Because “rates (and) charges” aka “fees”¹ represent such large percentages of the revenues collected by the Incline Village General Improvement District (“IVGID”), we believe it important to understand what these monetary exactions actually represent. And their authority for assessment. And against what/whom they are levied. Especially because as we’ve explained elsewhere, general improvement districts (“GIDs”) are limited purpose forms of local government with limited means of generating revenue.

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 decisions² 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,”³ especially those which are involuntarily assessed⁴, 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.”⁵

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”⁶ rather than labels, looking to their ‘operative effect.’”⁶ Especially when as here, the labels given⁷ were “undoubtedly drafted with [NRS 318.197(1)’s] permissive “standby service charges…for the availability of service” language “firmly in mind.”⁸

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”⁵ of the District’s various monetary exactions⁹? What is their “operative effect?”⁶ What are their realities⁶?

As elsewhere discussed, Emerson College v. City of Boston¹⁰ 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 fees¹¹) founded on the (municipal) police power¹².”

Given GIDs are limited purpose special districts¹³, unlike true municipalities such as counties¹⁴, cities¹⁵ and unincorporated towns¹⁶, they have expressly¹⁷ not been granted the power to provide for the “public health, safety…welfare” and morality¹⁸ of their inhabitants. Nor to regulate, tax and license businesses¹⁹. Nor to charge “regulatory (including licensing and inspection) fees.” Thus GIDs possess no municipal police powers²⁰. And 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?” Medeiros²¹ provides the answer:

“We analyze whether the charge:

(1) Applies to the direct beneficiary of a particular service²²;

(2) Is allocated directly to defraying the costs of providing the service²³; and,

(3) Is reasonably proportionate to the benefit received.”²⁴

There is a fourth (4th) pillar to the above “modified Emerson College test.”²⁵ It’s called the element of choice²⁶. Although

“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,’”²⁷ 

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 demonstrate this pillar actually continues as a fee identifying factor except when it comes to limited circumstances, such as fees for municipal public health and sanitation services²⁸.

Since IVGID charges no fees for the mere availability of public health and sanitation services²⁹, 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.”³⁰ Meaning that this fourth (4th) pillar is fully applicable to all of the District’s fees.

Summarizing then, in order for a monetary exaction to be a “fee:”

The Person/Property Assessed Must be The Primary Beneficiary of Some “Unique Benefit:” over and above that furnished to society as a whole³¹.

It Cannot Exceed The Reasonable Costs Government Incurs to Furnish That “Unique Benefit“ Represented by Payment³²: Because

“(T)he crucial factor in determining whether a municipal charge for services constitutes a…fee is whether the charge is intended to cover the cost of…providing a service.”³³ Where “the ‘fee’ unreasonably exceeds the value of the specific services for which it is charged[,] it will be held (to be) invalid”²³ as a tax³⁴.

In Other Words, It Must Be “Just And Reasonable.”³⁵ And,

It Must Be Incurred By Choice: “in that the party paying the fee has the option of not utilizing the governmental service and thereby avoiding the charge.”³⁰

Only if the above criteria fit the charge, is the monetary exaction a fee³⁶.

And now you know!

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1. The term “rates, tolls and charges” [see NRS 318.197(1)] represents different names for “specific services” for which “fixed price(s are) charged (see https://www.investopedia.com/terms/f/fee.asp). According to an AI search, a “rate is a fixed fee or cost per unit of service (often used for utilities like water or electricity). A toll is a fee paid for the use of a specific road, bridge, or tunnel, typically collected at designated points. A charge is a fee imposed for a service or product, which can vary based on usage or specific conditions.” The common denominator here being that all are fees!
2. See Dickson, Sheriff v. Jeff. Co. Bd. of Education, 311 Ky. 781, 786, 225 S.W.2d 672 (1949).
3. Such as its Recreation (“RFF”) and Beach (“BFF”) Facility Fees, defensible space fees, and solid waste “franchise fees.”
4. 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 as an “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) given ¶14.01 of the District’s Water Ordinance No. 4 instructs that “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.”
5. 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).
6. 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.
7. The District’s RFF/BFF for instance.
8. See Rider v. County of San Diego, 1 Cal.4th 1, 15, 820 P.2d 10 (1991).
9. In other words, NRS 318.197(1) “rates, tolls or charges?”
10. See 391 Mass. 415, 424-425, 462 N.E.2d 1098, 1105 (1984).
11. “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)].
12. 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.”
13. See our What Are GIDs discussion.
14. See NRS 244.143(2)(a).
15. See NRS 268.003(2)(a).
16. See NRS 269.128, and 269.185, et seq.
17. A requirement under NRS 244.137(2) and 268.001(2).
18. See NRS 244.150, et seq., 268.409, et sq and 269.190, et seq.
19. 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)].
20. 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.”
21. Supra, at 973 P.2d 741-42.
22. See Medeiros, supra, at 973 P.2d 743.
23. See Rizzo v. City of Philadelphia, 668 A.2d 236, 238 (Pa. Commw. Ct. 1995).
24. 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)].
25. See Medeiros, supra, at 973 P.2d 742.
26. See U.S. v. City of Huntington, W.Va., 999 F.2d 71, 74 (4th Cir. 1993).
27. See Nuclear Metals, Inc. v. Radioactive Waste Management Bd., 421 Mass. 196, 656 N.E.2d 563, 570 (1995).
28. 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)] service(s).
29. 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.
30. 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).
31. Where the person/property assessed realizes no benefit because its principal purpose is to benefit society, or alternatively, he/she/it “if anything, (is) only (an) incidental beneficiar(y)…the ordinance fails the first prong of the modified Emerson College test [see Medeiros, supra, at 973 P.2d 745].
32. This requirement represents the “reasonably proportionate to the benefit received” pillar of the modified Emerson College test [as stated in Medeiros, supra, at 973 P.2d 742, the fee must be “reasonably proportionate to the benefit received”].
33. See Rizzo v. City of Philadelphia, 668 A.2d 236, 238 (Pa. Commw. Ct. 1995).
34. See Dickson, Sheriff v. Jeff. Co. Bd. of Education, 311 Ky. 781, 786, 225 S.W.2d 672 (1949).
35. Given the District is a public utility [see NRS 704.020(2)(a); Springfield Gas & Electric Co. v. City of Springfield, 292 Ill. 236, 126 N.E. 739, 744, (1920), affirmed at 257 U.S. 66 and cited with approval at A.G.O. 53-231 (February 9, 1953)], both common law [see Austin View Civic Association v. City of Palos Heights, 85 Ill.App.3d 89, 94-95, 405 N.E.2d 1256, 1262 (1980); 64 Am.Jur.2d §297, p.496] as well as public policy [see NRS 704.040(2)] dictate its rates must be “just and reasonable.” That is, “simply high enough to produce revenue sufficient to bear all costs of maintenance…operation…interest charges on bonds and…accumulation of a surplus…sufficient to (service) all outstanding bonds” (see Springfield Gas, Id.). Since the Public Utility Commission (“NPUC”) need not grant deference to a private utility’s unjust and unreasonable rates [see NRS 704.040(1)], why should we? And for this same reasoning, the rates a GID charges must be held to this same “just and reasonable” standard.
36. See Clean Water Coalition, supra, at 127 Nev. 315.