City of Milwaukee v. Milwaukee & Suburban Transport Corp.

• Court: United States State Supreme Court of Wisconsin
• Writing for the Court: MARTIN
• Citation: 6 Wis.2d 299,94 N.W.2d 584
• Decision Date: 03 February 1959
• Parties: CITY OF MILWAUKEE, a municipal corporation, Respondent, v. MILWAUKEE & SUBURBAN TRANSPORT CORPORATION, Appellant.

Page 584

94 N.W.2d 584 6 Wis.2d 299 CITY OF MILWAUKEE, a municipal corporation, Respondent,
v.
MILWAUKEE & SUBURBAN TRANSPORT CORPORATION, Appellant. Supreme Court of Wisconsin. Feb. 3, 1959.

Quarles, Herriott & Clemons, Milwaukee, Lester S. Clemons, Arthur H. Laun, Jr., Milwaukee, of counsel, for appellant.

Walter J. Mattison, City Atty., Harry G. Slater, Deputy City Atty., Milwaukee, for respondent.

MARTIN, Chief Justice.

The question is whether or not the 'license fees' exacted under these ordinances constitute a tax for revenue or a charge for regulation or a contract. It is undisputed that at the time the ordinances were adopted the City had authority to tax the Company for revenue as well as for regulatory purposes.

As stated in Wisconsin Tel. Co. v. City of Milwaukee, 1905, 126 Wis. 1, 13, 104 N.W. 1009, 1 L.R.A.,N.S., 581, where the power to license exists, a reasonable discretion is vested in the municipality, but courts will look into ordinances with a view of determining whether they are passed for the purpose of revenue, although sought to be upheld as police regulations. Cities should not be permitted, under the guise of their regulatory power, to collect revenue for the benefit of the city regardless of the amount necessary to defray the expense of its regulation.

In its decision the trial court called attention to the fact that in the conversion ordinances the City undertook to repave and widen streets to accommodate the trackless trolleys and bear the expense of the obligation, formerly that of the Company,

Page 588

to repave and maintain the track zones; that the City obligated itself to prohibit parking of automobiles along portions of the routes, in connection with which the court took judicial notice of the fact that the City has been put to the [6 Wis.2d 304] expense of acquiring property for off-street parking, an expense due in part to such parking limitations. The court stated that the ordinances reveal substantial benefits proceeding to the Company and a concurring disadvantage and expense to the City. Therefore, it reasoned, the fees did not constitute a tax for revenue but, rather, compensation for the costs assumed and services rendered by the City.

According to Webster's New International Dictionary (2d ed. 1954), a 'tax' (noun) is:

'A charge, esp. a pecuniary burden imposed by authority; specif., a charge or burden, usually pecuniary, laid upon persons or property for public purposes; a forced contribution of wealth to meet the public needs of a government.'

To 'tax' (verb) is defined as:

'To assess with, or subject to the payment of, a tax or taxes; esp., to exact money from for the support of government * * *'

In 51 Am.Jur., Taxation, sec. 3, p. 35, it is stated:

'A tax is a forced burden, charge, exaction, imposition, or contribution assessed in accordance with some reasonable rule of apportionment by authority of a sovereign state upon the persons or property within its jurisdiction, to provide public revenue for the support of the government, the administration of the law, or the payment of public expenses. Any payment exacted by the state or its municipal subdivisions as a contribution toward the cost of maintaining governmental functions, where the special benefits derived from their performance is merged in the general benefit, is a tax.'

In 51 Am.Jur., Taxation, sec. 2, p. 34, it is stated:

'The term 'taxation' defines the power by which the sovereign raises revenue to defray the necessary expenses of government. Taxation is merely a way of apportioning the cost of government among those who in some measure are [6 Wis.2d 305] privileged to enjoy its benefits and must bear its burdens. The purpose of taxation on the part of government is to provide funds or property with which to promote the general welfare and protection of its citizens. Taxation, in its broadest and most general sense, includes every charge or burden imposed by the sovereign power upon persons, property or property rights for the use and support of the government and to enable it to discharge its appropriate functions, and in that broad definition there is included a proportionate levy upon persons or property and all the various other methods and devices by which revenue is exacted from persons and property for public purposes.'

In 38 Am.Jur., Municipal Corporations, sec. 321, p. 13, it is stated:

'* * * there is a sharp distinction between a municipal license for revenue and one for regulation under the police power; the first named is a tax and is to be construed under the principles and rules governing taxing powers, while the latter is under the police power, looking toward the health, morals, safety, or general welfare of the community.'

The substance, and not the form, of the imposition is the test of its true character. It is stated in 4 Cooley on Taxation (4th ed.), sec. 1784, p. 3511:

'The distinction between a demand of money under the police power and one made under the power to tax is

Page 589

not so much one of form as of substance. The proceedings may be the same in the two cases, though the purpose is essentially different. The one is made for regulation and the other for revenue. If the purpose is regulation the imposition ordinarily is an exercise of the police power, while if the purpose is revenue the imposition is an exercise of the taxing power and is a tax.'

See, also, 9 McQuillin, Municipal Corporations (3d ed.), sec. 26.15. The distinction between taxation for revenue and for regulation is determined by the relationship between the cost [6 Wis.2d 306] to, or services provided by, the City and the charge imposed. In 1 Cooley on Taxation (4th ed.), sec. 27, p. 98, it is stated:

'* * * a charge of a fixed sum which bears no relation to the cost of inspection and which is payable into the general revenue of the state is a tax rather than an exercise of the police power. Whether an imposition is called a license 'fee' or a license 'tax' is worthy of little consideration, since its real nature is the test.'

Following these rules, in Chesapeake & Potomac Tel. Co. v. City of Morgantown, W.Va. 1958, 105 S.E.2d 260, the court held 'use fees' involving no regulatory features which would bring them within the category of license fees were imposed purely for revenue purposes, and in the absence of any delegation by the state to the municipality of the power to exact such fees the ordinance which attempted to do so was invalid.

Apparently the trial court took the view that it is sufficient--in order to bring the charge under the police power--for the City to show that by adopting the conversion ordinances it assumed expenses and inconveniences not previously borne by it. That does not satisfy the test. In the first place, we do not read out of these ordinances the same evidence of expense and disadvantage to the City that the trial court did. In most of the instances where the City agreed to restore the track zone and where expenses for repairs or supervision were anticipated, the Company either paid a lump sum in discharge of its obligations in that respect or agreed...