Contractors and Builders Ass'n of Pinellas County v. City of Dunedin

Decision Date25 February 1976
Docket NumberNo. 47662,47662
Citation329 So.2d 314
CourtFlorida Supreme Court

John T. Allen, Jr., St. Petersburg, for petitioners.

C. Allen Watts, of Fogle & Watts, Deland, for respondent.

Ralph A. Marsicano and Burton M. Michaels, Tallahassee, for the Florida League of Cities, Inc., amicus curiae.

Thomas G. Pelham of Brown, Smith, Young & Pelham, Tallahassee, for the National Home Builders Association, amicus curiae.

HATCHETT, Justice.

In an action for declaratory judgment, brought against the City of Dunedin in Circuit Court, provisions of certain ordinances 1 were adjudged defective, as being an Ultra vires attempt by the city to impose taxes; and the city was enjoined from collecting fees the ordinances required as a precondition for municipal water and sewerage service. In addition, the Circuit Court ordered the City to refund the fees, but only to persons who had paid under protest. On appeal to the District Court of Appeal, Second District, that court reversed the circuit court judgment, City of Dunedin, Florida v. Contractors and Builders Association of Pinellas County, etc. et al., 312 So.2d 763; and, on June 10, 1975, certified that its decision passed upon a question of great public interest. As is customary in cases where such certificates have been entered, we exercise our discretion to review on its merits the decision below. E.g., Grant v. State, 316 So.2d 282 (Fla.1975); Winston v. State, 308 So.2d 40 (Fla.1974) (reh. den. 1975). See Fla.Const. art. V, § 3(b)(3).

Plaintiffs in the trial court, petitioners here, are building contractors, an incorporated association of contractors, and owners of land situated within the city limits of Dunedin. 2 They do not complain of all the fees Dunedin requires to be collected upon issuance of building permits, 3 but contend that monies which the city collects and earmarks for 'capital improvements to the (water and sewerage) system as a whole' (R. 725) constitute taxes, which a municipality is forbidden to impose, in the absence of enabling legislation. It is agreed on all sides that 'a municipality cannot impose a tax, other than ad valorem taxes, unless authorized by general law,' 312 So.2d at 766, and that no general law gives such authorization here. Respondent contends that these fees are not taxes, but user charges analogous to fees collected by privately owned utilities for services rendered. For the reasons stated in Judge Grimes' scholarly opinion, we accept this analogy, but we decline to uphold a revenue generating ordinance that omits provisions we deem crucial to its validity. We are unpersuaded, moreover, that the limitations, which the city has in fact placed on fees collected pursuant to Dunedin, Fla., Code §§ 25--31, 25--71(c) and (d), can suffice to make those fees 'just and equitable', within the meaning of Fla.Stat. § 180.13(2) (1973). In principle, however, we see nothing wrong with transferring to the new user of a municipally owned water or sewer system a fair share of the costs new use of the system involves.

Petitioners contend that Dunedin has imposed a tax under the guise of setting charges for water and sewer connections, relying on Broward County v. Janis Development Corp., 311 So.2d 371 (Fla.4th Dist.1975) aff'g Janis Development Corp. v. City of Sunrise, 40 Fla.Supp. 41 (17th Cir. 1973); Pizza Palace of Miami v. City of Hialeah, 242 So.2d 203 (Fla.3d Dist.1972); and Venditti-Siraro, Inc. v. City of Hollywood, 39 Fla.Supp. 121 (17th Cir. 1973). The Pizza Palace case is wholly inapposite, and the others are readily distinguishable. Only if the moneys collected in Venditti-Siraro and Janis Development had been used to underwrite the administrative costs of issuing building permits, or other costs incurred in enforcing building codes, would those cases be analogous to the present one. Compare State ex rel. Harkow v. McCarthy, 126 Fla. 433, 171 So. 314 (1936) with City of Panama City v. State, 60 So.2d 658 (Fla.1952). The analogy would be very close if the fees had been earmarked for future capital outlay: for example, acquisition of automobiles for building inspectors to use in their work.

But the fees in Janis Development and Venditti-Siraro bore no relationship to (and were greatly in excess of) the costs of the regulation which was supposed to justify their collection. In each case, the fees were required to be paid as a condition for issuance of building permits. In the Janis Development case, $200.00 per dwelling unit built was put into a fund for road maintenance. In Venditti-Siraro, one percent of estimated construction costs went into a fund for parks. Because the surcharges were collected for purposes extraneous to the enforcement of the building code, the courts concluded that the surcharges amounted in law to taxes, which the municipalities had not been authorized to impose. In contrast, evidence was adduced here that the connection fees were less than costs Dunedin was destined to incur in accommodating new users of its water and sewer systems. We join many other courts in rejecting the contention that such connection fees are taxes. 4

The avowed purpose of the ordinance in the present case is to raise money in order to expand the water and sewerage systems, so as to meet the increased demand which additional connections to the system create. The municipality seeks to shift to the user expenses incurred on his account. A private utility in the same circumstances would presumably do the same thing, in which event surely even petitioners would not suggest that the private corporation was attempting to levy a tax on its customers. 5

Under the constitution, Dunedin, as the corporate proprietor of its water and sewer systems, can exercise the powers of any other such proprietor (except as Fla.Stat. §§ 180.01 Et seq., or statutes enacted hereafter, may otherwise provide.) 6 Municipal corporations have 'governmental, corporate and proprietary powers' and 'may exercise any power for municipal purposes, except as otherwise provided by law.' Fla.Const. art. VIII, § 2(b); City of Miami Beach v. Fleetwood Hotel, Inc., 261 So.2d 801 (Fla.1972). 7 'Implicit in the power to provide municipal services is the power to construct, maintain and operate the necessary facilities.' Cooksey v. Utilities Commission, 261 So.2d 129, 130 (Fla.1972). There are no provisions in Chapter 180, Florida Statutes, expressly governing capital acquisition other than through deficit financing, 8 but it is provided that the 'legislative body of the municipality . . . may establish just and equitable rates or charges' for water and sewerage. Fla.Stat. § 180.13(2) (1973). See generally Annot., 61 A.L.R.3d 1236, 1248--1259 (1975).

When a municipality sells debentures as a means of financing the extension or enlargement of a public utility, the indebtedness thus incurred is eventually made good with utility revenues; and anticipated revenues 'may be pledged to secure moneys advanced for the . . . improvement.' Fla.Stat. § 180.07(2) (1973). When money for capital outlay is borrowed, water and sewer rates are set with a view towards raising the money necessary to repay the loan. State v. City of Tampa, 137 Fla. 29, 187 So. 604, 609 (1939); State v. City of Miami, 113 Fla. 280, 152 So. 6 (1933) (Reh. den. 1934) ('certificates of indebtedness . . . are payable as to both principal and interest solely out of a special fund to be created . . . out of the net earnings' At 13).

Water and sewer rates and charges do not, therefore, cease to be 'just and equitable' merely because they are set high enough to meet the system's capital requirements, as well as to defray operating expenses. State v. City of Tampa, supra; State v. City of Miami, supra. We see no reason to require that a municipality resort to deficit financing, in order to raise capital by means of utility rates and charges. On the contrary, sound public policy militates against any such inflexibility. 9 It may be a simpler technical task to amortize a known outlay, than to predict population trends and the other variables necessary to arrive at an accurate forecast of future capital needs. But raising capital for future use by means of rates and charges may permit a municipality to take advantage of favorable conditions, which would alter before money could be raised through issuance of debt securities; and the day may not be far distant when municipalities cannot compete successfully with other borrowers for needed capital. The weight of authority supports the view that raising capital for future outlay is a legitimate consideration in setting rates and charges. Hayes v. City of Albany, 7 Or.App. 277, 490 P.2d 1018 (1971); Hartman v. Aurora Sanitary District, 23 Ill.2d 109, 177 N.E.2d 214 (1961); Home Builders Ass'n of Greater Salt Lake v. Provo City, 28 Utah 2d 402, 503 P.2d 451 (1972).

It is also established that differential utility rates and charges may be 'just and equitable'. Fla.Stat. § 180.13(2) (1973); Hayes v. City of Albany, supra, notwithstanding the differential. In Brandel v. Civil City of Lawrenceburg, 249 Ind. 47, 230 N.E.2d 778 (1967), the court upheld an ordinance setting differential connection charges where two distinct sewerage systems had been engineered in the same political entity. The user connecting to the more expensive system paid a higher connection charge. Another common type of differential charge makes the character of the user determinative of utility rates:

In determining reasonable rate relationships, a municipality may sometimes take into account the purpose for which a customer receives the service. . . . Courts have recognized that differences in sewer use rates for residential customers and various other customers may be reasonable. Some customers may be subject to a flat rate while other customers are...

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