### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE Februar y 10, 2 003 Session THE TUCKER COR

PORATION v. THE CITY OF CLARKSVILLE, TENNESSEE Appeal from the Circuit Court for Montgomery C ounty No. C9-299 John H. Gasaway, III, Judge

No. M2002-00627-COA-R3-CV - Filed May 30, 2003

This is an appeal seeking to overturn the action of the trial court in granting a motion for summary judgment in favor of the City of

Clarksville in a suit

wherein the plain tiff cha llenge d the vali dity

of an ordinance enacted by

the defendant setting water and sew age connection fees base d on the square foota ge of the heated and cooled living space of the house connected to those services. We affirm the judg ment of the

trial cou rt. Tenn. R. App.P. 3 Appeal as a Right ; Judgme nt of the Cir

cuit Cour

t Affirme d and Remanded
V ERNON N EAL , Sp. J., delivered the opinion of the court, in which B EN H. C ANT RELL , P.J.M.S. and W ILLI AM B. C AIN , J., joined. James D. Kay, Jr., Nashville, Tennessee , for the appellant, The Tucker Corporation. David Haines, Clarksville, Tennessee, for the appellee , The City of Clarksville, Tennessee

. OPINION
The plaintiff, The Tucker Corporation, is a Tennessee Corporation primarily involved in the residential development and construction business in Montgomery County, Tennessee. The

City of Clarksville owns and operates a municipal water and sewa ge sy stem. The plaintiff filed an action agains tthe defendant in May , 1993, seeking to declare Section 13-309 of the City ’s Codified Or dinance invalid alleging that the provisions thereof are arbitrary , capricious, unreasonab le , co nf is ca to ry, and unco nstituti ona l and fur ther see king to e njoin the City a

nd any of its off icers, agents , offi cials or employees f rom enforcing the provisions of Section 13-309. The defe ndant responded

by f iling a moti o n for summary judgment which was granted by an order entered on February 4, 2002, dismissing plaintiff’s claims against the defendant with prejudice.-2- Factual Backgr

ound
In 1986 the City of Clarksville commissioned a study from the en gine ering firm of Barg e, Waggoner, Sumner & Cannon to develop a comprehensive plan to make a provision for water and sewage fa ci li ti es an d s er vi ce s i n C la rk sv il le th ro ug h t he ye ar 20 05. The study and ana lysis was completed and the final draft of the plan was filed with the City in February , 1987.
The report drafted

by Bar ge, Waggoner

gave several analy sis and recommendations relative to connection to the City’s water a nd sewag e sy stem. In particular, the re port recommended that the Clarksville City

Council ad

opt some typ e of rat

e and fe e schedu

le for water and sewer service s that would take into account what was deemed to be the inequitable situation that would be cr eated by chargingall customers, both old andnew, the same rates. The study found that the bonded de bt of the Clarks ville wat

er sy stem was a

pproximate

ly $ 14.7 million

which wa s calcul ated to e quate to $451 per equivalent residential customer. The study further c oncluded that the total bonded debt of the sewage sy stem was $23.3 million which was calculated to equate to $1,590 per equivalent residential customer . Barg e, Wagg oner fou nd that sewer rat

es in Clar ksville were generally

lower than other

T ennessee communities of similar size. Inasmuch as Clarksville wa s a fast growing mu ni ci pa li ty, the study and analy sis recommended that the new water and sewage connection

fees be increa sed ina manner which would take into account the cost indebtedness of the present infrastr ucture. The rep ort more f ully stated in p ertinen

t part as f ollows:

. . . . The cur rent fe e schedu

le is less than the c ost

incurre d by

the City to make the tap. Ideally , tap fees should be sufficient to not only cover the cost of ma

king the tap, but he

lp pay for the existing treatment and piping sys tem (or h elp pay for any expansion necessa

ry in part to serve the new customer(s)).
The existing rate paye

rs have made a substantial investment in plant facilitie s, and having incurred costs to make water and sewer service to o r near t

he area , which ma

y be one rea son why

the are a is bein g developed. The question a ris es, should the existing customers bear the burden of supplying

the service s to an area for the benefit of the ne w c ust ome rs , or should the ne w c ust ome rs be ar the ir f ai r s ha re ?

. . . . Clarksville’s tap fees and policies should be modified so that new customers help pay for

both the cost of local facilities and part of the infrastructuresupply

ing the a rea. The object

ive should

be fair ness to all parties, bot h n ew and existing customers. The policy should be-3- dire cte d toward preventing or reducing the inequity to existing customers that results when thes e customers must pay the incre ases in water rates that are needed to pay for a

dded plant and line costs for new customers. Clarksville is facing a period of larg e and substantial growth. This growth will require the expansion of both the water treatment and sewe

r treatm ent pla nt, a s well as extensive i mproveme

nts in the wat

er distri bution and

sewera ge coll ecti o n sys tems. Realistic

and fair tap fees would allow these new customers to help pay for

the improvements needed to serve th em. Front end capital contributions would perm it the use of a s ingle r ate sche dule applica ble to both existing and new customers, rather than different rates for different area s. New c ustomers connecting to the sy stem should be required to pay

an amount similar to that which has already been pa id by existing customers t

owards th e investe d capita

l funds.
The plan submitted by

Barg e, Wagg oner sh owed the amount of connection fees that were reasona bly necessa ry to accompl

ish the sta ted purpo ses. I

t was on tha

t recomme

ndation th at the City adoptedOrdinance 16-1987-88 effective Nove mber 1, 1987, which, among other things, fixed water and sewer f

ees for new connections. In 19 91, the Cla rksville City Council acting throug h the mayor appointed a committee to study the issue of wa ter/ sewer c onnection fees and to make recommendations to the City Council for fund ing the ex panded f

acilitie s that woul d be nee ded in the coming y

ears. The committee consisting of engineers, developers, homebuilder s and others filed its report February

24, 1992. Among other things, the study committee recommended that all future permitted homes falling under the original ordinance guidelines should be assessed a water/sewer connection fee based on theheated and cooled living sp ace expr

essed in u nits of squ are fe et. As a result of that

report, the Clarksville City Council ad

opted Or dinance 59-1991- 92 in 1992 w

hich is codified as Section 13-309 of the Official Code o the City of Clarksville. The ordinance provides that water and sewer connection fees for all new residential construction shall be based on the number of square feet of heated a nd cooled living area contained in the new c onstructions and set the new residential construction water connection fee at Twenty ce nts ($.20) per squarefoot and for new residential construction sewer conne ction fe e at Thirty ce nts ($.30) per square foot. The connection fees suggeste d by the Ba rge, Waggoner

report were far

in excess o f the fe es ultimat ely adoptedby the Clarksville City Council. The term “connection fee” as used in the Clarksville City Code refer s only

to a fee charg ed to defray

the cost of adding new users to the sy stem. The connection fee does not contain a charge for the developer or

any other hom

e builder tapping onto the system when that is done at the de veloper or builder’s expense.
The document

filed in th

e trial c ourt by

the City Comptrolle

r states t hat from 1 988 to October, 2001, the Clarksville Gas, Water and Sewer Department has collected a total of $6,915,658 in connection/tap fees and of that amount $4,67 7,200 hasbeen re turned to develope rs of off -site improveme

nts in the way of r

ebate coupons. Developers rece ive credit for improvements they make to the water

and sewe

r sy stem which are unrelated to the property that they themselves ar e dev elopi ng. In return, the City of Clarksville, Gas, Water and Sewer Department gives thos e-4-

individua ls a cre dit equal to t

he amount

of the impr

ovements . As a re sult

thereof, the Gas, Water and Sewer Department has netted a tot al of $2,238,458 in connection fees for water a nd sewer s ervices during this time period. From 1987 to October 17, 2001, the Clarksville Gas, Wat er an d Sewer Department has incurred $97,305,214.35 in costs associated with water and sewer trea tment facility expansion, all of whi ch has been occa sioned by increa sed dema

nds o n both sy stems as a result of populatio n growt

h and atte ndant dev elopment

. Standard of Review
The trial cou

rt found t hat base d on the do cuments s ubmitted, t here is n o genui ne issue a s to any materia

l fact that the defendant was entitled to judgment as a ma tter of law.
The party moving f

or summary judgment

bears the burden of demonstrating that no genuine issue of mater

ial fact exist s. The cour t must take the stron gest le gitimate

view of th

e evidence in favor of the non

moving pa

rty giving all reasona

ble infe rencesin favor of that party and discarding all countervailing evidence. Hamblen v. Davidson , 50 S.W.3d 433 (Tenn.Ct.App. 2000). Once the party moving f

or summary judgmen t satisfie s its burde

n of showi ng that t

here is no genuine issue of materia l fact, th e burden then shif ts to the nonmoving party to show tha tthere is a genuine issue of material fact requiring submission to the trier of facts. Versa v. Policy Studies, Inc. , 45 S.W.3d 575 (Tenn.Ct.App. 2000). Since only que stions of law are involved, there is no presumption of correctness regarding a trial cour t’s granting of summary

judgment. Our review of the gr anting of a motion for

summary judgmen t is de novo on the re cord bef ore this Co urt. See In Re: Estate of Hamilton v. Morris , 67 S.W.3d 786 (Tenn.Ct.App. 2001).
Issues Presented
Two issues have been presented for revie w on this appeal which are: (1) whether the trial court erred in granting the def

endant’s motion for summary judg ment on the plaintiff’s claim that the connection fee assessed by the defendant

is an unau

thorized f orm of taxa

tion and is ultra vires ; (2) whether th e trial court erred in granting the defendant’s motion for summary judgment on the plaintiff’s claim

that the connectionfee assessed by the defendant is discriminatory in violation of the Equal Protection Clause of the State Constitution and the United States Constitution.
The Fee or Tax Issue Municipalities may

exercise only those expr

ess or ne cessar

ily implied pow ers dele gated t o themby the L

egislature in their Charter or under Statutes. See City of Leba non v. Bai rd , 756 S.W.2d 236 (Tenn . 1988 ) citi ng Barnes v. City of Dayton , 216 Tenn. 400, 410, 392 S.W.2d 813, 817 (1965); Adams v. Memphis & Little Rock R.R. Co. , 42 Tenn. 645, 654 (1866). In Warren v. Bradley , 39 Tenn. App. 451, 459, 284 S.W.2d 698, 702 (1995) the court stated:

“It is univer sally

recognized that

municipa l corpor ations ca n exercis e no pow ers whic h are not in express terms, or

by r easonab le-5- intendme nt, conferred upon

them, and hence have no power [to do an act], in the abs ence of

a chart e r provisi on or statutory enactment empowering them to do so either in express terms or by necessary implication”.
When a municip ality

fails to a ct within it s c ha rt er un de r a pp li ca bl e s ta tu to ry a ut ho ri ty, the action is ultra vires and void or voidable. Crocker v. Town of Manchester , 178 Ten n. 67, 70, 156 S.W.2d 383, 384 (1941). Under Tennessee law, a municipal action may be declared ultra vires for either of two reasons: (1) because the action wa s wholly outside the scope of the ci ty’ s authority under its charter or statute, or (2) because action was not undertaken consistent with the mandator y provisions of its charter or a statute. Thus the law recognizes a differenc e between theexistence of a municipa

l power a nd the man

ner or mo de of exer

cising m unicipal power le gitimate

l y. City of Lebanon v . Baird , 756 S.W.2d at 241.
Both state law and the Charter of the City of Clarksville expressly or impliedly authorizes the City to charg e connectionfees for new connections to the water a nd sewer syste

ms. Tenn. Code Ann. § 7-3 4-104 titled Powers o f municipa lities pro vides in pe

rtinent pa rt as foll ows: (a) In addition to powers which it may now have , any

municipa

lity has the power under this chapter to . . . . (2) Operate

and maint

ainany public work f

or its own use or for the use and

benefit of its inhabi tants, and also operate

and maintain such public works for the use and benefit of persons , firm s and corporations (including municipa

l corpor ations an d inhabita

nts thereof) who se res idences or place of business are locatedoutside the territ orial boundaries of such mu ni ci pa li ty.

. . . . (5) Prescribe and

collect rates, fees and charg es for the service s, facilities andcommodities furnished by such public wo rks.
The term “Public works” is defined in Tenn. Code Ann. § 7-34-102(3) as a ny one (1) or combination of two (2) or

more of th

e followin g: water, sewera ge, g as or electric he at, ligh t or powe r works, plants and sy stems or pa

rking f acili ties, tog eth er with a

ll parts th ereof a nd appur tenance s thereto inclu ding, but n ot limited to, supply and distribution sy stems, reservoirs, dams, sewage trea tment and disposal work and generating plants.-6-

A portion of the Environmental Protection Act dealing with water and se wage c odified in Tenn. Code Ann. § 68-221-101 et seq., provides in § 68-221-210:

§ 68-221-2 10. Author

ity t o levy and collectother charges. - (a) The municipa lity collecting th e us er’s fee shall have in addition the authority to fix, levy

and collect fees , rents, t

olls or othe

r charg es in an amount necessary

to provide for the maintenance and operation of sewage treatment works and pa yment of any

indebtedness. (b) This autho

rity shallbe in addition to any other author ity to set like fees or to levy

taxes purs uant to any other statute or authority gr

anted by the state.
The Charter of the Cit

y of Clarksville author

izes the imp osition of n

ecessa ry charg es to provide utility

services and provides that the City may own, operate and maintain a sewag e disposal system and furnish the product. While the City of Clarks ville has ampl e legis lative au thority to impose co nnection

fees, it is uncontroverted that the City does not have authority to levy

a tax for such purpose.
It has been consistently he

ld that a tax is a revenue raising measure levied for the purpose of paying the government’s gene

ral debt s and liabilities and that a fee is imposed for the purpose of regulating a specific activity or for defray

ing the cost for providing a service or benef it to the part

y paying the same. See City of Tulla homa v. B edford County , 938 S.W.2d 408 (Te nn. 1997) ci ting Memphis Retail Liquior Dealers’ Ass’n v. City of M emphis , 547 S.W.2d 244, 245-46 (Tenn. 1977). The essentia

l test to determine whether fees are or are not t axes is whe

ther the y a re, or a re not, pa id into the general

public treasury a

nd disbursable for general public expenses. See Memphis Natural Gas Co. v. McCanles

s , 183 Tenn. 635; 194 S.W.2d 476 (1946).
In the case now be

fore this Court, the revenues generated from the connection fees are not paid into the city’s ge

neral fund but are

deposited into a water, sewage and g as utility funds ac count. Those fees have not been levied nor used for the purpo se of paying

for the City’s g eneral debts and liabilitie s, but have, instead, been used solely for the purpose of defray

ing cost of providing service for the benefit of the party pay ing the fee by

improving and upgrading the City ’s sewage and water sys tems. In view of the case law definition of what is a fee and what is a tax, we hold that the conn ecti on ch arg e at i ssue cons titut es a p ermi ssibl e fee

and n ot a ta

x. Equal Prot ectio n Chal lenge
The plaintiff next insists that the connection fee as se ss ed by t he de fe nd an t i s d is cr im in at or y, in violation of the Equal Protection Clause of the St ate and Uni ted St ate s C ons ti tu ti ons . In Thr oneberry

Properties v. Allen , 987 S.W.2d 37 (Tenn.Ct.App. 1998), this Court held that equ a l protection may be off

ended by treating persons in the same

category differently without justification and by passing

laws of local application that violate or suspend a gene ral law.-7-

Both the Four teenth Amendment to the United States Constitution and Article 1, Section 8 of our St ate Co nst it ut io n kn own as t he “ La w of the Land” clause pr ovide that equal protection requires that all persons in similar circumstanc es b e treat ed ali ke, bu t it d oes no t requ ire “t hings which are different in fact or opinion to be treated in law as though they were the same”. See State of T enn essee v. Smoky Mountain Secrets, Inc. , 932 S.W.2d 9 05 (Tenn . 1996); Tigner v. S tate 310 U.S. 141, 147, 60 S.Ct. 879, 882, 84 L. Ed . 1124 (19 40); Doe v. No rris , 751 S.W.2d 834, 841 (Tenn. 1988). The concept of equal protection espoused b y the f ederal constituti on and our

state constitution gu ar an te es th at “a ll pe rs on s s im il ar ly c ircumstan ced shall be treated alike”. See Tennessee Small School Sys. v. McWherte r , 851 S .W.2 d 139 ( Tenn. 1993) citi ng F.S. Royster Guano Co. v. Virgini

a , 253 U.S. 412, 415, 40 S.Ct. 560, 562 64 L. Ed. 989 (1920); Plyler v. Doe , 457 U.S. 202, 102 S.Ct. 2382, 72 L. Ed. 2d 786 (19 82); State ex rel. Department of Social Services v. W right , 736 S.W.2d 84 (Tenn. 1987 ). Conver sely , it has be en held that thing s which a

re diffe rent in fact or opinion are not

required by

either constitution to be treated the same. See Plyler v. Doe , supra, 457 U.S. at 216, 102 S.Ct. at 2394; see also Tennessee Small School Sy s. v. McWherter

, supra, 851 S. W.2d at 153 wherein the court said: “The initial discretion to determine what is ‘diffe rent ’ an d what is ‘the same’ resides in the leg islature s of the Sta

tes,” and legisl atures a

re give n conside rable latitude in deter

mining wh at grou

ps a re diffe

rent and what gr oups are the same .” I d. “I

n most instances the judicial inquiry into the legislative c hoice is limited to whether the classifications have a reasonable relationship to a legitimate state interest”. See Te nnessee Small School Sys. v. McWherter

, 851 S .W.2 d at 15 3 citi ng State v. S outhern F itnessand Health, Inc. , 743 S.W.2d 160, 164 (Tenn. 1 987); Harrison v Schra de r , 569 S.W.2d 822, 825 (Tenn. 1978). In Harrison v. Schrader , 569 S.W.2d 822, 825-826 (Tenn. 1978), the court also found that the determinative issue is whether the facts show some reasonable basis for the disparate state action. The court stated as follows:
Under t his standard, if some reasonable basis can be found for the classification, or if any state of facts may r

easonably be

conceiv ed to justify it, the classification will be upheld.
The Schrader

court further held that the test to be applie d, is that th

e classif ication mu st rest upon a reaso nable ba sis and tha t if it has a reasona ble basis , it is not unc onstitution al merel y because it results in some ineq

uality and that reasonableness depends on the facts of the c ase and no general rulecan be formulated for its determination. The burden of showing that a classifica tion is unreaso nable

and arbitrary

is upon the individual challenging the statute and if any state of f

acts can reasona bly be conc eived to j ustify

the clas sificati on or if the reaso nablene ss of the c lass is fa irly debatable, the statut

e must be u pheld. See Tennessee Small School Systems v. McW herter, 851 S.W.2d at 154. I

f a clas sificati o n i s natura lly a nd reaso nably

related to that whi ch it see

ks to accomplish, it has passed the rational basis test and meets the constitutional standards. See Vogle v. Wells Fargo Guard Services , 937 S.W.2d 856 at 858.-8- Conclusion
In the instant case, we hold that the connection fee at issue is a fe e and not a tax and the classification of charges for connection fees assessed to customers of Clarksville’s water a nd sew age system have a r easonab le relat

ionship to a

legiti mate c ity interest. The fee is applied

alike to a

ll customers of the same class. Assessment of the fee would not be unconstitutional even if it resulted in some inequality

inasmuch

as the ra tional ba sis test ha s been me t.
In applying the

standards and tests enumerated herein for de termining whether there

has been a violatio n of the st

ate or federalconstitution involving due process, we hold that the ordinance at issue is no t violative

of due pr ocess. The judgment of the trial court is affirmed and this cause is remanded to the trial court for any further proceedings consistent with this opinion. T he costs of this appeal are assessed to the appellant, The Tucker Corporation.

_________ __________

_____________

_