City of Huntington v. Bacon
473 S.E.2d 743, 196 W. Va. 457, 1996 W. Va. LEXIS 66 (1996)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A municipal service charge is a permissible 'fee' rather than an unconstitutional 'tax' under state law if its primary purpose is to cover the expense of providing a specific service, its assessment is not based on property value, it is reasonably related to the use of that service, and its proceeds are used exclusively to defray the costs of that service. A prior federal court's characterization of such a charge as a 'tax' for Supremacy Clause purposes does not collaterally estop a state court from determining its nature under state law when no federal right is involved.
Facts:
- In 1990, the City of Huntington (City) passed an ordinance imposing a municipal service fee on all owners of buildings to help cover the cost of providing fire and flood protection services.
- The fee was structured as an annual rate per lot ($70, later $80) plus an additional charge per square foot of floor space ($0.0375, later $0.0575) for each building.
- The ordinance defined 'user' as any person, firm, corporation, or governmental entity owning a building within the City limits that benefits from these services.
- In 1991, the City amended the ordinance to increase the rates and temporarily allocated $250,000 of the municipal service fee collected between 1991 and 1994 to improve streets and municipal infrastructure.
- John and Carole Bacon, along with other building owners (the Bacons), were assessed and sued by the City for non-payment of the municipal service fee.
- The Cabell County Board of Education (Board of Education) was also assessed the municipal service fee by the City.
- Some properties, including those owned by the Bacons, are located at an elevation substantially above the flood wall, leading them to argue they do not benefit from flood protection services.
Procedural Posture:
- The City of Huntington filed suit in the Circuit Court of Cabell County against the Bacons to collect the municipal service fee.
- The Bacons argued the fee was an unconstitutional tax, citing a prior Fourth Circuit Court of Appeals decision, and sought to invoke collateral estoppel.
- The Circuit Court of Cabell County granted summary judgment for the City, concluding the municipal service fee was a user fee and ordering the Bacons to pay.
- The Bacons appealed the Circuit Court's summary judgment to the Supreme Court of Appeals of West Virginia (appellants, Bacons; appellee, City).
- Separately, the City of Huntington initiated a declaratory judgment action in the Circuit Court of Cabell County to determine its right to collect municipal fees from the Cabell County Board of Education.
- The Circuit Court of Cabell County sua sponte certified a question to the Supreme Court of Appeals of West Virginia, implicitly finding the municipal service fee to be a fee and not a tax, and ruling it could be assessed against the Board of Education.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a municipal service fee, imposed by the City of Huntington on property owners (including a county board of education) for fire and flood protection services, constitute a permissible 'fee' or an unconstitutional 'tax' under state law, and is a state court precluded by collateral estoppel from making this determination after a federal court has characterized the charge as a tax for federal purposes?
Opinions:
Majority - McHugh, Chief Justice
No, a state court is not collaterally estopped by a prior federal court's determination that a municipal service charge is a 'tax' for Supremacy Clause purposes when the current dispute involves state law and no federal right. The Supreme Court emphasized that states are free to determine their own fiscal policies, limited only by the U.S. Constitution. While federal courts may characterize state charges as taxes when a federal right (like federal immunity from state taxation) is involved, a state court is not bound by this characterization when state law issues, not federal rights, are at stake. The issue decided by the Fourth Circuit in United States v. City of Huntington was distinct, focusing on the Supremacy Clause, thus failing the 'identical issue' condition for collateral estoppel. Yes, the municipal service fee is a permissible 'fee' and not an unconstitutional 'tax' under state law, provided its proceeds are used exclusively for fire and flood protection. The court determines the character of a charge by its 'operation and effect,' not merely its label. A tax's primary purpose is general revenue, while a fee's is to cover service expenses. The City's authority to impose 'reasonable rates, fees and charges' for essential municipal services is granted by W. Va. Code, 8-13-13. The fee, based on square footage, is not an ad valorem tax because it does not depend on property value. It is imposed on property owners by reason of their use of fire and flood protection, not mere ownership. Although past use of proceeds for street improvements temporarily made the charge a tax, its current exclusive use for fire and flood protection services, without exceeding costs, aligns it with a fee. Yes, the municipal service fee reasonably serves its purpose and is reasonably applied to the Bacons and the Cabell County Board of Education. Ordinances imposing such fees are presumed valid and reviewed for reasonableness. The court found it reasonable to target property owners, as they are the primary beneficiaries of fire and flood protection, even if other potential users exist. For flood protection, the city's determination that all property owners benefit, even those at higher elevations, was deemed reasonable. Furthermore, a county board of education is authorized to pay this fee under W. Va. Code, 18-5-9, which mandates providing for pupil health and maintaining school grounds and buildings. Since fire and flood protection directly serve these mandates, and state law only exempts school property from 'taxes' (not fees), the Board of Education has the authority to pay.
Analysis:
This case significantly clarifies the distinction between a 'tax' and a 'fee' in West Virginia jurisprudence, emphasizing a functional 'operation and effect' test. It reinforces state sovereignty by asserting that state courts are not bound by federal court characterizations of state fiscal measures when federal rights are not implicated. The decision provides a roadmap for municipalities to implement user fees for essential services, provided funds are directly tied to service costs and purpose, while cautioning against using fees as disguised revenue-generating taxes. It also clarifies the statutory authority of county boards of education to incur costs for services vital to the safety and maintenance of school facilities.
