Opinion ID: 2547472
Heading Depth: 2
Heading Rank: 3

Heading: storm drain fees may qualify as service fees

Text: ¶ 23 Jordan argues in the alternative that the storm sewer drainage fees at issue are not service fees akin to the water, lighting, and sewer fees recognized in section 17A-3-315. Rather, Jordan maintains that the storm sewer drainage fees are properly classified as impact fees prohibited under section 10-9-106(e) and the Impact Fee Act, Utah Code Ann. §§ 11-36-101 to -402 (2000). We reject Jordan's argument in this regard and hold that a storm sewer drainage fee may properly be classified as a service fee. ¶ 24 Our prior cases distinguishing service fees from taxes or assessments are instructive. In V-1 Oil Co. v. State Tax Commission, we described a service fee as a specific charge in return for a specific benefit to the one paying the fee. 942 P.2d 906, 911 (Utah 1996), vacated on other grounds, 942 P.2d 915, 918 (Utah 1997). We contrasted a service fee with a regulatory fee, which is a specific charge that defrays the government's cost of regulating and monitoring the class of entities paying the fee, and with a tax, which is a general revenue-raising measure. Id. In an earlier case, Murray City v. Board of Education of Murray City School District, we determined that a monthly charge imposed for the use of a sewer system constituted a fee for services, not an assessment, and made the following distinction: An assessment ... is imposed upon property within a limited area for an improvement to enhance all property within that area. On the other hand, the cost of a service is determined by the benefits conferred upon the occupants of the land rather than an increase in value to the land itself. 16 Utah 2d 115, 396 P.2d 628, 630 (1964) (citation omitted). Similarly, in Ponderosa One Limited Partnership v. Salt Lake City Suburban Sanitary District, we held that charges for use of a sewer system were service charges, not taxes or assessments, because they were payments for services furnished and were `in the nature of tolls or rents paid for services furnished or available.' 738 P.2d 635, 637 (Utah 1987) (per curiam) (quoting 11 E. McQuillin, Municipal Corporations § 31.30 (3d revised ed.1983)). ¶ 25 Jordan contends that a storm sewer drainage system provides no service or benefit to the school district and therefore any charge associated with the storm sewer system cannot be a service fee. Jordan asserts that service fees for electricity or water involve a school's consumption of a commodity that has been delivered, whereas the handling of storm water runoff does not involve the school's consumption of anything. Jordan also asserts that the school district should not be charged for its use of storm drains because the municipality's storm drain system already exists and will be serviced whether or not it is utilized by the school district. ¶ 26 We find Jordan's position untenable because Jordan does receive a service from Sandy City's storm drain system. The service provided is the acceptance and handling of storm water runoff generated by school district property. This service prevents damage to property from excessive accumulations of water and from flooding. See City of Littleton v. State, 855 P.2d 448, 452-53 (Colo.1993) (noting benefits provided by storm sewer drainage systems and ruling that storm sewer charges constituted service fees rather than special assessments). Moreover, Jordan's assertion that the storm drain system will be serviced regardless of whether the school district uses it ignores the fact that the impervious surfaces on school district properties contribute to the need to have and maintain such a system. ¶ 27 It is true that a school district does not consume storm water runoff in the same way it consumes water or electricity. Nevertheless, the district consumes storm drain services. In this respect, we find storm water runoff services comparable to sewer services  both involve the removal of unwanted substances from school district property. The removal of something one does not wish to retain can be as valuable as the delivery of something one wishes to receive. Our cases holding that charges for sewer services constitute service fees validate this principle. Ponderosa One, 738 P.2d 635; Murray City, 16 Utah 2d 115, 396 P.2d 628. Accordingly, we hold that a storm sewer drainage fee may properly be labeled a service fee and is akin to the water, lighting, and sewer charges mentioned in section 17A-3-315 of the Utah Code. See City of Littleton, 855 P.2d at 452-53; Teter v. Clark County, 104 Wash.2d 227, 704 P.2d 1171, 1180 (1985) (holding that charges related to control of storm and surface waters did not constitute taxes). ¶ 28 We also disagree with Jordan's contention that the storm drain fee is really an impermissibly charged impact fee. In Jordan's view, the appropriate way for Sandy City to fund its storm drain system is through impact fees charged prior to construction. Jordan asserts that because Sandy City did not require a storm water runoff impact fee at the time the schools were constructed, Sandy City cannot do so now. ¶ 29 By statutory definition, an impact fee is a payment of money imposed upon development activity as a condition of development approval. Utah Code Ann. § 11-36-102 (2000). We provided a comprehensive discussion of the definition of impact fees in Salt Lake County v. Board of Education of Granite School District, where we noted that impact fees are a species of real estate development exactions and are generally defined as charges levied by local governments against new development in order to generate revenue for capital funding necessitated by the new development. 808 P.2d 1056, 1058 (Utah 1991) (citation and quotation omitted). [4] ¶ 30 It may be that Sandy City could have attempted to fund its storm drain system through impact fees. Indeed, Salt Lake County opted for such an approach in the case just cited. Id. at 1056 (holding that a storm sewer impact fee was not an assessment). Sandy City argues, however, that its decision regarding the funding of its storm drain system is entitled to deference. It argues that a one-time fee paid only by property owners seeking development approval would not enable it to effectively address its storm water runoff challenges. It contends that creation of a storm sewer drainage utility and the imposition of periodic storm sewer fees are necessary to continuously support a system that must collect and dispose of the city's storm water runoff in a manner that protects property and complies with the federal Clean Water Act. [5] ¶ 31 We hold that Sandy City's decisions regarding the structure, operation, and funding of its storm sewer system are entitled to deference. We generally give latitude to local governments in creating solutions to problems, especially in meeting the challenges and needs caused by accelerated urban growth. See Price Dev. Co. v. Orem City, 2000 UT 26, ¶ 19, 995 P.2d 1237; State v. Hutchinson, 624 P.2d 1116, 1126 (Utah 1980). Accordingly, we decline to substitute our judgment for that of the Sandy City Council in the resolution of this municipal problem. ¶ 32 Finally, Jordan and amicus curiae Utah School Boards Association argue that the charges in question do not qualify as fees because there are serious questions as to whether they are reasonable charges for the services and materials actually provided. The Utah School Boards Association also argues that the fees should be classified as impermissible taxes or assessments because they are made primarily for the purpose of constructing capital improvements to the storm drain system. Finally, the Association argues that Sandy City fails to apply the fees evenly to all governmental property, thereby rendering the fees illegitimate. ¶ 33 We decline to address these issues because the sole question preserved by the parties and presented in this appeal is the legal issue of whether the City has authority under Utah Code Ann. § 10-9-106(2) to charge and collect a storm sewer drainage fee for services provided to properties owned by the Jordan School District. We offer no opinion regarding whether the fee charged by Sandy City is reasonable, whether the manner in which Sandy City allocates funds derived from the fee renders the fee an impermissible tax or assessment, or whether Sandy City fails to apply the charges evenly to all governmental property and whether any such failure renders the fee illegitimate. We also decline the Utah School Boards Association's request to remand this case to the district court for development of a factual record concerning these points. Because the parties voluntarily dismissed the claims giving rise to these issues, they are not before us. To the extent that the validity of Sandy City's charges is dependent on any of these issues, the parties will have to resolve them in subsequent litigation.