Opinion ID: 2293001
Heading Depth: 2
Heading Rank: 1

Heading: Fee versus Tax

Text: [¶ 12] There being no disagreement over whether Gladu is delinquent on his stormwater payments if the assessment is determined to be a fee, this inquiry first focuses on whether there is a genuine issue of material fact as to the four factors enumerated in Butler. Concluding that there is no genuine issue of material fact, we apply the Butler test to the facts in this case in making our determination that the assessment is a fee. This four-factor test is similar to those used in other jurisdictions. See, e.g., McLeod v. Columbia Cnty., 278 Ga. 242, 599 S.E.2d 152, 154-56 (2004) (listing similar factors); Church of Peace v. City of Rock Island, 357 Ill. App.3d 471, 293 Ill.Dec. 784, 828 N.E.2d 1282, 1284 (2005) (listing regulatory purpose, proportionality to the cost of the service, and voluntariness as the three requirements for a stormwater service charge to be a fee and not a tax); Long Run Baptist Ass'n v. Louisville & Jefferson Cnty. Metro. Sewer Dist., 775 S.W.2d 520, 522 (Ky.Ct.App.1989) (A tax is universally defined as an enforced contribution to provide for the support of government, whereas a fee is a charge for a particular service.). However, [a]lthough some jurisdictions have held that the benefits must be direct and exclusive. . . the trend seems to be in favor of upholding fees that confer intangible benefits on both those who are assessed and those who are not. Avi Brisman, Considerations in Establishing a Stormwater Utility, 26 S. Ill. U. L.J. 505, 521-22 (2002) (cited with approval in McLeod, 599 S.E.2d at 155).
[¶ 13] The facts relevant to the first factor, whether the assessment raises revenue or is for a regulatory purpose, are not in dispute. The Utility's expenses are well documented by both the City and Gladu. Although there are disputes as to whether the assessment can pay for debt services, there is no genuine dispute over the amount of money the City collects and allocates to different expenditures. The lack of a dispute as to any material fact is further evidenced by Gladu's failure to provide proof that the debt the Utility acquired was not used to build or maintain stormwater infrastructure. [¶ 14] As the material facts are not in dispute, our inquiry turns to whether the facts, as they relate to this factor, weigh in favor of the assessment qualifying as a fee. Gladu argues that the purpose of the assessment is to raise revenue because forty-four percent of the Utility's budget goes toward debt services, including debts acquired by the City prior to the creation of the Utility. [¶ 15] Although we have never directly addressed whether fees can be used to cover capital improvements and infrastructure, at least one other jurisdiction has addressed this precise issue and upheld a stormwater fee. In Tukwila School District No. 406 v. City of Tukwila, the Washington Court of Appeals held that a stormwater fee met the regulatory-purpose requirement when it was enacted to provide . . . revenue to construct, reconstruct, replace, improve, operate, repair, maintain, manage, administer, inspect, enforce facilities and activities for the storm and surface water utility plan and to relieve a burden created by property owners whose impervious surfaces contribute directly to runoff and pollution problems. 140 Wash.App. 735, 167 P.3d 1167, 1172 (2007) (quotation marks omitted). The court recognized that, because property owners contributed to water quality problems through stormwater runoff from their properties, the city could charge a fee to help defray the costs of ameliorating the problem. Id. at 1173. The court also concluded that [t]he construction of capital facilities is a recognized regulatory activity. Id. [¶ 16] The fact that the Utility acquired stormwater infrastructure debt from the City does not change the fact that the Utility is using the assessment to cover the costs of regulating stormwater runoff, and part of those regulatory costs include maintaining stormwater infrastructure. Because all of the Utility's expenses are for maintaining or administering the Utility, this factor weighs in favor of concluding that the assessment is a fee and not a tax.
[¶ 17] The facts relevant to the relationship between the assessment and the benefit conferred are also not in dispute. Gladu does not dispute that stormwater runoff contributes to water pollution, nor does he dispute that the Utility provides benefits to the public by regulating stormwater runoff. Gladu's argument is that he does not receive an individual benefit that is not conferred to the public at large in exchange for paying the stormwater assessment. [¶ 18] Gladu also argues that the assessment is not related to the Utility's purpose of providing better water quality because the assessment is calculated by area of impervious surface, which relates to the quantity, not the quality, of stormwater runoff. Contradicting Gladu's unsupported factual assertion, the City provided evidence that basing assessments on amount of impervious surface is a widely accepted and recommended method of calculating fees, and that the quantity of stormwater runoff is directly related to water quality. Therefore, there is no genuine issue of material fact as it relates to whether there is a direct relationship between the assessment of the fee and the benefit conferred. [¶ 19] Our analysis now turns to whether the benefit of managing Gladu's stormwater and improving water quality throughout the City is enough of an individualized benefit to Gladu to warrant upholding the assessment as a fee. Courts in other jurisdictions have differed in their approach to this factor, but in cases involving ordinances most similar to Lewiston's this factor has weighed in favor of a determination that the assessment is a fee. In McLeod, the Georgia Supreme Court acknowledged a trend . . . in favor of upholding fees that confer intangible benefits on both those who are assessed and those who are not. 599 S.E.2d at 155 (quotation marks omitted). The court agreed with the Supreme Court of Florida that there was a direct relationship between the fee paid and the benefit conferred if the fee applies to residential and non-residential developed property, but not to undeveloped property, which actually contributes to the absorption of stormwater runoff; the properties charged receive a special benefit from the funded stormwater services, which are designed to implement federal and state policies through the control and treatment of polluted stormwater contributed by those properties; and, the cost of those services was properly apportioned based primarily on horizontal impervious surface area. Id. (citing Sarasota Cnty. v. Sarasota Church of Christ, Inc., 667 So.2d 180, 184-87 (Fla.1995) (upholding a fee utilizing factors nearly identical to those in McLeod )). [4] [¶ 20] The City's Ordinance passes this test. The assessment applies only to developed property, the properties receive the special benefit of having their stormwater managed in an effort to comply with state and federal laws, and the assessment is properly based on horizontal impervious surface area. Viewing this factor in light of the recent trend toward upholding fees that confer intangible benefits on both those who are assessed and those who are not, McLeod, 599 S.E.2d at 155 (quotation marks omitted), it weighs in favor of upholding the stormwater fee.
[¶ 21] The issue of voluntariness concerns the availability of creditsin other words, whether Gladu has the ability to avoid the assessment if he wishes to do so. The facts pertaining to credits are not in dispute because the parties dispute only whether the available credits make the assessment voluntary. [¶ 22] Other jurisdictions are split on whether a stormwater fee is voluntary. In Dennehy v. City of Gresham, the court concluded that the available choice to have undeveloped land did not make the stormwater fee voluntary. 12 Or. Tax 194, 196-98 (T.C.1992). However, that ordinance did not provide for credits to offset or eliminate the fee. Id. at 195-97. In a case where the ordinance did provide for credits, the court upheld the stormwater fee, concluding that it was voluntary. Church of Peace, 293 Ill.Dec. 784, 828 N.E.2d at 1284, 1286. In that case, the Appellate Court of Illinois held: While it might be cost prohibitive for each plaintiff to construct its own storm water run-off containment system, each would certainly be able to calculate the cost of doing so versus the cost of paying for the use of the City's system. Voluntary participation involves nothing more than weighing the competing costs of participation. Id. 357 Ill.App.3d 471, 828 N.E.2d at 1286. [¶ 23] We find unpersuasive Gladu's argument that the high cost of avoiding the stormwater assessment renders the assessment involuntary. Gladu has the ability to weigh the costs of paying the stormwater assessment versus the relative costs of avoiding the assessment. [5] The fact that the costs of avoiding the assessment are quite high does not make the assessment involuntary. We conclude that the available credits create a voluntary fee. Our holding is limited to the facts of this case, with emphasis on the City Stormwater System Impact Credit, which provides for up to a 100% fee reduction. Fee Schedule § 2.2. In our analysis, we do not consider whether a fee is voluntary if the applicable ordinance does not include a 100% fee credit.
[¶ 24] Finally, the facts as they pertain to whether the assessment is a fair approximation of the cost to the government and the benefit to the individual are not in dispute. This factor concerns whether the assessment is a fair approximation of the cost of the regulatory service and of the benefit conferred to the user. The financial records of the Utility are determinative on whether the assessment is a fair approximation to the cost, and Gladu has not factually disputed those records. Gladu also has not raised any genuine issue of material fact regarding the relationship between the assessment and the benefits conferred upon him. [¶ 25] Gladu argues that, because the assessment benefits the public at large, his assessment is not a fair approximation of any purported benefit to him. In Butler, we upheld a $300 jury fee even though a litigant who did not ultimately have a jury trial would not impose upon the government any jury-related expenses and would not gain exactly $300 of benefit from paying the fee. 611 A.2d at 990. We concluded that a fee must be only a fair approximation of the cost to the government, even if that fee is in some instances greater than the government's actual costs. Id. Here, the City has shown through its financial reports that the assessment is based on a fair approximation of the cost of administering the Utility. Also, the City's impervious surface-based fee system makes a fair approximation of the benefit Gladu receives by having his stormwater managed and water quality protected. Therefore, this factor weighs in favor of upholding the fee. [¶ 26] After evaluating all four factors, we conclude that each factor individually supports our determination that the stormwater assessment is a fee and not a tax.