2.4 FEES, CHARGES, EXACTIONS AND SPECIAL ASSESSMENTS

Most municipalities and many urban counties operate some other water or sewer utility system, provide solid waste collection service, and typically have in place the billing systems for those services. FLA. STAT., § 403.0893(1) authorizes the addition of stormwater utility fees to this array of charges.

For those governments (usually counties) who do not have pre-existing billing systems, FLA. STAT., § 403.0893(3) authorizes the creation of one or more stormwater management system benefit areas, within which property owners may be assessed a per-acreage fee. This statute requires differential fees to be established where the benefits to individual properties differ substantially within the same district. Governments using this method of collection are authorized to utilize the non-ad valorem method of assessment prescribed in FLA. STAT., Chapter 197. That chapter authorizes such assessments to be placed on the ad valorem tax bill for annual collection.

The statute thus blurs the traditional distinction between cost-based utility fees and benefit-based special assessments. This distinction still has constitutional implications.

Article VII of the Florida Constitution forbids local governments to impose any tax, other than the property or ad valorem tax, without Legislative authorization. The Legislature has been chary with such authority, and has dispensed it only under limited circumstances for local option sales taxes or additional motor fuel taxes or occupational license taxes. Municipalities and charter counties are also authorized to impose utility taxes.

The question of whether a governmental charge is a permissible fee or assessment or an impermissible tax has been the subject of much litigation. Generally, in order to fall within the perceived limits of a "special assessment," the amount of the assessment must be commensurate with the special benefit or increase in value of the assessed property. In order to fall within the perceived limits of a "user fee," the amount of the fee must be commensurate with the special burden caused by the user or property. The distinction between benefit and burden is sometimes blurred.

2.4.1 Special Assessments

The general statutory authority for municipalities to impose special assessments has existed in one form or another since 1923. It is now located in Chapter 170 of the Florida Statutes. It provides a procedure for imposing liens on benefited property, to recoup the capital costs of constructing or improving streets, drainage, water and sewer facilities, parks, seawalls, mass transit, and a host of other public facilities. This statute authorizes property to be assessed "upon the property specially benefited by the program, in proportion to the benefits to be derived therefrom." The statute is an additional and alternative method for making assessments.

Counties have similar general statutory authority under the provisions of Florida Statute §125.01(1)(q).

In 1992, the Supreme Court of Florida decided the case of City of Boca Raton v. State, 595 So.2d 25. In that case, the Court declared two important points. First, it declared that cities having home rule authority were not necessarily limited to the statutory procedure for imposing special assessments. They could devise their own systems by local ordinance. Second, the Court approved a novel means of apportioning "benefits" against the assessed properties. It allowed an assessment for the costs of a redevelopment district, measured by the increase in the assessed property value as a result of the project. The methodology thus has a passing resemblance to a Tax Increment Finance district.

After the decision in Boca Raton, cities and counties have relied with more confidence on their inherent home rule powers in making special assessments. Cities have such powers under Article VIII, §2 of the Constitution, and charter counties have such powers under Article VIII, §1(g). Noncharter counties have only the broad powers granted by the Legislature under Chapter 125 of the Florida Statutes, but at present those powers include the special assessment power.

In addition to these general statutory and constitutional powers, Florida Statute §403.0893 gives to cities and counties the specific power to create one or more stormwater utilities. Subsection (1) authorizes stormwater utility fees, and subsection (3) authorizes special assessments, sufficient to plan, construct, operate and maintain such systems.

In determining that property is "specially benefited" so as to distinguish a special assessment from an unauthorized "tax," the more traditional view has been that the expenditure must be for a capital purpose. Collection of such money for operations and maintenance is not a one-time benefit to the value of property, and is better characterized as a user fee.

It has also been the traditional view that the benefit must be "special"; that is, it must be some gain in value not generally experienced throughout the community. For example, in Hanna v. City of Palm Bay, 579 So.2d 320 (Fla. 5th D.C.A. 1991), the City imposed a citywide assessment for maintenance of streets. The Court struck it down, finding no "special" benefit.

The benefit can be indirect. For example, in Carson v. City of Fort Lauderdale, 244 So.2d 485 (Fla. 2d D.C.A. 1965), property owners argued that they were not benefited by a stormwater system for which they were being assessed, because they were on higher ground with good percolation. The Court upheld the program, finding that all properties in the assessment district received sufficient benefit.

Both of these tests were failed by a "transportation utility fee" attempted in the case of State v. City of Port Orange, 650 So.2d 1. The Supreme Court found that the imposition of a charge against abutting developed properties, for the ongoing expenses of local street maintenance, was an unauthorized tax.

Although the Port Orange decision caused initial fears among cities and counties that the Court was retreating from a broad construction of home rule powers, those fears were allayed when the Court in 1995 affirmed stormwater utility charges as valid special assessments. In Sarasota County v. Sarasota Church of Christ, Inc., 667 So.2d 180 (Fla. 1996), the Court held that the stormwater charges were not taxes from which the Church was exempt. It also pronounced that judicial deference should be given to the local government's determination of benefits. The case is also significant because it blurs the historic distinction between user fees (commensurate with burden) and special assessments (commensurate with benefit). The Court found that all of the specially-assessed properties, including the Church, "burdened" the stormwater system. Finally, the Court affirmed special assessments on an ongoing basis for operations and maintenance, without mentioning its prior decision in Port Orange.

In subsequent decisions, the Court has continued to blur the historic distinction between special assessments and user fees, approving "special assessments" for the pro rata costs of providing an array of continuing services. See Harris v. Wilson, 693 So.2d 945 (Fla. 1997) (solid waste collection); Lake County v. Water Oak Management Corp., 695 So.2d 667 (fire rescue services). Along with the Sarasota Church of Christ decision, these cases wander from the historic requirement that special assessments be limited to capital expenditures that specially enhance the value of the benefited property.

The limits of lawful special assessments were exceeded in Collier County v. State, 733 So.2d 1012 (Fla. 1999). In that case, the County proposed to create an "interim government services fee" to recoup the costs of services to newly-developed property during the period (often more than a year) before property taxes can be collected. The County provided for collection of the fee through the non-ad valorem assessment procedure on the annual tax bill, authorized under Chapter 197 of the Florida Statutes. On review, the Florida Supreme Court held that these "fees" for general government services were an invalid tax because the general services were provided to all other citizens and properties and hence there was no "special" assessable benefit. The Court also held that the costs could not be collected as a user fee.

City of Gainesville v. State of Florida Department of Transportation., 778 So. 2d 519 (Fla. 1st DCA 2001) reviewed the more recent stormwater utilities decisions and the difference between user fees and special assessments. In this case, the City sought to compel the Florida Department of Transportation to pay user fees for the City's stormwater services. The trial court held that the City was attempting to collect special assessments, not fees, and therefore the State was immune. On appeal, this decision was reversed. The appellate court held that cities are authorized by statute to create storm water utilities and that the charges here were user fees, not special assessments. A special assessment is generally for improvements and is based on the benefit the land incurs. In contrast, a user fee is connected to the service provided and has a reasonable relationship to the amount of the fee and the cost or burden of the service. The court characterized storm water utilities as similar to water or sewer utilities. Traditionally, state agencies have paid user fees for these services. Furthermore, the court recognized that the voluntary nature of the charges were characteristic of user fees.

2.4.2 User fees

User fees are sometimes distinguished from taxes by the explanation that they are "voluntary." However, many decisions recognize that they are not. For example, in City of New Smyrna Beach v. Fish, 384 So.2d 1272 (Fla. 1980), the Supreme Court approved a year-round charge for waste collection, even though many seasonal residents desired to suspend their service when they were not in residence. The Court recognized that the City had to be prepared to render the service whether or not the customer "voluntarily" chose to utilize it or not during a particular month.

In Pinellas County v. State, 776 So.2d 262 (Fla. 2001), the Florida Supreme Court distinguished a tax from a fee in examining a charge Pinellas County wanted to collect for the establishment of a county wide reclaimed water service. The Court found that the charge here was a fee, because the service provided a special benefit to those paying the fee, in the form of unlimited access to reclaimed water. Furthermore, the court found the trial court's standard, that a fee must be voluntary, was too narrow. Interestingly, the Court noted that where a government entity provides access to traditional utility services, the court has not hesitated to impose mandatory fees whether a customer uses or even wants the services. Thus, in the future the issue of the voluntariness of the service may not be a factor in establishing that a charge for stormwater services is a user fee.

Impact fees are related to user fees, in that they impose an initial charge for the capital cost of a service, especially a utility, where it might otherwise have been amortized over a longer time through periodic user fees. A customary means of financing water and sewer utility systems has been the imposition of monthly rates and charges, a portion of which goes to a sinking fund to retire bonds that financed initial construction. Much of the decisional law of Florida with respect to utility fees, whether for initial capital or recurring costs, may be applied to stormwater utilities.

In Contractors and Builders Association v. City of Dunedin, 329 So.2d 314 (Fla. 1976), the Court found nothing wrong with imposing on the new customer a responsibility to prepay the capital portion of those rates. Moreover, the Court found that the charges did not lose their character as "user fees" merely because connection to utilities was mandatory for new construction.

The Dunedin decision established a two-part test which has since been followed to distinguish user fees from taxes. In the case of a tax, there is no requirement that a taxpayer receive a proportionate benefit or service, but there must be some general legislation that authorizes the tax. In contrast, a user fee is not a tax and is within the "home rule" authority of a city or county if the fee is rationally related to a demand for a public service, and the amount of the fee is rationally related to the pro rata cost of the service. This is sometimes referred to as a "dual rational nexus" test.

These standards echo more recent decisions of the U.S. Supreme Court invalidating some governmental exactions which failed those tests. Dolan v. City of Tigard, 512 U.S.374, 114 S.Ct. 2309, 129 L.Ed. 2d 304 (1994) continues the Court's recent explication of takings jurisprudence as it applies to development permit conditions and exactions, of which user or impact fees are a species. In the decision, the Court found an unconstitutional taking where a development permit was conditioned on the granting of public easements for floodway protection and bike paths. The Court cited a lack of proof that a private easement would not have sufficed for the requisite floodway protection, and a lack of evidence of the precise traffic impact of the proposed development, in comparison to the traffic benefit to be gained from the bike path.

Dolan professes to do no violence to the presumption of validity traditionally indulged for broad-based legislative regulation of property. The permit conditions struck down as a taking in Dolan were supposedly the result of an adjudicative process, as to which the Court found the necessary evidence wanting. Nevertheless, the Federal constitutional test announced in Dolan bears a striking resemblance to the Florida "dual rational nexus" test previously applied to legislative enactments such as impact fee ordinances in Dunedin.

In its prior decision in Nollan v. California Coastal Commission, 483 U.S. 825, 107 S.Ct. 3141, 97 L.Ed.2d 677 (1987), the U.S. Supreme Court had announced the first "essential nexus" test, but the appropriate test for the second nexus was unclear. The Nollan Court cited, with approval, state court decisions approving a fairly lax relationship declared to exist between development and exaction (e.g. Ayres v. City Council, 34 Cal.2d 31, 207 P.2d 1 (1949)) as well as decisions requiring a less-indulgent "rational nexus" (e.g. Jordan v. Village of Menomonee Falls, 28 Wis.2d 608, 137 N.W.2d 442 (1965), appeal dism. 385 U.S. 4).

Dolan professed to follow the state court decisions adopting an intermediate "reasonable relationship" standard for the second nexus, and expressly rejected, as a Federal standard, the views of a minority of states which require a strict "specifically and uniquely attributable" nexus. However, the Court declined to use the "reasonable relationship" terminology, finding it too temptingly similar to the "rational basis" test for legislation as to which minimal judicial scrutiny is exercised. Thus the term "rough proportionality" was invented as an expression of the requirements of the second nexus, although the Court abjured any requirement of precision in mathematical calculation.

2.4.3 Credits

In order to satisfy the requirement of "rough proportionality," some consideration must be given to other contributions that a feepayer may have made for the same service. For example, impact or user fee ordinances commonly give credits for the present value of taxes that may also be paid in the future for the same kind of service or facility, such as debt service on general obligation bond issues.

In the case of a stormwater utility, it is advisable to consider the credit or offset issue where, for example, some customers of the utility may have been required to dedicate road and drainage easements or to construct onsite retention facilities as a condition of plat or site plan approval. A customer who has provided such contributions cannot be said to receive as much benefit as the customer whose construction predated the creation of the stormwater utility. Assuming that the courts continue to demand such standards as "rough proportionality" or "rational nexus" to distinguish special assessments and user fees from taxation and takings, attention should be given to calculating the value of such setoffs in the establishment of rates for stormwater utility charges or assessments.

Another means of restoring proportionality of fees between those who may have constructed onsite facilities and those who have not is to require onsite facilities wherever feasible. It is often thought that existing improved properties whose construction antedates current stormwater regulation are forever "grandfathered" from having to comply with requirements for onsite facilities. However, this is a political decision for the particular governmental entity, within certain constitutional limits. The legal test is whether there has been a sufficient time for amortization of those investments which were made in reliance on old laws in existence at the time of original construction. See Lamar Advertising Associates of East Florida, Ltd. v. City of Daytona Beach, 450 So.2d 1145 (Fla. 5th D.C.A. 1984), review denied 458 So.2d 272 (Fla. 1984); E.B. Elliott Adv. Co. v. Metropolitan Dade County, 425 F.2d 1141 (5th Cir. 1970). There is never a "vested right" to continue an activity which is a public nuisance, Mugler v. Kansas, 123 U.S. 623, 8 S.Ct. 273 (1887).

2.4.4 Exemptions

Exemptions from stormwater fees and assessments usually fall into one of three categories. There may be a statutory or constitutional immunity enjoyed by another governmental body. There may be social reasons for exemption of a class of users, such as an affordable housing development. Finally, there may be other reasons for governmental subsidy, such as promotion of economic development by excusing fees for industrial projects. To maintain the legal integrity of a stormwater utility, the cost of any such exemption or subsidy must be funded by a source other than user fees or special assessments, such as general taxation. Otherwise, the necessary "rough proportionality" of such fees and assessments will be distorted by absorption of the subsidy.

Property of a state or Federal government is typically exempt from special assessments unless some statute removes that exemption, but the use of a utility by that government is subject to the normal and customary utility rates.

Thus, school districts are exempt from impact fees or service availability fees under the provisions of FLA. STAT., § 235.26(1). In Hernando County Water and Sewer District v. Hernando County Board of Public Instruction, 610 So.2d 6 (Fla. 5th D.C.A. 1992), the Court refused to make the school board liable for water and sewer connection fees.

FLA. STAT., § 235.34 allows, but does not require, the use of school district funds for stormwater improvements on or contiguous to a school site, and a proportional share of onsite and offsite improvements made necessary by the school's construction. Subsection (1)(c) provides that such payments are not mandatory unless the specific improvement and cost have been agreed to prior to the improvement's being made. Subsection (2) provides that this statute regulates all assessments against school districts and community college districts, and any contrary local government ordinance is void.

However, in City of Cocoa v. School Board of Brevard County, 711 So.2d 1322 (Fla. 5th D.C.A. 1998), the school board lost a claim that it was not subject to stormwater utility fees under these statutes. The Court found that fees charged under FLA. STAT., § 403.0893(1) were "user fees" akin to water and sewer consumption fees. The case was remanded for trial of the question of whether the school board was truly a user of the stormwater system or, as it claimed, had a sufficient onsite stormwater system.

Similarly, in City of Gainesville v. State of Florida Department of Transportation, 778 So. 2d 519 (Fla. 1st DCA 2001, the Department lost its claim that the City's stormwater utility ordinance imposed a "special assessment" from which state properties are exempt.