As explained elsewhere, general improvement districts (“GIDs”) are limited purpose forms of local government with very little means of generating revenue. So when they undertake functions beyond their limited purpose(s), generating the revenues necessary to financially support those functions becomes a challenge. Not to worry. Our little Incline Village General Improvement District (“IVGID”) is up to the challenge having adopted solid waste “franchise fees.”¹ If you the reader examines the District’s financial reporting, you will discover that solid waste franchise fee revenue is assigned to the solid waste fund², which is a sub-fund under the District’s Utility Fund. What exactly is this revenue source, and where does it come from?

If one examines IVGID staff’s accounting glossary within the budget the Board adopts each year, one will find no definition for the term “franchise fee.” Notwithstanding, case law instructs that a local government’s franchise fee represents “sums paid for the right to use (its) public streets or rights-of-way.”³ According to the Nevada Public Utility Commission (“NPUC”), because business use exacts wear and tear on a municipality’s streets and roadways, and the power to assess this kind of fee comes from the exercise of its police powers⁴ (assuming arguendo the municipality possesses such powers), this kind of charge represents another “fee…imposed by local government (just like)…business license…franchise…and right-of-way fees.” Take a look at your NV Energy electricity, Southwest Gas natural gas, and Spectrum cable television/internet bills. All include franchise fees (labeled “government fees”) payable to Washoe County which are passed through to you and we the end customers.

Even where a municipality’s franchise fee is a permissible one, like all fees, it must still bear some reasonable relationship to the value received from the government⁵. Otherwise, and “to the extent (the)…fee exceeds any reasonable value of the franchise, the excessive portion…is a tax…If this were not the rule, franchise fees would become a vehicle for generating revenue independent of the purpose of the fee”⁶ which is exactly what the fee represents insofar as IVGID is concerned.

One of the basic powers a GID may exercise, once it has been granted by a County Board of Commissioners⁷ (“County Board”), is “furnishing facilities for the collection and disposal of garbage and refuse⁸, as provided in NRS 318.142.”⁹ Based upon this power which was granted to the District on March 5, 1964⁷, the IVGID Board has entered into a series of solid waste franchise agreements with various solid waste collectors. And the District has always exacted a franchise fee from those collectors (this fact is documented in the published 1969 case of Whiston v. McDonald, 85 Nev. 508, 458 P.2d 107¹⁰) which gets passed on to the District’s ultimate solid waste disposal customers; i.e., you and us.

Currently IVGID has entered into a series of franchise/amended franchise agreements with Waste-Management (“WM”) for the latter’s collection and disposal of solid waste from Incline Village and Crystal Bay. ¶12.1 of the latest solid waste franchise calls for quarterly payments to be made by WM to IVGID of a 10% franchise fee on “Gross Receipts generated from Customers for the (solid waste) services rendered (t)hereunder.” And because of the way WM’s “rolling annual average return on revenue” is calculated¹¹, this fee in essence gets “passed through” to its solid waste customers in the form of higher charges which take into account this “allowable expense.” And since NRS 318.170(1)(b) permits GID “board(s)…with basic powers relating to…refuse collection and disposal (to)…compel all owners of inhabited property (with)in the District to use the District’s system for the collection and disposal of…garbage and other refuse,” here that’s exactly what IVGID has done¹².

So ladies and gentlemen. If you own¹³ or occupy real property in Incline Village or Crystal Bay where garbage and other rubbish is created, accumulated, or produced, or you are a contractor who creates, accumulates or produces solid waste in Incline Village or Crystal Bay, you are paying a franchise fee to IVGID based upon the gross solid waste fees charged by WM¹⁴!

1. If IVGID can get away with charging solid waste franchise fees, what’s to stop the District from charging them insofar as other public services are concerned?
2. See page 141 of the packet of materials prepared by staff in anticipation of the Board’s May 26, 2021 meeting (“the 5/26/2021 Board packet“).
3. See Jacks v. City of Santa Barbara, 3 Cal.5th 248, 262, 219 Cal. Rptr. 3d 859 (2017).
4. Municipal “police power(s) do…not specifically refer to the right of state and local governments to create police forces…(Rather,) the sovereign power of a state includes protection of safety, health, morals, prosperity, comfort, convenience and welfare of the public. In the U.S., the authority to regulate local matters concerning health, safety, and morality of state residents is reserved to states under the Tenth (10th) Amendment to the Constitution. The basic right of governments to make laws and regulations for the benefit of their communities is the police power. Thus police powers are defined as the power of a governmental body to impose laws and regulations which are reasonably related to the protection or promotion of a public good such as health, safety or welfare [see Shreveport v. Restivo, 491 So. 2d 377, 380 (La. 1986)]. Usually states delegate to their political subdivisions the power to enact measures to preserve and protect safety, health, welfare, and morals of the community” (see https://municipal.uslegal.com/police-powers/).
5. Jacks, supra, at 3 Cal.5th 267.
6. Jacks, supra, at 3 Cal.5th 269.
7. And here the Washoe County Board has granted IVGID this basic power (see Ordinance 97, Bill 102).
8. See NRS 318.116(13).
9. NRS 318.142 instructs that GID “board(s) shall have the power…to contract…for the collection and disposal of garbage and refuse from within the district.”
10. In July of 1963 Nan Whiston purchased an Incline Village lot from Crystal Bay Development Co. (“CBDC”). During her purchase she met Arthur Wood, personally, and they discussed trash hauling. As a consequence, on January 29, 1964 Robert McDonald (the IVGID Board’s then “president” and CBDC’s attorney) sent Ms. Whiston and her soon to be husband (Albert Ander) a letter wherein IVGID offered to enter into a contract with the latter two “for a 10-year term…for garbage disposal at Incline Village.” The letter required “payment…to the District…of 10 percent of the gross amount(a) collected…later to be increased to 15 percent and finally to 20 percent.” Although this payments were not labeled “franchise fees,” clearly, that’s what they were.
11. See: ¶1.26 of the agreement which defines “return on revenue” as 9% of the “ratio of Net Income to Gross Receipts;” ¶1.23 of the agreement which defines “Net Income” as “Gross Receipts minus Allowable Expenses;” and, ¶1.1 of the agreement which defines “Allowable Expenses” as “those expenses incurred by the Collector in the performance of this franchise.”
12. ¶3.1 of IVGID’s Solid Waste Ordinance, Ordinance No. 1 mandates that the District’s “garbage and other rubbish collection service(s)…shall be mandatory for all owners¹³, occupants, or persons in possession, charge, or control of all places and premises in the District where garbage and other rubbish (are) created, accumulated, or produced.”
13. ¶5.9 of IVGID’s Solid Waste Ordinance, Ordinance No. 1 instructs that “all (solid waste disposal) charges, fees and amounts due and payable shall be billed to the owner of the premises, whether or not the owner is also the occupant.”
14. So how much does IVGID exact in annual solid waste franchise fees? According to the District’s latest (2021-22) budget², IVGID has budgeted to receive $338,000 in franchise fees.