### IN THE COURT OF APPEALS OF TENNESSEE AT KNOXVILLE March 31, 2003 Session McMINN COUNTY v. OCOEE ENVIRONMENTAL SE RVICES, INC., ET AL 

### . Appeal from the Chancery Court for McMinn County No. 20324 John B. Hagler, Judge by Interchange

FILED JULY 9, 2003 No. E2002-00702-COA-R3-CV

This appeal questions the validity of a resolution en ac te d b y Appellan t McMinn Cou

nty imposing a surcha

rge fo r solid wa ste dispos al at all Cl ass I landfills located in McMinn County

. The resolution as initially passed imposed a surcha rge of $4.00 per ton of waste, and was s ubseque ntly reduced by McMinn County

to $2.75 per ton. Appellee Environmental Trust Compan y (“ET C”), which owns one of the two landfills in the county, r efused to pay the surcha

rge, asserting that it was actually an unlaw ful tax. McMinn County filed thisaction to

require ETC to pay

the surcharge. The Trial Court held that

the reso lution impos ed an unla wful tax, a

nd gra nted summa

ry judgmen t i n favor of ETC. We affirm the judgment of the Trial Court. Tenn.R.App. 3 Appeal as o f Right; Judg

ment of t he Chance ry Court

Affirme d; Cause Remanded
H OUSTON M. G ODDARD , P.J., delivered the opinion of the court, in which C HARLES D. S USANO , J R
. and D. M ICHAEL S WINEY , JJ., joined.
Vance L. B aker, Jr. , Athens, Tho mas J. Walsh, Jr., Memphis, and Brian L. Kuhn, Memphis, for the Appellan t, McMinn Co

unty H. Chris Trew, Athens, for the Appellee, Environmental Trust Company OPINION There are pre sently

two Class I la nd fi ll s l oc at ed in Mc Mi nn Co un ty. The McMin n County landfill is owned and operated by the County. The Meadow B ranch landfill, formerly known as the Mine Roa d landfill, is owned and operated by ETC. On February

21, 2000, the McMinn Coun t y Commission passeda resolution imposing a surcharge of $4.00 on e ach ton of solid waste processed at all Class I solid waste disposal facilities or incinerators in McMinn County. After the Commission subseque ntly realized that the funds gener ated by this surcharge could not be leg ally used to defra y-2-

the cost of bu

ilding wa ter lines down gradient

of the Meadow Branch landfill, as was its original intention, the Commission passed a resolution reducing the surcharge to $2.75 per ton.
ETC refuse d to pay

the surcharge , argu

ing that it is actua lly an unauthorized and unlawful tax. McMinn County filed this action on Decembe r 8, 2000, asking the Court to require ETC to pay the surchar

ge plus l ate pena

lties, inte rest and attorne y’ s f ees . Both parties moved for summary judgmen t. After a hearing, the Trial Court

granted ETC’s motion, denied the County ’s motion, and dismissed the action. Tenn.R.Ci v.P. 56.04 pro vides tha t summar y judgment " shall be rendered forthwith if the pleading s, depositions, answers to interrogatories, and admiss ions on file, together with the affida vits, if any, show

that there is no genuine

issue as to

any materia l fact and that the

moving pa

rty is entitled to a judgment as a matter of law." I n the present case, the facts are notin dispute, and the only issues are questions of law. Conseque ntly , the scop e of review is de novo with no presumption of correctness. See Tenn.R.A pp.P. 13(d

); Union Carbide Corp. v. Huddleston , 854 S.W.2d 87, 91 (Tenn.1993). In support of

its argument on a

ppeal tha t the Court

erred in finding that its ordinance was an unauthorized tax, McMinn County cites the following sections of T.C.A. 68-211-835, a part of the statute known as the Solid Waste Management Act of 1991:

(f)( 1) In addition to any

fee authorized by

title 5, an d to an y tippi ng fe e imposed by any local government under this section, a co un ty, municipa

lity or solid wa ste autho

rity is authorized to impose: (A) A surc harge on eachton of municipal solid waste received at a solid wa ste dispos al facil ity o r incine rator fo r expendit

u re fo r solid waste collection or disposal purposesconsiste nt with thispart; and/or (B) A solid waste disposal fee authorized by subsection (g). (2) The surcharge authorized to be imposed by a co unt y by subdivision (f)(1) (A) shall not take effec t until a regional s olid waste pl an is ap pr ov ed fo r s uc h c ou nt y. (g)(1) In addition to any power a uthorized by t it le 5, a c ou nt y, municipa lity or solid wa ste auth o rity is authorized to impose and collect a solid wa ste dispos a l fee. Funds generated from such f ees may only be used to

establish and maint

ain solid w astecollection and disposal service s, including, but n ot limited to , conven ience c enters. All residents of the county shall have access to these serv ices . The amount of the fee shall bear a reasona b le r elationship to the cost of pr o viding the solid waste disposal services. Such fees shall be1 The Court i n the Me mp his Retai l Li quor Dea lers case hel d this general propositi on inappli cable i n an ins tance

where “the lic ense char ge is imposed on those occupations which, whil e they are tol erated, are recognized as being hurtful to public morals, productive of disorder, or injuri ous to the public[.] ” 547 S.W.2d at 246. No ar gument

is made here that t

he solid waste i ndustry is such an occupation that would fal l withi n this excepti on. -3- segregated

from the general fund and shall be used only for the purposes for which they

were collected. The Supreme Court has provided the following guidance in determining w hether an assessme nt such asthe ordin ance at bar is an unauthor ized tax or a

n authori zed fee: Whether the charge for depositing wa ste in a landfill is a tax or a fee, even thou gh denomina

ted a tax, isdetermined by its purpose. A tax is a revenue raising measure levied for the pur pose of paying the govern ment's general debts and liabilitie s. . .A fe e is imposed for the purpose of regulating a specific activity or defr

aying the cost of providing a service or benefit to the par ty pay ing the fee. City of Tullahoma v. Bedford Co unty , 938 S.W.2d 408, 412 (Tenn.1997)(citations omitted). In the earlier case of Memphis Retail Liquor Deal ers’ Ass’n . v. City of Memphis , 547 S.W.2d 244 (Tenn.1977), the Court stated:

In Tennessee, taxes are distinguished from fees by the

objectives for which th ey are im pos ed. If the imposition is primarily for the purpo se of rais ing r even ue, i t is a t

ax; if its purpose is for the regulation of someactivity under the

police power of the governing authority , it is a fee. 547 S.W.2d at 245-46. The Memphis R etail Liquo r Dealers Court upheld the general principle that a regulatory

fee “must bear ‘some reasonable r elation’ to the expenses involved in the supervision and inspection of the licensed business.” 1 547 S.W.2d a t 246; accord Porter v. City of Pari s , 201 S.W.2d 688 (Tenn.1947) (“The fact, tha t t he fees charged pr

oduce more than the actual cost and expense of the enforcement

and supe rvision, isnot an ade

quate obj ection to

the exact ion of the fees. The charge made, however , must bear a reasonable relation to the thing

to be acc omplished .”); City of Chattanooga v. Bellsouth Telecommunications, Inc. , an unreported opinion of this Court file d in Knoxville on January 26, 2000. The Trial Court in the present case found as follows reg arding the objectives or purposes of the McMinn County Commission in enacting the ordinance :

The record reflects two reasons for the imposition o f the surcharge. First, the county

sought to recover $122,745.79 which was its share in the construction of a water line around the Meadow Br anch-4- Land fill after se

veral cont am in at es we re fo un d i n w el ls in th e v ic in it y. Th e county

also intended to put a

n addition al water

line in th e vi ci ni ty. Howeve

r, the sta te engineer would not c ertify, a nd the county does not urge, that defendant’s landfill caused these pr oblems. The secondreason for

the surcharge is the county ’s desire to recover the annual $277,000 sho

rtfall in th e op era ti on o f it s ow n l and fil l. It is

. . .“the co

unty ’s intent t

hat this fu nd (for its landfill) should not be supplementedb y the

tax rate bu

t. . .from funds g enerat

ed by solid waste activities.” (County’ s Statement of Fact #12).

* * * Upon being advised that a surcharg e could no t be imposed for any past or future water line, the county by Resolution

544 (Exhibit

2 to complain t) amend ed Res olut ion 5 33 to reduce the su rcharge to $2.75 per ton. A gain, there is nothing to connect the surcharg e with any costs except for the shortfall at the county ’s own landf ill. No cos ts are enu merated for any regula tion of the

Meadow B ranch L

andfill. (Parentheses and ellipses in original). The record

contains the depos ition of ea ch of the ten membe

rs of the McMinn County Commission and that o f the Coun ty E xecutive, Ron Bank s. Mr. Ba nks testif ied that the s ervices providedby the McMinn Count y la ndfill a re paid for in part by

tipping fees paid by

users of the County landfill, and in part by tax dollars taken fr om the County’s gene

ral fund. He stated that for the fi sc al yea r b eg in ni ng Ju ly 1, 200 0, the tax e xpenditure s from the

gener al fund f or the County landfill amounted to a total of $277,438.00.
Mr. Banks testified that hemade the recommendation to the Coun

ty Co mmission to im

pose the surcharge at the $4.00 per ton ra te and the subsequently reduc ed $2.75 per ton rate. When asked how he determined the rates which he recommended, Mr. Banks stated that “I sat down and figured out. . .what it was going to tak e to replace some of the tax dollars that was in there [going to the McMinn County

landfill]. ” Mr. Ba

nks furth er testif ied as fo llows: Q: Okay. So since y

ou d idn’t kn ow how much money y ou were going to bring

in and you

really didn’t know how muc h money it was going to cost to do whatev er these future plans were, your

calculation was based upon try

ing simply to raise re

venue. A: Raise revenue. As I sa y, first of all, take c ar e of t he tax dollars that was [sic] going into our facility , you know, opera tion. Q: Replac e the tax do llars. A: Replace the tax dollars, and number two, to upgrade servic es.-5-

The depositions of the County Commissioners confi rm that the primary purpose of the surch arge was to replace revenue from the County ’s general fund. Commissioner Rick Brown testified that the recommendation from Mr. Banks was based on “ the replacement of the gener al fund monies that were going into the landfill budge t.” Commissioner James Gaston stated that there was no other plan in place to spend the revenue from the sur cha rge “other than replacing the monies spent on the water line and replacing the monies that ty pica lly g o in th rough the general fund.” CommissionerBob Lamb stated that he did not re membe r any just ifica tion given f or the surch arge “other than the f

act that $ 2.75 allow ed us to g et th e generalfund money out of the landf ill.” CommissionerWayne Shell stated that “when w e cut it [the surcharge] to $2.75, that was the number that they g [a]ve us to offset the general fund money that we was [sic] taking out and putting into the oper ation s of o ur la

ndfill[.]”
T he other McMinn County Commissioners made statements to similar effect in thei r depositio ns. The official minutes of the Commission meeting at which the surcharge was a pproved state that “[t] here was also a lengthy discussion concerning legislation that say s the extra money must be used for landfill operation, but Mr. Banks added that this will free up some general fund monies for other purposes.” The Trial Court found that the County made no showing of any cos ts or expenditures incurred by it resulting fr

om the operation of the privately -owned Meadow Branch landfill, stating as follow s in relev ant part :

T he county admits that the surchar ge is not related to any direc t expen ditures associated with collection and disposal at E.T.C.’s landfill but is to be used exclusive ly for expen ses associated wit h collecti on and disp osal at itsown landf ill. * * * There is nothing in the rec ord s howing a ny c ost to the c ounty associated

with E.T.C.’s c ollection or disposal activities; nor showing any cost associated with regulating the activity at E.T.C.’s landf il l; nor showing any

cost for providing a service or bene fit to E.T.C. or it s c us to me rs wh ic h t he co un ty i s e nt it le d t o d ef ra y. The record

fully supports th ese findings. Mr. Banks’ testimony suggests that any

cost or responsi bility of reg ulating the Mead

ow Bran ch landf ill was at t

he state , not loca

l, level: Q: But ther

e was no effort made or investigation made to see wha t types of speci fic services they were providing at the Meadow B ranch landfill.
A: No, ther

e was not . Those th

ings a re gov erned by

the state regula tions, as we were, and so, the only thing we had a problem with-6- was trying to le

t the peop le know that they wer e gover ned by the state regulations and not by

us. The Trial Court found one additional fact “of particular significance,” which is undisputed: [T]hat after

enacting the $2 .75 per to n surcha rge on all Class I

solid wastefacilities in McMinn County, the county then reduced i t s tipping fee to its customers at its land fill so tha t the rea l cost tothem remained exactly the same as be

fore the imposition of

the surcharge. Thus, due to McMinn Coun ty’ s offsett ing red uction of its tipping

fees, th e result i s that the only additional revenue raised by the surchar ge come s from ETC and its Me adow Br

anch landfill customer s. It is undisputed that neither ETC nor its customers are to receive any benefit from the surch arge monies, wh

ich, as the Trial Co

urt found , are to b e used on ly f or expendi

tu res related

to the McMinn County landfill.
In the case of Lamar Advertising of Tennessee, Inc . v. City of Knoxville , an unreported opinion of this Court filed in Knoxville on April 11, 1997, we applied the following principle which is pertinent to the case at bar:

Since a municip ality

incurs c osts in

discharging certain duties cr eated by this type of ordinance, it is only reasona ble to re quire tho se be nefitti ng from the s ervice to defra y th e costs c ommensur

ate with the expenses incurred by

the municipality. It is only required that the fees bea r some re asonable r elation to t

he expense involved and it is no objection to a regulatory license that it produces more income than is required for its administration and enforcement. (Emphasi s added.) In Lamar Advertising , we held the City of Kno xvi lle’s sign inspection fee to be an invalid tax because it was not shown to bear a reasona ble rela tion to the actual expenses involved with the sign inspections.
In the pres ent case , Mr. Ba nks estima

ted that th e $2.75 pe r ton surc harge would result in ETC being required to pay

approximately $250,000 per y ear to M cMinn County. Knox Horner, part owner of ETC, es timated the cost of the surcharge at $300, 000 per yea r. As already

noted, the County did not demonstrate that it has incurre d any cost of reg ulating the Mead ow Bran ch landf ill. Under these cir

cumstanc es, we f

ind that the

McMinn Cou

nty ordinanc e imposing

the surcharge

is in fact an unauthorized and improper tax. The Trial Court further found t hat the su

rcharge, as imposed, along with the County’s decision to “absor b” the sur charg e with re spect to it s own landfill, violated the Commerce Clause of the Unite d States Constituti on. In light of our holding a ffirming the Court’s ruling that the-7-

surch arge is an inva

lid tax, we d

o not find it necess ary

to reach this cons titutio nal issue and it is pretermitted. On appeal, ETC raise s the issue , as state d in its brie f, of whe ther the Trial Cour

t erredin holding that T.C.A. 68-211-835(f)(1)(A) authorizes a surcha rge applicable to a pr ivately-owned landfill. The Trial Court reasoned and ruled as follows on this issue:

E.T.C.’s arg ument that this section applies only to publicly owned landfillscannot

be considered. It wa s applied t o a priva te landf ill in County of Benton v. H & W Environmental Se rvs. , [an unreported opinion of

this Court file d in Jackson on December 2, 1998]. Also, two Attorney Gene

ral Opinions have advised local governments that the section applies to p rivately owned landfills . Se e Op.Tenn. At ty.Gen. 00-053 (3/22/00); Op.Tenn.Atty.Ge n. 99-088 (4/8/99).
We agree and aff irm t he Cou rt’s r ulin g that T .C.A. 68-21 1-835 (f)(1) (A) aut horiz es a su rcharge applicable to a privately -owned landfill under the appropriate circumstanc es. For the foregoing reasons the judg ment of the Trial Court is affirmed andthe cause remanded for collection of costs below. Costs of appeal are adjudg ed aga

inst the Ap

pellant, Mc Mi nn Co un ty.

_________________________________________ HOUSTON M. GODDARD, PRESIDI NG JUDGE