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Are The District’s Recreation (“RFF”) And Beach (“BFF) Facility “Fees” Really “Fees,” or Are They “Taxes?”

IVGID 101 Posted on by

They’re taxes. And what follows are the reasons why.

As we’ve demonstrated elsewhere, “each year the District establishes…annual Recreation…and Beach Facility Fee(s)…collected from property owners within the District through a levy placed on the(ir) property tax bill(s)1. As part of the annual budget process the Board…approves a resolution2 which outlines the billing (see NRS 318.1973) and collection (see NRS 318.2014) process(es) set forth in Nevada Revised Statutes…At (a publicly noticed) meeting the Board…t(akes) action…which…approves a final report5 contain(ing) a description of each parcel of real property (allegedly) receiving…services and facilities(, and) the (final) amount of the charge(s)…for such year.”6 That resolution and report describe the RFF/BFF as “standby and service charges7 (for)…the availability of the use of IVGID’s beaches” and other delineated public recreation facilities8. But,

Just Because IVGID Staff And Past Boards Have Told Us The RFF/BFF Are “Fees,” Doesn‘t Necessarily Make Them Legitimately So: That’s because as elsewhere explained,

“The nature of (a) tax or charge that a law imposes is not determined by…(its) specially descriptive phrase…but (rather,)…its operating incidence”9 or “effect”10 “on the basis of realities.”11

Therefore, this discussion examines the “operative incidence” and “effect” of the RFF/BFF in an effort to determine whether they are the legitimate fees staff and the current/past Board(s) represent/have represented, or are they simply “taxes?” Let’s begin by examining

The Legal Test For Determining Whether The RFF/BFF Are “Fees“ or Really Something Else: As we’ve stated elsewhere, “the Hawaii Supreme Court in Medeiros adopted a modified version of the test articulated by the Massachusetts Supreme Judicial Court in Emerson College [v. City of Boston, 39 Mass. 415, 462 N.E.2d 1098, 1105 (1984)] which analyzes whether a monetary charge:

(1) Applies to the direct beneficiary of a particular service;

(2) Is allocated directly to defraying the costs of providing the service; and,

(3) Is reasonably proportionate to the benefit received.”

Where “th(e)se criteria fit the charge, it is a fee”12. And where they don’t, it’s a tax13.

The Additional “Paid by Choice” Factor: Emerson College included a fourth (4th) factor. Whether the charge is paid by choice14 But as alluded to above, the Massachusetts Supreme Judicial Court subsequently “weakened…adherence to the…’voluntary receipt of the service’…factor15 when determining whether a monetary exaction is a fee. As discussed in our When The “Paid by Choice” Factor Applicable to All Fees is Relaxed discussion, a close examination of the authorities relied upon by the Medeiros court was limited to situations involving special benefit services affecting public health or sanitation. Meaning that since furnishing the availability of largely public recreation facilities is not one of those limited and specific circumstances, here voluntariness of payment continues as a fourth (4th) factor to the Emerson College test.

So with that said, consider the following:

Insofar as The District‘s Public Recreation Facilities Are Concerned, The RFF Does Not Pay For “Special Benefits:” Initially, our discussion of Whether The RFF/BFF Are The Product of Nonexchange Transactions demonstrates that neither of these monetary exactions furnishes any benefit in consideration of payment. Rather, both are most closely aligned with “assessments imposed on…individuals, other than (those) assess(ed) on exchange transactions.”16

But with respect to the RFF in particular, consider that Washoe County has granted the District the basic power to furnish facilities for public recreation17. Based upon this grant District staff and past Boards have represented the RFF pays for the availability to access and use18 “IVGID’s…Championship golf course; Mountain golf course; tennis facilities; the Chateau and Aspen Grove; Diamond Peak Ski Resort, and (the) Recreation Center.” And because these facilities are public, they’re just as available to be accessed and used by any member of the general public as they are available to local parcel owners, whether or not he/she/it owns real property in Incline Village/Crystal Bay. Or whether or not his/her/its property is assessed the RFF. Therefore those who pay the RFF, or more importantly their Incline Village/Crystal Bay real properties because they’re the ones actually assessed19 and paying, realize no peculiar (i.e., special) “benefit”whatsoever! Let alone in a manner “not shared by (any) other member…of…society.”20

Insofar as The District‘s Beaches Are Concerned, The BFF Does Not Pay For “Special Benefits:” As elsewhere stated, under the beach deed local parcel owners with beach access have been expressly granted “an easement…for the benefit of (themselves,) all other owners of property located within (the District’s then) boundaries, and their respective successors and assigns in such ownership…to enter upon (the beaches) and to use said property for the recreational uses and purposes specified (t)herein.”21 In other words, local parcel owners with beach access, their successors and assigns, and their guests are entitled to “use…IVGID’s beaches” not because of payment of the BFF as staff and past boards have represented. But rather, because of the express use easement in the beach deed. Stated differently, those who pay the BFF, or more importantly their Incline Village real properties because they’re the ones actually assessed, realize no peculiar (i.e., special) “benefit” whatsoever in consideration of payment!

Let Alone One Which Specially Benefits The Entity Making Payment22: Recall that on the District’s Facility Fee FAQ web page in answer to the question of “what benefits do I get from these fees,” we are told:

“In short: IVGID beach access* and discounts at IVGID-run venues and programs.

The long answer: Each parcel and dwelling unit that is assessed an IVIGD Facility Fee is eligible to receive a combination of IVGID Recreation Passes and Recreation Punch Cards, totaling five (5), as suits their personal needs. These cards are paid for with the annual Recreation and Beach Facility Fees that are reflected on your Washoe County tax bill. IVGID Recreation Passes and Recreation Punch Cards allow the holder to pay a reduced rate at all IVGID facilities and provide access to the restricted-access IVGID Beaches*. Check out the programs and admission rates on our website and you will often see a discounted rate for IVGID Picture Pass holders.”

Given “these cards are paid for with the annual Recreation and Beach Facility Fees…reflected on (local parcel’s)…Washoe County tax bill(s), how exactly are those parcels able to realize “IVGID beach access* and discounts at IVGID-run venues and programs?” Given they can’t, those who are forced to pay are not the direct beneficiaries of the so called benefits furnished in consideration of payment.

Given No Benefit is Received in Consideration of Payment, They Lack Proportionality: “(T)he crucial factor in determining whether a municipal charge for services constitutes a valid…fee(, or something else,) is whether (it)…is intended to cover the cost of administering a regulatory scheme or providing a service.”23 In other words, to be a fee the RFF/BFF must be proportionate to the costs the District actually incurs to furnish the availability to access and use the recreation and beach facilities represented for which these fees are assessed24. Or stated differently, “the services for which the (RFF/BFF) are imposed (must be) sufficiently particularized as to justify distribution of the costs among a limited group (the ‘users,’ or ‘beneficiaries’ of the service), rather than the general public”25 as a whole.

It is for this reason that ¶5 of the resolution the Board adopts each year which fixes the RFF/BFF and orders their collection on the county tax roll6 recites they “are reasonable in their relation to the object of the charges imposed…and that said charges have been apportioned in relation to said natural, intrinsic, fundamental and reasonable distinctions among said rates.” However, just because staff and the Board have adopted the necessary language doesn’t necessarily mean it is truthful. And here we’ve demonstrated that no benefits are furnished in consideration of payment of the RFF/BFF. And that “the (alleged) benefits (availability to access and use District owned recreation and beach facilities)…are not limited to (just) the [parcels/dwelling units assessed (see discussion above)]…The capacity to (furnish District owned recreation and beach facilities extends to)…not only the private property interests of the owner(s), but also the(ir)…building’s occupants as well as (those of) surrounding buildings and their occupants.”26 And of course, the world’s tourists.

“If the benefits for which (the RFF/BFF) are imposed were limited to (just) the owners of (assessed parcels/dwelling units and they were)…essential to the public welfare, there would be no reason to depart from the optional character of a traditional fee.”27 But because here they are not, and the District has failed to “sufficiently particularize…the services for which the (RFF/BFF) are imposed,” there is no “reasonable proportionality” to the value of the arguable benefit(s) furnished28 and they are impermissible taxes29.

Because as we’ve elsewhere demonstrated the RFF/BFF greatly “exceed…the value of the specific services for which (they are allegedly) charged.”30 And because “a court cannot apportion the charge (n)or ascertain and allow (only) such portion…it may find reasonable,”31 the entire charge must be deemed a tax.

They Are Assessed to Raise Revenue: Recall that the main factor in determining the difference between a legitimate fee and a tax is whether the monetary exaction is limited to covering the cost of providing a particular governmental service32. Where as here the primary purpose (of the RFF/BFF) is to raise revenue, the authorities are uniform in holding that this is the primary indicia of a tax because “it entitles the taxpayer to receive nothing except the governmental rights enjoyed by all citizens.”33 Inasmuch as we’ve elsewhere demonstrated that the primary purpose of the RFF/BFF is to raise revenues34, they must be deemed to be taxes.

Those Real Properties Which Are Assessed Are Not Direct Beneficiaries of The Public Recreation Facilities Allegedly Furnished: As elsewhere explained, taxes are spent on vital services which “benefit…the entire community,”35 and not just those who pay36. In other words, what being a community is all about. But here, as we’ve elsewhere explained, the RFF is spent on the alleged availability of public recreation facilities which primarily benefit the world’s tourists. Even though unlike local Incline Village/Crystal Bay parcel owners who are involuntarily assessed the RFF, members of the general public are not required to pay the RFF. And insofar as the BFF is concerned, as we’ve elsewhere explained, this charge does not pay for the availability to access and use the beaches. Rather, the use easement in the beach deed do.

They Are The Product of “Enforced Contribution:”14 In other words, the payors of those exactions are given no choice insofar as payment is concerned37. This makes them taxes.

Moreover, They‘re Not The Standby And Service Charges For The Availability of Public Recreation Facilities Staff And Current/Past Boards Represent/Have Represented: For a more comprehensive review of this topic, the reader is referred to our Are The District’s Recreation And Beach Standby And Service Charge(s) Its Current/Past Boards Represent/Have Represented discussion.

District Staff, Its Auditors‘ And Consultants‘ Admissions: District staff and its auditors have made a number of admissions to the effect that the RFF/BFF are not the “standby and service charges (for)…the availability of the use of IVGID’s” beach and District owned recreation facilities they represent. Rather, they’re the product of what the law labels “non-exchange transactions.” Which makes them “taxes.”38

Given “Those Criteria (Do Not)Fit The Charge,” They Are Taxes: So there you have it! Given the presence of any one (1) of the above factors is sufficient to demonstrate the RFF/BFF are “taxes,” and here we have at least eight (8), the RFF/BFF must be and are in fact taxes.

And now you know.

  1. See page 102 of the packet of materials prepared by staff in anticipation of the Board of Trustee’s (“Board’s”) May 27, 2020 meeting (“the 5/27/2020 Board packet”).
  2. See NRS 318.201(9). For an example of the type of resolution, see pages 228-231 of the packet of materials prepared by staff in anticipation of the Board’s May 26, 2022 meeting (“the 5/26/2022 Board packet“).
  3. Which allows general improvement district (“GID”) boards to “fix (in part)…recreational facilit(y)…service…and standby service charges, for services or facilities furnished by the district, (as well as)…the (mere) availability of service…”
  4. Which allows “any (GID) board which has adopted rates pursuant to…chapter (NRS 318 to)…elect to have such charges for the forthcoming fiscal year collected on the tax roll.”
  5. An example of that report (for fiscal year 2022-23) appears at pages 232-237 of the 5/26/2022 Board packet.
  6. See NRS 318.201(8) and (9).
  7. See ¶4 at page 229 of the 5/26/2022 Board packet.
  8. See ¶4(b) at page 230 as well as ¶I at page 234 of the 5/26/2022 Board packet.
  9. See the reasoning in State v. Medeiros, 89 Hawai’i 361, 366, 973 P.2d 736, 741 (1999), adopted by the Nevada Supreme Court in Clean Water Coalition v. The M Resort, LLC., 127 Nev. 301, 310, 255 P.3d 247, 257 (2011).
  10. See Emerson College v. City of Boston, 39 Mass. 415, 424, 462 N.E.2d 1098, 1105 (1984).
  11. See Hukle v. City of Huntington, 134 W.Va. 249, 58 S.E.2d 780, 783 (1950).
  12. See Medeiros, supra, at 973 P.2d 742-745.
  13. See Clean Water, supra, at 127 Nev. 315; Douglas Co. Contractors v. Douglas Co., 112 Nev. 1452, 1457, 929 P.2d 253, 256 (1996); State ex. rel. City of Reno v. Boyd, 27 Nev. 249, 256, 74 P. 654, 655 (1903); 71 Am. Jur. 2d  §13, State and Local Taxation (2001).
  14. Meaning the party paying the fee has the option of not utilizing the governmental service and thereby avoiding the charge [see Vanceburg v. Federal Energy Regulatory Comm’n, 571 F.2d 630, 644 fn. 48 (D.C.Cir. 1977), cert. denied, 439 U.S. 818, 99 S. Ct. 79 (1978); Medeiros, supra, at 973 P.2d 741].
  15. Holding that “the element of choice is not a compelling consideration which can be used to invalidate an otherwise legitimate charge” [see Medeiros, supra, at 973 P.2d 741; Nuclear Metal v. Low Level Radioactive Waste Mgmt. Bd., 421 Mass. 196, 656 N.E.2d 563, 570 (1995)].
  16. In an exchange transaction, each party receives and gives up essentially equal values” [see GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions. GASB stands for the “Governmental Accounting Standards Board.” It is “the independent, private-sector organization…that establishes accounting and financial reporting standards for U.S. state and local governments that follow” Generally Acceptable Accounting Practices (“GAAP”) [see https://www.gasb.org/about-us]. Since Nevada local governments’ financial statements [see NRS 354.486(3)], other schedules required for funds [see NRS 354.612(2)], and annual reports concerning capital improvements [see NRS 354.5947(2)] must all be prepared in accordance with GAAP, the simple fact of the matter is that GASB governs the financial reporting of the District’s RFF/BFF].
  17. See Washoe County Bill No. 117 amending Ordinance No. 97 adopted November 15, 1965.
  18. In other words, the necessary alleged special benefit.
  19. See NRS 318.201(11) which states “the county treasurer shall include the amount of the charges on bills for taxes levied against the respective lots and parcels of land. Thereafter, the amount of the charges shall be collected at the same time and in the same manner and by the same persons as, together with and not separately from, the general taxes for the county.”
  20. Such as one which, “presumably, bestows a benefit on the applicant, not shared by other members of society,“ like “a request that a public agency permit an applicant to practice law or medicine. Or construct a house. Or run a broadcast station” [see National Cable Television Assn. v. U.S., 415 U.S. 336, 340-41, 94 S.Ct. 1146 (1974)].
  21. See page 2, line 27-page 3, line 2 of the beach deed.
  22. In other words, “the direct beneficiary of a particular service” (see Medeiros, supra, at 973 P.2d 742; Clean Water Coalition, supra, at 127 Nev. 315).
  23. See Rizzo v. City of Philadelphia, 668 A.2d 236, 238 (Pa. Cmwlth. 1995).
  24. See Commonwealth v. Caldwell, 25 Mass. App. Ct. 91, 94-95 (1987).
  25. See Emerson College, supra, at 39 Mass. 425.
  26. See Emerson College, supra, at 39 Mass.425-26.
  27. See Emerson College, supra, at 39 Mass. 426.
  28. See Emerson College, supra, at 39 Mass. 417-419; National Cable Television, supra, at 554 F.2d 1106-1107; Utah Office of Property Rights Ombudsman, Advisory Opinion #101, supra, at page 9 of 9.
  29. See Margola Assocs. v. City of Seattle, 121 Wn.2d 625, 640-41, 854 P.2d 23 (1993). Also see Health Services Medical Corp. v. Chassin, 175 Misc. 2d 621, 668 N.Y.S.2d 1006, 1009-10 (Sup. Ct. 1998) where a fee was declared “to be an unconstitutional tax because it directed a portion of payments made (i.e., the excess) by health maintenance organizations to hospitals for inpatient care to be deposited in the state’s general fund.”
  30. See Executive Aircraft Consulting, supra, at 845 P.2d 62 quoting National Cable Television Ass’n Inc. v. F.C.C., 554 F.2d 1094, 1106 (D.C. Cir. 1976).
  31. See City of Madera v. Black, 181 Cal. 306, 315, 184 P. 397 (1919).
  32. See Medeiros,supra, at 973 P.2d 741.
  33. See U.S. v. City of Huntington, W.Va., 999 F.2d 71, 74 (4th Cir. 1993).
  34. The financial shortfall between budgeted revenue and intentional overspending.
  35. See Hawaii Insurers Council v. Lingle, 120 Haw. 51, 60, 201 P.3d 564 (Haw. 2008).
  36. See Clean Water Coalition, supra, at 127 Nev. 322 quoting State v. Boyd, supra, at 21 Nev. 255,
  37. See National Cable Television Ass’n v. United States, 415 U.S. 336, 341, 94 S.Ct. 1146, 1149 (1974); United States v. La Franca, 282 U.S. 568, 572, 51 S.Ct. 278 (1931); City of Gary, Ind. v. Indiana Bell Tel., 732 N.E.2d 149, 156 (Ind. 2000).
  38. Since this subject is thoroughly examined at our Are The RFF/BFF Taxes Because They’re The Product of Nonexchange Transactions web page, rather than repeating ourselves, we simply refer the reader to this discussion.

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