Home Builders Ass'n of Utah v. City of American Fork

• Decision Date: 26 January 1999
• Docket Number: No. 970232,970232
• Citation: 973 P.2d 425
• Parties: 361 Utah Adv. Rep. 46, 1999 UT 7 The HOME BUILDERS ASSOCIATION OF UTAH, a Utah corporation, Plaintiff, Appellee, and Cross-Appellant, v. CITY OF AMERICAN FORK, a Utah municipality, Defendant, Appellant and Cross-Appellee.
• Court: Utah Supreme Court

Page 425

973 P.2d 425

361 Utah Adv. Rep. 46, 1999 UT 7

The HOME BUILDERS ASSOCIATION OF UTAH, a Utah corporation, Plaintiff, Appellee, and Cross-Appellant, v. CITY OF AMERICAN FORK, a Utah municipality, Defendant,

Appellant and Cross-Appellee.

No. 970232.

Supreme Court of Utah.

Jan. 26, 1999.

Darrel J. Bostwick, Jeffery R. Price, Peter W. Corroon, Salt Lake City, for plaintiff.

Jody K. Burnett, Kevin R. Bennett, Salt Lake City, for defendant.

STEWART, Justice:

¶1 This case is an appeal from a district court decision granting summary judgment in favor of plaintiff Home Builders Association of Utah. Home Builders brought suit in a declaratory judgment action against defendant American Fork City, asserting that American Fork had imposed unlawful fees for new real estate developments. At issue were fees for sewer and water hookups and for park acquisition and improvement. In its motion for summary judgment, Home Builders argued that Banberry Development Corp. v. South Jordan City, 631 P.2d 899 (Utah 1981), required municipalities to rely on specific factors in arriving at reasonable impact fees, and that the failure of the members of the American Fork City Council to expressly address those factors in approving the fee ordinance and resolutions rendered the fees void ab initio. The district court agreed and entered a summary judgment for Home Builders. American Fork appealed. Home Builders cross-appealed from an order denying a permanent injunction against temporary fee ordinances and an order allowing American Fork to retain monies collected under the ordinances the court had found invalid. We reverse and remand for further proceedings.

¶2 American Fork enacted Resolution 94-04-05R (April 12, 1994), establishing a sewer connection fee; Resolution 94-04-06R (April 12, 1994), establishing a water connection fee; ¹ and Ordinance No. 92-05-22 (May 26, 1992), amending annexation fee provisions. ² Home Builders filed a declaratory judgment action alleging that "[t]he effect of [these] Ordinances is to cast an unequal capital burden upon new home builders and developers, forcing them to pay a disproportionate share of the cost of public facilities such as sewers, roads, schools and water treatment plants."

¶3 Home Builders also asserted that the ordinances "imposed by the City grossly ignore the legal requirements established by the Utah Supreme Court." Those requirements are found in Banberry. ³ Banberry addressed the legality of impact fees imposed by municipalities to compensate for the burdens that new real estate developments place on existing municipal infrastructure by requiring extension of basic services to everexpanding communities. Banberry stated that "[w]ithout legal limits ... subdivision charges could easily be used to avoid statutory requirements for bonding municipal improvements, statutory limits on municipal taxation, and legal limits on restrictive or exclusionary zoning." 631 P.2d at 902. To prevent that, Banberry established limits on impact fees that can be charged for delivery of services to new developments.

¶4 Banberry held that the "presumption of constitutionality" applies to "a municipality's exercise of its legislative powers" in establishing impact fees. Id. at 904. Nevertheless, that presumption can be attacked:

Since the information that must be used to assure that subdivision fees are within the standard of reasonableness is most accessible to the municipality, that body should disclose the basis of its calculations to whoever challenges the reasonableness of its subdivision or hookup fees. Once that is done, the burden of showing failure to comply with the constitutional standard of reasonableness in this matter is on the challengers

Id.

¶5 As a substantive matter, Banberry held that fees designed to contribute to the capital costs of extending municipal services to new subdivisions had to be equitable. Banberry stated that "to comply with the standard of reasonableness, a municipal fee related to services like water and sewer must not require newly developed properties to bear more than their equitable share of the capital costs in relation to benefits conferred." Id. at 903. Banberry listed a number of factors that should be considered in assessing the reasonableness of impact fees:

Among the most important factors the municipality should consider in determining the relative burden already borne and yet to be borne by newly developed properties and other properties are the following ...:(1) the cost of existing capital facilities; (2) the manner of financing existing capital facilities (such as user charges, special assessments, bonded indebtedness, general taxes, or federal grants); (3) the relative extent to which the newly developed properties and the other properties in the municipality have already contributed to the cost of existing capital facilities (by such means as user charges, special assessments, or payment from the proceeds of general taxes); (4) the relative extent to which the newly developed properties and the other properties in the municipality will contribute to the cost of existing capital facilities in the future; (5) the extent to which the newly developed properties are entitled to a credit because the municipality is requiring their developers or owners (by contractual arrangement or otherwise) to provide common facilities (inside or outside the proposed development) that have been provided by the municipality and financed through general taxation or other means (apart from user charges) in other parts of the municipality; (6) extraordinary costs, if any, in servicing the newly developed properties; and (7) the time-price differential inherent in fair comparisons of amounts paid at different times.

Id. at 903-04 (citations omitted).

¶6 Banberry stated that these factors were not exclusive and should not to be read as limiting the ability of municipalities to deal with differing circumstances. See id. Municipalities must be allowed "the flexibility necessary to deal realistically with questions not susceptible of exact measurement.... Similarly, municipal officials must also have the legal power to deal creatively with extraordinary or unforeseen circumstances in the provision of municipal services." Id. at 904 (citations omitted).

¶7 After Home Builders filed its complaint, it deposed the former mayor and various city council members who had voted on the fee ordinances. They were asked if they personally had considered the Banberry factors, and they responded that they had not. They also were unable to describe precisely how American Fork had arrived at the particular fees. They stated that they had primarily relied on numbers provided by city employees who were more directly responsible for overseeing the sewer, water, and annexation regulations. The names of these employees were provided, but Home Builders did not depose them.

¶8 Home Builders moved for summary judgment on the ground that the city council had a duty to apply the seven Banberry factors in setting its fees for new real estate developments, and that the alleged failure of the council members to do so rendered American Fork's fees void from the outset. American Fork argued that Home Builders' motion was premature because Home Builders had not adduced sufficient information from discovery to demonstrate that American Fork's fees were unreasonable as a matter of law. The City asserted that Home Builders had failed to depose the American Fork employees who had actually calculated, or otherwise recommended, the fee schedules that were ultimately approved by the city council. The City also argued that Home Builders had not presented evidence demonstrating what fees would have been "reasonable" or to what degree American Fork's fees varied from that reasonable level.

¶9 The district court did not rule that the fees were unreasonable under Banberry. Rather, the court ruled that American Fork had failed to apply the Banberry factors and that therefore resolutions 94-04-05R and 94-04-06R and Ordinance No. 92-05-22 were void from the outset.

¶10 In response to the court's ruling, American Fork enacted emergency temporary ordinances to cover the fees in question: Ordinance No. 96-09-33, placing a moratorium on building permits unless applicants agreed to "voluntarily" pay the previously assessed fee; and Ordinance No. 96-09-34, titled "Emergency Impact Fee Ordinance," which imposed the fees at the same level as before.

¶11 Home Builders moved for a permanent injunction restraining the City from imposing any ordinances at variance from the court's earlier ruling and for return of the monies "illegally" collected. Contemporaneously, American Fork moved for a determination of the actual costs of services provided to new developments so that those amounts could be deducted from any monetary claims pursued by Home Builders. The district court rejected both motions, ruling that American Fork had acted within its municipal powers in establishing the "temporary" emergency fee schedule, and also finding that Home Builders had not sought monetary damages but had merely requested a determination of the legality of the fee ordinances. Upon voluntary dismissal of the other pending claims raised in Home Builders' complaint, the court rendered a final judgment in the case.

¶12 Both parties appealed. American Fork renews its argument that Home Builders' motion was premature. Specifically, American Fork points to the undisputed fact that no competent evidence had been adduced that the fees imposed were unreasonable. Home Builders cross-appealed the district court's rejection of its motion for a permanent injunction and return of monies collected. Home Builders argues that by rejecting these motions, the court improperly allowed American Fork to circumvent the court's order voiding the prior ordinances. Because the outcome of Home Builders' cross-appeal is dependent upon the correctness of the...