Opinion ID: 1202187
Heading Depth: 1
Heading Rank: 4

Heading: impermissible tax

Text: TAB argues that, even if the City has the authority to impose the fee, the fee is a tax, regardless of the label the City has chosen for it. In TAB's view, the fee is not imposed in conjunction with the regulation of any conduct or use of property, and there is no particularized benefit to those who pay the fee. TAB argues that both the existing water customers, who do not pay the fee, and those added to the system after January 6, 1986, will receive the same benefit from the Lake Gaston projecta stable source of water supply for the future. Therefore, TAB concludes, the primary purpose of the fee is to raise revenue for a public purpose which will benefit all the citizens of Virginia Beach equally, and thus it is a tax. See Charlottesville v. Marks' Shows, Inc., 179 Va. 321, 329, 18 S.E.2d 890, 894 (1942). As all residents of Virginia Beach are not required to pay the fee, it is not a uniform tax and, for that reason, TAB concludes that it violates Article X, § 1 of the Virginia Constitution. The trial court held that this fee, although it regulates conduct by prohibiting new or expanded connections to the City's water system without payment of the fee, is a proprietary feea fee for utility service. We have previously considered and rejected challenges that similar utility fees were, in reality, impermissible tax assessments. McMahon v. City of Virginia Beach, 221 Va. 102, 107-08, 267 S.E.2d 130, 134 (1980); Weber Sanitation Comm'n v. Craft, 196 Va. 1140, 1151, 87 S.E.2d 153, 160 (1955). In McMahon, we held that where the fee did not exceed the city's actual cost in providing the service, where there was a reasonable correlation between the benefits of the service provided and burdens of the fee paid, and where the fee did not apply to vacant property, the fee was valid and not solely a revenue measure or special assessment. 221 Va. at 107-08, 267 S.E.2d at 134. Applying these same considerations to the fee at issue leads to a similar conclusion. The anticipated total revenue which will be generated by this fee represents only approximately one-third of the total costs of the project. Obviously, fee revenues will not exceed the City's cost in providing the service. While the completion of the project undoubtedly will benefit all water users in Virginia Beach, the City's witnesses testified that without the prospect of the Lake Gaston project, new developments or connections to the existing water system would not have been possible. Therefore, those who are paying the fee for the new connections, or expanded unit service, are receiving an immediate benefitaccess to the present City water system which would be unavailable without the project. Furthermore, the City has demonstrated that the project's scope is considerably larger and, therefore, more expensive than would have been required in the absence of new connections. Finally, the provisions of Article X, § 1 apply to taxation of property. This fee is not assessed against property, since only those connecting to the City water system pay the fee; vacant lot owners do not. Therefore, the fee is not a tax and is not prohibited by Article X, § 1 of the Virginia Constitution.