Court Opinion

ID: 9374639
Source: CourtListenerOpinion
Date Created: 2023-02-23 17:11:27.601228+00
Date Added: 2024-06-11T17:16:52.082887
License: Public Domain

2023 UT 2

                              IN THE

      SUPREME COURT OF THE STATE OF UTAH

  UTAH SAGE, INC., DBA HOBBY TRACTORS & EQUIPMENT, LARKIN
  TIRES, INC., GARY LARSON, AND FRATERNAL ORDER OF EAGLES
                              #3372,
                  Appellees and Cross-appellants,
                                 v.
                     PLEASANT GROVE CITY,
                   Appellant and Cross-appellee.

                          No. 20200290
                      Heard March 14, 2022
                     Filed February 23, 2023

                        On Direct Appeal

                  Fourth District, Spanish Fork
                  The Honorable Jared Eldridge
                         No. 190300164

                            Attorneys:
  Gerald M. Salcido, Sandy, for appellees and cross-appellants
    Robert C. Keller, Nathanael J. Mitchell, Salt Lake City, for
                  appellant and cross-appellee

 JUSTICE PETERSEN authored the opinion of the Court, in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE PEARCE, JUSTICE
              HAGEN, and JUSTICE POHLMAN joined.
Due to their retirements, JUSTICE HIMONAS and JUSTICE LEE did not
  participate herein; JUSTICE DIANA HAGEN and JUSTICE JILL M.
                           POHLMAN sat.

   JUSTICE PETERSEN, opinion of the Court:
__________________________________________________________
   
     JUSTICE HAGEN and JUSTICE POHLMAN became members of the
Court on May 18, 2022 and August 17, 2022, respectively. Both sat
as visiting judges prior to their confirmations.
                  LARSON v. PLEASANT GROVE CITY
                        Opinion of the Court

                         INTRODUCTION
   ¶1 Pleasant     Grove     (City) enacted a        three-tiered
―Transportation Utility Fee‖ (TUF), under which local property
owners would be charged a monthly fee corresponding to the
―intensity‖ with which they used city roads, as determined by a
study of user demand on the City‘s roadways. The funds
generated were to be used only to repair and maintain city
roadways.
   ¶2 The question before us is whether the City had the
authority to enact the TUF. If so, we must then determine whether
the City properly characterized the TUF as a fee, or if it is really a
tax for which the City was required to follow specific enactment
procedures that were not observed here.
    ¶3 We conclude that the City acted within its broad
authority to provide for the public‘s safety and welfare when it
enacted the TUF. And we determine that the purpose of the TUF
is characteristic of a fee because it is a specific charge for a specific
service. The TUF charges local property owners for their use of
city roadways, and the funds generated by the fee may be used
only to compensate the City for the repair and maintenance of
those roadways.
    ¶4 Accordingly, we affirm the district court‘s decision that
the City had the power to enact the TUF, but we reverse its ruling
that the TUF was actually a tax. However, this may not be the end
of the analysis. Because the district court concluded that the TUF
was a tax based on its purpose, it did not address an additional
issue that is relevant to the TUF‘s status as a fee—its
reasonableness. On that issue, we remand to the district court for
it to first determine whether the Plaintiffs have waived a claim
that the fee is unreasonable. If the court concludes that they have
not, then it should address that question in the first instance.
                          BACKGROUND
    ¶5 In the mid-2000s, the roads in the City were rapidly
deteriorating. The City commissioned an engineering study,
which determined that 41 percent of its roads were in ―fair to
poor‖ condition and would soon be in a ―very poor to failing
state.‖ After various failed attempts to secure funding for the
needed road repairs, the City adopted Ordinance 2018-19 and

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Resolution 2018-45, which together established a Transportation
Utility Fee.1
   ¶6 The TUF had two important characteristics. First,
residential and commercial property owners would be charged a
monthly fee based on their ―intensity of use of the city streets.‖ To
gauge intensity of road usage, the City commissioned a study that
analyzed ―user demand‖ on city roads by measuring ―the amount
of traffic a residence or commercial business would generate‖
during ―a specific time window.‖ Using the study‘s findings ―as a
backbone,‖ the City divided property owners into three
categories: tier 1 businesses, tier 2 businesses, and residential. Tier
2 businesses ―ha[d] the highe[st] intensity of [road] use,‖ and
were to be charged $236.05 per month. These businesses included
gas stations/convenience stores, restaurants with drive-thru
service, and businesses with more than 250 parking stalls. All
other businesses were placed in tier 1 and were to be charged
$41.27 per month. Finally, residential property owners were to be
charged $8.45 per month.
    ¶7 Second, the funds generated by the TUF were to be kept
separate from the City‘s general fund, and they could be used
only for the repair and maintenance of city roadways. Specifically,
both the Ordinance and Resolution mandated that ―[a]ll
transportation utility charges [would] be deposited in the
Transportation Utility Revenue Fund and [would] not be
commingled with or transferred to other city funds, including but
not limited to, the general fund.‖ The funds were to be used only
for ―the costs of maintenance and repair of the city street network,
including engineering fees.‖ And they explicitly could not be used
for ―general fund expenditures that do not relate to road
maintenance and repair.‖
   ¶8 After the City passed the TUF, a city resident and several
commercial property owners (Property Owners) sued the City to
block implementation of the fee. The parties ultimately filed cross-
__________________________________________________________
   1 Ordinance 2018-19 and Resolution 2018-45 amended

Ordinance 2018-10 and Resolution 2018-021, which established a
TUF ―based on the average peak day adjusted trips for each type
of business.‖ Under Ordinance 2018-19 and Resolution 2018-45,
the City divided commercial businesses into two tiers ―based
upon the intensity of use for the business type.‖ Only Ordinance
2018-19 and Resolution 2018-45 are at issue in this appeal.

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                 LARSON v. PLEASANT GROVE CITY
                       Opinion of the Court

motions for summary judgment. The Property Owners argued
that the City lacked authority to enact the TUF because a
―transportation utility‖ is not specifically authorized in the
Municipal Code. And they argued in the alternative that the TUF
was not really a fee, but was a tax for which the City had not
followed the proper enactment procedures.
   ¶9 In ruling on the first issue, the district court concluded
that Utah Code section 10-8-84, the General Welfare Statute, gave
―the City broad authority to pass ordinances which are reasonably
and appropriately related to the objectives of providing for the
public safety, health, morals, and welfare.‖ And the court
concluded that this ―broad authority includes authority to create a
transportation utility and implement a fee or tax.‖
    ¶10 But with respect to the second issue, the district court
found in favor of the Property Owners, determining that the TUF
constituted a tax rather than a fee. The court looked to our
precedent holding that a service fee is ―a specific charge in return
for a specific benefit to the one paying the fee.‖ (Citing V-1 Oil Co.
v. Utah State Tax Comm’n, 942 P.2d 906, 911 (Utah 1996), vacated in
part on other grounds, 942 P.2d 915 (Utah 1997).) And it concluded
that because the benefits of the TUF would accrue not only ―to the
individual property owners in the City but also to anybody who
happens to use the City‘s road system whether they are a city
resident or not,‖ it could not ―conclude there [was] a ‗specific
benefit‘ that returns to those who pay the fee.‖ Thus, the court
concluded that the TUF was a general benefit that ―benefit[ted]
the public at large,‖ and was therefore a tax.
   ¶11 The Property Owners appeal the district court‘s
determination that the City had the authority to enact the TUF.
And the City appeals the district court‘s conclusion that the TUF
is a tax. We exercise jurisdiction under Utah Code section
78A-3-102(3)(j).
                    STANDARD OF REVIEW
   ¶12 ―In reviewing the trial court‘s decision to grant summary
judgment, we give the court‘s legal decisions no deference,
reviewing for correctness, while reviewing the facts and
inferences to be drawn therefrom in the light most favorable to the
nonmoving party.‖ Dairy Prod. Servs., Inc. v. City of Wellsville,
2000 UT 81 ¶ 15, 13 P.3d 581 (citation omitted).

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                            ANALYSIS
   ¶13 We first address the Property Owners‘ argument that the
City had no authority to enact the TUF. We conclude that it did,
and we affirm the district court on this point.
   ¶14 We then assess the City‘s argument that the district court
was wrong in concluding that the TUF is really a tax. We agree
with the City, and we reverse this ruling of the district court.
     I. THE CITY HAD AUTHORITY TO ENACT THE TUF
   ¶15 The Property Owners argue that the district court erred
when it concluded the City had the authority to enact the TUF.
The district court ruled that under Utah Code section 10-8-84, the
Municipal Code‘s General Welfare Statute (sometimes referred to
in caselaw as the ―general welfare clause‖), the City had ample
authority to enact a user fee to fund road maintenance.
   ¶16 We agree with the district court. The Legislature has
―conferred upon cities and counties the authority to enact all
necessary measures to promote the general health, safety, morals,
and welfare of their citizens.‖ State v. Hutchinson, 624 P.2d 1116,
1118 (Utah 1980). The General Welfare Statute allows
municipalities to
       pass all ordinances and rules, and make all
       regulations, not repugnant to law, necessary for
       carrying into effect or discharging all powers and
       duties conferred by this chapter, and as are
       necessary and proper to provide for the safety and
       preserve the health, and promote the prosperity,
       improve the morals, peace and good order, comfort,
       and convenience of the city and its inhabitants, and
       for the protection of property in the city.
UTAH CODE § 10-8-84(1).
    ¶17 We have explained that the General Welfare Statute
grants municipalities such as the City two distinct types of power:
first, ―power is given to implement specific grants of authority‖;
second, municipalities are given ―an independent source of power
to act for the general welfare of [their] citizens.‖2 Hutchinson,

__________________________________________________________
   2 Hutchinson involved a statute identical to the General Welfare

Statute that applied to counties rather than cities, but that does
                                                     (continued . . .)
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                 LARSON v. PLEASANT GROVE CITY
                       Opinion of the Court

624 P.2d at 1122. In other words, the General Welfare Statute
grants local governments ―independent authority apart from, and
in addition to, specific grants of authority to pass ordinances
which are reasonably and appropriately related to the objectives
of that power, i.e., providing for the public safety, health, morals,
and welfare.‖ Id. at 1126 (citation omitted). And we have
―expressly abandon[ed]‖ any requirement that municipal powers
be strictly construed, id. at 1119 n.3, deeming such a rule to be
―antithetical to effective and efficient local and state government.‖
Id. at 1126.
    ¶18 Repairing streets that are in poor condition—and are
headed toward a ―very poor to failing state‖—unquestionably
falls within a municipality‘s general power to provide for the
public safety and welfare. And ―[w]e generally give latitude to
local governments in creating solutions to problems, especially in
meeting the challenges and needs caused by accelerated urban
growth.‖ Bd. of Educ. of Jordan Sch. Dist. v. Sandy City Corp.,
2004 UT 37, ¶ 31, 94 P.3d 234 (citations omitted).
    ¶19 The Property Owners do not dispute that the City has
authority to repair and maintain city roadways. Rather, they
argue that the City lacks authority to charge a transportation
utility fee to fund these services. In support of this argument, they
point to another provision of the Municipal Code that involves
utilities but does not specifically refer to a transportation utility.
Utah Code section 10-8-14, titled in relevant part ―Utility and
telecommunications services,‖ states that a municipality may
―construct, maintain, and operate waterworks, sewer collection,
sewer treatment systems, gas works, electric light works,
telecommunications lines, cable television lines, public
transportation systems, or public telecommunications service
facilities.‖ UTAH CODE § 10-8-14(2)(a). The Property Owners
reason that because a transportation utility is not listed in this
provision, the City is not allowed to establish one. And
consequently, they reason that the City is not permitted to charge
a fee to support a transportation utility.
  ¶20 The Property Owners rely upon language from
Hutchinson, where we stated that ―[s]pecific grants of authority
may serve to limit the means available under the general welfare

not change our analysis. State v. Hutchinson, 624 P.2d 1116 (Utah
1980) (analyzing UTAH CODE § 17-5-77).

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clause.‖ 624 P.2d at 1126. For example, in Harding v. Alpine City,
656 P.2d 985 (Utah 1982) (per curiam), we concluded that Alpine
City could not require all buildings within 500 feet of a city sewer
line to connect to the line because a different statute permitted
cities to require this only of buildings within 300 feet of a sewer
line. Id. at 985–86. We reasoned that ―if the City were permitted to
reach beyond 300 feet[,] the words ‗300 feet‘ in the statute would
have no meaning.‖ Id.
   ¶21 But although we acknowledged that specific grants of
authority might have such a limiting effect, the thrust of
Hutchinson went in the opposite direction. The key principle
established in that case was that the Legislature‘s grant of general
welfare power to local governments provides them with
―independent authority apart from, and in addition to, specific
grants of authority to pass ordinances which are reasonably and
appropriately related to the objectives of that power.‖ Hutchinson,
624 P.2d at 1126 (citation omitted). And we cautioned that specific
grants of authority ―should generally be construed with
reasonable latitude in light of the broad language of the general
welfare clause which may supplement the power found in a
specific delegation.‖ Id.
    ¶22 Here, the Property Owners do not explain why the
utilities identified in section 10-8-14 should be read as an
exhaustive list that prevents the City from establishing a different
type of utility and charging a fee to fund it. The Property Owners
do not point to any language in this provision that prohibits cities
from establishing a utility not listed there. And they do not
provide any legal analysis as to why this statute should be read as
an exception to the rule we announced in Hutchinson that cities
have independent authority to act for the general welfare, and
specific grants of authority ―should generally be construed with
reasonable latitude‖ because the General Welfare Statute ―may
supplement the power found in a specific delegation.‖ Id.
Accordingly, the Property Owners have not persuaded us that
section 10-8-14 prevents the City from enacting the TUF.
   ¶23 The Property Owners also argue that a definition of
―utility‖ found in the Uniform Fiscal Procedures Act for Utah
Cities prohibits the City from establishing a transportation utility.
That Act defines a ―utility,‖ for purposes of that chapter only, as
―a utility owned by a city, in whole or in part, that provides
electricity, gas, water, or sewer, or any combination of them.‖
UTAH CODE § 10-6-106(24).

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                  LARSON v. PLEASANT GROVE CITY
                        Opinion of the Court

    ¶24 But this argument fails for the same reasons. The
Property Owners do not identify any language in the definition
purporting to create an exhaustive list of the utilities a city is
allowed to establish.
    ¶25 The Property Owners also contend that their argument is
supported by two statutes in other titles of the Utah Code that
define ―public utility,‖ which also do not list a transportation
utility.3 But the Property Owners do not explain why these
definitions of a ―public utility‖ are relevant here.
__________________________________________________________
    3 The Property Owners reference two definitions of ―public

utility.‖ The first is in Title 54, titled ―Public Utilities.‖ There,
―public utility‖ is defined as
       includ[ing] every railroad corporation, gas
       corporation, electrical corporation, distribution
       electrical    cooperative,     wholesale       electrical
       cooperative, telephone corporation, telegraph
       corporation,      water     corporation,      sewerage
       corporation, heat corporation, and independent
       energy producer not described in Section 54-2-201
       where the service is performed for, or the
       commodity delivered to, the public generally, or in
       the case of a gas corporation or electrical corporation
       where the gas or electricity is sold or furnished to
       any member or consumers within the state for
       domestic, commercial, or industrial use.
UTAH CODE § 54-2-1(23)(a). The second is in Title 59, titled
―Revenue and Taxation,‖ which states that
       ―Public utility‖ means: (a) for purposes of this
       chapter, the operating property of a railroad, gas
       corporation, oil or gas transportation or pipeline
       company, coal slurry pipeline company, electrical
       corporation, telephone corporation, sewerage
       corporation, or heat corporation where the company
       performs the service for, or delivers the commodity
       to, the public generally or companies serving the
       public generally, or in the case of a gas corporation
       or an electrical corporation, where the gas or
       electricity is sold or furnished to any member or
       consumers within the state for domestic,
       commercial, or industrial use.
                                                    (continued . . .)
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   ¶26 Finally, the Property Owners note that the Legislature
has given municipalities authority to levy special taxes for specific
purposes, like road maintenance. But the Property Owners make
no argument as to why the availability of this funding mechanism
prevents the City from enacting a different funding mechanism
(the TUF).
   ¶27 Accordingly, the Property Owners have not persuaded us
that the district court erred in concluding that the City had
authority to enact the TUF.
 II. THE TUF IS PROPERLY CHARACTERIZED AS A SERVICE
                          FEE
   ¶28 We now address the City‘s argument that the district
court erred in holding that the TUF was a tax rather than a fee.
The district court concluded that the TUF should be deemed a tax
because ―the benefit of an improved road system[] is a general
benefit rather than a specific benefit to those who pay the fees.‖
The City argues that the court‘s focus on whether others
benefitted from the fee in addition to the fee payers was incorrect.
To date, we have not specifically addressed whether a
transportation utility fee should be considered a fee or a tax.
    ¶29 As we will explain, we conclude that the purpose of the
TUF qualifies it as a service fee because it is a specific charge for a
specific service—the use of the City‘s roads. We recognize that
there are surely others who use the City‘s roads but do not pay
the TUF, such as a visitor from out of town who drives through
the City and purchases a meal at a drive-thru restaurant.
However, this fact on its own does not transform the TUF into a
general revenue-raising measure or otherwise nullify the TUF‘s
status as a fee.
    ¶30 In the primary case analyzing the distinction between
taxes and fees, V-1 Oil Co. v. Utah State Tax Comm’n, we explained
that there is no ―bright line test for distinguishing a tax from a
fee.‖ 942 P.2d 906, 911 (Utah 1996), vacated in part on other grounds,
942 P.2d 915 (Utah 1997). ―Rather, [h]ow such exactions should be

Id. § 59-2-102(30)(a) (2018). While the definition in section
59-2-102(30)(a) has been amended since 2018, we quote the 2018
version that the Property Owners relied upon in their briefing.
And we note that none of the recent amendments affect our
analysis.

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                  LARSON v. PLEASANT GROVE CITY
                        Opinion of the Court

classified depends upon their purpose.‖ Id. (alteration in original)
(citation omitted) (internal quotation marks omitted). ―[A] tax
raises revenue for general governmental purposes . . . .‖ Id.
(citations omitted). In contrast, we described two types of fees: a
―service fee,‖ which ―raises revenue . . . to compensate the
government for the provision of a specific service or benefit to the
one paying the fee‖; and a ―regulatory fee,‖ which defrays the
cost of regulating the fee payer. Id. (citations omitted). If a charge
does not fit into one of these fee categories, then ―it is a general
revenue-raising measure and must be classified as a tax.‖ Id.
    ¶31 Where the purpose of a government exaction indicates
that it is a fee, we next consider whether the fee is ―reasonable‖—
in other words, whether the charge ―bears some reasonable
relationship to the cost of the benefit [or service] said to justify its
imposition.‖ Id. at 917 (citations omitted). ―To be a legitimate fee
for service, the amount charged must bear a reasonable
relationship to the services provided, the benefits received, or a
need created by those who must actually pay the fee.‖ Id. at 911.
We have explained that ―[t]his requirement is intended to prevent
a fee from being used to generate excessive revenues and
becoming indistinguishable from a tax.‖ Id. (citation omitted).
    ¶32 In sum, the first step in determining the nature of a
government exaction is to consider its purpose and determine
whether it is characteristic of a service fee, a regulatory fee, or a
general revenue-raising tax. If the purpose is characteristic of a
fee, we then consider whether the fee is reasonable. If it is, then
the exaction is a legitimate fee.
   ¶33 Applying these principles here, we conclude that the
purpose of the TUF is characteristic of a service fee. As an initial
matter, neither party contends that the TUF is a regulatory fee. So
the only question before us is whether the TUF is a service fee—in
other words, whether it is a ―specific charge‖ for a ―specific
service or benefit.‖ Id.
   ¶34 And we conclude that the TUF is a specific charge for a
specific service that the City provides to those who pay the TUF.
The purpose of the TUF is to generate funds for the repair and
maintenance of city roads by charging a three-tiered fee that
correlates with the fee payer‘s ―intensity of use‖ of those roads (as
determined by the user demand study).
   ¶35 Accordingly, the TUF relates to a specific service: the use
of City roadways. The district court characterized the service
provided a bit differently, as ―the benefit of an improved road
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system[].‖ And we do not disagree that it is likely that the result
of the TUF would be better roads. But we conclude it is more
accurate to characterize the TUF as a charge for the use of city
roads. The City set the TUF fee schedule based on the demand
that City residents and commercial property owners place on the
roadways. The user demand study quantified the ―intensity of
use‖ of city roads by residents and various types of commercial
businesses. The City then established a three-tiered fee schedule
accordingly. Thus, the TUF is designed to charge residents and
commercial business owners an amount that generally
corresponds to their use of the roads and the additional traffic
they generate, such as trips made by customers to and from a
business.
    ¶36 And the TUF constitutes a ―specific charge‖ to
―compensate‖ the City for this specific service (the use of its
roads). See id. (explaining that a service fee ―raises revenue . . . to
compensate the government for the provision of a specific service
or benefit to the one paying the fee‖). The funds generated by the
TUF may be used only to compensate the City for the repair and
maintenance of its roadways. By the express terms of both the
Ordinance and Resolution, ―[a]ll transportation utility charges
shall be deposited in the Transportation Utility Revenue Fund and
shall not be commingled with or transferred to other city funds,
including, but not limited to, the general fund.‖ Moreover, ―[t]he
funds deposited may only be used for the costs of maintenance
and repair of the city street network, including engineering fees,
but may not be used for general fund expenditures that do not
relate to road maintenance and repair.‖ Accordingly, the TUF is a
targeted charge to compensate the City for the wear-and-tear
caused by the use of its roadways, and not a ―general revenue-
raising measure.‖ Id.
    ¶37 Thus, we conclude that the purpose of the TUF qualifies
it as a service fee because it is a specific charge for a specific
service. Local property owners who use the City‘s roads most
intensely pay a fee amount that is commensurate with their use.
And the City may spend the funds generated by the fee only for
the improvement and maintenance of those roads.
   ¶38 However, the district court concluded that the TUF was
not a service fee because the service provided would benefit not
only the fee payers but also the general public. The court reasoned
that ―the benefit of an improved road system[] is a general benefit
rather than a specific benefit to those who pay the fees‖ because

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                       Opinion of the Court

―[t]he benefit not only accrues to the individual property owners
in the City but also to anybody who happens to use the City‘s
road system.‖ Therefore, it reasoned that it could not ―conclude
there is a ‗specific benefit‘ that returns to those who pay the fee,‖
but that ―the benefit is general in nature benefitting the public at
large.‖ On this basis, the court determined that the TUF must
therefore be deemed a tax.
    ¶39 As we explained above, the service provided by the City
is better characterized as use of City roads rather than improved
roadways in general. But this distinction does not directly answer
the point made by the district court. Whether the TUF is a charge
for the use of City roadways, or a charge for the benefit of driving
on improved roadways, the district court was correct in observing
that some non-fee-payers will drive upon the City‘s improved
roads.
   ¶40 But the fact that some people who do not pay the fee may
benefit from it does not necessarily transform the fee into a tax.
For example, in V-1 Oil, we did not analyze whether others might
have benefited from the environmental surcharge at issue. We
asked only whether V-1 Oil benefitted from the surcharge. Id. at
916.
    ¶41 The threshold question in separating a service fee from a
general revenue-raising tax is whether the fee compensates the
City for a particular service or benefit that it provides (here, the
use of its roads), and whether those who pay the fee (here, City
residential and commercial property owners) receive that
particular service or benefit. See id. at 911, 917 (describing ―the
first prong‖ of the test for whether a charge is a fee or tax as
whether the payer benefits from paying the charge at issue).
    ¶42 Such is the case here. The City has structured the TUF so
that the fee is charged in proportion to its findings about how
much residential and commercial property owners use the
roadways. This ―use‖ includes not only individual trips upon the
roads, but also the demand that the property owners place upon
the roads—for example, gas stations and drive-thru restaurants
pay a larger fee because they draw customers who use City roads
to reach them.
    ¶43 The City could have chosen to distribute the TUF
differently. Taking our earlier example of the out-of-town visitor
who drives through the City and purchases a meal at a drive-thru
restaurant, the TUF compensates the City for the visitor‘s use of
its roads through the exaction from the owner of the drive-thru
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restaurant. Instead, the City could have devised a way to charge
each vehicle that uses its roadways for each individual trip. In
such a scenario, rather than the drive-thru restaurant owner
paying the tier-3 fee, restaurant employees and customers would
each pay for their individual trips to the restaurant. But the fact
that the City did not structure the TUF in this manner does not
make it a general revenue-raising measure. We will not second-
guess the manner in which a local government chooses to
apportion a service fee unless the manner indicates that the
purpose of the fee is not to compensate the municipality for the
provision of a specific service or benefit to fee payers, or the
apportionment renders the fee unreasonable. Accordingly, we
conclude that the purpose of the TUF is characteristic of a service
fee.
    ¶44 But as we discussed in V-1 Oil, this does not end the
inquiry. We then consider whether the fee is ―reasonable‖—in
other words, whether the charge ―bears some reasonable
relationship to the cost of the benefit [or service] said to justify its
imposition.‖ Id. at 917 (citations omitted). ―This requirement is
intended to prevent a fee from being used to generate excessive
revenues and becoming indistinguishable from a tax.‖4 Id. at 911
(citation omitted). Accordingly, although the purpose of the TUF

__________________________________________________________
    4 In expounding upon this requirement, we have explained

that ―for a fee for service to be reasonable, the total cost of the
service so financed must fall equitably upon those who are
similarly situated and in a just proportion to the benefits
conferred.‖ V-1 Oil Co. v. Utah State Tax Comm’n, 942 P.2d 906, 911
(Utah 1996), vacated in part on other grounds, 942 P.2d 915 (Utah
1997). But ―[w]e do not insist on exact mathematical precision.‖ Id.
As a practical matter, ―[t]he nature of the service or benefit
provided may . . . make it difficult or impossible to distribute the
services or benefits equally to all who pay the fee.‖ Id. at 911–12
(citation omitted). And a fee may be reasonable even if it raises
revenue that exceeds the cost of the service. Id. at 911.
Fundamentally, if the charge is not reasonably related to ―some
need created by the one paying the fee,‖ or if the ―services
provided through the fee are not of demonstrable benefit to the
one paying the fee,‖ it is likely unreasonable and therefore
illegitimate. Id. at 912 (citations omitted) (internal quotation marks
omitted).

                                  13
                  LARSON v. PLEASANT GROVE CITY
                        Opinion of the Court

qualifies it as a service fee, if the TUF is unreasonable, it may lose
that status.5
   ¶45 The Property Owners argue that the TUF is unreasonable.
However, we note that because the district court concluded that
the purpose of the TUF was characteristic of a tax, it did not
consider the reasonability of the TUF. The City claims that the
Property Owners should not be permitted to make such an
argument now because they did not make it in the district court or
present proof in support of such a claim. The Property Owners
dispute this characterization.
    ¶46 In either event, because the district court did not reach
this question, we do not resolve it here. Rather, we remand to the
district court to determine whether the Property Owners
sufficiently argued in their motion for summary judgment (or at
some other time in the district court proceedings) that the TUF is
unreasonable, or whether they waived the argument. If the
argument was not waived, the district court should address it in
the first instance.
                           CONCLUSION
    ¶47 The district court properly concluded that the City was
within its broad authority to enact the TUF, and we affirm that
ruling. However, the court incorrectly determined that the TUF
was a tax because it would benefit others beyond those paying the
fee, so we reverse that ruling. We conclude that the purpose of the
TUF qualifies it as a service fee. This leads to the second step of
the analysis—whether the fee is reasonable. We remand to the
district court for consideration of this issue in the first instance. If
the district court determines that the Property Owners have
waived an argument that the TUF is unreasonable, the TUF
should be deemed a service fee. However, if they have not waived
this claim, the district court should make its own determination as
to whether the TUF is reasonable.

__________________________________________________________
   5 Importantly, however, fees are presumed to be reasonable. V-

1 Oil, 942 P.2d at 917. Cities ―are entitled to flexibility in their
legislative solutions to problems.‖ Id. (citation omitted). The party
challenging the fee bears the burden of proving it is unreasonable.
Id. at 917–18. And ―[a]bsent any proof that the fee is
unreasonable‖ in relation to the benefits conferred upon the fee
payer, that burden is not met. Id. at 918.

                                  14
                     Cite as: 2023 UT 2
                    Opinion of the Court

   ¶48 Accordingly, we affirm in part, reverse in part, and
remand.

                            15