Courts have oftentimes been asked to define the characteristics of a “fee,” and how they differ from other kinds of monetary exactions such as “taxes.” The distinction is not one that is always observed with nicety in the judicial decisions¹ which are asked to determine the same. Notwithstanding, and as elsewhere explained, just because staff and past Boards have labeled many of the District’s monetary exactions “fees,”² especially those which are involuntarily assessed³, doesn’t necessarily make them so. That’s because

“The nature of (a)…charge…(the) law imposes is not determined by the label given…but (rather)…its operating incidence.”⁴

Therefore, whenever the validity of a monetary exaction like a “fee” is questioned,

“Courts will determine and classify (the exaction) on the basis of realities”⁵ rather than labels, looking to their ‘operative effect.’”⁵ Especially when as here, the labels given⁶ were “undoubtedly drafted with [NRS 318.197(1)’s] permissive “standby service charges…for the availability of service” language “firmly in mind.”⁷

In other words, courts will not allow government to do what our District regularly does. That is, let “the ends justify the means” by calling their involuntarily assessed monetary exactions something they are not!

So with this introduction in mind, we ask what are the “operating incidences”⁴ of the District’s various monetary exactions? What is their “operative effect?”⁵ What are their realities⁵?

As elsewhere discussed, Emerson College v. City of Boston⁸ instructs that the “fees imposed by a governmental entity tend to fall into one of two principal categories:

1. “User fees, based on the rights of the entity as proprietor of the instrumentalities used…or

2. Regulatory fees (including licensing and inspection fees⁹) founded on the (municipal) police power¹⁰.”

Given GIDs are limited purpose special districts¹¹, unlike true municipalities such as counties¹², cities¹³ and unincorporated towns¹⁴, they have expressly¹⁵ not been granted the power to provide for the “public health, safety…welfare” and morality¹⁶ of their inhabitants. Nor to regulate, tax and license businesses¹⁷. Thus GIDs possess no municipal police powers¹⁸. Nor do they have the power to charge “regulatory (including licensing and inspection) fees.” Therefore, when we speak of a GID’s power to charge “fees,” we’re talking exclusively about “user fees based on the rights of the entity as proprietor of the instrumentalities used.”

So how does one “distinguish between a ‘fee’ and” some other form of monetary exaction?” State of Hawaii v. Medeiros¹⁹ provides the answer:

“We analyze whether the charge:

(1) Applies to the direct beneficiary of a particular service²⁰;

(2) Is allocated directly to defraying the costs of providing the service²¹; and,

(3) Is reasonably proportionate to the benefit received.”²²

And there is a fourth (4th) pillar to the above “modified Emerson College test.”²³ It’s called the element of choice.

“Subsequent to its opinion in Emerson College, the Massachusetts Supreme Judicial Court…weakened its adherence to the…voluntary receipt of…’service’…identifying factor described in Emerson College…holding that ‘the element of choice is not a compelling consideration which can be used to invalidate an otherwise legitimate charge.’”²⁴ 

However, in our Special And Limited Circumstances Under Which The “Paid by Choice” Factor Applicable to All Fees Based on “The Right of a Governmental Entity as Proprietor of The Instrumentalities Used” Can Be Disregarded discussion, we believe we have demonstrated that this pillar continues as a fee identifying factor except when it comes to fees for municipal public health and sanitation services²⁵.

Since IVGID charges no fees for the availability of health and sanitation services²⁶, all of the District’s fees are predicated upon “choice in that the party paying the fee has the option of not utilizing the governmental service and thereby avoiding the charge.”²⁷ Meaning this fourth (4th) pillar discribed above is applicable to all of the District’s fees.

So there you have it. Only if the above criteria fit the charge, is the monetary exaction a fee²⁸. Otherwise, it “is a tax and not a fee.”²⁹ “And therefore, invalid.”³⁰ And now you know.

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1. See Dickson, Sheriff v. Jeff. Co. Bd. of Education, 311 Ky. 781, 786, 225 S.W.2d 672 (1949).
2. Such as its Recreation (“RFF”) and Beach (“BFF”) Facility Fees, defensible space fees, solid waste “franchise fees,” etc.
3. Such as the District’s 10% solid waste franchise fee (see ¶12 of the Franchise Agreement which provides for 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). Or the District’s defensible space fee which is included in all monthly water service billings (see the current schedule of charges) pursuant to the District’s Water Ordinance No. 4 given 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. And 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.” Or the RFF/BFF given that pursuant 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.”
4. See Clean Water Coalition v. The M Resort, LLC, 127 Nev. 301, 255 P. 3d 247, 256 (2011) citing State v. Medeiros, 89 Haw. 361, 973 P.2d 736, 741 (1999).
5. See Hukle v. City of Huntington, 134 W.Va. 249, 58 S.E.2d 780, 783 (1950); Clean Water Coalition,supra, at 127 Nev. 315.
6. The District’s RFF/BFF for instance.
7. See Rider v. County of San Diego, 1 Cal.4th 1, 15, 820 P.2d 10 (1991).
8. See 391 Mass. 415, 424-425, 462 N.E.2d 1098, 1105 (1984).
9. “Proprietary fees do not implicate the taxation power (as long as they are)…commensurate with governmental expenditures occasioned by the regulated party” [see Emerson College, supra, at 391 Mass. 425 (fn. 16)].
10. Those incredibly broad regulatory powers related generally to “[p]ublic safety…health, morality, peace and quiet, (and) law and order” [see Berman v. Parker, 348 U.S. 26, 32, 75 S.Ct. 98 (1954)]. These powers flow from the Tenth Amendment  to the U.S. Constitution which states that “powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.”
11. See our What Are GIDs discussion.
12. See NRS 244.143(2)(a).
13. See NRS 268.003(2)(a).
14. See NRS 269.128, and 269.185, et seq.
15. A requirement under NRS 244.137(2) and 268.001(2).
16. See NRS 244.150, et seq., 268.409, et sq and 269.190, et seq.
17. 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)].
18. 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.”
19. See 89 Haw. 361, 973 P.2d 736, 741-42 (1999).
20. See Medeiros, supra, at 973 P.2d 743.
21. See Rizzo v. City of Philadelphia, 668 A.2d 236, 238 (Pa. Commw. Ct. 1995).
22. See Clean Water Coalition, supra, at 255 P.3d 256; City of Madera v. Black, 181 Cal. 306, 313, 184 P. 397 (1919). Where the ordinance or resolution adopting the fee does not require that the funds generated from the fee be used for the service represented by payment, “leaving open the possibility that the charge could be used for general revenue raising purposes,” it must be held to be invalid [see Executive Aircraft Consulting, Inc. v. City of Newton, 252 Kan. 421, 426, 845 P.2d 57 (1993) citing National Cable Television Ass’n, Inc. v. F.C.C., 554 F.2d 1094, 1106 (D.C.Cir. 1976)].
23. See Medeiros, supra, at 973 P.2d 742.
24. See Nuclear Metals, Inc. v. Radioactive Waste Management Bd., 421 Mass. 196, 656 N.E.2d 563, 570 (1995).
25. Examples include standby service charges for the availability of municipal water [see Jones v. Water Commission of Detroit, 34 Mich 273, 275 (1876)] and sewer [see Ripperger v. Grand Rapids, 338 Mich. 682, 62 N.W.2d 585 (1954)] services.
26. Yes it charges water and sewer fees for services affecting public health and sanitation. However, these fees are not for the availability of those services but rather, for services actually furnished. Only after the customer has rendered his/her/its “consent” to become the District’s public utility customer.
27. See Medeiros, supra, at 973 P.2d 741 citing Vanceburg v. Federal Energy Regulatory Comm’n, 571 F.2d 630, 644 n. 48 (D.C.Cir. 1977), cert. denied, at 439 U.S. 818, 99 S.Ct. 79 (1978).
28. See Clean Water Coalition, supra, at 127 Nev. 315.
29. Medeiros, supra, at 973 P.2d 745.
30. Medeiros, supra, at 973 P.2d 742.