Zweig v. Metro. St. Louis Sewer Dist.
| Decision Date | 27 March 2012 |
| Docket Number | No. ED96110,Cause No. 08SL-CC03051,ED96110 |
| Parties | WILLIAM DOUGLAS ZWEIG, et al., Plaintiffs-Respondents/ Cross-Appellants, v. THE METROPOLITAN ST. LOUIS SEWER DISTRICT, Defendant-Appellant/ Cross-Respondent, |
| Court | Missouri Court of Appeals |
Appeal from the Circuit Court of the County of St. Louis
Honorable Dan Dildine
This case involves a Hancock Amendment challenge.
Background and Procedural History
In 2007, the Metropolitan St. Louis Sewer District (MSD) adopted a new stormwater "user charge." 1 The charge was imposed on every property within the sewer district with an impervious area at a rate of $0.12 per one hundred square feet of impervious area on the property. Unimproved properties were assessed no charge, and properties that had impervious area but drained internally or directly into a waterwaywere given a 50% credit. The charge was assessed on all properties with impervious area, including property owned by tax-exempt, non-profit, and governmental agencies. MSD's Board approved the rate change but did not submit the issue to the voters.
In 2008, property owner William Zweig filed a class action suit against MSD seeking a declaration that the new charge constituted an unconstitutional "tax" under the Hancock Amendment because MSD had not submitted it to a vote.2 The petition also sought injunctive relief from the charge, a refund of amounts collected by MSD under the new rate structure, and attorneys' fees. Upon stipulation of the parties, the trial court certified the class as to the claims for declaratory and injunctive relief, but not to the refund claim. The case was bifurcated with a trial regarding the constitutionality of the user charge held first, followed by a trial to determine the appropriate relief. William Zweig and the other taxpayers (taxpayers) prevailed in the first phase of the case - the trial court found that the charge was an unconstitutional tax. In the second phase, the court certified the class and granted prospective relief, but denied taxpayers' refund claim. The court also awarded taxpayers' attorneys' fees and costs.
On appeal, MSD claims the trial court erred in holding that the new charge was a tax as opposed to a user-fee. On cross-appeal, taxpayers claim they were entitled to a refund of amounts they had already paid under the unconstitutional tax. MSD also claims the trial court erred in the amount of attorneys' fees it awarded to taxpayers.
Standard of Review
As the judgments challenged on appeal were made pursuant to a court-tried case,Murphy v. Carron is the proper standard of review. Missouri Growth Ass'n v. Metropolitan St. Louis Sewer Dist., 941 S.W.2d 615, 619 (Mo. App. E.D. 1997). This Court will affirm the judgment unless there is no evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law. Id The trial court's award of attorneys' fees is reviewed for abuse of discretion. Williams v. Finance Plaza, Inc., 78 S.W.3d 175, 184 (Mo. App. W.D. 2002).
Discussion
This case comes before us as a challenge under the Hancock Amendment to a "charge" imposed by the MSD without a vote. MSD argues that the charge is a user fee and not a tax, and therefore not subject to the provisions of the Hancock Amendment. The taxpayers counter that the charge is indeed a tax and pursuant to the Hancock Amendment, MSD was required to put the proposed change to a vote.
To determine whether a charge is a tax or a user fee, this Court must consider the five factors set out in Keller v. Marion County Ambulance District, 820 S.W.2d 301 (Mo. banc 1991). Arbor Inv. Co., LLC v. City of Hermann, 341 S.W.3d 673, 683 (Mo. banc 2011). But, as Justice Holstein so astutely points out in his concurrence in Beatty v. Metropolitan St. Louis Sewer Dist., analysis under Keller is fraught with difficulty because the factors developed in that opinion are so vague and manipulatable that they necessarily result in repetitive litigation and are ultimately unworkable. 867 S.W.2d 217, 222 (Mo. banc 1993). One would be hard pressed to find a case more demonstrative of the problems identified by Justice Holstein than the one before us. Both sides attempt to obfuscate the factors to their advantage. The ordinance imposing the "charge" was clearly drafted with the Keller factors. At the same time, the taxpayers conflate thefactors, which confuses the issues. Unfortunately, as Justice Holstein also recognized, the Keller analysis is the current state of the law and this Court is bound to abide by it. Id
We shall attempt to analyze each of the five Keller factors as distinctly and succinctly as possible.
Factor One: When is the fee paid?
The first factor in the Keller analysis examines when the fee is paid. Keller, 820 S.W.2d 301, 304 n.10. "Fees subject to the Hancock Amendment are likely due to be paid on a periodic basis while fees not subject to the Hancock Amendment are likely due to be paid only on or after provision of a good or service to the individual paying the fee." Id
This first factor perfectly illustrates Justice Holstein's criticism of Keller. The cases analyzing this factor lack uniformity and are all over the board. In Missouri Growth Ass'n v. Metropolitan St. Louis Sewer Dist., a case applying the Keller analysis to a MSD waster water charge, this Court relied on the language of the ordinance imposing the charge as proof that that the fee was paid only after the service was provided. 941 S.W.2d 615, 623 (Mo. App. E.D. 1997). In Building Owners & Managers Ass'n of Greater Kansas City v. City of Kansas City, the Western District analyzed a fee charged by the City's Fire Department for yearly required fire inspections of businesses and multifamily residential buildings. 231 S.W.3d 208 (Mo. App. W.D. 2007). The Court held that "the critical inquiry under this factor is not the timing of the fee 'but the regularity with which the fee is paid.'" Id. at 212 (quoting Beatty v. Metro. St. Louis Sewer Dist., 867 S.W.2d 217, 220 (Mo. banc 1993)). Applying this holding, the Courtfound that even though the fee was paid after the inspection was conducted, because the fees were incurred on a regular basis, i.e. they had to be paid yearly, this charge was more like a tax than a user fee. Id.
MSD relies on the language of the ordinance imposing the stormwater "fee" and Missouri Growth as evidence that the first factor should have been decided in its favor. The ordinance reads, in pertinent part: "All bills for Stormwater User Charges shall be. . . issued monthly for services provided in the preceding month." This language tracks the language approved in Missouri Growth. However, this is the only evidence MSD cites in support of this factor.
The taxpayers argue that MSD had the Keller factors in mind when it drafted this ordinance, and was simply attempting to manipulate the analysis. Taxpayers point to the fact that there was no variation in the amount of the bills from month-to-month as evidence that property owners were not being billed for services they had already received. They argue that this fact demonstrates that the charge was billed without regard to when the service was actually used. The taxpayers' argument more correctly relates to factor three - whether the amount of the fee is affected by the level of goods or services provided to the fee payer.
To the extent that there exists any principled way to approach this factor, the stormwater charge appears to be more like a tax than a fee. MSD relies solely on the wording of the ordinance to show that the fee is charged after the service is provided. If a municipality could satisfy the Keller factors based solely on the language of the ordinance, the municipality could simply draft an ordinance around the Keller factors, disguising every tax as a user fee. This would render the Hancock Amendmentmeaningless. Such a result is untenable. Without any additional evidence supporting MSD's position, the fact that the fee is charged periodically tips the scales in favor of taxpayers under this factor.
This is not to say that any time a fee is charged periodically, the first factor is resolved in favor of a tax. That is clearly not the state of the law. See Arbor Inv. Co., LLC v. City of Hermann, 341 S.W.3d 673, 684 (Mo. banc 2011); Missouri Growth, 941 S.W.2d at 623. And logic dictates the same result. Certainly bills for some "user fees" are sent to property owners on a periodic basis, such as monthly utility bills, but this is because those services are used by the property owners on a continuous basis. This Court's holding is limited to the proposition that a municipality may not rely solely on the language of an ordinance to satisfy this factor; it must provide some evidence that property owners actually used the service during the previous billing cycle. See Arbor Inv. Co., LLC v. City of Hermann, 341 S.W.3d 673, 684 (Mo. banc 2011); Missouri Growth, 941 S.W.2d at 623. In Arbor and Missouri Growth, the municipality also sent out monthly billing statements, but these were for services which the property owners used on a monthly basis - gas, electric, water, trash, etc. There was no evidence from MSD that the taxpayers in this case used the stormwater service on a monthly basis.
MSD argues that taxpayers' use of this service is "continuous and ongoing" because the infrastructure to provide the service must be in place at all times, justifying its monthly billing cycle. The permanence of infrastructure is just not a consideration under factor one. Take Beatty for example. In Beatty, our Supreme Court considered a Hancock Amendment challenge to a flat-rate sewer charge. Beatty, 867 S.W.2d at 218. Obviously, the infrastructure for a sewer system must be in place at all times whether it isbeing used or not. The Court still found the first factor against MSD. Id. at 220.
Factor Two: Who pays the fee?
The second Keller factor looks at who pays the fee. Keller, 820 S.W.2d 301, 304 n.10....
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