Opinion
NO. 2013-CA-000716-MR
07-03-2014
CITY OF LANCASTER, KENTUCKY; GARRARD COUNTY WATER ASSOCIATION, INC.; HARLAN BRATTON; AND JOE NAYLOR APPELLANTS v. GARRARD COUNTY, KENTUCKY; AND GARRARD COUNTY FISCAL COURT APPELLEES
BRIEFS FOR APPELLANTS: David S. Samford Mark David Goss L. Allyson Honaker Lexington, Kentucky M.E. Wesley Lancaster, Kentucky ORAL ARGUMENT FOR APPELLANTS: David S. Samford Lexington, Kentucky AMICUS CURIAE BRIEF FOR DUKE ENERGY CORPORATION: Rocco O. D'Ascenzo Cincinnati, Ohio AMICUS CURIAE BRIEF FOR KENTUCKY ASSOCIATION OF ELECTRIC COOPERATIVES, INC: Dan Yates Louisville, Kentucky AMICI CURIAE BRIEF FOR LOUISVILLE GAS AND ELECTRIC COMPANY AND KENTUCKY UTILITIES COMPANY: Kendrick R. Riggs Timothy J. Eifler Deborah T. Eversole Stephen A. Sherman Louisville, Kentucky Allyson K. Sturgeon Louisville, Kentucky BRIEF AND ORAL ARGUMENT FOR APPELLEES: Mike Troop Frankfort, Kentucky AMICUS CURIAE BRIEF FOR KENTUCKY ASSOCIATION OF COUNTIES: Timothy A. Sturgill Frankfort, Kentucky AMICUS CURIAE BRIEF FOR KENTUCKY RURAL WATER ASSOCIATION, INC.: Damon R. Talley Hodgenville, Kentucky AMICUS CURIAE BRIEF FOR KENTUCKY POWER COMPANY: Mark R. Overstreet Frankfort, Kentucky
TO BE PUBLISHED APPEAL FROM GARRARD CIRCUIT COURT
HONORABLE C. HUNTER DAUGHERTY, JUDGE
ACTION NO. 12-CI-00383
OPINION
REVERSING AND REMANDING
BEFORE: JONES, MOORE, AND TAYLOR, JUDGES. TAYLOR, JUDGE: The City of Lancaster, Kentucky, and the Garrard County Water Association, Inc., (collectively referred to as appellants) bring this appeal from a March 21, 2013, Opinion and Order of the Garrard Circuit Court granting a motion for summary judgment in favor of Garrard County and Garrard County Fiscal Court. We reverse and remand.
On August 13, 2012, the Garrard County Fiscal Court enacted Ordinance No. 0-08-13-12-1 to provide financial support for the 911 emergency telephone service provided to the residents of Garrard County. The Ordinance provides, in relevant part:
WHEREAS, there currently is a system for financial support based upon a charge on "land line" phones in Garrard County, Kentucky, and
WHEREAS, technology advancements have resulted in the current financial system for support of 9-1-1 emergency communications unfairly placing the burden of supporting the system on a disproportionately small segment of the citizens of Garrard County, Kentucky, and
WHEREAS, Kentucky Revised Statutes (KRS) 65.760 provides that the financial support of 9-1-1 emergency "may be obtained through the levy of any special tax, license or fee not in conflict with the Constitution and Statutes of this state," and
WHEREAS, the Garrard County Fiscal Court believes that distributing the burden among the citizens through a fee on water meters is more equitable and requires more persons to support the system than a "land line" phone fee.
NOW, THEREFORE, BE IT HEREBY ORDAINED by the Garrard County Fiscal Court that there is established, imposed and implemented a charge of .25 [sic] cents on each and every water meter located in Garrard County, Kentucky.
IT IS FURTHER ORDAINED that every water company, water association or other entity operating a
water distribution system in Garrard County, Kentucky shall collect the herein established fee and remit said amounts so collected, on not less than a quarterly basis, to Bluegrass 911 Communications and shall be permitted to withhold 2% of these monies for the administration of this fee.
Under the Ordinance, a "fee" of 25 cents was imposed upon every water meter located within the geographical confines of Garrard County to finance the county's 911 emergency communications system. A concomitant duty was imposed upon entities providing water within the county to collect the fee; this included the City of Lancaster and the Garrard County Water Association (GCWA).
Consequently, on November 9, 2012, the City of Lancaster filed a Verified Complaint for Declaratory and Injunctive Relief against Garrard County and the Garrard County Fiscal Court. Therein, the City alleged the Ordinance was unconstitutional and that collection of the fee was an unconstitutional taking of property. The Fiscal Court filed an Answer and Third-Party Complaint against GCWA. The Fiscal Court then filed a motion for summary judgment alleging that the Ordinance merely established a valid user fee. By Opinion and Order entered March 21, 2013, the circuit court rendered a summary judgment upholding the validity of the Ordinance and concluding that the Ordinance imposed a valid user fee. The Court specifically reasoned:
Here, the Court finds the fees levied under the Garrard County ordinance are for the statutorily provided governmental objective for the citizens of Garrard County, that is, funding and continuation exclusively ofThis appeal follows.
the 911 emergency services not otherwise provided by a nongovernmental entity/provider. The monies generated by the fee cover only the operational costs of the 911 service, are not revenues or profits in excess of the reasonable costs associated with the public service. The fees are placed within a specific 911 account, not Garrard County's general fund.
Moreover, KRS 65.750 et seq. provides that there can be "other means of funding" in addition to or in lieu of the telephone land line funding collected by a telephone utility. In the Court's view the statute does not restrict the fiscal court's decision as to the source of funding or the collection mechanism, therefore the fee upon a household's water meter and the collection and remittance by a water utility is appropriate under the statute.
Constitutionally, the proposed fee is indistinguishable from the land line fee authorized by KRS 65.750 which, to this point, has remained unchallenged.
CONCLUSION
The Garrard County ordinance, No. 0-08-13-12-1, levies a constitutionally valid and statutorily permissible fee upon the household water meters in Garrard County, Kentucky for the sole purpose of funding the Bluegrass 911 Communications as allowed under KRS 65.760. The fee may be collected and remitted to the County by the water utilities within Garrard County.
Appellants contend that the circuit court erroneously rendered summary judgment upholding the validity of the Ordinance. Appellants advance myriad arguments to support their contention that the Ordinance is invalid. In particular, appellants focus on the circuit court's legal conclusion that the Ordinance imposed a valid user fee upon every water meter in Garrard County. Appellants do not believe that the Ordinance imposed a valid user fee but rather believe the Ordinance imposed an invalid tax. Appellants urge this Court to conclude that the Ordinance was invalid as it imposed a tax rather than a valid user fee.
To begin, summary judgment is proper where there exists no material issue of fact and movant is entitled to judgment as a matter of law. Kentucky Rules of Civil Procedure 56; Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476 (Ky. 1991). In its summary judgment, the circuit court viewed the fee imposed under the Ordinance as a valid user fee. Having reviewed applicable legal precedents, we are of the opinion that the fee imposed by the Ordinance is not a valid user fee and that the circuit court erred by rendering summary judgment concluding that it was.
Under Kentucky Revised Statutes (KRS) 65.760(3), a city, county, or urban county government may "through the levy of any special tax, license, or fee not in conflict with the Constitution and statutes of this state" raise funds required to operate a 911 service. The Fiscal Court's stated purpose for enacting the Ordinance was to provide the necessary funding for 911 service. The Ordinance does so by imposing a "fee" upon every water meter located within the geographical area of Garrard County. The circuit court viewed the fee imposed under the Ordinance as a valid user fee. In support thereof, it reasoned that "the proposed fee is indistinguishable from the [telephone] land line fee authorized by KRS 65.750." For the reasons hereinafter stated, we hold that the circuit court misinterpreted and misapplied the law of this Commonwealth.
A user fee is simply defined as "the fee or charge imposed by a local government on the user of a public service . . . ." KRS 91A.510. Our case law has recognized that a valid user fee exists where there is a reasonable relationship between the fee charged and the benefit received. Ky. River Auth. v. City of Danville, 932 S.W.2d 374 (Ky. App. 1996); Board of Educ. of Fayette County v. Lexington-Fayette Urban County Gov't, 691 S.W.2d 218 (Ky. App. 1985); see also 84 C.J.S. Taxation § 3 (2014). Generally, a user fee is charged to the recipient of a benefit received from the government or for a particular governmental service. For example, tolls paid by a driver for the use of a particular highway or fees paid by individuals with telephone land line service for the benefit of 911 telephone service are classic user fees. In these examples, the fees charged to the driver or land line telephone user are directly related or bear a reasonable relationship to the use or benefit of a government service (use of highway or benefit of 911 service). This direct relationship between the fee charged and benefit received is a prerequisite to a valid user fee.
In this case, no such direct relationship exists between the fee charged (25 cents upon each water meter) and the benefit received (911 telephone service). It is for this reason that the fee set forth by the Ordinance is not a valid user fee, and the circuit court erred by rendering summary judgment concluding that it was.
We do not reach the questions of whether the fee as provided in the Ordinance constitutes a license or a tax and, if so, whether either is valid. Rather, these questions are to be considered by the circuit court upon remand. Our review is limited to the circuit court's grant of summary judgment upon the legal conclusion that the Ordinance imposed a valid user fee, which we have concluded was in error.
However, upon remand, if the circuit court determines that the ordinance imposes a tax, the parties at oral argument have both conceded that it would be an unconstitutional tax, whereupon the ordinance would be invalid under Kentucky Revised Statutes 65.760.
We view any remaining contentions of error as moot.
In sum, we hold that the circuit court erred by rendering summary judgment concluding that the fee set forth in the Ordinance was a valid user fee. We hold that the fee imposed by the Ordinance did not constitute a valid user fee.
For the foregoing reasons, the Opinion and Order of the Garrard Circuit Court is reversed and remanded for proceedings consistent with this opinion.
JONES, JUDGE, CONCURS.
MOORE, JUDGE, CONCURS IN PART, DISSENTS IN PART, AND FILES SEPARATE OPINION:
MOORE, JUDGE, DISSENTING IN PART: I concur with the excellent opinion of the majority reversing the circuit court's decision. However, respectfully, I would not remand this case on the issue of whether the ordinance imposing the "fee" is actually a veiled attempt to impose a tax, which as written would be unconstitutional. Counsel for all parties agree that it if it does constitute a tax, it would not be constitutional. I agree. Accordingly, I see no reason to prolong this litigation by remanding this issue to the circuit court. BRIEFS FOR APPELLANTS: David S. Samford
Mark David Goss
L. Allyson Honaker
Lexington, Kentucky
M.E. Wesley
Lancaster, Kentucky
ORAL ARGUMENT FOR
APPELLANTS:
David S. Samford
Lexington, Kentucky
AMICUS CURIAE BRIEF FOR
DUKE ENERGY CORPORATION:
Rocco O. D'Ascenzo
Cincinnati, Ohio
AMICUS CURIAE BRIEF FOR
KENTUCKY ASSOCIATION OF
ELECTRIC COOPERATIVES, INC:
Dan Yates
Louisville, Kentucky
AMICI CURIAE BRIEF FOR
LOUISVILLE GAS AND ELECTRIC
COMPANY AND KENTUCKY
UTILITIES COMPANY:
Kendrick R. Riggs
Timothy J. Eifler
Deborah T. Eversole
Stephen A. Sherman
Louisville, Kentucky
Allyson K. Sturgeon
Louisville, Kentucky
BRIEF AND ORAL ARGUMENT
FOR APPELLEES:
Mike Troop
Frankfort, Kentucky
AMICUS CURIAE BRIEF FOR
KENTUCKY ASSOCIATION OF
COUNTIES:
Timothy A. Sturgill
Frankfort, Kentucky
AMICUS CURIAE BRIEF FOR
KENTUCKY RURAL WATER
ASSOCIATION, INC.:
Damon R. Talley
Hodgenville, Kentucky
AMICUS CURIAE BRIEF FOR
KENTUCKY POWER COMPANY:
Mark R. Overstreet
Frankfort, Kentucky