Real estate taxes, insurance and utilities comprise expenses that we all have come to expect as necessary incidents of property ownership. Many cities and towns in Massachusetts, however, also impose user fees for municipal services, as part of the development process, or on an ongoing basis once properties have been developed. These fees are not always legal.
“Under the Massachusetts Constitution, municipalities do not have an independent power of taxation; however, they may impose fees.” Silva v. City of Fall River, 59 Mass. App. Ct. 798, 800 (2003). Fees fall into two broad categories: user fees charged for special municipal services and regulatory fees designed to compensate the municipality for regulating particular activities. For a user fee to be valid, it must be (1) “charged in exchange for a particular governmental service which benefits the party paying the fee in a manner ‘not shared by other members of society,'” (2) “paid by choice, in that the party paying the fee has the option of not utilizing the governmental service and thereby avoiding the charge,” and (3) “collected not to raise revenues but to compensate the governmental entity providing the services for its expenses.” Emerson College v. City of Boston, 391 Mass. 415, 424-425, quoting National Cable Television Ass’n v. United States, 415 U.S. 336, 341 (1974).
Cities and towns most commonly get themselves into legal trouble with user fees when they attempt to use them to defray costs for basic, public services, such as fire protection, public school expansion and repairing the municipal sewer system. See Emerson College, supra (“augmented” fire protection); Greater Franklin Developers Ass’n, Inc. v. Town of Franklin, 49 Mass. App. Ct. 500, 501-503 (2000); Berry v. Town of Danvers, 34 Mass. App. Ct. 507, 510-511, 512 (1993). The Supreme Judicial Court has recently held that the inquiry into the existence of a particularized, private benefit for a user fee “does not involve an exact measuring or quantifying of the comparative economic benefits of the limited group and the general public. Instead, the inquiry is whether the limited group is receiving a benefit that is, in fact, sufficiently specific and special to its members.” Denver Street LLC v. Town of Saugus, 462 Mass. 651, 660 (2012).
Nevertheless, the service for which the user fee is assessed must pose some private benefit which is different in kind than the benefit generally realized by the citizenry of a city and town. Thus, the Sewer Connection Permit Program in Berry was held invalid because it sought to have all new entrants into the Danvers sewer system pay “to repair problems inherent in the existing system,” rather than “as a means of financing new infrastructure needed to accommodate new users.” Id., at 512. In contrast, the user fee assessed by Saugus in Denver Street LLC was upheld because it provided a financing mechanism to expedite the expansion of sewer capacity, under an administrative consent order with the state Department of Environmental Protection, so that fee payers could hook up to the municipal system more quickly than would otherwise have been possible. Id., at 660-661.
In short and in sum, cities and towns may only charge user fees for services which bestow upon the fee payers a special benefit different than that received by the general public; they may not impose such fees as a backdoor method of paying for basic services. Property owners should consider these principles whenever their community seeks to charge them fees for municipal services.
Written by Nicholas P. Shapiro, Esq., of Phillips & Angley. Edited by Jeffrey T. Angley, Esq. Copyright (c) 2011-2014 by Jeffrey T. Angley, P.C. All rights reserved.
Disclaimer: The information contained in this post is general in nature and for educational purposes only. No personal legal advice is being provided. If you have an actual legal issue that needs to be addressed, you should seek the advice of competent legal counsel. This post does not create an attorney-client relationship between the reader and Jeffrey T. Angley, P.C., Phillips & Angley or their attorneys.