Wastewater System Infiltration and Inflow (I/I) Mitigation Fees have been in the news lately in Massachusetts. A recent court case, Denver Street, LLC vs. Town of Saugus, determined that the Towns “I/I Reduction Contribution” was not an allowable fee but an illegal tax. The ruling required repayment of $670,460, plus 12% interest, to four (4) developers.
The ruling references a 1984 case, Emerson College v. Boston, 391 Mass. 415,424-425, which sets the definition of a fee.
Fees imposed by a government entity…share [three] common traits that distinguish them from taxes:[1] they are 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] they are 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] the charges are collected not to raise revenues but to compensate the governmental entity providing the services for its expenses.
The Saugus case focused on the first and third requirements as both parties stipulated that the developer had the choice to not develop the property.
Many communities have similar sewer banks mechanisms, some required by State Regulatory Consent Order, that charge a fee for new connections to the sewer system. Are all sewer banks in trouble?
Does this Massachusetts Court Case jeopardize the mechanism of a sewer bank to help cities/towns receive revenue to fund sewer system improvements?
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Yes, all sewer banks in Massachusetts are in trouble and this ruliung does jeopardize the mechanism. The Massachusetts courts have placed far too much weight on the Emerson case. That case (from 27 years ago) revolved around the City of Boston charging a tax exempt property a fee for the fire protection services that were paid for through property taxes and not paid for by the planitiff. The courts have used this case to overrule local connection/impact/development fees for decades and now this.
A case with a very narrow scope has taken on its own life to halt too many mitigation fees in the Commonwealth. It is time for that case to be overturned!