Opinion ID: 1226260
Heading Depth: 1
Heading Rank: 4

Heading: is the fee a charge or a tax?

Text: JKC contends the trial court erred in ruling the new account fee is a sewer service charge. The fee provides a general benefit to everyone who lives in Authority's district because proceeds will be used to expand treatment capacity. Consequently, the court erred in refusing to hold that the fee is actually a tax which Authority must apply uniformly to all residents of the district, not just to new customers, JKC argues. We disagree. We hold that the required payment is a charge, not a tax, and Authority has uniformly imposed the charge upon those who are required to pay it. First, the required payment primarily benefits those who must pay it because they receive a special benefit or service as a result of improvements made with the proceeds. That special benefit is the proper treatment and disposal of sewage. Brown v. County of Horry, 308 S.C. 180, 184-85, 417 S.E.2d 565, 568 (1992) (holding that road maintenance fee imposed on all motor vehicles registered in county was a service charge, not a tax). It is true that the entire area may benefit from improved and expanded sewage service, but a charge does not become a tax merely because the general public obtains some benefit. Brown v. County of Horry, supra ; Robinson v. Richland County Council, 293 S.C. 27, 33, 358 S.E.2d 392, 396 (1987) (holding that required payment imposed to fund installation and maintenance of sewer facility was assessment, and not tax, regardless of whether general public obtained health benefit from elimination of sewage problem). Second, proceeds from the required payments are dedicated solely to capital improvement projects. The proceeds are not placed in a general fund to be spent on Authority's ongoing expenses and maintenance, which is a hallmark of a tax. Hagley Homeowners Ass'n v. Hagley Water, Sewer, and Fire Auth., 326 S.C. 67, 75, 485 S.E.2d 92, 96 (1997) ([g]enerally, taxes are imposed on all property for the maintenance of government); Brown v. County of Horry, supra (revenue from fees destined for general fund indicates a tax). Third, as the parties stipulated, the revenue generated by the required payment will not exceed the cost of capital improvements to the system. C.R. Campbell Constr. Co. v. City of Charleston, 325 S.C. 235, 481 S.E.2d 437 (1997) (applying factors from Brown v. County of Horry, supra , to uphold validity of municipal real estate transfer fee dedicated to parks and recreation). Fourth, Authority uniformly has imposed the required payment upon those who must pay it. The trial court ruled the required payment, because it was a charge imposed by a special purpose district, was not mandated by statute or the constitution to be uniform in the sense that every customer had to pay it. The court noted, however, that Authority uniformly had imposed the required payment on all new customers based on their anticipated water usage. We agree with the trial court's reasoning. While no statute or constitutional provision explicitly requires charges by special purpose districts to be uniform, the Court has stated that charges or assessments imposed only upon certain individuals must be fairly and justly apportioned among those charged with their payment. A method of apportionment, whether by statute or by regulation, that is manifestly arbitrary or discriminatory does not fulfill the constitutional requirements of due process and equal protection. Hagley Homeowners Ass'n, 326 S.C. at 76-77, 485 S.E.2d at 97 (quoting Newton v. Hanlon, 248 S.C. 251, 149 S.E.2d 606 (1966)). Fifth, we may consider the fact that Authority intended to classify the payment as a charge. Brown v. County of Horry, 308 S.C. at 184, 417 S.E.2d at 568 (while governmental entity's intent may be considered, the question of whether a required payment is a charge or a tax depends on its real nature and not the label assigned to it by the governmental entity that approved it). Authority described it as a new account fee in the resolution adopting it, and has not used tax levies since 1975 in order to maintain continued eligibility for federal grants. JKC's reliance upon Casey v. Richland County Council, 282 S.C. 387, 320 S.E.2d 443 (1984), is misplaced. In that case, the county imposed a required payment upon all residents who lived in unincorporated areas of the county to build a sewer system. The Court stated that each resident required to pay the assessment must receive a specific benefit or service in order for the payment to qualify as a valid assessment. Each resident did not because many residents of unincorporated areas already were served by municipal systems; therefore, the payment was not an assessment. Instead, the Court determined the required payment was a tax because it would provide only a general benefit to those residents already served by municipal systems. But as a tax, it was unconstitutional because it was not uniformly applied to everyone who lived in the countyresidents of municipalities and unincorporated areas alike. Id.; S.C. Const. art. X, §§ 1 and 6. Consequently, the Court struck down the required payment. We find Casey distinguishable from the present case. The new account fee properly is classified as a charge, not a tax, as explained above. Furthermore, every person or entity required to pay the new account fee will receive a special benefit or service as a result of improvements made with the proceeds. Unlike Casey, Authority has not required anyone who will not benefit from the service to pay the fee. Accord Wright v. Proffitt, 261 S.C. 68, 72, 198 S.E.2d 275, 277 (1973) (assessment for a local improvement is valid when it confers a benefit on property owners in the district where it is assessed, and that benefit is distinct from general benefit enjoyed by those outside the district); Newton v. Hanlon, 248 S.C. at 262-63, 149 S.E.2d at 612 (special purpose district may use ad valorem property tax, frontage-foot assessments, monthly use charges, or combination thereof, to build and maintain a sewer system); Distin v. Bolding, 240 S.C. 545, 126 S.E.2d 649 (1962) (upholding validity of legislative act that allowed a special purpose district to impose assessments on real property to pay for construction of sewage disposal facilities).