constitutional provisions proscribing local _and special
legislation was borrowed from the constitution of Indiana); State of
Nevada v. Irwin, 5 Nev. 111, 120 (1869) (pointing out that Article 4,
Section 22 of the Indiana Constitution is “verbatim with that of Nevada”
Constitution Article 4, Section 20, except that Indiana makes more
exceptions to special legislation). ‘The Nevada constitutional framers’
purpose in adopting mandates proscribing local and special legislation
was to “remedy an evil into which it was supposed the territorial
legislature had fallen in the practice of passing local and special laws for
the benefit of individuals instead of enacting laws of a general nature for
the benefit of the public welfare.” Evans v, Job, 8 Nev. 322, 333 (1873)

 

‘The framers of the Indiana Constitution had similar concerns with local
and special legislation, deeming the practice of legislators agreeing to
vote for the local bills of other legislators in return for comparable
cooperation for passing their own local bills a “growing evil.” See
Municipal City of South Bend v. Kimsey, 781 N.E.2d 683, 686 (Ind. 2003).
‘The problem with such lawmaking is that when “a law affects only one
small area of the state, voters in most areas will be ignorant of and
indifferent to it.” Id. Likewise, early in Nevada's jurisprudence, this
court explained that the purpose behind requiring statutes to be general
in nature is that when a statute affects the entire state, it is more likely
to have been adequately considered by all members of the Legislature,
whereas a localized statute is not apt to be considered seriously by those
who are not affected by it. Town of Pahrump v. Nye County, 105 Nev.
227, 173 P.2d 1224 (1989); see also Colman v. Utah State Land Bd,, 795
P.2d 622, 636 (Utah 1990) (providing that “{a] law is general when it

13

 

 
applies equally to all persons embraced in a class founded upon some
natural, intrinsic, or constitutional distinction. It is special legislation if it
confers particular privileges or imposes peculiar disabilities, or
burdensome conditions in the exercise of a common right; upon a class of
persons arbitrarily selected, from the general body of those who stand in
precisely the same relation to the subject of the law” (quoting Utah Farm
Bur, Ins, Co. v, Utah Ins. Guar, Ass'n, 664 P.2d 751, 754 (Utah 1977).
‘At their core, local and special law proscriptions “reflect a concern for
‘equal treatment under the law,” Robert F. Williams, Equality Guarantees
in State Constitutional Law, 63 Tex. L. Rev. 1195, 1209 (1985), and seek
to fix inequities in the areas of “economics and social welfare.” See
Donald Marritz, Making Equality Matter (Again): The Prohibition
Against Special Laws in the Pennsylvania Constitution, 3 Widener J.
Pub. L. 161, 184-85 (1993) (explaining the origins of Pennsylvania's
constitutional prohibition against special laws).

Although the Nevada Constitution expresses a preference for
generally applicable laws, local or special laws are not ipso facto
unconstitutional. Nev. Const. art. 4, §§ 20, 21; see W.R. Co. v. City of
Reno, 63 Nev. 330, 952-63, 172 P.2d 158, 169 (1946). A local or special
law may be upheld so long as (1) it does not come within any of the cases
enumerated in Nevada Constitution Article 4, Section 20; and (2) a
general law could not have been made applicable. Nev. Const. art. 4, §
21; see Anthony v, State of Nevada, 94 Nev. 337, 580 P.2d 939 (1978);

 

Cauble v, Beemer, 64 Nev. 77, 96, 177 P.2d 677, 686 (1947); Conservation
District v, Beemer, 56 Nev. 104, 45 P.2d 779 (1935). For the reasons
explained below, A.B. 6, section 18 fails on both counts.

 

 
om

 

A.B. 6, section 18 is a local and special law

‘The CWC and The M Resort argue that because A.B, 6, section
18 applies in only a single Nevada county, and only to users of the
municipal or county sewer systems in that county, it is local law, and
because it applies specifically and directly to a single entity in the state to
the exclusion of all others similarly situated, it is a special law. The CWC
also points out that the assembly bill's text admits that it is being used in
lieu of a general law. The State responds that even though, on its face,
A.B. 6, section 18 operates selectively in a few political subdivisions and
in only a limited geographical area, it is not a local or special law because
it advances supervening statewide budget concerns that transcend purely
local interests. ‘The State also urges this court to disregard the legislative
admission that section 18 is being used in lieu of a general law.

A law is local if it operates over “a particular locality instead
of over the whole territory of the State.” Damus v. County of Clark, 98
Nev. 512, 516, 569 P.2d 983, 935 (1977) (citing State of Nevada v. Irwin, 5
Nev. 111, 121 (1869). A law is special if it ‘pertain[s) to a part of a class
as opposed to all of a class.” Id. (citing Lrwin, 5 Nev. at 121); see State of
Nevada v. Cal. M. Co., 15 Nev. 284, 249 (1880) (describing a special law
as one that “imposes special burdens, or confers peculiar privileges upon
one or more persons in no wise distinguished [way] from others of the
same category”). On the other hand, a general law is one that is applied
uniformly. Nev. Const. art, 4, § 21; see Black's Law Dictionary 963 (9th
‘ed, 2009) (defining a general law as one that is “neither local nor confined

in application to particular persons”)

 

15

 
In drafting A.B. 6, section 18, the Legislature found and
declared that “[a] general law cannot be made applicable to the provisions
of this section because of special circumstances.” A.B. 6, § 18(1)(e), 26th
Spec. Sess. (Nev. 2010). The State acknowledges that when legislative
findings are expressly included within a statute, those findings should be
accorded great weight in interpreting the statute, but it points out that
such findings are not binding and this court may, nevertheless, properly
conclude that section 18 is a general law despite the Legislature's
declaration to the contrary. McLaughlin v. LV.H.A., 68 Nev. 84, 98, 227
P.2d 206, 210 (1951); Dunn v. Tax Commission, 67 Nev. 173, 184, 216
P.2d 985, 991 (1950). The Legislature's express finding and declaration

 

that section 18 is not a general law, however, is consistent with the bill
section’s text, which, as the district court found, is directed specifically at
the CWC and funds collected from wastewater treatment users within
specified areas of Clark County. The law applies only to the CWC. The
State argues that a law need not be operative in every part of the state to
be general, but the determination of whether a law is local or special is
based on how it is applied, not on how it actually operates. See County of
Clark v. City of Las Vegas, 97 Nev. 260, 628 P.2d 1120 (1981) (noting that
a statute with a population classification is not necessarily contrary to
Article 4, Sections 20 and 21, because if the classification applies
prospectively to all counties that could come within its population class, it
is neither local nor special).

Although the State asserts that the law is general because it
advances supervening statewide concerns that transcend local interests,

the case on which the State relies, State ex rel. List v. County of Douglas,

 

 

 
does not support that proposition. 90 Nev. 272, 278, 524 P.2d 1271, 1275
(1974). Instead, in Lis
a compact between Nevada and California that required the Nevada
counties bordering Lake Tahoe to pay apportioned shares from their
general funds to the Tahoe Regional Planning Agency, holding that the

 

, this court upheld a statute, enacted pursuant to

preservation of the region of the Lake Tahoe Basin

as a natural resource for the enjoyment of all

people sets it apart from the embrace of the

commands of [Nevada Constitution Article 4,

Sections 20 and 21]. Were we to rule otherwise,

every interstate compact proposing to protect and

preserve a common natural resource through an

agency empowered to enact laws would be a

nullity. We are wholly unable to attribute such an

intention to those who wrote the prohibitions of

[Article 4, Sections] 20 and 21.
List, 90 Nev, at 279, 524 P.2d at 1275. ‘Thus, the holding is based on the
conclusion that the statute's purpose was to conserve a common “natural
resource for the enjoyment of all people” that is not confined to a local
area, Id, In so holding, the court in List agreed with the California

Supreme Court, which, in addressing a challenge to the

 

me compact
under similar California constitutional provisions reasoned that

“{tJhe water that the Agency is to purify cannot be
confined within one county or state;....‘The
wildlife which the Agency should protect ranges
freely from one local jurisdiction to another.
Only an agency transcending local boundaries can
devise, adopt and put into operation solutions for
the problems besetting the region as a whole.
Indeed, the fact that the Compact is the product of
the cooperative efforts and mutual agreement of
two states is impressive proof that its subject
matter and objectives are of regional rather than
local concern.”

 

 
Id, (quoting People ex rel. Younger v. County of El Dorado, 487 P.2d 1193,
1201 (Cal. 1971).

List, unlike this case, addresses regional concerns and the
preservation of a natural resource directly affected by inhabitants of that
region. Here, a natural resource common to an interstate region is not at
issue; instead, A.B. 6, section 18 is in the reverse and addresses statewide
concerns through legislation that applies only to the CWC and funds
collected from wastewater-treatment users within a certain locality.
Since section 18 on its face advances statewide objectives, but burdens
only the CWC by appropriating funds collected from certain residents and
businesses within a particular locality for the state's general use, it is
special (pertaining to only the CWC) and local (applying to only a
particular locality). Damus, 93 Nev. at 616, 569 P.2d at 935; Cal. M. Co.
15 Nev. at 249.

By requiring # wer fees it assessed against its members

for capital improvement projects and services for the benefit of Las Vegas

Valley sewer service users, A.B. itional
local and special tax against the CWC in violation of Nevada Constitution
Article 4, Section 20

‘The Legislature is not permitted to pass local or special laws
“[flor the assessment and collection of taxes for state, county, and

township purposes.” Nev. Const. art. 4, § 20. An exaction of money for
the purpose of generating revenue is a tax. Douglas Co. Contractors v,
Douglas Co,, 112 Nev. 1452, 1457, 929 P.24 253, 256 (1996); State v.
Boyd, 27 Nev. 249, 256, 74 P. 654, 655 (1903); see also Hawaii Insurers
Council v, Lingle, 201 P.3d 564 (Haw. 2008); 71 Am. Jur. 2d State and
Local Taxation § 13 (2001) (explaining that a charge is a tax if its purpose
is to raise revenue). While a tax is compulsory and it entitles the

 

 
taxpayer to receive nothing except the governmental rights enjoyed by all
citizens, a user fee is optional and applies to a specific charge for the use
of publicly provided services, See U.S. v. City of Huntington, W.Va., 999
F.2d 71, 74 (4th Cir. 1993) (explaining that “[ulser fees are payments
given in return for a government-provided benefit’; while taxes are
“enforced contribution{s] for the support of government” (alteration in
original) (quoting United States v. La Franca, 282 U.S. 568, 572 (1931)));
City of Gary, Ind. v, Indiana Bell Tel., 732 N.E.2¢ 149, 156 (Ind, 2000),
Other courts, in addressing the issue of whether an exaction
amounts to a tax, have explained that “the nature of the tax or charge
that a law imposes is not determined by the label given to it but by its
operating incidence,” State v, Medeiros, 973 P.2d 736, 741 (Haw, 1999)
(internal quotation omitted) (citing City of Huntington v, Bacon, 473
S.E.2d 743, 752 (W. Va. 1996) (“It is a well-nigh universal principle that
courts will determine and classify taxation on the basis of realities, rather
than what the tax is called in the taxing statute or ordinance.” (quoting
Hukle v, City of Huntington, 58 S.E.24 780, 788 (W. Va. 1950)); Emerson
College v, City of Boston, 462 N.E.2d 1098, 1105 (Mass. 1984) (explaining

that ultimately, “the nature of a monetary exaction must be determined

by its operation rather than its specially descriptive phrase” (internal
quotation omitted))). Thus, to distinguish between a “fee” and a “tax,” the
Hawaii Supreme Court in Medeiros adopted a modified version of the test,
articulated by the Massachusetts Supreme Judicial Court in Emerson
College, which analyzes whether the charge “(1) applies to the direct
beneficiary of a particular service, (2) is allocated directly to defraying the

 

 
non a

 

costs of providing the service, and (3) is reasonably proportionate to the
benefit received.” Medeiros, 973 P.2d at 742. If those criteria fit the
charge, it is a fee. Id, at 742-45.

Here, the amounts collected by the CWC members through
assessments were directed at capital improvement projects (mainly the
SCOP) and sewer services. As the district court concluded in its
summary judgment, such fees are user fees. Applying the Medeiros test,
the fees were to be applied for the benefit of members who provided sewer
services, they were allocated to defray capital improvement project and
sewer service costs, and they were proportionate to the benefits included
in the CWC’s capital improvement plan (in particular, the SCOP, which
the district court estimated would cost $850 million to construct) that was
in effect when A.B. 6 was enacted and when the district court rendered
its decision. Id,, 973 P.2d at 742.

"In support of its argument, the State points out that municipal
public utility rates are “ordinarily not characterized as taxes, .... even if
some of the proceeds are used as general revenue.” See 12 Eugene
McQuillin, The Law of Municipal Corporations § 35:69 (3d ed. 2006). The
CWC, however, was created by interlocal agreement among four political
subdivisions of the State for the primary purpose of constructing the
SCOP, managing effluent flowing through CWC facilities, and preparing
and implementing regional water quality plans for its members and,
ultimately, residents and businesses in the Las Vegas Valley. As the
district court found, the fees that the CWC collected from its members
were user fees for the purpose of carrying out the CWC’s conferred
functions, including the SCOP, and implementing regional water quality
plans for treatment and discharge of effluent from members’ treatment
plants.

20

 
0

‘This court has not addressed whether user fees collected for
capital improvement projects and sewer services are transformed into a
tax through a subsequent law directing their transfer into the State's
general fund, but it has addressed the issue of whether an ordinance
exacting a fee from subdivision contractors for purposes of supporting

county school capital improvements was properly characterized as a

 

regulatory measure or a tax, Douglas Co, jas Co., 112
Nev. 1452, 1459, 929 P.2d 253, 257 (1996). In that case, looking at the

ordinance’s “true purpose” to determine whether it w:

 

regulatory or
revenue-raising, the court reasoned that the ordinance that implemented

the “fair share cost” (FSC) program was being utilized to benefit the

 

entire county rather than the new subdivision against which the fee was
of the FSC

are incidental to its true purpose—to raise revenue to finance

 

assessed. Id, It then concluded that “any regulatory featur

construction benefitting the County at large and not simply the
subdivision at issue,” Id, Since the FSC was “clothed with the indicia of
a tax rather than a regulatory measure,” this court held that the FSC
program was an impermissible tax.? Id, at 1459, 929 P.2d at 257-58. In
so doing, this court explained that “when it appears from the Act itself

 

that revenue is its main objective, and the amount of the tax supports

"Because this court determined that the FSC was invalid under
statutes enabling and constraining impact fees and governing police
power, it concluded that it was unnecessary to address appellants’
contention that the FSC was also an unconstitutional tax. Douglas Co.
Contractors, 112 Nev, at 1466, 929 P.2d at 261.62,

21

 
os

that theory, the enactment is a revenue measure.” Id. at 1457, 229 P.2d
at 266 (quoting Eastern Diversified v. Montgomery County, 570 A.2d 850,
854 (Ma. 1990).

Applying that reasoning to this case, the purpose of AB. 6,
section 18 is to help correct the state’s revenue shortfall. Revenue-raising
acts are defined as taxes, Id, Although the State distinguishes Douglas
County Contractors on the basis that the ordinance in that case involved
the “collection of regulatory fees,” and argues that this case involves
“reasonable utility fees,” the holding in Douglas County Contractors rests
on the exaction’s true purpose. A.B. 6, section 18 takes the revenue
obtained from user fees collected by the CWC members from business and
residents within their respective jurisdictions with the intention of

I fund uses, Such a

 

applying those fees to unrestricted statewide gene
broad-range-intended use “is of weight in indicating that the charge is a
tax.” Emerson College, 462 N.E.2d at 1106 (internal quotation omitted),
“{S]tatutory earmarking of proceeds for [purposes other than what they
were assessed] is more consistent with a revenue raising purpose than
with an intent to recover...expenditures” related to the CWC’s
conferred functions. Id, Applying that reasoning here, A.B. 6, section
18's mandate directing the CWC to transfer money to the State's general
fund for statewide-unrestricted-general use is an impermissible local and
special tax. Id.; see La Franca, 282 U.S. at 572 (defining taxes as the
“enforced contribution to provide for the support of government”).

The State, in arguing that A.B. 6, section 18 is not an
impermissible tax under Nevada Constitution Article 4, Section 20, relies
in part on Barber v, Ritter, in which the Colorado Supreme Court upheld

22.

 
statutes requiring money to be transferred from state special cash funds
that were financed by user fees, surcharges, and special assessments into
the state's general fund. 196 P.3d 238 (Colo. 2008). We are not
persuaded, however, that the reasoning in Barber applies to this case for
two reasons. First, the challenge against the statute requiring the money
transfer in this matter is based on the Nevada Constitution’s prohibition
against local and special laws under Article 4, Sections 20 and 21, and
the plaintiffs/appellants in Barber challenged the statutes at issue in that
case under the Colorado Taxpayer's Bill of Rights (TABOR), an
amendment to the Colorado Constitution passed in 1992 by citizen
initiative that was aimed at limiting government spending without
taxpayer approval. See Colo. Const. art. X, § 20 (1992); Barber, 196 P.3d
238. Thus, the court in Barber did not analyze the statutes’
constitutionality under any local and special law prohibitions. Second,
unlike this case, the court in Barber held that it was permissible under
TABOR to require the money retained in state special funds to be
transferred to the state’s general fund, reasoning that the transfers did
not amount to a tax subject to TABOR's voter approval requirement
because the transfer of fees from state cash funds to the state’s general
at 242, 249,

 

fund did not alter their essential character as fees. Id,

 

Barber, therefore, does not provide any authority for the proposition that

 

funds held by a specific political subdivision within a specific locality may
be transferred to the state's general fund for the benefit of the entire

ate and still comport with Nevada's constitutional proscriptions on local

and special laws.

 

 
om Be

 

Our conclusion that A.B. 6, section 18 constitutes an
impermissible tax is consistent with the reasoning from other
jurisdictions that have addressed similar situations. For example, in
Hawaii_Insu v. Lingle, the Hawaii Supreme Court
determined that a statute requiring the Hawaii Insurance Council to
transfer funds collected as regulatory fees to the state's general fund was
an unlawful attempt to transform $3.5 million of legitimate assessments
into a general tax. 201 P.8d 564, 583 (Haw. 2008). In that case, the court
rejected the state's “contention that a user or regulatory fee, if initially
assessed as such, can be transferred to a general fund when the same
assessment would have been invalid had it been assessed initially with
the express understanding that the funds would be transferred to the
general fund.” Id, at 582.

Here, while the fees were collected as user fees, when the
Legislature later enacted A.B. 6, section 18, requiring that the collected
fees be transferred to the State's general fund for unrestricted general
use, they were transformed into a local and special tax, which is
prohibited under Article 4, Section 20 of the Nevada Constitution.
Although the State attempts to distinguish Lingle on the basis that the
transfer of “regulatory fees” is not at issue here, the point in Lingle that
is relevant in this matter is that feos assessed as legitimate fees can be
transformed into impermissible taxes if they are later transferred to the
State's general fund. 201 P.8d at 682. This is true because they would no
longer bear any relationship to the purpose for which they were assessed
‘once mixed into the general fund. See id, (emphasizing the revenue’s
ultimate use in determining whether a fee amounts to a tax by asking
whether it provides a general benefit to the public, of a sort often financed

24

 
om

 

by a general tax); see also Health Services Medical Corp. v. Chassin, 668
NY.S.2d 1006, 1009-10 (Sup. Ct. 1998) (declaring a statute to be an
unconstitutional tax because it directed a portion of payments made by
health maintenance organizations to hospitals for inpatient care to be
deposited in the state's general fund)

Accordingly, looking at A.B. 6, section 18's true purpose, which

is to raise the State's revenue bi

 

through an assessment against one
political subdivision of the state that operates in only a specific locality in
the state, we conclude that section 18 is an impermissible local and
special tax under Article 4, Section 20 of the Nevada Constitution. See
Douglas Co, Contractors v, Douglas Co,, 112 Nev. 1452, 1457, 1459, 929
P.2d 253, 256, 257 (1996); State v. Boyd, 27 Nev. 249, 74 P, 654 (1903),

 

Jaw could apply to address the State's bu:

Even if this court were to credit the State's argument that
AB. 6, section 18 involves only fees, not a tax, taking it outside Article 4,
Section 20, the measure still fails because it violates Article 4, Section 21,
which mandates general laws in all cases where they “can be made
applicable.” While A.B. 6, section 18 declares that a general law could
not apply “because of special circumstances,” and the Legislature's
decision on whether a general law can be made applicable in a given case
is presumed correct, Hess v. Pegg, 7 Nev. 23 (1871), a law’s compliance
with Article 4, Section 21 nevertheless is subject to judicial review. City
of Reno v. County of Washoe, 94 Nev. 827, 332-33, 580 P.2d 460, 463-64
(1978); State of Nevada v, Inwin, 5 Nev. 111, 120 (1869) (noting “that the
power of determining whether a given law is repugnant to the principles
of a constitution with which it is alleged to conflict, belongs to the
judiciary,” and the court in that regard is conclusive): Heckler v. Conter,

25

 
187 N.E, 878, 879 (Ind. 1933) (rejecting earlier authority that allowed the
legislature complete discretion in determining whether a general law
could have applied, reasoning that “if the Legislature may arbitrarily
decide that a general law cannot be made applicable, and its decision is
final and cannot be questioned, it is not restrained or restricted in any
sense, and the constitutional provision [proscribing local or special laws
in cases where a general law could have applied] is, if not a nullity, at
east a mere admonition’).

When determining whether a local or special law is
permissible because a general law could not be made “applicable” for
purposes of Nevada Constitution Article 4, Section 21, we look to whether
the challenged law “best subservo[s) the interests of the people of the
intended to
affect.” Irwin, 5 Nev. at 122. In upholding local or special legislation in

 

state, or such class or portion as the particular legislation is

the past, this court has focused on whether “the general legislation
existing was insufficient to meet the peculiar needs of a particular
situation,” or whether a particular emergency situation existed, requiring
more speedy action and relief than could be had by proceeding under the
existing general law. Cauble v, Beemer, 64 Nev. 77, 96, 177 P.2d 67,
686 (1947). With those precepts in mind, local or special laws have been
upheld in situations where an emergency situation existed within a
certain county or locality and a general law could not apply to address the
situation because only that county or locality was affected. Id, (upholding
local law that removed the Lyon County seat from Dayton to Yerington
after the Lyon County courthouse burned down); see also Quilici_v.
Strosnider, 34 Nev. 9, 115 P. 177 (1911) (upholding local law that

26

 
authorized Washoe County to issue bonds to fund rebuilding a Washoe
general hospital and to levy taxes to pay for the bonds, based on the
unsanitary and inadequate conditions of the existing hospital);
Conservation District v. Beemer, 56 Nev. 104, 45 P.2d 779 (1935)
(upholding law that authorized Washoe County to issue bonds to help
fund the construction of reservoirs to store and regulate Truckee River
floodwaters). In all of those cases, the challenged local or special laws
addressed immediate concerns within a locality and directly burdened
and benefited those who were subject to the laws. This court has also
upheld local or special laws on the basis that the general legislation
existing was insufficient to meet the peculiar needs of a particular local or
special situation and a general law could not be made applicable. See
State ex rel. List v. County of Douglas, 90 Nev. 272, 278, 524 P.2d 1271,
1275 (1974) (upholding legislation that created the Tahoe Regional
Planning Agency and allowed it to regulate activity in order to preserve a
common natural resource); Dotta v. Hesson, 38 Nev. 1, 143 P. 305 (1914)
(upholding law that permitted the issuance of county bonds to construct a
high school in a rural location of the county); State v. Lytton, 31 Nev. 67,
99 P. 855 (1909) (upholding law that permitted the issuance of county
bonds to construct a county jail and courthouse); Hess v. Pegg, 7 Nev. 28
(1871) (upholding law that designated Reno as Washoe County's seat);
State of Nevada v, Irwin, 6 Nev. 111 (1869) (upholding legislation that
appointed @ person to serve as county sheriff from the time when the

county was created until the county's first election); see also Goodwin v.
City of Sparks, 93 Nev. 400, 666 P.2d 415 (1977) (concluding that a
revitalization and redevelopment law that applied to only two cities was

 

 
invalid under Article 4, Section 21 because a general law could have been
made applicable to all cities, as deterioration of downtown areas and need
for improvement was not unique to Reno and Sparks).

Although we agree with the State that the statewide budget
crisis presents exigent circumstances that must be addressed, those
circumstances are of statewide concern and cannot be addressed through
legislation that does not comport with Article 4, Section 21's local and
special law proscription. Political differences that might make it difficult
to agree on a generally applicable law to address the State's budget crisis,
do not create “special circumstances” that would permit a local or special
law to address a concern that affects the entire state. The State's position
in this appeal fails to recognize that the common thread in this court's
jurisprudence from the beginning of Nevada's statehood is that
permissible local or special laws address particular concerns that pertain
only to the locality or to the part of the class affected by the laws, and not
to statewide concerns. No Nevada case has upheld a challenged local or
special law that addressed a statewide concern, and the State points to no
other jurisdiction that has permitted such a law. Indeed, just shortly
after the Nevada Constitution was forged, this court explained that in
determining the validity of any local or special law, “a general law should
always be construed . .. to be applicable in all cases where the subject is
one in which from its very nature the entire people of the State have an
interest.” Evans v. Job, 8 Nev. 322, 386 (1873). The Indiana Supreme
Court's analysis of statutes under its constitutional proscriptions against

local and special laws has been parallel to Nevada's in determining

whether a general law could have applied. It has pointed out that when

 

 
examining local or special legislation, the court looks at whether the
“legislation is reasonably related to ‘inherent characteristics’ of the
affected locale,” and whether it applies “wherever the justifying
characteristics are found.” Municipal City of South Bend v, Kimsey, 781
N.E.2d 683, 692 (Ind, 2003), Stating the converse, the Indiana Supreme
Court explained that “if the conditions the law addresses are found in at

le

 

a variety of places throughout the state, a general law can be made
applicable and is required by Article IV, and special legislation is not
permitted.” Id, at 692-93.

AB. 6, section 18 requires one political subdivision to turn
over money collected in a local area to the State's general fund coffers for
statewide benefit. It affects the people of the entire state of Nevada, and
the State's budget crisis is, by its very nature, a subject of interest to all
people of the state. For that reason, it cannot be addressed by a local or
special law that applies to burden only one entity of the state that
operates in one locality of the state. The State offers special
circumstances but does not indicate why general law, uniformly applied
to all political subdivisions or based on some other qualifying criteria was
not used to address the budget shortfall, From early in this court’s
jurisprudence, such laws have been rejected. In 1903, this court held
unconstitutional a statute that, among other things, required money
collected from Reno city licenses to be allocated in portions to the state,
Washoe County, and the city. State v, Boyd, 27 Nev. 249, 74 P. 654
(1903). In concluding that the statute was invalid, the court stated:

‘The purpose of an exaction from the public in the
form of a tax or license, either for revenue or in
the exercise of the police power, is for the benefit
of the locality from which the money is collected.
Any exaction laid upon a district or community in

29

 
which it has no interest, or imposed for the benefit
of others, to which it is not justly bound to
contribute, is invalid.

Id, at 255, 74 P. at 654. The court explained that it is “not only just, but
it is essential” that a “state purpose must be accomplished by state
taxation.” Id, at 266, 74 P. at 654. It further explained that the city
cannot be compelled to pay in order to relieve others in the county and
the state of a “public burden properly resting upon them.” Id, In holding
unconstitutional the statute's requirement that the city turn over
portions of city licensing fees to the county and state, the court explained
that it was beyond the Legislature's taxing power to “compel one town,
city, or locality to contribute to the payment of the debts of another.” Id,
at 257, 74 P. at 655 (quoting Matter of Lands in the Town of Flatbush, 60
N.Y. 398 (1875).

The State argues that Boyd is inapposite because it involved a
“tax statute” and the application of a well-established rule limiting the
use of “money derived through local taxation,” and it argues that money
obtained through local government utilities is not subject to such
limitations. Boyd, without limiting its decision to taxes, states that
“{ajny exaction laid upon a district or community ... imposed for the
benefit of others, to which it is not justly bound to contribute, is invalid.”
21 Nev. at 255, 74 P. at 654; see Goodwin v. City of Sparks, 93 Nev. 400,
566 P.2d 415 (1977) (rejecting local law where a general law could have
been made applicable); County of Clark v. City of Las Vegas, 92 Nev. 323,
550 P.2d 779 (1976) (rejecting a local and special law that applied only to

certain areas in and around Las Vegas, concluding that a general law
‘could be made applicable throughout the state). Other courts with local
‘and special law proscriptions have likewise rejected laws that burden

 

 
only one class or locality because a general law could address the
situation. See, e.g., Municipal City of South Bend v, Kimsey, 781 N.B.24
683 (Ind. 2003) (determining that an annexation statute that applied to
only one county based on the statute's population criteria was invalid,
despite the legislature's declaration that an emergency existed, because
no facts existed to explain why the special legislation should apply only to
one county); Carson v. City of Kansas City, Kansas, 177 P.2d 212 (Kan.
1947) (invalidating special street paving law that applied to only one
city); Lev. Com, 565 S.W.2d 634 (Ky. Ct. App. 1978) (invalidating
special law prohibiting donations to the election campaigns of candidates
for a Property Valuation Administrator office from persons whose
property he or she may assess).

Accordingly, since A.B. 6, section 18 is a local and special law
that addresses a statewide concern to which a general law could have
applied, it is not permissible under Article 4, Section 21. We thus
conclude that the district court erred by declaring it constitutional.

CONCLUSION

A.B. 6, section 18's purpose is to help correct the State's
revenue shortfall through an assessment against one political subdivision
of the state that operates in only a specific locality in the state, Because
it burdens only the CWC in its efforts to raise revenue for the state, it is

an impermissible local and special tax under Article 4, Section 20 of the

Because it is not necessary to our disposition here, we do not reach
The M Resort's claims that A.B. 6, section 18 is unconstitutional because
it mandates a taking, violates equal protection rights by imposing a de
facto tax upon The M Resort, and impairs contractual obligations.

 

 
Nevada Constitution. The Nevada Constitution also prohibits local and
special laws where a general law could apply and because A.B, 6, section
18 addresses the State's budget shortfall, which, by its very nature is an
issue of concern for all the people of the state, to which a general law
could have applied, it also fails under Article 4, Section 21. Therefore,
since A.B. 6, section 18 conflicts with Nevada Constitution Article 4,
Sections 20 and 21, we reverse the district court's judgment.

ph ae

Hardesty

We concur: