Opinion ID: 2524628
Heading Depth: 1
Heading Rank: 3

Heading: Facilities and Services Fees

Text: We begin by discussing the nature and characteristics of the PIF. As part of its duty to provide wastewater collection and treatment services, the District, through its Board, is expressly authorized to fix and from time to time to increase or decrease fees, . . . for services, programs, or facilities furnished by the District. § 32-1-1001(1)(j)(I), 9 C.R.S. (2000); see also § 32-1-1006(1)(a)(I), 9 C.R.S. (2000) (providing authority for the District to compel owners of buildings within the District's boundaries to connect to the water and sewer lines). The legislature grants special districts and local governments the authority to set fees; this promotes the policy of having development help pay its own way. See Board of County Comm'rs v. Bainbridge, Inc., 929 P.2d 691, 698 (Colo.1996); Bennett Bear Creek Farm Water & Sanitation Dist. v. City & County of Denver, 928 P.2d 1254, 1268 (Colo.1996). Local governments often require various forms of development fees in order to apportion some of the capital expense burden they face to developers and new residents. Bainbridge, 929 P.2d at 698. The District has explicitly adopted this rationale for assessing the PIF, noting that current customers are not expected to subsidize or pay for growth or to benefit development and/or developers. Breckenridge Sanitation District, Financial Procedures and Policies 1 (Jan. 1990). In conjunction with the legislative grant of authority to set appropriate fees, the District promulgated a Single-Family Equivalent Unit Conversion Schedule, which set forth a comprehensive system for determining SFE units and converting them into PIF assessments. A PIF is assessed on every new project in the District, from residential housing to retail stores to service stations. In promulgating its schedule for assessing PIFs, the District acted in a legislative capacity. See Bennett Bear Creek, 928 P.2d at 1261 (holding that a district acts legislatively when it sets rates and charges for its services); Cottrell v. City & County of Denver, 636 P.2d 703, 710 (Colo.1981) (determining that [r]atemaking is essentially a legislative function). Municipal charges fall into four categories: (1) ad valorem property taxes; (2) excise taxes; (3) special assessments; and (4) service fees. [11] See Bloom v. City of Fort Collins, 784 P.2d 304, 309 (Colo.1989). The court of appeals concluded that the PIF was a service fee. Krupp, 1 P.3d at 184. We agree. A service fee is a charge imposed on persons or property for the purpose of defraying the cost of a particular government service. E-470 Pub. Highway Auth. v. 455 Co., 3 P.3d 18, 24 (Colo.2000); Bloom, 784 P.2d at 308. The PIF meets this definition: it is a one-time charge assessed on new building projects within the District for the purpose of defraying the cost of expanding the District's wastewater treatment system to accommodate new projects. The PIF is very similar to a number of other municipal charges that we have held to be constitutionally valid service fees. See, e.g., City of Littleton v. State, 855 P.2d 448, 452 (Colo.1993) (storm drainage and flood management system); Anema v. Transit Constr. Auth., 788 P.2d 1261, 1267 (Colo. 1990) (public transportation system); Bloom, 784 P.2d at 310 (street maintenance); Zelinger v. City & County of Denver, 724 P.2d 1356, 1359 (Colo.1986) (storm drainage system); Loup-Miller Constr. Co. v. City & County of Denver, 676 P.2d 1170, 1174 (Colo. 1984) (sewer system); City of Arvada v. City & County of Denver, 663 P.2d 611, 615 (Colo. 1983) (water system). Because a service fee is designed to defray the cost of a particular governmental service, the amount of the fee must be reasonably related to the overall cost of the service. Bloom, 784 P.2d at 308. Mathematical exactitude is not required, however, and the particular mode adopted by the governmental entity in assessing the fee is generally a matter of legislative discretion. Id. Absent evidence to the contrary, we presume that the District may rationally distinguish between different types of projects in setting its rates. See Loup-Miller, 676 P.2d at 1174. Because the setting of rates and fees is a legislative function that involves many questions of judgment and discretion, we will not set aside the methodology chosen by an entity with ratemaking authority unless it is inherently unsound. Bennett Bear Creek, 928 P.2d at 1268. Here, the District commissioned an independent expert report to evaluate its system for converting projects into SFE units and assessing PIFs. The expert report concluded: (1) multi-family units (such as apartment buildings and condominiums) are much more likely to be used as temporary rental units than are single family units; (2) multi-family units have, on average, higher per unit peak day flows than single family units; (3) the variation in selected conversion units used for residential users is therefore reasonable; (4) based on updated demographic information, duplexes are more appropriately treated as multi-family units; and (5) the current unit PIF rate of $4,000 per SFE unit falls well within the justifiable range for unit PIF rates, based on the District's combined historical investment and capital cost. Based on this and other evidence, the Board concluded that the District's rate design, and differential charges implementing these rates, was rational. The trial court agreed. We agree with the trial court that the record is sufficient to establish a rational basis for the distinction between long-term and short-term residences in the District's SFE conversion schedule. We also agree that based on the evidence suggesting that the expected short-term, high-occupancy use of the triplex units is typical of the multi-family unit conversion category, the District had a rational basis for assessing triplexes in the higher, multi-family category. Given the evidence that even duplexes are more appropriately categorized as short-term, high-occupancy units, we reject the Krupps' contention that in assessing the PIF on their particular project, the District should have converted both the duplexes and triplexes using the lower SFE rate. The District Manager calculated the specific PIF assessment on the Krupps' project by utilizing the publicly promulgated conversion schedule. There is no evidence that, in performing this task, the District Manager arbitrarily ignored the PIF's legislatively established design or miscalculated the assessment. While the SFE conversion schedule did not provide a specific conversion rate for triplexes, the District explicitly authorized the District Manager to make such a determination. See Breckenridge Sanitation District, Rules and Regulations 9-7 (Apr. 1988). Such authorization is permissible, as long as there are sufficient statutory and administrative safeguards to insure that administrative action will be rational and consistent, and that subsequent judicial review of the action, if necessary, will be available and effective. See Cottrell, 636 P.2d at 709; see also Fremont RE-1 Sch. Dist. v. Jacobs, 737 P.2d 816, 819 (Colo.1987) (noting that the modern trend for courts is to allow greater freedom of discretion, within the scope of their authority, to administrative officials). The District Manager, exercising properly authorized direction, selected a conversion rate for the triplexes that was supported by the evidence as being reasonable and consistent. We conclude that the PIF is established by legislative authority, and is reasonably related to the specific government service of providing wastewater collection and treatment to new developments within the District. It rationally differentiates between different classes of buildings based upon anticipated peak wastewater flows per unit. Furthermore, the District Manager validly calculated the Krupps' specific PIF assessment according to a publicly promulgated conversion framework. Nevertheless, the Krupps maintain that because payment of the PIF is a condition of development, the District's assessment of the PIF against their development constitutes a regulatory taking. We now turn to that question.