Court Opinion

ID: 4017753
Source: CourtListenerOpinion
Date Created: 2016-07-21 14:06:48.371589+00
Date Added: 2024-06-11T14:34:12.124615
License: Public Domain

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GREATER CINCINNATI/NORTHERN
KENTUCKY APARTMENT ASSOCIATION, INC.,
FOX CHASE SOUTH, LLC, WESTERN
BOULDERS, LLC, VISTA WILDER, LLC,
VAIL, L.L.C., D/B/A ASPEN PINES APARTMENT
HOMES, GLEN HOLLOW APARTMENTS, LLC,
JOSLIN ENTERPRISES, LTD. CO ., CHURCHILL
PROPERTY GROUP, LLC, COLD SPRING
HOUSING ASSOCIATES, LLC, AND VIANNA
GOINS

                  ON APPEAL FROM CAMPBELL CIRCUIT COURT
V.                   HONORABLE FRED A. STINE, V, JUDGE
                              NO. 13-CI-00956

CAMPBELL COUNTY FISCAL COURT,                                               APPELLEES
HON. STEVE PENDERY, IN HIS OFFICIAL
CAPACITY AS CAMPBELL COUNTY JUDGE
EXECUTIVE

             OPINION OF THE COURT BY JUSTICE -CUNNINGHAM

                                     AFFIRMING

       Our 911 emergency telephone service has become one of the most

critical of all local public services. It provides instant access for all

Kentuckians in times of need. But dispatching these emergency calls cannot

occur without cost. We hold that the fee imposed by the Campbell County

Fiscal Court to fund this indispensable service is a constitutional and

statutorily valid exercise of its authority.
                                    Background

       Historically, the emergency 911 service in Campbell County—like much

of the Commonwealth—was funded by imposing a monthly subscriber fee per,

landline telephone. Needless to say, the number of landline phones is

decreasing rapidly. As such, the increase in wireless telephones and other

technologies has rendered the landline subscriber fee an inadequate source of

funding.

       On August 7, 2013, the Campbell County Fiscal Court ("County")

adopted Ordinance 0-04-13 ("Ordinance"). The Ordinance replaced the

landline subscriber charge with an annual service fee of $45.00 levied upon

each occupied individual residential and commercial unit within Campbell

County. The Greater Cincinnati/Northern Kentucky Apartment Association

("Association") filed a declaratory action in Campbell Circuit Court alleging that

the Ordinance was an unconstitutional and invalid exercise of the County's

authority. The trial court disagreed and ruled in favor of the County, thus

affirming the Ordinance. The Association appealed that judgment and moved

pursuant to CR 74.02 for an order transferring this case from the Court of

Appeals to this Court. Given the statewide importance of this case, we granted

transfer. Having reviewed the record and the law, we affirm the circuit court's

ruling, but on different grounds.

                                      Analysis

      Although the Association challenged the constitutionality of the

Ordinance before the trial court, it has failed to raise a direct constitutional

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argument before this Court. In any event, state constitutional provisions

concerning local government's taxing authority are irrelevant here. As

subsequently discussed, the Ordinance provides for a fee, not a tax. In

accordance with the parties' arguments, we will limit our analysis to whether

the Ordinance is a statutorily valid exercise of the County's authority.

Statutory Validity

      The Ordinance was adopted pursuant to KRS 65.760(3) which provides

in pertinent part:

      The funds required by a city, county, or urban-county government
      to establish and operate 911 emergency telephone service, or to
      participate in joint service with other local governments, may be
      obtained through the levy of any special tax, license, or fee not in
      conflict with the Constitution and statutes of this state. The special
      tax, license, or fee may include a subscriber charge for 911
      emergency telephone service that shall be levied on an individual
      exchange-line basis, limited to a maximum of twenty-five (25)
      exchange lines per account per government entity. (Emphasis
      added).

In construing statutes, we must give effect to the intent of the General

Assembly. Maynes v. Commonwealth, 361 S.W.3d 922, 924 (Ky. 2012). "We

derive that intent, if at all possible, from the language the General Assembly

chose, either as defined by the General Assembly or as generally understood in

the context of the matter under consideration." Id. (citing Osborne v.

Commonwealth, 185 S.W.3d 645 (Ky. 2006)).

      It is undisputed that the funds collected by the County are not a form of

special tax or license; rather, the Ordinance clearly provides that the charge is

a service fee. The plain language of KRS 65.760(3) indicates that funds

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required to establish and operate 911 telephone services "may be obtained

through the levy of any . . . fee not in conflict with the Constitution and

statutes of this state." (Emphasis added). There is no term provided in KRS

65.760(3) that qualifies the nature or scope of the term "fee." Thus, the only

express limitation provided in the statute is that the fee not conflict with our

state Constitution or statutes.

      The Association argues that the fee imposed under the Ordinance

constitutes an impermissible user fee that violates KRS 91A.510. That statute

defines a user fee as a "fee or charge imposed by a local government on the

user of a public service for the use of any particular service not also available

from a nongovernmental provider." The Association contends that the

Ordinance is invalid because it imposes a user fee that is not based on actual

use of the benefit received. As such, the Association submits that the

Ordinance levies an unauthorized flat-rate tax.

      In support of their respective arguments, both parties cite extensive case

law, none of which is directly on point. See, e.g., Barber v. Comm'r of Revenue,

674 S.W.2d 18 (Ky. App. 1984) (holding that a fire protection service charge

was unconstitutional where enabling statute only authorized funding through

use of property taxes); Kentucky River Authority v. City of Danville,   932 S.W.2d
374, 377 (Ky. App. 1996) ("The fee in this case is based upon the actual use by

the city of the Kentucky River water basin.") (emphasis added). In fact, this is

the first occasion upon which this Court has had the opportunity to interpret

KRS 65.760(3) or KRS 91A.510. We recognize that we must construe all

                                          4
applicable statutes together in an attempt to harmonize and give effect to the

provisions of each. See Commonwealth v. Phon, 17 S.W.3d 106, 108 (Ky. 2000)

(citations omitted). However, there is no need to harmonize the two statutes

presented here. KRS 91A.510 is entirely inapplicable to the present issue.

      The Association's argument is premised on the erroneous assumption

that the term fee must mean user fee. To the contrary, "[v]arious fees exist and

are used to implement programs deemed desirable by the Commonwealth."

Kentucky River Authority, 932 S.W.2d at 377. In addition, KRS 65.760(3) was

enacted in 1984, thus predating KRS 91A.510 by two years. Therefore, the

statutory definition of user fee now embodied by KRS 91A.510 did not exist

when KRS 65.760(3) was enacted.

      Furthermore, the subsequent enactment of KRS 91A.510 did not modify

or qualify the term fee included in KRS 65.760(3). It is critical to note that

these statutes appear in entirely different Chapters of the KRS and contain no

references or citations to each other. Moreover, while KRS 91A.510 is a general

provision, KRS 65.760(3) is a specific provision that expressly authorizes the

use of fees to fund 911 emergency telephone services.      Cf. Long Run Baptist

Ass'n, Inc. v. Louisville and Jefferson County Metropolitan Sewer District, 775
S.W.2d 520,, 523 (Ky. App. 1989) ("since Chapter 76 clearly gives MSD express

authority to impose a service charge . . . we affirm the trial court's ruling that

the charge is not a tax."). Similarly, KRS 65.760(3) demonstrates the General

Assembly's specific intent to permit local governments to fund 911 telephone

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services through the imposition of fees. It is also clear that nothing in that

provision requires that the fee be based on use.

      Accordingly, we need not analyze whether the fee imposed by the

Ordinance is a valid user fee. However, this does not mean that the

unqualified term "fee" used in KRS 65.760(3) is unencumbered by reason or

restraint. While analogy to cases discussing user fees, service charges, or

similar forms of statutory assessments may prove instructive, our analysis is

not dictated by KRS 91A.510 or any Kentucky decision interpreting statutes

that are not at issue here. As a matter of first impression, the following

analysis applies only to the nature and scope of fees authorized by KRS

65.760(3).

Fees Authorized Under KRS 65.760(3)

      Fees authorized by KRS 65.760 must bear some reasonable relationship

to the benefit received. This nexus is similar, but not necessarily identical, to

that required by other statutory assessments, charges, and fees.     See Kentucky

River Authority, 932 S.W.2d at 376 ("The validity of special fee assessments and

users fees depends on an analysis of the charge and the benefits received.");

Curtis v. Louisville and Jefferson County Metropolitan Sewer District, 311
S.W.2d 378, 382 (Ky. 1958) (affirming property assessment that funded surface

drainage project due to the "general improvement of conditions of health,

comfort and convenience in the area         )   "

      Here,. the 911 emergency service fee is levied upon occupied residential

and commercial properties. In the narrow context of KRS 65.760(3), occupied

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properties are an exceedingly logical and practical object of the fee revenue

authorized by that provision. Common sense dictates that Campbell County

residents engaged in either labor or leisure spend a significant amount of their

time at residential and commercial properties located within Campbell County.

It naturally follows that demand for this 911 emergency telephone service

derives significantly from residents' occupation and use of those properties.

We must keep ever in mind that these are safety and life saving services. Fire

protection, ambulance assistance, law enforcement, and other first responders

are all critical to the well being of people who occupy properties covered by the

ordinance in question.

      While the scope of benefits received from the 911 emergency telephone

service is incapable of precise measure, it is uncontroverted that all citizens

benefit from that service. Cf. Long Run Baptist, 775 S.W.2d at 524 (affirming

service charge where the court determined that all property owners benefited

from the service rendered). To assess payment upon only those citizens

actually telephoning 911 is not, nor has it ever been, the policy of our counties

or our Commonwealth.

      Even the old landline fee expressly outlined in KRS 65.760 would offend

the Association's overly restrictive interpretation requiring actual use of 911

telephone services. In fact, a system that is based entirely on actual use would

be insufficient to sustain this service. Fortunately, many, if not most

Kentuckians go through life and never encounter an emergency requiring the

use of the 911 service. Thus, accepting the Association's interpretation of the

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word "fee" provided in KRS 65.760 to mean "user fee" would require this Court

to presume that the General Assembly intended an unpalatable and absurd

result. This we cannot do. See Maynes, 361 S.W.3d at 924.

       We must clarify that the nexus required to sustain a fee imposed under

KRS 65.760(3) need not necessarily be direct. Rather, a fee that bears a

reasonable relationship to the benefit received is sufficient. This approach

comports with the General Assembly's specific intent to provide a functional

system of fee based funding for one of the most vital services offered by our

local governments. Therefore, we hold that the fee imposed by the County to

fund this indispensable service is a constitutional and statutorily valid exercise

of its authority.

                                    Conclusion

       For the foregoing reasons, we hereby affirm the judgment of the

Campbell Circuit Court.

      All sitting. Abramson, Barber, Keller, and Noble, JJ., concur. Venters,

J., dissents by separate opinion in which Minton, C.J., joins.

      VENTERS, J., DISSENTING: I respectfully dissent. With candor only

judges can fully appreciate, Counsel for the Campbell County Fiscal Court

(Campbell County) acknowledged in his oral argument before this Court that

fitting the "service fee" created by Ordinance 0-04-13 within the available

statutory framework was like trying to drive a square peg into a round hole.

The majority has opted, for better or worse, to chisel off the corners of the

square peg so that what is in reality a flat-rate tax on real estate can be

                                         8
jammed into the round hole provided by statute for service fees. The better

approach would be to call out the so-called "service fee" for what it is: a tax on

real property ownership. The so-called "service fee" fits within none of the

criteria recognized for the imposition of a governmental fee and bears all the

hallmarks of a tax. And, because it is a tax on property that is not assessed on

an ad valorem basis, it violates Section 174 of the Kentucky Constitution.

      A major premise of the majority opinion is that the ordinance does not

impose a "user fee" as defined in KRS 91A.510, but is instead some other kind

of "fee." That will come as news to Appellee, Campbell County, since it argues

in its brief that "[t]he Ordinance does not create a 'Property Charge,' but a

valid user fee that is in harmony with KRS 91A.510-530."            (emphasis

added.) Campbell County also says in its brief that it "chose to replace the

Subscriber Charge [of its former Ordinance] with a user fee which is one of

four ways for funding the 911 service." (emphasis added.) Appellee's entire

argument is predicated upon their claim that their 911 "service fee" is valid

because it is a "user fee." However, calling something a "user fee" does not

make it one.

A. The "service fee" assessed under Ordinance 0-04-13 is not a "fee."
      Fees properly assessed by governmental entities are characterized as

either regulatory and license fees, or user fees. I am not aware of any other

kind of fee. Regulatory and license fees are paid by those who choose to engage

in a state-regulated activity. Often, but not necessarily, the activity is

commercial in nature, like engaging in a licensed profession or working with a

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regulated material. Other regulatory license fees are imposed upon those who

choose to participate in regulated recreational activities, like hunting and

boating. 84 C.J.S. Taxation § 3 (2015) ("A 'regulatory fee' is an imposition that

funds a regulatory program. Regulatory fees are authorized by the state's

police power to regulate particular businesses or activities and serve regulatory

purposes[.]") (internal citations omitted).   See Klein v. Flanery, 439 S.W.3d 107,

114 n.6 (Ky. 2014) NA] 'tax' in the strict sense of monies levied to meet the

general expenses of government has been distinguished in a variety of contexts

from more particularized exactions, such as fines, user fees—tolls, for

example—infrastructure assessments, or regulatory fees[.]")

       Campbell County's 911 emergency service is not a regulatory program; it

does not police the practice of any commercial or recreational activities.

Annual payment of the assessed fee does not entitle the fee-payers to

participate in a regulated profession or activity. Therefore, by definition, the

Campbell County 911 "service fee" is not a regulatory fee.

      The other category of government fees is a user fee. That is what

Appellees claim to have created in Ordinance 0-04-13. A "user fee" is a fee or

charge "imposed by a local government on the user of a public service for the

use of any particular service not also available from a nongovernmental

provider." KRS 91A.510 (emphasis added). Payment of the "user fee" entitles

the payer to use the particular service. That is, after all, the effect of the word

"for" in the statutory definition. The fee is exchanged for the right to use the

service. Typical examples of user fees are toll bridge fares and court costs, but

                                         10
also included are things like the admission fee to a government-owned facility

such as a public park or swimming pool. As reported in Corpus Juris

Secundum, "A true fee benefits the party paying the fee in a manner not shared

by other members of society." 84 C.J.S. Taxation § 3.

       Our case law teaches that the constitutional "validity of special

assessments and users fees depends on an analysis of the charge and the

benefit received." Kentucky River Authority v. City of Danville,   932 S.W.2d 374,

376 (Ky. App. 1996). "Assessments and fees charged without a relationship to

a benefit received by the payor are arbitrary and capricious and violate due

process and the constitutional prohibition against the taking of private

property without just compensation." Id. (citations omitted).

      Appellees concede what the Majority asserts: "[I]t is uncontroverted that

all citizens benefit from the [911] service." Of course they do — access to 911

emergency service is universally available to everyone in the community

regardless of whether they own real estate and pay the "service fee." It equally

serves pedestrians injured in vehicular accidents; persons threatened by

domestic violence; victims of crime; anyone that needs an emergency medical

response. Landowners paying the fee get no benefit not otherwise available to

everyone. There is no relationship between the fee charged and the benefit

received. Consequently, the "service fee" cannot be justified as a "user fee."

      Being neither a regulatory fee nor a user fee, the "service fee" created by

Ordinance 0-04-13 is exactly what it appears to be: it is a tax. There is

nothing wrong or illegal about taxing real estate owners to pay for government

                                         11
 services at a rate disproportionate to the benefit they receive. That is quite

 common; it is generally accepted, and even expected. That is how Kentuckians

 pay for their school systems and public libraries; property taxes also provide

 the general funding for running city and county governments. Paying for 911

 service with a tax on real estate would be entirely appropriate provided it was

done in compliance with Section 174 of the Kentucky Constitution, which

provides: "All property, whether owned by natural persons or corporations,

shall be taxed in proportion to its value, unless exempted by this Constitution."

B. Ordinance 0-04-13 imposes a flat-rate tax on property.
       The "service fee" described in Ordinance 0-04-13 has none of the

attributes of a legitimate fee. Moreover, it has all of the indicia of a tax.

Dickson v. Jefferson County Board of Education, 225 S.W.2d 672, 675 (Ky.

1949) provides:

      There is a marked difference between a fee in its true concept and
      a tax. As said in 51 Am.Jur., Fees, Section 12:

      'The distinction between a fee and a tax is one that is not always
      observed with nicety in judicial decisions, but any payment
      exacted by the state or its municipal subdivisions as a contribution
      toward the cost of maintaining governmental functions, where the
      special benefits derived from their performance is merged in the
      general benefit, is a tax.'

      On the other hand, a fee is generally regarded as a charge for some
      particular service . . . . [T]he Legislature has the power to impose
      fees for official duties performed by county officers and to direct
      that the fees be paid into the State Treasury.

      We noted in Klein that "[t]he classic 'tax' is 'imposed by a legislature upon

many, or all, citizens. It raises money, contributed to a general fund, and

spent for the benefit of the entire community[.]"' 436 S.W.3d at 114 n.6

                                         12
(citation omitted). As described in Klein, the "service fee".imposed by

Ordinance 0-04-13 is a tax.

         Not only does Campbell County's annual "service fee" for 911 service look

and feel like a tax, it is actually assessed, billed, and collected as a tax. Just

like any other tax on real estate, payers liable for the so-called "service fee" are

identified by the Campbell County Property Valuation Administrator, which is

Kentucky's tax assessor. The charge is placed on the property tax bills by the

county clerk in the performance of her duty under KRS 133.220(2) to prepare a

bill showing the taxpayer "the total amount of taxes due the state, county,

school district, and any other taxing district for which the sheriff collects

taxes." Then, the "service fee" is collected by the sheriff performing his duty as

the county tax collector. The 911 service fee is assessed by the tax assessor,

billed by the tax billing office, and collected by the tax collector.

         In City of Bromley v. Smith,   149 S.W.3d 403 (Ky. 2004), this Court did

not flinch when we were confronted with a flat-rate assessment on real

property in Kenton County to pay for "life squad and other nonfire-related

emergency services." Id. at 404. Despite the unquestioned value of the

services provided to the citizens, we unanimously struck down the ordinance

because it violated Section 174 of the Kentucky Constitution.       City of Bromley

holds:

         The annual flat-rate tax assessed per unit of real property and
         imposed for life squad purposes is not authorized under the
         Kentucky Constitution in the form that has been chosen by the
         City. In Kentucky, local real property taxes must be ad valorem,
         that is, based on assessed value. The term "ad valorem" literally
         means "according to worth." A flat tax is unrelated to value. As
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          correctly observed in Barber,[1 ] other than special assessments for
          municipal improvements and user charges for the provision of
          measurable services such as waste collection and sewer service,
          charges that may be based in part on the amount of waste or water
          consumption which could be reasonably calculated to burden the
          system, all property taxes must be based on assessed value or ad
          valorem. A flat-rate life squad tax is not based on value, and it
          cannot be deemed to be either a license fee, special assessment or
          user fee. The taxes are of a type that is not recognized by
          Kentucky law. 'Consequently, they are invalid and
          unconstitutional. It is of interest to note that the legislature has
          specified an ad valorem tax as a method of financing emergency
          ambulance services in KRS 75.040.

Id. at 405-406 (emphasis added).

          In Barber v. Commissioner of Revenue, 674 S.W.2d 18, 20 (Ky. App.

1984), the City of Silver Grove (which is in Campbell County) attempted to levy

a "fire protection service charge," which was in effect a one-time flat-rate tax on

occupied property. The ordinance provided that the assessment would be

added to the property owner's ad valorem tax bill. The Court of Appeals struck

the ordinance as an unlawful tax on real estate, stating: "The proper way [to

fund such services] is to charge all real and personal property to be benefited

by the fire protection with a rate times the assessed value of the property." Id.

at 21 (emphasis added). The assessment used to fund such services was thus

held to be an illegal flat-rate tax; the circumstances here are identical to the

Barber case, and we should follow the cogent assessment of the issue as

charted in that decision.

      1   Barber v. Comm'r of Revenue, 674 S.W.2d 18 (Ky. App. 1984).

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                                     CONCLUSION

       The "service fee" involved here has none of the attributes of a legitimate

regulatory fee or user fee. When something looks like a duck, walks like a

duck, and quacks like a duck, we can be certain of one thing: it is a duck. The

Campbell County 911 "service fee" looks like a tax, it is assessed like a tax, and

it is collected like a tax. It is a tax. Driving square pegs into round holes is

bad carpentry; skirting the Kentucky Constitution by calling a flat-rate tax on

real estate a "service fee" is bad law.

       KRS 67.760 permits the Campbell County Fiscal Court to finance its 911

emergency system by any of the following ways: "the levy of any special tax,

license, or fee not in conflict with the Constitution and statutes of this state."

Campbell County's chosen method of funding 911 emergency service violates

KRS 67.760 because it conflicts with the Constitution. It is a tax imposed on

real estate, and just like the taxes imposed in City of Bromley and Barber, it

should be stricken because it violates the ad valorem requirement of Section

174 of the Constitution.

      Our role in these matters is not to whittle out a quick fix so that an

invaluable public service can be maintained without exposing local officials to

the unpleasant business of creating or increasing a tax. This Court's function

in the grand scheme of things is to point out the legal infirmity of the matter so

that the legislative and executive branches of state and local governments can

craft enduring solutions that protect, not only invaluable public benefits like

911 emergency services, but also the integrity of the law itself. Securing

                                          15
essential public services does not require citizens or political subdivisions to

drive square pegs into round holes.

      Therefore, I respectfully dissent. Minton, C.J., joins.

COUNSEL FOR APPELLANTS:

Richard L. Norton
Erica Lynn Horn
Jeffrey Jay Greenberger
Timothy Joseph Eifler
Stephen A. Sherman
Madonna E. Schueler

COUNSEL FOR APPELLEES:

Steven J. Franzen
Robert Edward List
Thomas Edison Edge

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