Heartland Apartment Ass'n, Inc. v. City of Mission

• Decision Date: 07 April 2017
• Docket Number: No. 111,521,111,521
• Parties: HEARTLAND APARTMENT ASSOCIATION, INC., et al., Appellants/Cross-appellees, v. CITY OF MISSION, Kansas, Appellee/Cross-appellant.
• Court: Kansas Supreme Court

392 P.3d 98

HEARTLAND APARTMENT ASSOCIATION, INC., et al., Appellants/Cross-appellees,

v.CITY OF MISSION, Kansas, Appellee/Cross-appellant.

No. 111,521

Supreme Court of Kansas.

Opinion filed April 7, 2017

Mary Jo Shaney, of White Goss, a Professional Corporation, of Kansas City, Missouri, argued the cause, and James C. Bowers, Jr., Daniel P. Goldberg, and Bryant E. Parker, of the same firm, were with her on the briefs for appellants/cross-appellees.

Thomas V. Murray, of Lathrop & Gage LLP, of Overland Park, argued the cause, and Mark A. Samsel, of the same firm, was with him on the briefs for appellee/cross-appellant.

Athena E. Andaya, deputy attorney general, for amicus curiae Office of Kansas Attorney General.

John A. Donley, of Devine and Donley, LLC, of Topeka, for amicus curiae National Federation of Independent Business Small Business Legal Center.

Lucas Bell, of Topeka, for amicus curiae Kansas Association of Realtors.

The opinion of the court was delivered by Beier, J.:

In 2010, the City of Mission passed a Transportation User Fee (TUF). The TUF is assessed on all developed real property based on a formula that attempts to estimate the number of vehicle "trips" a particular property generates. The revenue raised by the TUF, according to the enacting ordinance, is used for maintenance and upkeep of Mission's streets.

Plaintiffs Heartland Apartment Association, Inc., an association whose members own or operate multifamily retail housing; Building Owners and Managers Association of Metropolitan Kansas City, an association whose members own commercial buildings; and several individual owners of developed property challenged the TUF as an impermissible excise tax levied by Mission in violation of K.S.A. 2016 Supp. 12-194.

The district court judge granted summary judgment to Mission. On appeal, a panel of the Court of Appeals reversed, holding that the TUF is an impermissible excise tax under K.S.A. 2016 Supp. 12-194. We granted Mission's petition for review.

For the reasons outlined below, we affirm the decision of the Court of Appeals and reverse the judgment of the district court.

FACTUAL AND PROCEDURAL BACKGROUND

In August 2010, Mission's City Council adopted Ordinance No. 1332, which established the TUF and created a "transportation utility" "for the purpose of maintenance of City streets." Mission City Code § 145.030. The ordinance "imposed and levied" the TUF on "the owners of all developed property within the City of [Mission]." Mission City Code § 145.070. The ordinance does not cover real property exempt from taxation under K.S.A. 79-201 (exempting religious, educational, similar property from all property, ad valorem taxes). Mission City Code § 145.071.

The TUF is based on the "direct and indirect use of or benefit derived from the use of public streets, bicycle lanes and sidewalks generated by the developed property." Mission City Code § 145.070. It identifies three basic factors to be used in determining the amount of the fee:

"1. The developed use of the property which includes the amount of vehicular traffic generated by the property, as determined by [Mission's] City Administrator.

"2. For non-residential uses the developed square footage on the property or parcel.

"3. The traffic generation factor for each use category of developed property." Mission City Code § 145.080A.

To calculate the fee, the ordinance requires the use of "Trip Generation, 8th Edition, published by the Institute of Transportation Administrators (‘ITE Manual’)," Mission City Code § 145.020D, and outlines the following procedure:

"[Mission's] City Administrator shall determine the category of use from the ITE Manual that shall apply to each developed lot or parcel within the City [of Mission]. In the absence of a specific use category from within the ITE Manual for a particular developed use, [Mission's] City Administrator shall determine the appropriate category by interpreting the ITE Manual and assigning the category which most accurately reflects the traffic generated by the particular developed use. After determining the appropriate use category for a developed parcel, [Mission's] City Administrator shall use the estimated vehicle trip generation figures for the assigned use category from the ITE Manual to compute an estimate of annual trips related to the parcel and assign the parcel to a group of similarly used properties (‘customer group’)." Mission City Code § 145.080B.

The three customer groups are: single-family residential, multi-family residential, and non-residential use. Mission City Code § 145.080B.

The ordinance does not set out the charge to be assessed, instead leaving that to "be as fixed from time to time in [Mission's] annual budget." Mission City Code § 145.080D. The billing and collection of the fee is accomplished in conjunction "with ad valorem real estate taxes annually." Mission City Code § 145.090.

Mission's TUF Administrative Manual provides further details about the calculation of the fee. The 2012 manual is included in the record on appeal. According to this version of the manual, the TUF that is actually assessed depends on five factors:

"1. That property's estimated trip generation over a period of time.

"2. A split trip rate that includes a 1-cent base charge and a differentiated commercial and residential property component. The residential per trip rate is 2.076 cents and the commercial per trip rate is 1.490 cents.

"3. Special consideration is given for specific trip generation data that better refines or defines the trips a particular land use generates.

"4. The jurisdiction's total annual transportation funding requirement.

"5. The share of that budget to be generated through the TUF system versus other sources."

The manual also contains Land Use classification data from the ITE Manual for all property in Mission. The data is broken down into various categories, such as "Animal Hospital/Vet Clinic," "Fast-Food Restaurant (w/Drive-through Window)," "Gasoline/Service Station with Convenience Market and Car Wash," and "Gasoline/Service Station with Convenience Market." Each classification includes data such as the average trips generated each day of the week and the total weekly trips for a particular usage. The per-day and per-week trips are based on a unit that varies, depending on the use. For example, an animal clinic's trip generation is based on 1000 square feet gross floor area, a hotel on its number of rooms, and a gas station on "vehicle fueling positions."

In March 2012, plaintiffs filed suit against Mission, seeking a declaratory judgment and preliminary and permanent injunctions. Plaintiffs had paid the TUF in 2010 in amounts ranging from $72.00 to $16,159.87.

Specifically, plaintiffs asserted five claims in district court. In Claim I, the two associations asked for a declaratory judgment that the TUF was an impermissible excise tax violating K.S.A. 2016 Supp. 12-194 and that Mission must stop "assessing, billing, and collecting the TUF"; return fees "collected illegally with pre-and post-judgment interest"; and pay the associations' reasonable attorney fees and costs. In Claim II, the individual plaintiffs sought the same relief as the associations had sought in Claim I. In Claim III, plaintiffs asked for both a preliminary and a permanent injunction to prevent Mission from enforcing the TUF and for an order requiring Mission to reimburse plaintiffs for TUF amounts they had already paid, to pay pre-and post-judgment interest, and to pay plaintiffs' reasonable attorney fees and costs. In Claim IV, the individual plaintiffs asked the district court to order Mission to reimburse each individual plaintiff for the TUF amount each had paid in 2010 and 2011, including interest, attorney fees, and costs. In Claim V, plaintiffs alleged due process and equal protection violations because Mission "has enacted an illegal and discriminatory tax, has treated similarly situated persons and entities differently without a rational basis, and has infringed on the political power and privileges of property owners in the City of Mission, Kansas."

The individual plaintiffs and Heartland filed a motion for summary judgment on Claims I, II, and III. Mission filed its own motion for summary judgment against all plaintiffs on all claims.

After reviewing the motions and supporting memoranda, the district judge issued his memorandum decision granting summary judgment to Mission and denying summary judgment to plaintiffs.

The judge began his analysis with acknowledgment of Mission's constitutional "home rule" power to determine its local affairs, including " ‘the levying of taxes[,] excises, fees, charges and other exactions except when ... limited or prohibited by enactment of the legislature applicable uniformly to all cities of the same class.’ " He then noted that under K.S.A. 2016 Supp. 12-194, " ‘no city or county shall levy or impose an excise tax or a tax in the nature of an excise’ " and that the "substance of both Motions is whether the TUF is an unlawful excise tax."

The judge next addressed whether the TUF qualified as a fee or a tax, concluding that it is a tax, based on the definitions used in Kansas.

"The TUF is not voluntary—all property owners generally must pay it. The citizens who pay the TUF do not receive any special benefit for it. There is no aspect of contract or consent in payment of the fee. The money raised from the TUF is used to pay for street improvements, which are used by all. And the TUF is not a way to compensate the government for regulating a specific service, benefit, or privilege."

The judge then turned to the question of whether the TUF further qualified as an excise tax. Relying on Kansas caselaw that had defined an "excise tax" as one " ‘imposed on the performance of an act, the engaging in an occupation or the enjoyment of a privilege,’ " the district judge concluded that the TUF is not an excise tax. According to the judge, "Mission determines the charge for the tax based on the estimated...