Hayes v. City of Albany

• Decision Date: 26 November 1971
• Citation: 7 Or.App. 277,490 P.2d 1018
• Parties: David HAYES, Appellant, v. CITY OF ALBANY, Oregon, a municipal corporation, Respondent.
• Court: Oregon Court of Appeals

Page 1018

490 P.2d 1018

7 Or.App. 277

David HAYES, Appellant, v. CITY OF ALBANY, Oregon, a municipal corporation, Respondent.

Court of Appeals of Oregon, Department 2.

Argued and Submitted Sept. 23, 1971.

Decided Nov. 26, 1971.

Frank L. Whitaker, Portland, argued the cause and filed the briefs for appellant.

Merle A. Long, Albany, argued the cause and filed the brief for respondent.

Before SCHWAB, C.J., and FOLEY and FORT, JJ.

FORT, Judge.

This declaratory judgment proceeding is brought by plaintiff, a home builder, who seeks to have two ordinances of the city declared void. One is amendatory of the other, and both relate to disposal of sewage.

Following a charter amendment authorizing construction of a sewage disposal system, the city in 1967 adopted Ordinance No. 3330. This established classes of sewer users and, by Section 3, provided monthly charges varying with the uses set forth therein. Section 4 required payment of a sewer connection charge whenever properties were hooked up to the sewer system. It also created use classifications for that purpose and specified a different connection charge for each such classification.

All funds collected under both Section 3 and Section 4 were paid into a separate fund denominated a Sewer Service Fund.

In 1970, Section 4 was amended by Ordinance No. 3472. This comprehensive amendment rewrote the former section. One part provided:

'Section 4: (b) CONNECTION CHARGES.

'To establish appropriate provisions for the construction and expansion of the sanitary sewer system of the city, inclusive of the treatment plant, and to provide for the necessary oversizing of the sanitary sewer system, and to be assured that the cost of such construction and expansion is borne by those who receive the benefits thereof, there is hereby established connection charges for all connections made to the sanitary sewer system of the city in accordance with the following amounts:

'* * *.'

A specific series of classifications followed and the amount to be charged established for each. These amounts represented a large increase over the former Section 4. For example, the charge for a single family dwelling was increased from $25 to $255. It is this change toward which plaintiff's attack is chiefly directed. A complicated formula for industrial use involving measurement and evaluation of waste discharge was also provided under which a new major industrial user of the city's disposal system, such as a frozen food processor, might be required to pay a connection charge amounting to as much as $400,000. Prior to the amendment the maximum charge was $200.

The schedule of connection charges also provided for an annual percentage reduction to be applied uniformly for all nonindustrial categories based on the ratio of existing total use in terms of millions of gallons per day passing through the disposal plant in relation to its maximum rated capacity of 8,700,000 gallons per day, and for the first year set that percentage at 60.9 per cent. This was the percentage of the rated capacity which was found by the council to be actually utilized during 1970. The ordinance provided for an annual recomputation of that percentage until the capacity of the sewage disposal plant was reached. At that time and thereafter the user would pay the maximum amount provided.

Plaintiff attacks the validity of the increased sewer connection charge provided by Ordinance No. 3472 on the ground that it is a tax, and also even though it be considered to be a 'user charge' rather than a tax it is void because it is not 'just and equitable' as required by ORS 224.220.

He bases his contention that it is a tax on the ground that the ordinance is a revenue measure, rather than a proper exercise of the police power. He relies on Haugen v. Gleason, 226 Or. 99, 359 P.2d 108 (1961). In that case a county planning commission sought to charge subdividers a per lot fee of $37.50. The funds collected were to be used by the county or the school district for land acquisition.

In holding that ORS 92.044 did not authorize the regulation adopted by the county planning commission, the court said:

'In form, Regulation 4.10 speaks in regulatory language, and requires the dedications of land and payment of money 'in accordance with standards adopted by the Planning Commission.'

'The next sentence, however, reads:

"* * * Such money shall be used for land acquisition and may be given either to the County or the School District of the area, as specified by the Planning Commission.'

The above-quoted language has only one meaning: the collection of money from subdividers is for the purpose of acquiring land. Since the ordinance contains nothing to relate the money, or its expenditure, to the land being subdivided, the result is that the money will become part of the public funds of the county or the school district as the case may be.

'Every presumption of legislative validity must be granted. Wright v. Blue Mt. Hospital Dist., 214 Or. 141, 144, 328 P.2d 314. But Regulation 4.10 authorizes the county to lay a tax upon one class of landowners for a public purpose which may be, but need not be, related to the activity being regulated. The regulation cannot stand because it fails to limit the use of money so produced to the direct benefit of the regulated subdivision.' 226 Or. at 104--105, 359 P.2d at 111.

Here, however, the challenged ordinance expressly provides:

'(Section 4(c)(4):) All monies received from the Sewer Connection Charges plus interest, if any, shall be deposited in the Sanitary Sewer Capital Reserve Fund * * * and shall be expended from that fund only for the purpose of making major emergency repairs, extending or oversizing, separating, or constructing new additions to the treatment plant or collection and interceptor systems.'

Thus it is apparent that the funds derived from the challenged sewer connection charge can be used only in furtherance of the specified purposes and cannot be diverted to general public uses. Here, unlike Haugen, all funds received under Ordinance No. 3472 must be used for a purpose directly 'related to the activity being regulated.'

Plaintiff also relies on Daniels v. Point Pleasant, 23 N.J. 357, 129 A.2d 265 (1957), and Weber Basin Home Builders Ass'n v. Roy City, Utah, 487 P.2d 866 (1971).

Both Daniels and Weber dealt with efforts by the city government to raise funds for general municipal purposes by vast increases in the fees charged for building permits wholly unrelated to the costs involved in the regulation or inspection of buildings.

In Daniels the court said:

'* * * Admittedly, the purpose of the ordinance was to raise revenue to defray the increased cost of school and other government services. * * *' 23 N.J. at 362, 129 A.2d at 267.

and in Weber the court pointed out:

'* * * (T)he declared purpose was to raise general revenue for the City * * *.' 487 P.2d at 866.

In both, the funds derived went into the general fund of the municipality and thus might be used for purposes wholly unrelated to the purpose of the charge. We have already pointed out that under the challenged ordinance this not only could not happen but the proceeds from both the connection charge and the sewer user fee must be used directly in the development and maintenance of the sewage disposal system, which is the regulated activity.

In Associated Homebuilders v. City of Livermore, 56 Cal.2d 847, 17 Cal.Rptr. 5, 366 P.2d 448 (1961), the California Supreme Court held that a municipality which was authorized to collect fees for services and facilities furnished by it in connection with...