|Legal Opinion: |
Text of Document: MEMORANDUM
FROM: Sid Hemsley, Senior Law Consultant
DATE: December 7, 2009
RE: Refuse Fees
You have the following question: Can a city charge refuse fees based on considerations other than the cost of providing the service?
Under the facts you related, the city currently pays for refuse collection from the general fund, but you have suggested to the city a $7 per month refuse charge, and an additional $5 per month for bush/leaves collection. Now one of the aldermen has asked whether the city can adopt differential fees for those services, and if the answer is yes, “what basis could be used for determining which customer is charged what fee? Could it be based on appraised value of property? On income?” What classifications of solid waste customer would have a reasonable basis?
With respect to income, the question of whether a county could adopt a solid waste customer classification based on age and disability arose in the unreported case of White v. Hickman County, 2005 WL 11210982 (Tenn. Ct. App. 2005). The court held that the classification was reasonable, at least after an amendment to the county’s solid waste disposal resolution. However, I still have serious reservations that this opinion would survive a challenge based on much better proof of rate discrimination on the part of the plaintiffs, which was sorely lacking.
In 1994, in White, above, Hickman County passed a solid waste management plan under Tennessee’s Solid Waste Management Act, reflected in Tennessee Code Annotated, title 68, Parts 8 and 9. In 1995, Hickman County passed Resolution 9570, under which it adopted a schedule for municipal solid waste disposal in the county. Apparently, that fee schedule was adopted under Tennessee Code Annotated, § 68-211-835(g), which authorizes cities and counties to “impose and collect a solid waste disposal fee,”( in addition to tipping fees and other fees, but provides that, “The amount of the fee shall bear a reasonable relationship to the cost of providing the solid waste disposal service.”
Section 1 of Resolution 9570 provided a solid waste disposal fee of:
RESIDENTIAL- $90 per dwelling per year
BUSINESS- $180.00 per business unit per year
INDUSTRIAL- $10.00 per ton over disposal cost.
Section 7 of the Resolution 9570 also provided that:
Elderly and disabled property owners qualifying for property tax reductions, according to records in the Hickman County Trustee’s Office, shall also qualify for a like reduction in MSW fees.
But in 1997, Hickman County passed Resolution 9724, which amended Resolution 9570. Pertinent amendments on the question of whether the county could give its citizens breaks in the cost of residential solid waste disposal based on age and income were:
- Section 1: Defined “RESIDENTIAL” as “Any dwelling unit constructed for human habitation intended for use during the current billing cycle. Section 3 of Resolution 9724 changed Section 7 in Resolution 9750 to read:
to include a fifty percent (50%) exemption for low income households based upon the most current poverty guidelines index as prepared by the Federal government. Persons desiring to take advantage of this exception shall furnish a copy of the household’s most recent IRS 1040 statement. Additionally, there is hereby authorized a fifty percent (50%) exemption for hunting cabins and second homes (cabins and homes which are used only for part-time recreational purposes.). The aforementioned exemptions shall be in effect retroactively to residential billing for the first half of the calendar year 1997. Also, retroactively effective to July 1, 1996, all churches are hereby exempt from solid waste fees unless they have a daily operation or program (day school, etc.). In such cases, they shall be billed according to the current Commercial billing system.
The court found that “with the passage of Resolution No. 9724 amending the original Resolution No. 9570, the current Resolution, as written, containing exemptions is not arbitrary and has a rational basis in fact and has corrected any prior inequities.” [At 4]
Much of the case involved the question of whether “The amount of the fee shall bear a reasonable relationship to the cost of providing the solid waste disposal service,” as required by Tennessee Code Annotated, § 68-211-835 (g)(1), but the court considered that question from the perspective of the whole fee system rather than by individual fee payers. The system had been losing money, and under the new fee schedule it was not losing money.
But the court briefly considered the question of whether the breaks given to residential rate payers based on age and income were legal. However, the court’s resolution of the question of whether exemptions for all or part of the garbage disposal fee appears to be based on the absence of proof by the plaintiffs. Said the court:
The last issue for this court to determine is whether the exemption process utilized by the Court is arbitrary and capricious. The Cut is authorized by statute it (sic) impose the solid waste disposal fee on all residence (sic). The manner by which this fee was being imposed bears a reasonable relationship to a proper legislative purpose. Newton v. Cox, 878 S.W.2d 105 (Tenn. 1994). Further, the statutory procedure, as it was imposed was neither arbitrary nor discriminatory and comports with substantive due process. This Court finds that there is no evidence of any discriminatory purpose for the classification system and that the exemptions have not been granted in an arbitrary manner. [At 10]
In the next paragraph, the court deals with the exemption for low income property workers:
Plaintiffs presented two lists summarizing exemptions granted by the County. (Trial Exhibits 15 and 16). Both lists appear to contain inconsistencies regarding the granting of exemptions. Dwight Sullivan, former chairman of the Solid Waste Disposal Committee, testified regarding the supposed inconsistencies. Mr. Sullivan explained that even though two people on the list claimed the same exemption (disability, fixed income, etc.), the exemption was only granted to those who actually established that they met the criteria. One way to establish this was to demonstrate to the committee that they qualified for the property tax reduction. These lists do not adequately provide the Court with evidence to conclude that the conduct of the County was arbitrary and capricious. [At 10]
The only “conclusive evidence of inconsistent treatment,” declared the court was by White and Holt, and that evidence involved residents and in home businesses. [At 10] But those incidents of inconsistent treatment had not occurred after Amendment 9724.
I am not sure what would have happened in White if there had been proof of discriminatory application of Amendment 9724. It seems likely that the court would have upheld the amendment that granted a 50% fee reduction based on the property exemption as being a reasonable classification, but would have held that its application was discriminatory. If that is so, White supports the proposition that a city can establish a class or classes of residents based on their property tax status, presumably under Tennessee Code Annotated, 7-64-101, 7-64-201, and 67-5-705, all of which authorize municipalities to defer property tax taxes on residences, based variously on income, age and disability.
The law governing the establishment of “reasonable classifications” is probably best expressed in the unreported cases of Tucker v. City of Clarksville, 2003 WL 21250811 (Tenn. Ct. App. 2003). Although that is a utility fee case, what is says applies to fee classifications generally:
Both the Fourteenth Amendment to the United States Constitution and Article I, Section 8 of our State Constitution known as the “Law of the Land” clause provide that equal protection requires that all persons in similar circumstances be treated alike, but it does not require “things which are different in fact or opinion to be treated in law as though they were the same.” [Citation omitted by me.] The concept of equal protection espoused by the federal constitution and our state constitution guarantees that “all persons similarly circumstanced shall be treated alike.” [Citations omitted by me.] Conversely, it has been held that things which are different in fact or opinion are not required by either constitution to be treated the same. [One citation omitted by me.] .... See also Tennessee Small School Sys. v. McWherter, supra, 851 S.W.2d at 153 wherein the court said: “The initial discretion to determine what is ‘different’ and what is ‘the same’ resides in the legislatures of the States,” and “legislatures are given considerable latitude in determining what groups are different and what groups are the same.” Id. “In most instances the judicial inquiry into the legislative choice is limited to whether the classifications have a reasonable relationship to a legitimate state interest.” [Citations omitted by me. Emphasis is mine.] .... In Harrison v. Schrader, 569 S.W.2d 822, 825-826 (Tenn. 1978), the court also found that the determinative issue is whether the facts show some reasonable basis for the disparate state action. The court stated as follows:
Under this standard, if some reasonable basis can be found for the classification, or any state of facts may reasonably be conceived to justify it, the classification will be upheld.
The Schrader court further held that the test to be applied, is that the classification must rest upon a reasonable basis and that if it has a reasonable basis, it is not unconstitutional merely because it results in some inequality and that reasonableness depends on the facts of the case and no general rule can be formulated for its determination. [At 5-6]
The burden of proof of showing that the classification is unreasonable, continued the court:
is upon the individual challenging the statute and if any state of facts can reasonably be conceived to justify the classification or if the reasonableness of the classification is fairly debatable, the statute must be upheld. [Citation omitted by me.] If a classification is naturally and reasonably related to that which it seeks to accomplish, it has passed the rational basis test and meets the constitutional standard. [At 6]
In the utility area, generally “reasonable classifications” are based on the cost of providing the service. Part of the reason is that the utility statutes generally do not allow utility fee “breaks” for utility users that are not based on the cost of providing the service, although cities apparently have latitude in developing utility fee customer classifications. For example, in Tucker, above, the City of Clarksville adopted an ordinance that set water and sewerage connection fees based on the square footage of the heated and cooled living spaces of the house connected to such services. The “legitimate governmental interest” of the City of Clarksville in adopting that classification derived from an engineering study that said that: The “current fee schedule is less than the cost incurred by the City to make the tap,” that, “The existing rate payers have made a substantial investment in plant facilities,” that, “The question arises, should the existing customers bear the burden of supplying services to an area for the benefit of the new customers or should the new customers bear their fair share”?, and that “Clarksville’s tap fees and policies should be modified so that new customers help pay for both the cost of local facilities and part of the infrastructure supplying the area.....” [At 2]
The “legitimate governmental interest” in White for the garbage disposal fee reduction seems to be aiding low income and elderly citizens of the city by reducing their fees for garbage collection services, and that it is a reasonable classification to use the low income, elderly and disabled property tax deferral statutes to promote that legitimate interest.
Tennessee Attorney General’s Opinion 06-177 addresses the question of whether counties and municipalities have the authority to exempt those who qualify for the state tax relief program from the stormwater fees.
It opines that the answer is no, for several reasons:
(1) 1. Tennessee Code Annotated, § 68-221-1107 authorizes municipalities to establish a storm water user fee; (2) that law requires a certain methodology to determine the stormwater fee; (3) and that law provides for an exemption from the stormwater fee that does not include those who are exempt from property taxes.
With respect to those three points that opinion reasons that:
- The stormwater fee statute [Tennessee Code Annotated, § 68-221-1107(a)] mandates a specific methodology of calculating the fee, based on the users proportional actual or estimated usage of the stormwater and flood control facilities of the city.
- The Attorney General’s Office has also previously concluded that entities otherwise exempt from taxation are not exempt from a user’s fee. In considering whether a religious institution would be exempt from the stormwater users fee, the Attorney General concluded that “[b]ecause the storm water user fee is not a tax, and because there is constitutional exemption for religious or charitable entities from paying fees for the services being rendered by the government, an otherwise tax-exempt entity is not exempt from paying a fee... [Op. Tenn. Atty. Gen. No. 94-039 (Mar. 21, 1994)]
- The legislature carved out an exemption to the storm water fee [owners of agricultural land and other persons whose water runoff is not discharged through the storm water or flood control facilities of the city], but did not include persons who qualify for the tax relief program. Under the rules of statutory construction, where there is an express exemption, it cannot be enlarged by implication.
There are obvious differences between Tennessee Code Annotated, § 68-211-835 (g)(1), which authorizes the municipality to charge a solid waste disposal fee, and Tennessee Code Annotated, § 68-221-1107(a), which authorizes municipalities to charge stormwater fees. The former statute does not mandate a certain methodology to determine the amount of the solid waste disposal fee; it says simply that:
.... a county, municipality or solid waste authority is authorized to impose and collect a solid waste disposal fee. Funds generated from such fees may only be used to establish and maintain solid waste collection and disposal services, including, but not limited to convenience centers. All residents shall have access to these services. The amount of the fee shall bear a reasonable relationship to the cost of providing the solid waste disposal services....
There is nothing in that statute that prescribes how individual solid waste disposal fees shall be established. As pointed out above, in White the court looked at the total fees raised under the solid waste resolution to determine whether “The amount of the fees shall bear a reasonable relationship to the cost of providing the solid waste disposal service.” (Tucker Corporation did the same thing with respect to the water and sewer connection fees at issue in that case.)
Likewise, there is no express exemption from the solid waste disposal fee built into the Tennessee Code Annotated, § 68-211-835 (g)(1). In fact, it was held in Horton v. Carroll County, 968 S.W.2d 841 (Tenn. Ct. App. 997), that under that statute every resident of the county could be charged a solid waste disposal fee whether or not the resident in question used the disposal service.
Those two major differences in the solid waste disposal fee statute and the stormwater fee statute may be enough to relieve a city’s concern that the exemption in its solid waste disposal fee ordinance or resolution might be defective. In addition, what is called for in White is a 50% reduction in the solid waste disposal fee based on the property tax exemption rather than an exemption from the fee, although it might be argued that the 50% reduction in the solid waste disposal fee reflects an “exemption” from 50% of the fee.
The city might use White to afford low income property owners relief from part of the solid waste disposal fee. I cannot accurately predict whether such an effort will legally succeed. White is an unreported case, which is not binding on the courts, but unreported cases have they have been called “persuasive” by the courts.
I do have a reservation about the exemption from the solid waste disposal fee imposed by Hickman County/ That resolution exempts churches from the solid waste disposal fee unless they run daily operations of some kind. White did not have any problems with that exemption, and no doubt that churches that operate daily programs generate more waste than do churches than do not operate such programs, but I am not sure that a total exemption reflects a reasonable classification. The city may want to reflect on whether to grant such an exemption.
Presumably, a solid waste disposal fee based on property tax assessments would also be a reasonable classification, due to the loose language of Tennessee Code Annotated, § 68-211-835(g)(1), and the absence of any other language in the Solid Waste Disposal Act that expressly requires solid waste disposal fees to be based strictly on the cost of providing garbage service.
I did run across this notation in O-Reilly, State & Local Gov’t Solid Waste Management, § 11.7(2d ed.), which appears informative on solid waste disposal charges:
A significant trend in local waste programs is the variable rate pricing that has been adopted by about 6,000 municipalities. It charges the waste generating public for amounts of solid waste that are larger than a certain selected amount; beyond that amount, there is a charge for each additional can or bag of waste. Such a “variable can rate” or “pay as you throw (PTYT)” is strongly supported by federal EPA because it actively encourages households to generate less waste and to recycle more of what would have gone to the local landfills.
Footnote 5 in that publication says, “http://www.epa.gov/oswer has a special page dealing with the EPA’s PAYT programing.”