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Ewing, Reid H.
Transportation utility fees /
c by Reid Ewing.
Tampa, Fla. :
b Center for Urban Transportation Research,
z United States.
University of South Florida.
Center for Urban Transportation Research.
t Center for Urban Transportation Research Publications [USF].
Transportation Utility Fees: Passing Legal Muster by Reid Ewing
TRANSPORTATION UTILITY FEES: PASSING LEGAL MUSTER Reid Ewing Center for Urban Trahsportation Research Univers ity of South Florida ABSTRACT Fiscally strapped local governments can look to transportation utility fees (TUFs) as a potential new s.ource .of revenue for roads. In a TUF o rdinance, roads are treated as a public u tility, and "u sers are c harged fees for servi ces re nde red by the locality . While not user fees in the classic sense, TUFs have som e of the same advantages: they represent a source of additio nal revenue for local governments that have exhausted taxing authority; t hey promo te e quity by charging use rs of government fac ilitie s and services for such use; and in the l o ng-ru n, they may lead to a mo r e efficient allocation of resources. To pass lega l muster, a TUF must be structured to be as much like a user fe e as possible, and as little like a tax o r special assessment. Guidance in struct u ri ng a TUF is provided by the Supreme Court of Colorado, which up h eld Fort Col lins' TUF as a special fee ; by the Supreme Court of Idaho, which struck dow n Pocatello's TUF as a disguised tax; and by the courts and legislatures of other states, which have drawn the line between fee s, taxes and assessments through their case law and enactments. Several Florida j ur isdictions are co ntemp lating adopt ion of TUFs. Under a ppli cable law, fees must be reasonably related to the use o f r oadways or to costs occasioned by such use. If they are truly user fees rather tha n taxes or assessments, TUFs sh o uld be im posed on governmen t al and ot h er tax-exempt traffic gene r ato r s and on occupants of renta l property. By the same token, t hey should not be imp osed on vacant land and unoccupied structures since these land uses do not generate sign ifican t numbers of trips. TUFs s h ould be collected with other utility charges and should be enforced by discontin u ing other utility services for failure to pay t he utility bill in full Funds so collected m ust b e spent f o r th e benefit of feepayers and may not be d i verted to non-road purposes. These and other elements have been incorporated into a TUF ordinance for t he City of Port O r a nge, Florida. The city is exp ecte d to adopt t h e ordinance in January 1992, and t hen test the legality of the TUF by validating bonds to be repaid with p roceeds. If the TUF is upheld in Florida, it will bode well for localities in other stro n g home rule" states that might wish to tap this new revenue source. 1
INTRODUCTION H isto rically, Florida loca lities paid for roads with taxes and special assessments. S inc e the mid-1980s they have also imposed transportation impact fees. But even tapping all of these sources, many Florida l ocalities find their road ne eils are growing faster than their r ev enu es Reven ue shor t falls are particularly troublesome in the areas of roadway maintenance and rehabilitation which canno t be funded with impact fee s. Severa l localities are contemplating adoption of transportation utility fee s (TUFs) to m ake up t heir shortfalls. One of these localities is t he City of Port Orange, Florida. The Center for Urban Transportation Researc h University of South Florida, is assisting Port Orange in reviewing le gal i ssues surrou nd ing this fee developing fee options and initia l fee schedul e s, drafting an impleme ntin g .. ordina nce, developing a customized pavement management system to estimate revenue needs, a nd creating informational materials for p ublic consump t ion. TUF: USER FEE OR TAX? The co n cept of a TUF is simp l e: local roads are treated as a public utility, l ike water and sewer service and trash collectio n Residents and businesses are charged a fee for the use of local roads. Road use is estimated using standard sou r ces such as the Institute of Transportation Engineers' Trip manual. Es t imates are refined based upon driveway counts and travel su rveys. Fees are collected with municipal utility bills. 2
A TUF is not a user fee in the classic sense. By the textbook definition, user fe. es are "payments for voluntarily purchased, publicly provided services that be nefit specific individuals, but exhib i t public-good characteristics or are closely associated with public goods."1 A TIJF is not comparable t o fees for, say, use of public swimming pools. It is not voluntarily paid and does not fund a service that benefits "specific individuals" to the exclusion of non -feepayers. In th i s sense it is more akin to a tax than a fee. . The conventio n a l wisdom says that local roads are not suitable for funding with user fees ... user charges can function only when activities financed have two n ecessary conditions: benefits separability and chargeability. These. a r e features absent from pure public goods ... the farther a good or se rv ice departs from publicness and .the close r it approximates a private good, the more feasi ble are user charges."2 While roads are not a pure public good, they certainly fall near the public end of the public-private spectmm.3 Provision of such goods has h istorica ll y been funded with taxes rather than user fees. The tax-like nat ur e and applicat i on of TUFs raises this ques tion : What is lite C. Kurt Zorn, "User Charges and Fees," in John E. Peterson and Dennis R Strachot,a (eds .}, GQvemm.ent Finance; Concepts and Pract ices (Government F'mance Officers p: 137. 1 John L. Mike.ell, Thca l Administration: Analysis and ApRlications for the Public Sector (Brooks/Cole Publishing Co.), p. 360. Pure public goods such as national defense and mosquito abatement have two defining characteristics: once they are made available, separation of those who have paid from those who have not is impossib l e (nonexclusion}; and any n umber of people can consume the same good at the same time without diminishing the amount of that good available for anyone else to consume (nonexhaustion or nonrivalry}. Roads are not a pure public good because u sers exhaust roadway capacity as traffic volumes rise and becauSe road access ca n be limited in certain cases. 3
difference; .if any, between a TUF and a tax dedicated to roads? This paper addresses the q uest ion from both public policy and le gal perspectives. Af ter a brief public policy discussion, the focus shifts to l egal issu es surrounding TUFs The legal a nalysis, while fe atu ring Flor id a cases and statutes, raises univer sal issues. The p ape r c o n cludes t hat to pass l egal muster, a TUF must be structured to be as much like a user fee as possibl e and as little like a tax or ass essm en t This conclusion has i m p li ca t ions for how t he fee is cal cula ted, co lle cted and enforc ed, who is subje ct to the fee and who is exemp t, a nd what u se is made of fee proceeds ADVAi\ 'TAGES OF USER FEE S Three a dvanta ges are commo nly ascr ibed to user fee s. User fees pro vide a dd it ional reven u e for government func t ions ; promote equity by charging users of governmen t facilities and services for s u ch use ; a nd pro m ote e f fic i en t allocation of reso urces by providing de m and s igna ls and a ctin g as a rationing device. Wh il e TUFs a re no t u ser fees in the classic se ns e, t hey have so me of th e same adv antages. Revenue Potential Localities in Flor i da h ave few tax options available for meeting road needs. Urbanize d count i es already levy t he maximum local option gas tax allowed by law. All 4
receive a fixed share of gas tax reven u es collected by the state. This leaves only the local property tax with a n y room to grow, and the property tax ranks amo n g the least popular revenue sources in public opinion polls (see, for example Figure 1 ). Port Orange's property tax rate is only 4.3 mills per $ 1 ,000 assessed valua ti on. The city is empowered t o raise an addit i onal $5 mil lion a nn ua ll y under the Florida Cons t itution s 1 0-mi ll ca p far more t han required to meet road n eeds. Yet, Port Orange officia l s are reluc t ant to i n crease t h e mill age rate significantly. In localities such as Po r t O r ange a TUF may be the only po li tically via b le source of new reve!lue availab le: for road operation and m ainte n ance. Equ ity Another advantage o f a TUF is in the area of equ ity. Equity is very muc h in the eye of the beholder. For some it is equitab l e to base government lev i es on resi dents' ability to pay. For o t hers, i t is more equitable to base l evies o n use of government service s or benefits derived from government services. Public anti p athy t oward the local pro p erty tax sugges t s that it is pe r ce i ved as inequitable by all measures. The prop erty tax is only loosely rel ated to abili t y t o p ay for public serv i ces, u se of pu blic s e rvices, a nd benefits de r ived from p ublic services. A r ecen t report distributed by the Florida Chamber o f Commerce may reflect the common public 5
attitude toward the property tax: In its impact on individuals, Florida's property tax has bo th vertical and horizontal inequities .... Even with the homestead exemption, the property tax is very regressive for hom eown ers and renters ... Florida's property tax also has horizon tal i nequities beca u se it taxes identical properties at different rates, depending on tpe type of ownership .... The property tax has n o relati o ns hip to benefit s received.4 Port Orange's preference for a TUF is equity-related. With a TUF, every user pays to support the local road system. With a property tax, a significant perce nta ge of users are wholly or partially exempt from payment (see Table 1). Of course, some inequity creeps into transportation utility fees because local road use is estimated rather than mea sured, and because estimates are based on averages for entire classes of property. Only be tween class d ifferences i n local road use can be captured in the fee schedule; within-class differences are lost in the process of averaging. Still, Port Orange o f f ici als view this shortcoming as a les s serious than the exemption of entire classes of developed property from any payment under the property tax. A TUF is inherently r egres sive since all residential users within a given class are SRI International, Crossroads: D esignini Florida's Tax (Florida Chamber of Commerce Foundation, 1990), pp. 45. 6
charged the same fee, regardless of inco me. A fee schedule that assigns the same number of daily tri p s to all dwelling u.nits overcharges low-income households with below-av erage t rip rates, and undercharges t heir high-income neig hbor s. Let i t suffice to say tha t some of the regressivity can. be eliminated bY. differentiating in the fee schedule among housing types and providing a break for hou se holds without automobiles Even with a regressive fee, the gNat majority of residential risers will pay l ess than the y would have if the same total dollar amount were raised \vith a p roperty tax. Relative to a property tax; a TUF places. more of the financial burden on high trip generating commercial properties (see Table 2). Economic Efficiency The final advantage of user fees --promoting efficient allocation of reso urce s --does no t apply i n t he short run to TUFs. If road users could be charged for the mar ginal costs of thei r trips, including delay imposed on other road users and envirorunental damage, then trips valued at Jess than their social costs would not be made. Economic theory tells us such prici ng would maximize net b enefits to society. Absent metering of road use \vith A VI (automatic vehicle ide ntification) technology, a TUF must appear as a ftxe d charge to the individual user. In the short-run, a TUF neither moderates travel demand nor encourages use of more economically efficient 7
alternat ive s. It provides no demand signa ls t hat can b e u sed in service pla nning. In the lon g-run, however, individ ua ls' l ocat i o nal choices and the political process of fee setting could lead t o a rel a tivel y efficient a ll oc a tion of resources to ro ad p r ojects. FEESTRUCfURE Guida n c e in struc t uring a TUF is provided by the S upreme Co u rt o f Co l orado which uph eld For t Collins' TUF as a special fee ;5 by the Sup r e m e Court o f Idaho which struck down P ocatello 's TUF as a disg ui s ed tax;6 and by the courts and l egisl atures of o the r states, whi ch have drawn the line betw een u ser fe es taxes a n d specia l assessments through theii case law and e n ac tments The name given a revenue so u rce does n o t deter min e whe t her it i s a tax, assessment, or fee. What counts is a reven u e so urce 's c ha rac teris tics. Sal ie n t charac teristics a r e e n u m era ted in T able 3. I t is t he se char a cteri stics t hat w ill dete rmine whethe r a t rans po rtation utility fee" is in f act, a fee or someth i n g e lse. Municipa lities i n Florida are granted broad home ru l e powers. However, in Florida as in mos t s tates, t axes may be l evied o nly if speci f ically aut h oriz e d by statu te A TUF woul d be illegal if judge d to be a tax. Bloom v City of Fort Collins, 784 P .2d 304 (Colo. 1989). 'Brewster v City of Pocatello, 168 P .2d 765 (Idaho 1988). 8
Odds are that a TUF would also be illegal if judged to be a special assessment. Special assessments may be levied only on properties that realize some "special benefit" from facilities o r services Traditionally, this meant that properties had to abut physical impr ovemen t s to be subject to special assess m ents. Improveme nts fina nce d by this m eans tended to be limited in scale and scope (e.g., res idential street paving and subdivision street lighting). Mor e recently, special assessments have foun d "n on-traditional app l icat io ns, financing services and facilities beneficial to extensive areas and a broader pub lic.' Norr traditional special assessments have been upheld by the Florida courts in several cases.8 One Florida cour t even upheld a special assessment for areawide trash collection.9 Yet, in the case most on point a special assessment for a citywide road repaving program was declared invalid because t he b enefits conferred by the p r ogram were not "spec ial" enough .10 The courts o f virtu ally all states would have to stretch to find support 1 Judith W. \Vegner, Public and Private Partnerships for FinanCmg Highway Improvements, Highway Results Digest (May 1987), p. 7. See, for example, City a/Treasure Island v. Strong, 215 So.2d 473 (Fla. 1 %8); Bodner v. City of Coral Gables, 245 So.2d 250 (Fla. 1971); and City of Naples v. Moon, 269 So. 2d 355 (Fla. 1972). Cloarlotte Co1111ty v Fiske, 350 So 2d 578 (Fla. 2od DCA 1971). 10 Hanna v. City of Palm Bay, 579 So.2d 320, 322 (Fla 5th DCA 199 1). A small window of opportunity roay be left open by this decision since the special assessment in question was le vied under Chapter 170, F .S., which authorizes a special assessment only where a public improvement provides property owners with "a benefit which is different in type or degree from benefits provided to the community a s a whole." Insofar as Florida ease law applies a less demanding standard than does Chapter 170 (simply that costs be reasonably a p portioned in relation to benefits}, a special assessment for road maintenance might conceivably he upheld under municipal or county home rul e powers. 9 ;
for a TUF in existing precedents governing assessments. Basis for Fee Setting Taxes are based on ability to pay. The basis is obvious for income taxes; it is less obvious for sales and property taxes, but still tbe case.11 T ax revenues m ust be spent in a manner b eneficial to the p ublic (as opposed to priv ate interests) but need not.benefit any particular taxpayer. The nexus be twee n who pays and who ben efit s is weak o r n o nexis tent. Assessments are based o n special benefits derived from public facilities and services. Special assessments may not exceed the value of t he special benefits to property owners. Here the nexus between who pays a nd who benefits is very strong. Use r fees are based on tbe use of facilities or services. Feepayers mus t receive some b ene fit from the expenditure of funds, but the fee nee d not r elate exactly to the benefit received. The nexus between who pays a nd who b enefits i s more ten uous than wit h sp ecial a s ses sments. Where there are different classes of users, tbe clas ses may impact public facilities differently or be impacted by publi c facilities differently. Thus, in the interes t of equity fees 11 Property taxes are sometimes conceived as bencfitdrivcn. Police protection, f"ue protection, and other general sen-ices funded with prope .rty taxes may enhance property values communitywide However, service levels bear no direct relationship to tax incidence. That is why we conceive the property tax as fundamentlllly based upon ability to pay. 10
may vary a m ong user classes rathe r t ha n remaining a si m p l e and uniform function of use The most common basis for d ifferential fees is t he costs occasioned by di ffere nt users. Highway cost a ll ocation s tudies have long made the disti n cti o n between costs occasio n ed by highway use and benefits der i ved f rom highway use. Cos t s occasioned are m ost often u sed to allocate highway costs among vehicle classes a nd to establish corresponding fuel tax rates.1 2 It has been suggested that loca l road impact fee s be set on the same basisP P ub lic utili t y regulators have like wise made the dis tin ction b etween "cost of service" and "value of service." In Florid a it is left up to the Public S ervice Commissio n to determine what are f air and reasonab l e r ates fo r regu lated utilities. Different ial rates need not be pegged t o differential costs.t Still cost of service is the mo st commo n bas i s for utility rate setting and one generally acknowledged to be fair and reasonable. T he Colora d o S up rem e Coun is t he o nl y court as yet to uphold t h e l egality of a TUF (specif i cally, For t Colli n s TUF). The co urt ruled that a TUF bas ed o n cost of service could be levied u n der the municipality s home rule powers : See Congressional Budget Office, Who &'IS for Highways; Is a New S tudv of Highwav Cost A ll ocation Needed? (1978), pp. 43-46 and Appendix A; U.S. Department of Transportation, Final Report on tbe Highway Cos t Allocation Study ( 1982), Chap t ers II through IV; and The U rban Institute, RationalizatiQD o f Froced u res for Highway Co.st Allocation (1990), pp. 17-4 5 Sue McNeil, Thomas Ross i and Chris H e ndrickson, Im pact Fee Assessment Using Highway Cost Allocation Methods," T r answrtation Research Record 1101 (1987), pp. 73 79. u Florida Retail Federation v Mayo, 331 So.2d 308 (Fla. 1976); Incemational Minerals & Chemical Corp. v. Mayo, 336 So.2d 548 (Fla. 1976); and Occidental C!Jemical Co. v. Mayo, 351 S o.2d 336 (Fla. 1977). 11
We are thus s a tisfied that where as here, a m unic ip ality imposes a sp ecial fe e upon owners or occ upants of develope d l o t s fronting city str eets for th e p u rpo se of providing revenu es for th e mainten anc e of city s tree ts, and where the fee is reasonably designed to defray the cost of the s ervice prov i d ed by the municipality, s u ch fee is a va!id form of goverrun e n t charge within the l egislative au thority of the m uni cipality.1 5 (e m p hasis added) ' It is n o t cle a r whether the court expected the fee to de fray the cost of service on a l o tb y-lo t basis, or si m ply in t oto. City staf f h owever, clearly intended the f ormer: The f ac to r wi th th e mos t imp act (on street mai n tenance co st s ) i s the traffic loading p l aced up o n t he street by t he developed use of the p ro pe r ty fronting the street. For example, a single f a mily residen t ial home will gene rate an average of 5 trips per day where a fast food resta urant can gen e rate up to 100 t i me s that a mount. T o main tai n equity in a ll oc atin g cost to prope rty owners, t hi s must b e tak e n int o account.16 In Fl orida, gu idance in fee s etting co m es primarily from i mpact fe e cases. The landmark Dunedin case e stab lishe d cos ts oc cas ioned as the basis f or imp a ct fees : 15 B loom v. City of Fort Col/illS 784 P.2d 304, 311 (Colo. 1989). Jay M Col e and Robert L Lee, "The City of F o r t C ollins Transportation Ut ility Fee," unpublished briefmg paper p repared by city sta ff p 3. 12 .
Raising expansion capital by setti n g (impact fee s), whi ch do not e x ceed a pro rata share of reasonably anticipated c osts of expa nsio n, i s permissible where expansion is reasonably requ ired, f use of the money collec ted is limited to meeting the costs of expansion. 17 The Dunedin t est was applie d t o ro ads in Home Builders v. Board of Palm Beach County Commissioners. A road i m pact fee wa s upheld when evidence showed that the costs of cons tru cting additional roads assigned to different la nd u ses based on the numbe r of ve hicl e trips generate d, far exceeded the "fair share" fee charged by the co u nty.18 In sum, a TUF cou l d b e based str i ctly o n road use or could be refined to accoun t for d iff erent i al costs occas i oned by road user s. Costs occasioned is th e principal basis for hig hway cost allocation a nd utility rate setting. I t also appears more consistent wi th applicab l e case law "Reasonableness" Standard A fee sched u le m ust h ave some "reasonab le" basis.19 Eithe r u se" o r "costs 11 Contractors and Builders Association of Pinellas County v City of Dunedin, 329 So.2d 314, 320 (Fla. 1976). Home Builders v Board of County Commissioners of Palm Beach County, 446 So.2d 140 (Fla. 4 th DCA 1983). See, for example, Cooksey v. Utilities Commission, 261 So.2d 129 (Fla. 19'n). 1 3
occasioned by use" provides such a basis. This does not mean, however, that fees must be bas e d u pon precise estima tes of use or costs occasioned by use in order t o withstand l egal challenge. One challenging the reasonab l eness of a fee must overcome a strong presumption of validity b y demonstrating that government acted arbitrarily.2 One challenging user classific a t ions must show that there i s n o co nceivab l e rational basis fo r the user classific atio n scheme being attacked.21 In the Fort Collins case, the Colorado Supreme Court stated: The amount o f a special fee must be reasonably related to t he overall cost of the service ... Mathematical exactitude, however, is no t required, and the part icu lar mode adopted by a city in assessing t h e fee i s generally a matter of legislative discretion.22 The same standard will likely be applied by the Fl o r ida courts.23 New Smyma Beach v. lntemal Improvemem Trust Fund, 543 So.2d 824 (Fla. 5th DCA 1989). 11 User classifications are not subject to strict scrutiny by the courts except where a suspect class. such as race. or a fundamental righc, such as freedom of speech, is involved. Lcxa!JatciJee River Environmental Control District v. School Board of Palm Beach County, 496 So.2d 930 (Fla. 4th DCA 1986). Bloom v. City of Fort Collins, 784 P.2d 304, 308 (Colo 1989). See, for example, Pinellas Apartmem Association, Inc. v. Cily of St. Petersburg, 294 So.2d 676, 678 (Fla. 2nd DCA 1974). The court held that mathematical exactitude was not required in selling garbage collection fees that exactly reflected the cost of service 1 4
Fee Calc'ulations One reasonable basis for a TUF is t he n u mbe r of tr ip s genera ted by properties. ITE's Trip Generation Man ual has b een the basis for TUFs in Fort Collins, Pocatello, and Tualatin, Oregon. It will be the basis in Port O ran ge. To reflect differentia l trip making each property should be ass i gned to the most appropriate l1E land-use code, and the trip generation rate specific to that code should be applied to the property. In the past, fee schedules have often lumped ITE land-use codes toge ther into broad land-use categories, thereby creating very heterog e ne o u s categories. For p r operties that do not correspond to any ITE code, traff ic counts shou ld be conducted at property boundaries. Local traffic counts should also be conducted to verify and refine ITE rates. The fee schedule can be ref ined to better reflect use of local roads or costs occasioned by use by: Distinguishing between households with and without automobiles. The ITE . Manual provides adjustment factors for households without automobiles An applica t ion process can be used to s implify the admi ni s t ration of a special fee for autoless households. 15
Adjusting trip gen e ration e stimates for pass-by t rips that are attrac t ed to commercial pro p erti e s a s intermediate stops on the way to primary destinations, and also adjust i ng for in t ernal trips within mixeduse deve lopmen ts that never use the public road system. For consis t ency s sake, guidelines in t he ITE Manual s hould be foll o w ed when estima tin g pass-by and int e rnal tr ips. ' Using vehicle miles of t ravel rat her than number of trips as the meas ure of local road use Av erage trip lengths by land use can be estimated fmm regi o nal travel mo d els or l ocal travel surveys. Allocat i ng the cos ts o f arteria ls, collectors and l ocal roads separate l y in with the different functions performed by e ach (see Figure 2). Si n ce the primary functi o n of local roads is to provide access to land, costS o f such roads sho uld be assigned primarily to fron t ing property. On the other hand, si nce the primary function o f arterials is to provide mo b ility their c osts shou l d b e distri bu ted am o ng all road users. Co llect o rs fal l somewhere between the two Allocating costs of new construction, resurfacing, lighting, land scapi ng, etc. separ ately, us in g allocation f orm ul as specific to each cost comp o ne nt. Highway cost alloca t ion stud i es typ ic ally 'divide t otal costs into componen ts 16 .....
. and allocate each separately. Adjus tin g for the volume of tru ck traffic genera ted by land uses. In terms of wear and tear on pavement, studies have shown that heavily loaded trucks are equivalent to hundreds or even t housands of automobiles Accordingly, highway cost allocation studies have used equ iva le nt single axle l oads (ESALs) as a basis for alloc ating pavement rehabilitation and mai nt e nance costs OPERATING POLICIES PROCEDURES Along with a fee structure, operating policies and procedures must be established. Many have legal implications. Tax-exempt Properties All deve loped p ro perties, whether tax-exempt or not, should be charged if a TUF is truly a user fee. This includes properties owned by state and federa l age ncies and school districts, as well as a local government's own properties. Local governments can expec t challenges from other levels of government, contending a TUF is a disguised tax o r special assessment from which they are exempt. The Comptroller General has authorized federal agencies to pay charges for use of public 17
utilities, but would almost certainly object to roads be ing treated as a utility ... the furnishing by a State or l ocal government of a quantum of direct utility type services, such as sewer, water, trash, etc., to the Federal Government, for which payment may be autho r ized, is to be dist i nguished from the performance by a State or local government of governmental functions, such ' as police and fire protec t ion, re gulation of t raffic and road construction and maintenance, genera ll y supported by taxes for w hi ch payment by a Federal agency, absent statutory aut h ority, is not permissible .24 (emphasis added) Antici pating a challenge from a publi c agency, a loc ality might want to base itS TUF on an actual traffic count at a public agency's property lin e. This wou l d ensUie that the fee at l east, reflects the actual "quantum" o f road use. Vacant Land and Unoccupied Structures Property taxes are levied on vacant l and and unoccupied structures. Specia l assessments are also levied o n vacant land and unoccupied structures to the extent that their value is irl.creased by public improvements However, as a user fee a TUF is premised on the use of facili t ies or services. A 51 Comp. Gen. 135, 137 (1971). 18
TUF must be based on costs occasioned by use benefits derived from use or other userelated criteria. S i nce vacant land and u n occupi e d s tru c t ures do no t gener a te signi f ican t n umbers of t r ips, i t wou ld be unfair to impose a significant fee on them A f ee waiver or discount can b e granted to owne r s o f u n o c cupied structures e it her by means of an applicat i o n p r oc ess or based on negligible water u se. Tual atin us e d an app li catio n process originally but in order to simplify administration switched to waivers b a sed on water use. Owners and Occupants Whenever practical TUF o r dinan c es should impose fe es on occupants o f rental property. It is the occupants of p r operty that use the ro ad system The billing of non-owner occupants was a factor in t h e cour t dec i sio n upholding Fort Collins' TUF as a special fee r athe r than a tax. 25 Still, it was only one of many factors persuading the Colorado Supreme Court to ru l e as it did Moreover, t h e court see m e d unperturbed b y the fact that property owners were u lt i mate l y li ab l e fo r unpa i d fees in For t Collins Thu s i n t he interes t of fee collection and enforcement, it m ay b e adva n tageo u s to m ake prope rty owners li ab l e for f ees i f renter s fail to pay thelil, and m ake u n pa i d fees a lien o n property even at the risk of affecting the status "Bloom v Cily of Forr C
of a TUF.26 TUF Collection A TUF will ordinarily be co lle cted as part of a unified municipal utility bill. In Flor ida and many other s tates the property tax bill is limite d to ad valorem t axes and specia l . assessments In these sta t es, any locality collecting a TUF via the property tax bill is inadvertently compromising the TUF's s tatu s as a user fee. Orlando's stormwater utility fee was judged by t he Florida Attorney Genera l to be a special assessment rather than a user fee. His opinion was based, i n part, on Orlando's use o f the property tax bill t o collect t he "fee."27 Even in states without such restrictions, a l ocality may create a presumption that the TUF is a fee for service by adding it to the u nifie d utility bill along with water and sewer f ees, tras h collection fees, and storm water utility fees. Mak ing the TUF part of t h e month l y utility b ill could also hel p defuse public opposition. In explaining public prefere nce for the The Fort Collins' TUF ordinance specifies that: In the event that a t enant in posses.sion of any premi>e> shall pay sai d fee, such payment shall relieve the owner of such obligation and lien; but the city shall not be required to look to any person whomsoever other than the owner for the payment of such fee s. The TUF ordinance for Tualatin has equivalent language. Pocatello s ordinance makes owners and occupants 'jointly responSible' for the payment of fees. Florida Attorney General Opinion (AGO) 90-47. 20
sales tax over th e property tax, commentators often n ote that sales taxes are collec ted in s m all amounts with daily purcha ses while the property tax i s collected annually in o ne lump sum. Enforcement Payment of sho ul d be e nfor ce d primarily by cutting off oth e r public utility services b illed wit h the TUF. G i ven a unif ied u tility bill parti al payme n t s may e i ther be applie d to t h e TUF pri'or to water a n d sewer cha r ges or may be app li ed to all utility charges o n a pro r ata b a sis. In either case the water p ayment will come up sho rt and water se rvice may b e discontinued as method of e nfor cing payment o f o t her utility fe e s Discontinuance of services is t h e m ost effective o f the basic remedies for enforcing payment of delinquent charges.28 Howeve r it is no t imm une to challenge It ha s long been accep ted t ha t a pub lic u t ility may n o t refuse to render service for so m e colla tera l matter u nrela ted to service. Accordingly, courts i n Florida a nd cer t ain o ther states have adopted a n interl ocking" t es t t o decide whet her one u tility service ca n be cut off for no n payment of service charge s due anothe r utili ty .29 "See Mary Julia nn e Yard, "Es tablishing a S t o rm water Utility: Cons i d erations for the Loca l Gov ernment Lawyer; The Florida Ba r Journal (December 1990 ) p. 38. See St ate v. City of Miami, 27 S o .2d 118, 126 (Fla. 1946); Edri s v Sebri11g Utilities Commission, '1:31 So.2d 585, 587 (Fla. 2nd DCA 1970), cert d enied, 240 So.2d 643 (Fla. 1970}. 21
Water service and road maintenance are not sufficiently i n terre lat e d to meet the interlocking test. Even so, it may be possible to tie the two toge ther through a unifi ed utility bill. As local governments i n other state s ha ve added new service charges to the ir utility bills, a new legal test has emerged: Does the legislative scheme that permits u nifie d billing and termination of all service s for failure to make payment in full, bear a reas onab l e rela t i on to the goal of public he alt h protec t i on? If the answe r is "yes," unifi e d billing has been upheld.30 Appeals To ensure due proc ess requirements are met, a TUF ordinance should provide an avenue for appeal of fee calculations. In Tualatin road u sers may appe al t he lan d -use classification or square footage assigned to a p roperty in the fee calc ulati on. In Fort Collins, users were ab le to appeal i n sp ecial cases or cases of error in the fee calculation. The Florida courts are likely to allow even more room for appeals. The calculation of a TUF is analogous to the calculation of a road impa c t fee. Under t h e Home Builders decision, property owners are entit le d to in depe nden tly calculate road impact fees based on t hei r own trip generation studie s .31 See, for example, Perez v. City of Sa11 Bnmo, 616 P.2d 1287 (Cal. 1930) "Home Builders v. Board of Cowrty Commissioners of Palm Beaclr Cormty, 446 So.2d 140, 145 (Fla. 4th DCA 1983). 22
Parenthetically, only commercial l and uses need b e given the option of conducting independent trip generation studies. For residential land uses subject to fla t fees, appeals may be limited to the iss ue of appropriate land-use classification si nce the fee is b ased on average tr ip making charac teristics for an entire class of users . Dedication of Fund s TUF funds sho ul d be dedicated to road related purposes, without exception. While uphold in g Fort Colli n s' TUF ordinance in the main, the Colorado Supr eme Court struck down a severab le provision authorizing the city counci l to transfer excess reve n ues not required for road maintenance t o any other fund of t he city. If transferred, t h e fee would no lo nger bear a "reasonable relationship" to services rendered by the city for the nexus between who pays and who benefits would b e broken. The fee would beco me the "functional equivalen t of a tax."32 The Florida courts will doub t less adopt the same reasoning. The Fifth District Court of Appeal struck down Daytona Beach 's user fee for beac h access because the mon ies collected were not designed t o pay for only b eac h-relate d municipa l services cause d by vehic u lar use.33 "Bloom v. City of Fort Collins, 784 P.2d 304, 311 (Colo. 1989). City of Daytona Beaclz Shores v. State, 454 So.2d 651, 655 (Fla. 5th DCA 1984). 23
Even granting that TUF funds may be used only fo r ro ad-re l ated purposes the courts will likely hold that a portion of a city's general administrative expenses are "road-related" and thus eligible for TUF funding Eve n as it struc k down Fort Collins "transfer provision," the Colorado Supreme Court made it clear that the rul in g applied only to the use of excess reven u es for general governmenta l expenses ''umel ated to the mainten ance of city str eets."34 The use of funds to def r ay an equi t able share of overhead was le f t intact. Funds for New Construction Localities implementing TUFs to date have utilized funds stric tly for operation a n d maintenance of l ocal roads However, funds could also be used for new road cons t ruction, insofa r as such construction meets the needs of existing rat her t han new developmen t. This is the flip side of the issu e faced by localities in setti ng transporta t io n impact fees under the commonly accepted rational nexus test: In setting impac t fees, tota l cons t ructio n costs must be div i ded between cost s inc u rred to e li minate any backlog of road ne eds at current traf fic volu m es, and costs incurred to accommodate new trips due to anticipated development. Under the Dunedin decision, only the latter may be funded with impact f ees.3s Bloom v. City of Fort Collins, 784 P.2d 304, 311 (Colo. 1989). "Qmuactors a11d Builders Association of l'inellas County v. City of Dunedin, 329 So.2d 314, 321 (Fla. 1976). 24
Co nver se ly, only the former could be fun ded with a TUF since new users would otherwise benefit from a "windfall" at the expense of o ld users .36 Use of Roads by Non-residents The i ssu e of road use by n on-f ee pay ers loomed l arge in the Pocatello case. In ruling . agains t Pocatel l o s :fee the court he l d: Accepting the l egal def in ition t hat a fee is a cha rg e for a direct public service, while a tax i s a fo rced contr ibu tion by the public at l arge to meet public needs, the City cannot charge and collect fee s for t he res to ration and maintenance of public streets ... .fees colle cted from the own ers/occup i ers of the indi vidual premises go to support a proprietary s ervice t hat is s hared by the public at large.31 (emphasis added) Similar concerns arose in F l orida when impact fees were fus t u s ed to finance infrastructu re ava il able to the general public. The courts responded by limiting the amount of t he fee to a developer's "fa i r share" of to tal infrastructure costs that is, to t he cos t s 34 If a road user tax were involved, the proceeds cou l d be used for any road-related purpose. However, a TUF is a fee and llence it would be discriminatory to ask one class of road users to fund expenses clearly occasioned by another. The nexus between who pays and Who benefits is stronger f or a user fee than a tax. "Brewster v. City of Pocatello District Court, County of Bannock, State of Idaho, Register #39971-A, p .ll. 25
oc c asioned by the development itself.38 By ana logy, any b e nefit accruing to the public gene rally should not inval idate a TUF as l ong as fees do not exceed feepayers fair share of total road cos ts.39 The ba l ance o f road costs occasioned by those traveli n g throug h the community, .must be defrayed w ith other reven u es. CONCLUSION Under applicab l e law, a TUF mus t be r easonab l y related to the us e of roadways o r to costs occasioned by s u ch u se I f it is truly a user fee rather t ha n a tax or assessment, a TUF should be imposed on gover nm ental and o t her tax-exempt t r affic generators and on occ u pants of rental p r operty. By th e same token, it should not be imposed on vac ant land and u n occup ied structures since these land uses do not generate significan t numbers o f trips. The TUF should be collected with other u tility c h arges a n d s h ou l d be enforced by discont inuing othe r utility services for fa ilure. t o pay the utili t y bill i n f ull. Funds so co ll ected must be spent for t h e benefit of feepayers and may not be diverted to n o n -road "Home Builders v. Board of Cowuy Commissio11ers of Palm Beach Cowuy 446 So .2d 140, 1 4 3 (Fla. 4 t h DCA 1983). J' We embrace this conservative precedent to be on the safe side. AnOther line of Florida cases suggests that feepayers may be asked to pay the full costs of facilities they and others share See, for example, l>y Steel and Wtre Co., lnc. v. City of Jacksonville, 401 F .Supp: 701 (1975) The court in that case held: Plainti!fs argue that the ordinance unfairly r equire s that one group of persons pay for the benefit and exempts the other who a fso receive the benefit However, true this may be. t h e ordinance is not rendere d uncons titut ional. O u r sys tem of government freq u ently imposes certai n b u rdens on some groups whil e exempt ing others. 26
purposes. These and other elements have been incorporated into a 1UF ordinance for the City of Port Orange. The city is expected to adopt the ordinance in January 1992, and then test the legality of the 1UF by validating bonds to be repaid with proceeds. If the TUF i s upheld in Flor ida it wi ll bode well for l ocalities in other strong home rule" states that might ' wi$h to tap thi s new reve nue source. 27
Fi gure 1 Citizens' Attitudes Toward s Taxation i n Fl orida so+-... 70 .J..-:.--.2 60-l---. s so+---u _340+---ii 30 +--'--"' 20-l----10-1----0 -1----t . Source.: Institute of l'ublic Opinion Research and Florida Atlan tic University
Figure 2 PROPORTION OF SERVICE Mobility Arterials Collectors Locals Reproduced from American Association of State Highway and Transportation Officials, A Policy on Geometric Deign of Highways and Streets (AASHTO, 1990), p. 9.
'table 1 PORT ORANGE PROPERTY VALUATION (1990) Market Value o f Pro perty $1,070,575,955 Governmental Exemptions 39,344,031 Instituti o nal Exe m ptions 10,217,615 ( mos tly for nonp ro fits) Homestead Exemption . 219 489 509 ($25,000 for homeowners) Miscellaneo u s Exemptions 4 336,787 O ther Adjustments 6,793,077 Taxa ble Value of Property $790,394,936
Table 2 ANNUAL LEVY R E QUIRED FOR PORT ORANGE ROAD RESURFACING AND STREET LIGHTING ($873,800 PER YEAR) TUF Property Tax S in gle fami ly $56 $68 home ($65,000 taxable value } Convenience $368 $175 store wf gas pumps Quali t y $333 $366 restau r ant Gen eral off i ce $65 $271 Elementary $328 -school Church $12 -
Table 3 CHARACTERISTICS OF REVENUE SOURCES UNDER FLORIDA LAW User Fee Property Tax Special Assessment Bas i s for Charge Use Ability to Pay Special benefits Who Pays? Users (property Property Property owners or owners owners occupants) State & Federal NO YES YES, unless Property' Exempt? statutes authorize payments School Property N O YES YES, unless school Exempt? district agrees to payments Inst itutional Property NO YES, if owned by NO Exemp t ? a nonprofi t and used for exemp t purpose Home stead Prope rty NO YES N O Exempt? Vacant Land/Vacant YES NO NO S t ructures Exempt? Bill ing Mechan i sm Utility bill Property tax bill P r operty tax bill o r separa t e bill o r separate bill E nforcement D iscontinuance of Tax deed Lien foreclosure Mechanism ut ility services procedure or tax deed procedure Revenues Necessarily N O NO YES Spent Where Collected? Chatact erizations of user fees and special assessments are upon: Attorney General Opinion (AGO) 076137; AGO W-39; AGO 90-47; AGO 91-27; 49 Comp. Gen. 72 (1%9); 48 FlaJur.2d Special Asje.