In an action for declaratory judgment, brought against the City of Dunedin in Circuit Court, provisions of certain ordinances
Plaintiffs in the trial court, petitioners here, are building contractors, an incorporated association of contractors, and owners of land situated within the city limits of Dunedin.
Petitioners contend that Dunedin has imposed a tax under the guise of setting charges for water and sewer connections, relying on Broward County v. Janis Development Corp., 311 So.2d 371 (Fla. 4th Dist. 1975) aff'g Janis Development Corp. v. City of Sunrise, 40 Fla. Supp. 41 (17th Cir.1973); Pizza Palace of Miami v. City of Hialeah, 242 So.2d 203 (Fla. 3d Dist. 1972); and Venditti-Siraro, Inc. v. City of Hollywood, 39 Fla. Supp. 121 (17th Cir.1973). The Pizza Palace case is wholly inapposite, and the others are readily distinguishable. Only if the moneys collected in Venditti-Siraro and Janis Development had been used to underwrite the administrative costs of issuing building permits, or other costs incurred in enforcing building codes, would those cases be analogous to the present one. Compare State ex rel. Harkow v. McCarthy, 126 Fla. 433, 171 So. 314 (1936) with City of Panama City v. State, 60 So.2d 658 (Fla. 1952). The analogy would be very close if the fees had been earmarked for future capital outlay: for example, acquisition of automobiles for building inspectors to use in their work.
But the fees in Janis Development and Venditti-Siraro bore no relationship to (and were greatly in excess of) the costs of the regulation which was supposed to justify their collection. In each case, the fees were required to be paid as a condition for issuance of building permits. In the Janis Development case, $200.00 per dwelling unit built was put into a fund for road maintenance. In Venditti-Siraro, one percent of estimated construction costs went into a fund for parks. Because the surcharges were collected for purposes extraneous to the enforcement of the building code, the courts concluded that the surcharges amounted in law to taxes, which the municipalities had not been authorized to impose. In contrast, evidence was adduced here that the connection fees were less than costs Dunedin was destined to incur in accommodating new users of its water and sewer systems. We join many other courts in rejecting the contention that such connection fees are taxes.
The avowed purpose of the ordinance in the present case is to raise money in order to expand the water and sewerage systems, so as to meet the increased demand which additional connections to the system create. The municipality seeks to shift to the user expenses incurred on his account. A private utility in the same circumstances would presumably do the same thing, in which event surely even petitioners would not suggest that the private corporation was attempting to levy a tax on its customers.
When a municipality sells debentures as a means of financing the extension or enlargement of a public utility, the indebtedness thus incurred is eventually made good with utility revenues; and anticipated revenues "may be pledged to secure moneys advanced for the ... improvement." Fla. Stat. § 180.07(2) (1973). When money for capital outlay is borrowed, water and sewer rates are set with a view towards raising the money necessary to repay the loan. State v. City of Tampa, 137 Fla. 29, 187 So. 604, 609 (1939); State v. City of Miami, 113 Fla. 280, 152 So. 6 (1933) (reh. den. 1934) ("certificates of indebtedness ... are payable as to both principal and interest solely out of a special fund to be created ... out of the net earnings" At 13).
Water and sewer rates and charges do not, therefore, cease to be "just and equitable" merely because they are set high enough to meet the system's capital requirements, as well as to defray operating expenses. State v. City of Tampa, supra; State v. City of Miami, supra. We see no reason to require that a municipality resort to deficit financing, in order to raise capital by means of utility rates and charges. On the contrary, sound public policy militates against any such
It is also established that differential utility rates and charges may be "just and equitable". Fla. Stat. § 180.13(2) (1973); Hayes v. City of Albany, supra, notwithstanding the differential. In Brandel v. Civil City of Lawrenceburg, 249 Ind. 47, 230 N.E.2d 778 (1967), the court upheld an ordinance setting differential connection charges where two distinct sewerage systems had been engineered in the same political entity. The user connecting to the more expensive system paid a higher connection charge. Another common type of differential charge makes the character of the user determinative of utility rates:
Dunedin distinguishes between residential and commercial users, on one hand, and industrial users, on the other. See ante, pp. 316-317 n. 1, and petitioners do not question this distinction. Here the issue is whether differential connection charges are "just and equitable", when they vary depending on the time at which the connection to the utility system is made.
Raising expansion capital by setting connection charges, which do not exceed a pro rata share of reasonably anticipated costs of expansion, is permissible where expansion is reasonably required, if use of the money collected is limited to meeting the costs of expansion.
When certificates of indebtedness are outstanding, new users, like old users, pay rates which include the costs of retiring the certificates, which represent original capitalization. State v. City of Miami, supra. New users thus share with old users the cost of original facilities. For purposes of allocating the cost of replacing original facilities, it is arbitrary and irrational to distinguish between old and new users, all of whom bear the expense of the old plant and all of whom will use the new plant.
In Hayes v. City of Albany, supra, the situation was very much like the situation here. An existing system faced the imminent prospect of expansion and, as of a date certain, residential connection fees climbed from $25 to $255. (An hypothetical industrial user's charges soared from $200 to a prohibitive $400,000.) These charges were to be deposited in a fund restricted as follows:
If the ordinance in the present case had so restricted use of the fees which it required to be collected, there would be little question as to its validity. We conclude that the ordinance in the present case cannot stand as it is written.
The same considerations which underlie statutes of frauds require that a revenue producing ordinance explicitly set forth restrictions on revenues it generates, where such restrictions are essential to its validity. As between private parties, a contract "that is not to be performed within the space of one year", Fla. Stat. § 725.01 (1973), or which is "for the sale of goods for the price of $500 or more", Fla. Stat. § 672.201 (1973), is unenforceable unless reduced to writing, with certain exceptions not pertinent here. Counsel for respondent has represented that the fees collected under the ordinance exceed $196,000.00. Brief for Respondent at 53. Nothing in the record indicates that capital outlay for expansion will be completed within a year's time.
The failure to include necessary restrictions on the use of the fund is bound to result in confusion, at best. City personnel may come and go before the fund is exhausted, yet there is nothing in writing to guide their use of these moneys, although certain uses, even within the water and sewer systems, would undercut the legal basis for the fund's existence. There is no justification for such casual handling of public moneys, and we therefore hold that the ordinance is defective for failure to spell out necessary restrictions on the use of fees it authorizes to be collected.
The decision of the District Court of Appeal is quashed and this case is remanded to the District Court with directions that the District Court dispose of the question of costs; and that the District Court thereafter remand for further proceedings in the trial court not inconsistent with this opinion. In the trial court's consideration de novo of the question of refunds the chancellor is at liberty to take into account all pertinent developments since entry of his original decree.
It is so ordered.
ADKINS, C.J., and ROBERTS, OVERTON and ENGLAND, JJ., concur.
5/8" meter ________________ $ 95.00 1" meter ________________ 170.00 1-1/2" meter ________________ 265.00 2" meter ________________ 360.00
5/8" meter _________________ $105.00 1" meter _________________ 180.00 1-1/2" meter _________________ 290.00 2" meter _________________ 390.00
Petitioners challenge as unlawful the fees prescribed by Dunedin, Fla.Code § 25-71(c).