|Legal Opinion: |
Text of Document: MEMORANDUM
FROM: Sid Hemsley, Senior Law Consultant
DATE: March 19, 2009
RE: Solid Waste Collection Fees
I have researched the question of whether the reference in Tennessee Code Annotated, ' 67-5-103(c) to the billing of "special assessments" on property tax bills as authorized by ' 6-2- 201(19) applies only to general law mayor-aldermanic cities. As you recall, a few days ago I orally opined that it might have been the intention of the General Assembly to have that statute apply to all cities in Tennessee.
I have changed my mind about the answer to that question. My research convinces me that the better view is that Tennessee Code Annotated, ' 67-5-103(c) applies only to special assessments made under ' 6-2-201(19) of the general law mayor-aldermanic charter. It might also be argued that Tennessee Code Annotated, ' 67-5-103(c) also applies to:
- The general law modified city manager-council charter by virtue of fact that ' 6-33- 101(a) of that charter provides that, "Every territory incorporating under the provisions of chapters 30-36 of this title has all the power and authority enumerated in ' ' 6-2-201, 6-19-101 and 6-19-102. "
- The general law manager-commission charter because ' 6-19-101(19) of that charter is similar to ' 6-2-201(19) of the general law mayor aldermanic charter, and identical as to the "special assessment to the property owner" part of the statute.
But Tennessee Code Annotated, ' 67-5-103(c) could easily and expressly be made to apply to all the general law charters, each of which has the "special assessment to the property owner" provision. With respect to respect to private act and home rule cities, consideration might also be given to opening Tennessee Code Annotated, ' 67-5-103(c) to such cities whose charters have "special assessment to property owner" provisions.
But there appears to be a threshold problem that needs to be looked at before such action is taken: Most cities that impose solid waste regulation, collection and disposal charges probably do not impose them as "special assessment[s] to property owner[s]" ; rather, they probably charge them as fees or user fees. In fact, it is often difficult to draw distinctions between what are called "special assessments" "fees," and "user fees." The "special assessment to the property owner" provisions in the general law charters and in Tennessee Code Annotated, ' 67-5-103(c), appear to make it clear that in context of that latter statute the solid waste regulatory, collection and disposal fee must be levied against the property. Indeed, that is probably the reason that statute authorizes such an assessment to be billed on the property tax bill, and why it does not allow the same thing for "fees" and "user fees" and "other charges." In any case, note that the statute does not allow the special assessment to be treated the same way as a property tax bill; no lien attaches to the property, and no penalties or interest for late payment of the special assessment accrue. Presumably, the property could not be sold for failure to pay the assessment.
Section 6-2-201(19) of the general law mayor-aldermanic charter provides that:
(19) Collect and dispose of drainage, sewerage, ashes, garbage, refuse or other waste, or license and regulate their collection and disposal, and the cost of collection, regulation may be funded by taxation, special assessment to the property owner, user fees and other charges;....
The general law manager-commission charter, ' 6-19-101(19) contains a similar provision, as follows:
Collect and dispose of drainage, sewerage, ashes, garbage, refuse or other waste, or liens and regulate such collection and disposal, and the cost of such collection, regulation or disposal may be funded by taxation or special assessment to the property owner; ....
The general law modified city manager-council charter, ' 6-33-101(a), also contains this provision: "Every territory incorporating under the provisions of chapters 30-36 of this title has all the powers and authority enumerated in ' ' 6-2-201, 6-19-101 and 6-19-102."
Tennessee Code Annotated, ' 67-5-103(c) provides that:
With respect to municipalities that fund all or part of the cost of waste disposal by special assessments to the property owner, as authorized in ' 6-2-201(19), the special assessment may be billed in the same manner as municipal real property taxes notices, but shall not constitute a lien on any affected property or accrue any penalties or interest for late payment. Any municipality that exercises this method of waste disposal by special assessment shall bear all costs of system modifications necessary to prepare property tax notices.
Note that Tennessee Code Annotated, ' 6-2-201(19) [general law mayor aldermanic charter] and Tennessee Code Annotated, ' 6-19-102(19) [general law manager commission charter] differ in the respect that the former authorizes municipalities to pay for the regulation, collection and disposal of solid waste by taxes, special assessments to the property owner, and user fees and other charges, and the later authorizes municipalities to pay for the cost of the regulation, collection and disposal of solid waste by taxation or special assessment to the property owner. Tennessee Code Annotated, ' 6-33-101(a) in a left hand fashion, authorizes municipalities to pay for the regulation, collection and disposal of solid waste by both the methods prescribed in the general mayor aldermanic and the general law manager-commission charters.
A number of Tennessee cases undertake the distinction between taxes and special assessments. That distinction indicates that by whatever name they might be called "special assessments" for solid waste regulation, collection and disposal, are not taxes. However, only a consideration of West Tennessee Flood Control & Soil Conservation District v. Wyatt, 247 S.W.2d 56 (Tenn. 1952), is necessary to make that point. In that case, the public act establishing the plaintiff flood control district authorized the board of commissioners of the district to "levy special assessments against any and all lands within the district which may be benefitted by said improvements in an amount that is necessary, not to exceed fifty cents per acre in any one year, said benefits to be determined by said Commissioners after a hearing before said board." The board of commissioners levied a general "special assessment" of $.50 per acre against all the land in the flood control district. The principal question before the Court was whether the $.50 per acre levy was a tax or a special assessment.
Holding that it was a tax, the Court distinguished between a tax and a special assessment:
Whether or not the Act in question is an unlawful delegation of the taxing power is not determined by the term "special assessments." While the law recognizes differences between special assessments and a tax, the purpose for which it is levied is controlling. The differences between a special assessment and a tax are (1) a special assessment can be levied only on land for special purposes; (2) a special assessment is based wholly on lands benefitted. The imposition of a charge on all property, real and personal in a prescribed area, is a tax and not an assessment. Where the assessment is to provide revenue for both general and special purposes it must be denominated a tax as distinguished from a special assessment. In other words if the money collected, all or any part of it, is used for some purpose other than as a direct benefit to the land assessed, it is a tax. The Constitution expressly forbids the Legislature from delegating to a subordinate agency, such as the defendant "Flood Control and Soil Conservation District," the power to levy such a tax. [At 58.]
However, continued the Court,"It cannot be doubted that the Legislature has the authority to select or create new governmental agencies and delegate to them the power to make 'special assessments ' for the benefit of lands located in a specified area." [At 58] [Citations omitted.]
Why was the "special assessment" levied by the flood control district actually a tax (which the district had no constitutional authority to levy)? The Court reasoned that:
1. The Act did not provide that the assessment levied be for any particular purpose. In fact, it provided that the levy was "to provide revenue for the operation of the district." [The Court's emphasis.]
2. The Act did not define the improvements to be made, nor for the filing of any pleading or procedure specifying in detail the planned improvements.
3. The Act contained no planned procedures or specifications of any kind providing the manner of determining special benefits and their ratio. The Court, citing an earlier case, acknowledged the difficulty of formulating a plan or method by which to determine which and by how much lands are benefitted by a local improvement project, but that difficulty did not negate the requirement that the Act contain such a plan.
Finally, declared the Court:
The whole theory upon which "special assessments" are upheld as not violative of constitutional limitations upon the power to tax, is that the property assessed "will be specially benefitted thereby above the benefits received by the public at large;" and, while the results may not be such as are anticipated, still the principle holds good. And it is likewise held that the burden may be apportioned between the public and the property benefitted, and between the property owners themselves, according to actual benefits expected, or according to value, or, in some jurisdictions, according to the area of frontage, as the Legislature may direct. [Arnold v. City of Knoxville, supra [115 Tenn. 195, 90 S.W. 473.] [At 61.]
[Also see Reasoner v. Memphis, 39 S.W. 2d 1029 (1931); Rockwood v. Rogers, 290 S.W.2d 381 (1926); Obion County v. Massengill, 151 S.W.2d 156 (1941).]
Patterson v. City of Chattanooga, 241 S.W.2d 291 (Tenn. 1951) pointed out the difference between taxes, user fees and special assessments:
'As we have pointed out, sewer rental charges are not taxes or special assessments, but possess commercial characteristics. '
The same holds true in the instant cases. Here the user of water is assessed a certain amount for the use of the sewer which under ordinary circumstances is a necessary incident to for the user of water to have to dispose of the sewerage and water after it is used and polluted. It is upon these users alone that the charge is made and not upon the property as a whole but as the various property owners and properties become users of water they are charged for this service measured by the quantity of metered water supplied them...
The Court of last resort of Oklahoma in the case of Sharp v. Hall, 18 Okla. 678, 181 P.2d 972, 974, basing its opinion on an Alabama case of Benson v. Andalusia, 204 Ala. 99, 195 So. 443, reached the same conclusion. The Oklahoma Court saying: 'such charges assessed for the use of the sewer system cannot be construed as a general tax. They are charges for special benefits received by certain persons residing in he city, but not enjoyed by all. ' [At 293]
But in cases involving charges for municipal services of various kind, the use of the words "assessed," "special assessment," "special benefits," and similar language can be confusing as to exactly the form and character of the charge at issue. Tennessee Attorney General's Opinion 83-466 makes a similar point. There one of the questions was whether the "fire tax" levied by Shelby County was a tax or a fee, to which that opinion declared:
There is some doubt whether the charge for fire protection is properly labeled a "fee," since that term generally refers to a payment made upon the voluntary use of a service. See Parking Authority v. City of Trenton, 40 N.J. 251, 191 A.2d 289, (1963); Jersey City Sewerage Authority v. Housing Authority, 40 N.J.145, 190 A.2d 870 (163); 16 E. McQUILLIN, THE LAW OF MUNICIPAL CORPORATIONS ' 44.02. N.16 (3d ed. 1979). Here property owners in rural Shelby County must pay the fee whether they desire fire protection or not; the element of voluntariness is wholly absent from the program. This charge resembles a 'special assessment,' the legal term used when a government furnishes a service and then assesses a charge against those citizens who benefit from it. A citizen cannot choose to reject the benefit from a special assessment, just as persons in rural Shelby County cannot decline fire protection. A special assessment generally is for a permanent improvement to property; fire protection however, has been deemed a proper purpose for a special assessment. See McCoy v. City of Sisterville, 120 W.Va. 471, 199 S.E. 260 (1938). The courts have not carefully preserved a distinction between fees and special assessment, [Emphasis is mine.] and some charges have been deemed fees even though citizens could not choose to avoid them by rejecting the service offered. See Holman v. City of Dierks, 233 S.W.2d 392 Ark. (1950) (fee imposed on each dwelling and business for spraying the city with insecticide.) [Emphases are mine,]
In the instant case, it makes no real difference whether the charge is characterized as a fee or a special assessment. Section 5-16- 101(a) authorizes counties 'to charge fees, rates and charges,' so it too is not limited to fees....
It is clear that whether the fire protection charge is a fee or a special assessment, it is not to be treated as a tax. ' [T]axes are burdens of a pecuniary nature imposed generally upon individuals or property for defraying the cost of governmental functions ' . [Citation omitted by me.] They are payable into the general fund to defray the customary governmental expenditures. Id. In contrast, the instant charge is imposed only on those who benefit from it, and only an amount necessary to pay for the service. It is indisputable that mere fees imposed upon users of a municipal service are not taxes. It is equally clear that ' [a] special assessment is not in the constitutional sense a tax at all. ' S. Siwel & Co. v. Los Angeles County, 160 P.2d 789, 792 (Cal. 1945).
But note that TAG 84-446 itself creates some confusion about the form and character of a special assessment, by declaring that, "This charge resembles a 'special assessment, ' the legal term used when a government furnishes a service and then assesses a charge against those citizens who benefit from it..." In almost the next breath it declares that, "A special assessment generally is for a permanent improvement to property." That language does not clear up the distinction between a user fee, which is a charge assessed against the user of a service, and a special assessment, which is generally a charge assessed against the property, regardless of who is the user, for the benefit received by the property. Obviously, the property owner is liable for the special assessment against the property.
Here we come to the distinction that the Tennessee courts have made between a tax and a fee. S & P Enterprises, Inc. v. City of Memphis, 672 S.W.2d 212 (Tenn. Ct. App. 1983), upheld an amusement device regulation fee that the plaintiff argued was a tax. The city by affidavits argued that the fee would produce revenue of around $225,000 and the implementation program would cost $227,000. The Court observed that:
An occupational or a privilege tax embodies as its primary purpose the creation and collection of revenue while a true license fee as distinguished from such a tax should be fixed to cover the expense of issuing it, the service of officers and other expenses directly or indirectly incident to the supervision of the particular business or vocation. [Citing Macmillan v. City of Knoxville, 139 Tenn. 310, 202 S.W, 65 (1917). [At 215]
Such a fee, continued the Court, "is only required that the fees bear some reasonable relationship to the expenses involved...." [At 217]
More recently, in City of Tullahoma v. Bedford County, 938 S.W.2d 408 (Tenn. 1197), it is said that:
Whether the charge for depositing waste in a landfill is a tax or a fee, even though denominated a tax, is determined by its purpose. A tax is a revenue raising measure levied for the purpose of paying the governments general debts and liabilities. Memphis Retail Liquor Dealers ' Ass ' n v. City of Memphis, 547 S.W.2d 244, 245-46 (Tenn. 1977). See City of Knoxville v. Lee, 159 Tenn. 619, 623, 21 S.W.2d 628, 629-30 (1929). 16 Eugene McQuillin, The Law of Municipal Corporations, ' 44.02 (rev.3d ed. 1994). A fee is imposed for the purpose of regulating a specific activity or defraying the cost of providing a service or benefit to the party paying the fee. [At 412] [Citations omitted.]
One of the most instructive cases on this distinction with respect to court costs is Crocker v. Finley, 459 N.E.2d 1346 (Ill. 1997), and is cited with approval in City of Tullahoma v. Bedford County, above. In Crocker, an Illinois statute required court clerks to collect a $5 filing fee in all
cases seeking a dissolution of marriage, which was to be used to fund shelters and other services for the victims of domestic violence. Holding that the fee was actually a tax, the Court said:
A fee is defined as a "charge fixed by law for services of public officers." (Black's Law Dictionary 553 (5th ed. 1979) and is regarded as compensation for the services rendered (36 A C.J.S. Fee, at 248 (1961)). Thus court charges imposed on a litigant are fees assessed to defray the expenses of his litigation. On the other
hand, a charge having no relation to the services rendered, assessed to provide general revenue rather than compensation, is a tax. [Citation omitted.] [At 452]
In the general law mayor-aldermanic charter, cities have the option of paying for the regulation, collection and disposal of solid waste by "taxation, special assessment to the property owner, user fees, and other charges." But the language in that charter, and in the other two general law charters, about "[by] special assessment to the property owner," and in Tennessee Code Annotated, ' 67-5-103(a) does not appear to be a loose use of the term "special assessment." Rather, it is discrete term, in which the cost of the regulation, collection and disposal of solid waste are paid by the property owner, not by taxation, nor user fees or other charges. For that reason, in order to obtain the benefit of Tennessee Code Annotated, ' 67-5- 103(a), the charge for solid waste regulation, collection and disposal must actually be a special assessment against the property owner. Although West Tennessee Flood Control & Soil Conservation District v. Wyatt, above, dealt with the question of whether the charge in that case was a tax or a special assessment, it is worth reviewing for the purpose of determining what qualifications a charge must meet to be a "special assessment to the property owner" in the context of the general law charters and Tennessee Code Annotated, ' 67-5-103(a). The general law mayor-aldermanic charter, and perhaps the other two general law charters, resolve the question of whether there is a state statute authorizing the special assessment. But they do not contain any guidelines for how the special assessment must be made. Generally, it appears that a special assessment statute or ordinance must detail how that is to be done, based on some benefit to the property in question.