JK CONST. v. REGIONAL SEWER AUTHORITY

• Citation: 336 S.C. 162,519 S.E.2d 561
• Decision Date: 02 August 1999
• Docket Number: No. 24981.,24981.
• Court: United States State Supreme Court of South Carolina
• Parties: J.K. CONSTRUCTION, INC., as property owner in Western Carolina Regional Sewer Authority, and on behalf of all others similarly situated, Appellant, v. WESTERN CAROLINA REGIONAL SEWER AUTHORITY, South Carolina, Respondent.

336 S.C. 162

519 S.E.2d 561

J.K. CONSTRUCTION, INC., as property owner in Western Carolina Regional Sewer Authority, and on behalf of all others similarly situated, Appellant, v. WESTERN CAROLINA REGIONAL SEWER AUTHORITY, South Carolina, Respondent.

No. 24981.

Supreme Court of South Carolina.

Heard June 10, 1999.

Decided August 2, 1999.

James Andrew Smith of Love, Thornton, Arnold & Thomason, P.A., Greenville, for appellant.

Steve A. Matthews of Sinkler & Boyd, P.A., Columbia, and Leo H. Hill of Hill, Wyatt & Bannister, Greenville, for respondent.

WALLER, Justice:

J.K. Construction, Inc., (JKC) paid under protest a "new account fee" imposed by Western Carolina Regional Sewer Authority (Authority), then brought a declaratory judgment action challenging the validity of the fee. JKC asked the court to enjoin Authority from imposing the fee and order Authority to reimburse everyone who had paid the fee. The circuit court referred the case to a master-in-equity, granting the master authority to enter a final judgment with appeal directly to this Court. The master granted Authority's motion for summary judgment, ruling the fee was valid under statutory law and the state constitution. JKC appeals.

FACTS

The parties stipulated to all pertinent facts. Authority is a special purpose district created by the Legislature in 1925. The district includes most of Greenville County and portions of three surrounding counties. Authority owns and operates trunk sewer lines, sewage pumping stations, and sewage treatment facilities. It disposes of sewage initially collected by other entities. JKC receives service from the Metropolitan Sewer District, a special purpose district that is a sub-district of Authority.

In 1995, on the recommendation of a consultant and after a public hearing, Authority's Board of Commissioners voted to begin requiring each person or entity to pay a new account fee when connecting to the sewer system or upgrading to a larger water line. The fee ranges from $500 for a residential user to $80,000 for a large industrial user. Authority began imposing the fee November 1, 1995. Before 1975, Authority relied on ad valorem property taxes to fund operating, maintenance, capital, and debt service expenses. Authority began that year, as a condition of continued eligibility for federal grants, to rely solely on sewer use charges to pay all expenses and debt. Since the 1970s, Authority has used revenue from its customers to pay about $120 million in debt service on general obligation and revenue bonds. In addition, customers' revenue has provided more than $28 million for capital projects not financed with bonded indebtedness.

Since 1995, Authority's customers, through payment of sewer use charges, have built up retained earnings from a deficit to a balance of $26.5 million and funded a contingent account of $2.3 million, according to Authority's 1997 fiscal report. Those amounts, however, are not sufficient to pay for all future capital improvements to the system. Proceeds from the new account fee will be spent only on unspecified capital improvement projects in the future. The new fee generated nearly $310,000 in revenue in fiscal 1996 and $1.27 million in fiscal 1997.

STANDARD OF REVIEW

This appeal raises three questions of law. When an appeal involves stipulated or undisputed facts, an appellate court is free to review whether the trial court properly applied the law to those facts. Craig Constr. Co. v. Hendrix, 568 So.2d 752, 756 (Ala.1990); Miller v. Board of Trustees, 132 Idaho 244, 970 P.2d 512, 514 (1998); cert. denied, ___ U.S. ___, 119 S.Ct. 2050, 144 L.Ed.2d 216 (1999); cf. Harleysville Mut. Ins. Co. v. R.W. Harp and Sons, Inc., 305 S.C. 492, 409 S.E.2d 418 (Ct.App.1991)

(stipulated facts leave only a question of law for trial court); Independent Grain Dealers Marketing Ass'n, Inc. v. Beard, 284 S.C. 309, 326 S.E.2d 169 (Ct.App.1985) (same). In such cases, the appellate court owes no particular deference to the trial court's legal conclusions. See S.C. Const. art. V, §§ 5 and 9; S.C.Code Ann. §§ 14-3-320, 14-3-330, and 14-8-200 (1976 & Supp.1998) (granting Supreme Court and Court of Appeals the jurisdiction to correct errors of law in both law and equity actions); accord Foss Alaska Line, Inc. v. Northland Services, Inc., 724 P.2d 523, 526 (Alaska 1986) (appellate court may review application of legal doctrine to undisputed facts without usual deference to lower court); Gwinnett County v. Davis, 268 Ga. 653, 492 S.E.2d 523, 525 (1997) (same); cases collected in West's Digests, Appeal and Error, Key No. 841.

ISSUES

1. Did the trial court err in ruling that the new account fee was a charge, rather than a tax that must be uniformly applied to all customers in the special purpose district?

2. Did the trial court err in ruling that Authority may impose the new account fee on individuals connecting to the sewer system after a given date?

3. Did the trial court err in ruling that imposition of the new account fee does not violate the Equal Protection Clause?

1. IS THE FEE A CHARGE OR A TAX?

JKC contends the trial court erred in ruling the new account fee is a sewer service charge. The fee provides a general benefit to everyone who lives in Authority's district because proceeds will be used to expand treatment capacity. Consequently, the court erred in refusing to hold that the fee is actually a tax which Authority must apply uniformly to all residents of the district, not just to new customers, JKC argues.

We disagree. We hold that the required payment is a charge, not a tax, and Authority has uniformly imposed the charge upon those who are required to pay it.

First, the required payment primarily benefits those who must pay it because they receive a special benefit or service as a result of improvements made with the proceeds. That special benefit is the proper treatment and disposal of sewage. Brown v. County of Horry, 308 S.C. 180, 184-85, 417 S.E.2d 565, 568 (1992) (holding that road maintenance fee imposed on all motor vehicles registered in county was a service charge, not a tax). It is true that the entire area may benefit from improved and expanded sewage service, but a charge does not become a tax merely because the general public obtains some benefit. Brown v. County of Horry, supra; Robinson v. Richland County Council, 293 S.C. 27, 33, 358 S.E.2d 392, 396 (1987) (holding that required payment imposed to fund installation and maintenance of sewer facility was assessment, and not tax, regardless of whether general public obtained health benefit from elimination of sewage problem).

Second, proceeds from the required payments are dedicated solely to capital improvement projects. The proceeds are not placed in a general fund to be spent on Authority's ongoing expenses and maintenance, which is a hallmark of a tax. Hagley Homeowners Ass'n v. Hagley Water, Sewer, and Fire Auth., 326 S.C. 67, 75, 485 S.E.2d 92, 96 (1997) ("[g]enerally, taxes are imposed on all property for the maintenance of government"); Brown v. County of Horry, supra (revenue from fees destined for general fund indicates a tax).

Third, as the parties stipulated, the revenue generated by the required payment will not exceed the cost of capital improvements to the system. C.R. Campbell Constr. Co. v. City of Charleston, 325 S.C. 235, 481 S.E.2d 437 (1997) (applying factors from Brown v. County of Horry, supra,

to uphold validity of municipal real estate transfer fee dedicated to parks and recreation).

Fourth, Authority uniformly has imposed the required payment upon those who must pay it. The trial court ruled the required payment, because it was a charge imposed by a special purpose district, was not mandated by statute or the constitution to be uniform in the sense that every customer had to pay it. The court noted, however, that Authority uniformly had imposed the required payment on all new customers based on their anticipated water usage.

We agree with the trial court's reasoning. While no statute or constitutional provision explicitly requires charges by special purpose districts to be uniform, the Court has stated that charges or assessments imposed only upon certain individuals "must be fairly and justly apportioned among those charged with their payment. A method of apportionment, whether by statute or by regulation, that is manifestly arbitrary or discriminatory does not fulfill the constitutional requirements of due process and equal protection." Hagley Homeowners Ass'n, 326 S.C. at 76-77, 485 S.E.2d at 97 (quoting Newton v. Hanlon, 248 S.C. 251, 149 S.E.2d 606 (1966)). Fifth, we may consider the fact that Authority intended to classify the payment as a charge. Brown v. County of Horry, 308 S.C. at 184, 417 S.E.2d at 568 (while governmental entity's intent may be considered, the question of whether a required payment is a charge or a tax depends on its real nature and not the label assigned to it by the governmental entity that approved it). Authority described it as a "new account fee" in the resolution adopting it, and has not used tax levies since 1975 in order to maintain continued eligibility for federal grants.

JKC's reliance upon Casey v. Richland County Council, 282 S.C. 387, 320 S.E.2d 443 (1984), is misplaced. In that case, the county imposed a required payment upon all residents who lived in unincorporated areas of the county to build a sewer system. The Court stated that each resident required to pay the assessment must receive a specific benefit or service in order for the payment to qualify as a valid assessment. Each resident did not because many residents of unincorporated areas already were served by municipal systems; therefore, the payment was not an assessment. Instead, the Court determined the required payment was a tax because it would provide only a general benefit to those residents already served by municipal systems. But as a tax, it was unconstitutional because it was not...