Drees Co. v. Hamilton Township
132 Ohio St. 3d 186, 2012 Ohio 2370 (2012)
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Rule of Law:
Impact fees imposed by a limited-home-rule township on new construction or redevelopment to fund general public services like roads, fire, police, and parks operate as unauthorized taxes, as such townships lack the statutory authority to enact taxes not specifically authorized by general law under R.C. 504.04(A)(1).
Facts:
- Hamilton Township, a limited-home-rule township, experienced significant population growth from 5,900 in 1990 to 23,556 in 2010.
- On May 2, 2007, the Hamilton Township Board of Trustees passed Amended Resolution No. 2007-0418, implementing impact fees within its unincorporated areas.
- The resolution adopted a schedule of fees to be charged to applicants for zoning certificates for new construction or redevelopment, categorized as road-impact, fire-protection-impact, police-protection-impact, and park-impact fees.
- The purpose of these impact fees was stipulated to be to benefit the property by providing adequate funds to afford new properties the same level of service as previously developed properties, and to offset increased services and improvements needed due to development.
- The fees varied based on land use (e.g., per unit for single-family dwellings, per 1,000 square feet for retail/commercial) and were phased in over two years, reaching full assessment by August 31, 2009.
- All collected impact fees were deposited into separate, non-geographic accounts for each fee type (roads, fire, police, parks) and were to be used only for the purpose of that account.
- The resolution permitted credits against the impact fees for certain improvements made by landowners/developers toward major roadway-system improvements.
- The Drees Company, Fischer Single Family Homes II, L.L.C., John Henry Homes, Inc., and Charleston Signature Homes, L.L.C., sought zoning certificates and paid impact fees under protest.
Procedural Posture:
- Appellants (Drees Co. et al. and Home Builders Association of Greater Cincinnati) brought an action against Hamilton Township and its trustees in a state trial court.
- Appellants sought a declaratory judgment, injunctive relief, and damages, alleging the impact fees were contrary to Ohio law and unconstitutional.
- The parties submitted stipulated facts and exhibits, and each side filed a motion for summary judgment.
- The trial court granted Hamilton Township's motion for summary judgment, holding that the township's impact fees were authorized pursuant to its limited police powers and were not in conflict with state law.
- Appellants appealed the trial court's decision to the Twelfth District Court of Appeals.
- The Twelfth District Court of Appeals affirmed the trial court's judgment, holding that the impact fees were not a prohibited form of taxation, did not conflict with general laws of the state, and did not alter the structure of township government.
- The Ohio Supreme Court accepted a discretionary appeal.
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Issue:
Does a limited-home-rule township have the authority under R.C. 504.04(A)(1) to impose 'impact fees' on applicants for zoning certificates for new construction or redevelopment when these fees are used to fund general public services like roads, fire, police, and parks, thereby operating as unauthorized taxes?
Opinions:
Majority - Pfeifer, J.
No, a limited-home-rule township does not have the authority to impose these impact fees because they operate as unauthorized taxes under R.C. 504.04(A)(1). Limited-home-rule townships are creatures of law with only statutorily conferred authority, and R.C. 504.04(A)(1) explicitly prohibits them from enacting taxes other than those authorized by general law. The court distinguished between a 'fee' and a 'tax' by analyzing the substance of the assessments, not merely their form, primarily using factors from State ex rel. Petroleum Underground Storage Tank Release Comp. Bd. v. Withrow and Am. Landfill, Inc. v. Stark/Tuscarawas/Wayne Joint Solid Waste Mgt. Dist. Applying the Withrow factors, the court found that the impact fees lacked a regulatory purpose, unlike the UST fees which addressed specific environmental harms and provided a form of insurance. The revenue from Hamilton Township's fees was spent on typical township expenses benefiting the entire community (roads, fire, police, parks), despite being in segregated funds. The court emphasized that the money was not earmarked for specific geographic areas around the assessed properties, but could be spent generally throughout the township. Assessed parties received no particular service above that provided to any other taxpayer who already pays taxes for these services, nor were the fees responsive to need in the way the Withrow fees were. Instead, they were tied to governmental spending decisions. Applying the Am. Landfill (Bidart/San Juan) three-factor analysis, the court concluded that the fees were taxes. The entity imposing the assessment was a legislative body, favoring characterization as a tax. The assessment applied to a broad class of people (anyone engaging in development), placing it between a classic fee and a classic tax. The predominant factor, the ultimate use of the revenue, solidly placed the assessment in the realm of taxation because the funds were earmarked for police protection, fire protection, road improvement, and parks that benefit the entire community. The court rejected the appellate court's interpretation of a stipulation, clarifying that the fees were intended to maintain the general welfare of the community by ensuring consistent service levels despite growth, which is a public, not private, benefit. The court concluded that these fees were a revenue-generating measure for infrastructure improvements benefiting the entire township, exceeding the cost and expense of any direct service provided to the landowner (beyond the zoning certificate, which had a separate fee), and thus constituted taxes.
Analysis:
This case provides crucial guidance on the distinction between permissible regulatory fees and unauthorized taxes for limited-home-rule townships, significantly limiting their ability to fund growth-related infrastructure through special assessments on developers. By emphasizing the 'substance' of the assessment and the 'ultimate use' of the revenue for general public benefit, the Ohio Supreme Court offers a robust framework for lower courts to scrutinize local government exactions. The decision compels townships to rely on traditional, statutorily authorized tax mechanisms or seek specific legislative authorization for impact fees, thereby ensuring accountability and preventing local entities from circumventing state taxing limitations under the guise of 'fees.'
