As elsewhere stated, according to Emerson College v. City of Boston, at 391 Mass. 415, 424-425, 462 N.E.2d 1098, 1105 (1984), fees “based on the rights of (a governmental) entity as proprietor of the instrumentalities used,”¹ are:

1. Charged “in exchange for a particular governmental service”² which specially benefits the party paying the fee³ in a manner “not shared by other members of society;”⁴

2. Collected not to raise revenues⁵, but rather, “as a means of compensating…government for the cost of offering and regulating the special service, benefit, or privilege” furnished in consideration⁶;

3. “Reasonabl(y priced⁷)…in relation to the…cost (of the) goods or services for which the fees are imposed;”⁸ and,

4. Paid by choice⁹.

Given only “if those criteria fit the charge…is (a monetary exaction)…a fee”¹⁰ (otherwise, it is a tax¹¹), here we discuss the voluntariness of payment pillar and under what circumstances it can be disregarded.

Because so many of the District’s so called “fees” by design don’t include the element of choice¹², naysayers¹³ rely upon “a modified version” of the above Emerson College test¹⁴ as authority for what the District has done. A test which omits “payor consent” as a necessary pillar when determining whether a monetary exaction is a fee or a tax. They point to Medeiros¹⁵ which at first blush appears to support their argument. Because it

“Analyzes whether the charge:

(1) Applies to the direct beneficiary³ of a particular service²;

(2) Is allocated directly to defraying the costs of providing (that) service⁵; and,

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

So has the paid by choice factor⁹ been eliminated when it comes to considering whether the District’s many involuntary fees¹² are legitimate?

Although deviation from the “rule” (first adopted by the Massachusetts Supreme Judicial Court) when determining whether a monetary exaction is a fee or a tax subsequent to its opinion in Emerson College has “weakened…adherence to the…’voluntary receipt of the service’…factor¹⁶, a close examination of the authorities relied upon by the Medeiros court reveals it hasn’t been eliminated. That’s because “so called” deviation is expressly limited to circumstances involving special benefit services affecting public health or sanitation. Such as,

1. Charges assessed to the owners of residential property to maintain connections to municipal sewer¹⁷ and water¹⁸ systems;

2. Charges assessed to defray the costs¹⁹ of emergency medical services provided to unconscious individuals (whether or not they own real property) incapable of choosing whether or not to receive those services²⁰; and,

3. Municipal planning charges assessed to manufacturers of low-level radioactive waste²¹.

Although these cases and the others which follow were discussed in Nuclear Metal in support of the proposition that

“Several…jurisdictions have either expressly or impliedly declined to place great reliance on the voluntariness of a service in assessing whether a charge is a fee or a tax,”

None has declined to place reliance upon the paid by choice factor when it comes to services having nothing to do with public health and sanitation. Such as the mere availability of public or private recreation facilities²². Moreover, a close examination of the four cases cited from these jurisdictions which have supposedly weakened reliance upon the paid by choice factor, actually discloses that the validity of the fees discussed therein had nothing directly to do with the element of choice/lack thereof. For instance,

In Nuclear Metal, supra, at 421 Mass. 206, the court concluded that

An “assess(ment against)…each person licensed or registered to receive, possess, use, transfer or acquire radioactive materials…to defray the costs annually incurred…to implement (a) plan for managing the disposal of low-level radioactive waste…(wa)s a classic regulatory fee.”²³

Meaning that here, “the element of choice (wa)s not a compelling consideration which c(ould) be used to invalidate an otherwise legitimate charge.” Moreover,

“The plaintiff (wa)s not ‘compelled’ to pay the fee, even though it must pay the fee so long as it engages in manufacturing activities in the Commonwealth that produce as a byproduct low-level radioactive waste….(If it)…ha(d) a ‘choice,’ in the sense that this term has been used in our cases, as to whether to engage in manufacturing activities resulting in the production of low-level radioactive waste…just as the plaintiffs in the Bertone and Southview cases²⁴ (had a choice, it)…could have avoided the charges under consideration in those cases by forgoing the rights for which the charges were assessed.”

In Rizzo, supra, at 668 A.2d 237-38, the court concluded that “a fee for emergency medical services (EMS) provided by the City (of Philadelphia)’s Fire Department…to the civilian population” was justified simply because it was “reasonable.” No issue over “the element of choice” was raised nor even discussed in this opinion. In fact, the court inferred that these fees were actually incurred by choice “for services rendered” simply by adopting conclusionary language to this effect²⁵.

In Resolution Trust Corp. v. Lanzaro, at 140 N.J. 244, 658 A.2d 282, 288 (1995), the court concluded that a fee payable to the Sheriff of Monmouth County for services rendered at the execution sale of property secured by mortgages held by RTC²⁶ was disproportionate²⁷. And thus intended primarily to raise revenue rather than compensate the governmental entity for the cost of providing its service²⁸. Thus the court concluded that “the charge sought to be imposed…(wa)s essentially equivalent to a tax measured by the sale(s) price of the foreclosed property (and could)…not lawfully be imposed on RTC.”²⁹ And for this reason, no issue over “the element of choice” was even discussed in this opinion. Moreover, even if it had been discussed, it would be a non-issue given the court inferred “these fees were incurred by choice (in that) ‘[t]he RTC decided to be the highest bidder to take title (rather than money) and thereby control the timing of a later resale at a better price.'”²⁸

In Bloom v. City of Fort Collins, at 784 P.2d 304, 305 (Colo.1989), the court concluded that

A “transportation utility fee” for the purpose of providing revenues for the maintenance of local streets” was “a special fee imposed upon owners or occupants of developed lots fronting city streets.”³⁰

But in Nevada, there is no such thing as a “special fee.” It’s certainly not a “rate, toll or charge” general improvement district (“GID”) Boards of Trustees (“BOTs”) are expressly authorized by NRS 318.197(1) to fix. And as we’ve demonstrated elsewhere, GIDs have no power to “legislate,” let alone to create a monetary exaction such as a special fee. Based upon Colorado’s definition of a “special fee,”³⁰ the closest similar monetary exaction we have in NRS 318 would be a “special assessment.”³¹ But “the essential characteristic(s) of a special assessment (are) that it must confer some special benefit to the property assessed,”³² “require…the revenues generated…be applied to enhance the value of the properties assessed ‘in an amount at least equal to the burden imposed,’”³³ and, be “reasonably related to the overall cost of the service.”³⁴

Even though the special fee in Bloom was not equivalent to any of the fees the District is authorized to fix under NRS 318.197(1), that court did discuss the fact that “the transportation utility fee (at issue wa)s not conditioned (up)on the voluntary choice of owners or occupants of developed lots.”³⁵ Relying upon ordinances imposing a sewer service charge upon apartment building owners³⁶, and a storm drainage fee upon property owners³⁷ (both cases founded upon public health and sanitation), the Bloom court concluded “we have never held…that a (such a) service fee must be voluntary.”³⁵

So taken as a whole, although these four cases may support the notion of a “weakening” insofar as “adherence to the…’voluntary receipt of the service’…factor” when determining whether a monetary exaction is a fee, they certainly don’t support the proposition this factor has been eliminated as naysayers argue. And they certainly have little bearing on the involuntarily imposed fees the District’s Board of Trustees (“BOT”) actually fixes³⁸!

Finally for context, since it is the Medeiros case which recognizes the deviation to the rule³⁹ relied upon by naysayers in disregarding the paid by choice factor⁹ when it comes to distinguishing fees from taxes⁴⁰, we feel it is important to understand what that case was really all about. Quite notably, it had nothing to do with charging a fee for a service or facility. Or the availability of such a service or facility. Rather, it involved collection of a revenue generating measure adopted to defray some of the costs the Honolulu police department incurred in conducting thousands of criminal investigations and many hours testimony in the trials of individuals arrested for crimes⁴¹. Such as Mr. Medeiros who was convicted of the crime of unauthorized entry into a motor vehicle⁴².

For all of these reasons then, when it comes to determining whether the “paid by choice” factor applied to any fee the District adopts can be disregarded, the benefits furnished in consideration must be evaluated. And where we’re talking about benefits other than public health and sanitation, the element of choice pillar recognized in Emerson College remains and must be applied.

And now you know!

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1. The only basis under which general improvement districts (“GID’s”) are allowed to adopt fees [Emerson College v. City of Boston, 391 Mass. 415, 424-425, 462 N.E.2d 1098, 1105 (1984)] because GIDs are limited purpose special districts (see our What Are GIDs discussion), which unlike true municipalities such as counties [see NRS 244.143(2)(a)], cities [see NRS 268.003(2)(a)] and unincorporated towns (see NRS 269.128, and 269.185, et seq.), have no power to provide for the “public health, safety…welfare” and morality (see NRS 244.150, et seq., 268.409, et sq and 269.190, et seq.) of their inhabitants. Nor to regulate, tax and license businesses [see NRS 244.335, et seq., 268.0035(1) and 269.170, et seq. as long as those businesses are not “subject to substantial regulation by a federal or state agency” [see NRS 268.0035(4)(b)]. Meaning they have no municipal police powers [Art. VIII, §8 of the Nevada Constitution instructs that “the Legislature shall provide for the organization of cities and towns by general laws, and shall restrict their power of taxation, assessment, borrowing money, contracting debts and loaning their credit, except for procuring supplies of water”], nor the power to charge “regulatory (including licensing and inspection) fees.”
2. In governmental finance, this is known as the distinction between “exchange” and “non-exchange” transactions. In “an exchange transaction…each party receives and gives up essentially equal values….In a nonexchange transaction, a government gives (or receives) value without directly receiving (or giving) equal value in return.” Nonexchange transactions are represented by one of “four classes…based on shared characteristics…1. Derived tax revenues, which result from assessments imposed on exchange transactions (for example, income taxes, sales taxes, and other assessments on earnings or consumption). 2. Imposed nonexchange revenues, which result from assessments imposed on nongovernmental entities, including individuals, other than assessments on exchange transactions (for example, property taxes and fines). 3. Government-mandated nonexchange transactions, which occur when a government at one level provides resources to a government at another level and requires the recipient to use the resources for a specific purpose (for example, federal programs that state or local governments are mandated to perform). 4. Voluntary nonexchange transactions, which result from legislative or contractual agreements, other than exchanges, entered into willingly by the parties to the agreement (for example, certain grants and private donations)” [see GASB Statement No. 33].
3. 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).
4. See National Cable Television Ass’n v. United States, 415 U.S. 336, 341, 94 S.Ct. 1146 (1974). Because if the benefits furnished are as available to those who are not assessed, as to those who are, there is no “special” benefit.
5. Given “a fee…is not a revenue measure [see Executive Aircraft Consulting, Inc. v. City of Newton, 252 Kan. 421, 427, 845 P.2d 57 (1993)], “any payment exacted by the State or its municipal subdivisions as a contribution toward the cost of maintaining governmental functions, where the special benefits derived from their performance (are) merged (with) the general benefit, is” not a fee. It is a tax (see Dickson v. Jefferson County Bd. of Ed., 225 S.W.2d 672, 311 Ky. 781, 786 (Ky. 1949). Otherwise, “the addition of ‘public policy or interest served, and other pertinent facts,’ if read literally, carr(y) an agency far from its customary orbit and puts it in search of revenue” (see National Cable Television Ass’n, Id.).
6. See Emerson College, supra, at 39 Mass. 424.
7. “(T)he crucial factor in determining whether a municipal charge for services constitutes a valid…fee is whether the charge is intended to cover the (reasonable) cost of…providing a service” [see Rizzo v. City of Philadelphia, 668 A.2d 236, 238 (Pa. Commw. Ct. 1995)]. Where “the ‘fee’ unreasonably exceeds the value of the specific services for which it is charged it will be held (to be) invalid” [see Executive Aircraft Consulting, supra, at 252 Kan. 426 quoting National Cable Television Ass’n v. F.C.C., 554 F.2d 1094, 1106 (D.C. Cir. 1976)].
8. See Resolution Trust Corp. v. Lanzaro, 140 N.J. 244, 658 A.2d 282, 288 (1995).
9. 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 n.48 (D.C. Cir. 1977), cert. denied, 439 U.S. 818, 99 S.Ct. 79 (1978)].
10. See State of Hawaii v. Medeiros, 89 Haw. 361, 973 P.2d 736, 742-745 (1999).
11. See Clean Water Coalition v. M Resort, 127 Nev. 301, 315, 255 P.3d 247 (2011); Douglas Co. Contractors v. Douglas Co., 112 Nev. 1452, 1457, 929 P.2d 253, 256 (1996); State v. Boyd, 27 Nev. 249, 256, 74 P. 654, 655 (1903); 71 Am. Jur. 2d  §13, State and Local Taxation (2001).
12. For instance, the District’s 10% solid waste franchise fee (see ¶12 of the Franchise Agreement which Provide(s) Solid Waste and Recyclables Collection Services) is involuntarily and mandatorily passed through “allowable expense” to “all owners, occupants, or persons in possession, charge, or control of all places and premises in the District where garbage and other rubbish is created, accumulated, or produced” (see ¶3.1 of the District’s Solid Waste Ordinance No. 1). The District’s defensible space fee is included in all monthly water service billings (see the current schedule of charges) pursuant to the District’s Water Ordinance No. 4. Pursuant to ¶14.01, “no person shall construct, extend, or connect to any Public Water System without first obtaining a written permit from District and paying all fees and connection charges” associated therewith. Moreover, pursuant to ¶9.06, “all 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.” According to Policy No. 16.1.1, the District involuntarily “charge(s) the prescribed Recreation Fee and the Beach Fee to all qualifying real properties within the boundaries of the District.”
13. Those who insist the ends justify any means because otherwise, there will be no funding source to cover the financial shortfall between budgeted revenues and the District’s intentional overspending.
14. See Clean Water Coalition, supra, at 127 Nev. 315.
15. Id., at 973 P.2d 742.
16. 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)].
17. See Ripperger v. Grand Rapids, 338 Mich. 682, 62 N.W.2d 585 (1954).
18. See Jones v. Water Commission of Detroit, 34 Mich 273, 275 (1876).
19. See Safe Auto Ins. Co. v. Berlin, 991 A.2d 327 (2010).
20. See Rizzo, Id.
21. See Nuclear Metals, supra.
22. The alleged benefit furnished by the Recreation (“RFF”)/Beach (“BFF”) Facility Fees according to the District (see our What The District Has Told Us The RFF/BFF Represent discussion).
23. Remember, fees are either “user fees, based on the rights of the entity as proprietor of the instrumentalities used…or…regulatory fees (including licensing and inspection fees) founded on the (municipal) police power” [see Emerson College v. City of Boston, 391 Mass. 415, 424-425, 462 N.E.2d 1098, 1105 (1984)]. Regulatory fees can be assessed regardless of choice.
24. See Bertone v. Department of Pub. Utils., 411 Mass. 536, 549 n. 12, 583 N.E.2d 829 (1992), quoting Southview Coop. Hous. Corp. v. Rent Control Bd. of Cambridge, at 396 Mass. 395, 403, 486 N.E.2d 700 (1985).
25. See Id., at 668 A.2d 238.
26. RTC is “a federal governmental instrumentality that acts as receiver or conservator of failed thrift institutions…To enhance (its) ability to achieve its statutory mission, Congress exempted RTC and ‘its capital, reserves, surpluses, or assets [and income]’ from all ‘state, municipal, and local taxation except taxes on real estate held by the Corporation.'” (Id., at 140 N.J. 251).
27. “The services rendered by the Sheriff and employees of his office required approximately ten hours of work (yet) the fee imposed, determined solely on the basis of the amount of the successful bid for the property, was $275,000.”
28. See Id., at 140 N.J. 259.
29. See Id., at 140 N.J. 260. Recall that the District has no power to adopt fees primarily to raise revenue. For this reason its fees are arguably “based on the rights of (a governmental) entity as proprietor of the instrumentalities used.”
30. In Colorado “there are several measures (available) for generating revenue available to a municipality for the purpose of deriving funds to carry out the city’s public functions” (ld., at 784 P.2d 307). Unlike Nevada [see NRS 244.137(2) and 268.001(2)which instruct that “in Nevada’s jurisprudence, the Nevada Supreme Court has adopted and applied Dillon’s Rule to county, city and other local governments”], Colorado is a “home rule” state. Meaning “the Colorado Constitution expressly grants home rule municipalities ‘all powers necessary, requisite or proper for the government and administration of its local and municipal matters, including the power to legislate upon ‘[t]he assessment of property in such city or town for municipal taxation and the levy and collection of taxes thereon for municipal purposes’” (Id., at 784 P.2d 307). Including the adoption of “charge(s known as ‘special fees’) imposed upon persons or property for the purpose of defraying the cost of a particular governmental service [see T. Cooley, The Law of Taxation §33 (4th ed. 1924); O. Reynolds, Jr. Local Government Law §105]” furnished (see Bloom, supra, at 784 P.2d 308).
31. See NRS 318.350(1).
32. See O. Reynolds, Jr., Local Government Law §99 (1982)]. This type of monetary exaction is “based on the premise…the property assessed is enhanced in value at least to the amount of the levy [see Reams v. City of Grand Junction, 676 P.2d 1189, 1194 (Colo.1984)],”
33. See Id., at 676 P.2d 1194.
34. See Western Heights Land Corp. v. City of Fort Collins, 146 Colo 464, 468-69, 362 P.2d 155 (1961); O. Reynolds, Jr., Local Government Law §105.
35. See Bloom, supra, at 784 P.2d 310.
36. See Loup-Miller Construction Co. v. City & County of Denver, 676 P.2d 1170 (1984).
37. See Zelinger v. City & County of Denver, 724 P.2d 1356 (1986).
38. Take a look at our Fees The District Actually Adopted discussion. There we identify nearly thirty (30) different types of fees. How many have eliminated the “paid by choice” factor? Turns out only one. The RFF/BFF.
39. In the course of that opinion the Medeiros court discusses the differences between taxes and fees (see Medeiros, supra, at 973 P.2d 740-742).
40. And it is there where the element of choice pillar is discussed. Culminating in what was disingenuously characterized as the sensible conclusion “a person or entity may benefit from a government service even though he or she has not voluntarily requested it.”
41. See Medeiros, supra, at 973 P.2d 738.
42. See Emerson College, supra, at 391 Mass. 424.