A new lawsuit says Pleasant Grove’s latest attempt to generate funds for road maintenance “is a tax disguised as a fee” — and is therefore illegitimate and illegal based on Utah’s constitution, state statute and court opinions.
The Libertas Institute, a libertarian-leaning Utah think tank, filed the lawsuit late Tuesday in 4th District Court. The group hopes the case will result in a precedent that would affect several other cities that have instituted similar policies — including Provo, Vineyard, Highland, North Ogden, Mapleton and South Weber.
“Historically, cities have always [raised road revenues] through taxes,” said Connor Boyack, president of the Libertas Institute. “And many cities for various different reasons — not wanting to raise taxes — have begun just creating this separate fee that is on your monthly bill. ... It’s easier to do because then you don’t piss off the public by telling them you’re raising their taxes.”
Scott Darrington, Pleasant Grove’s city administrator, declined to comment Thursday on the pending litigation, but he confirmed that the city had been served.
As part of its suit, the Libertas Institute is asking a judge to issue a temporary restraining order on the city’s $8.45 a month transportation and road fee, which would be assessed on residents’ utility bills each month, beginning Wednesday.
“We’re doing this to hold Pleasant Grove accountable, and then other cities, as well, who are doing this,” Boyack said. “[We want to] make sure that they’re following both state law and the constitution — which require that this type of thing be done through a tax, it be done transparently and people understand what it’s all about, rather than trying to sneak it in on people’s monthly utility bills.”
Pleasant Grove, the lawsuit states, had pursued other means of generating the more than $3 million in revenue the city determined it would need to spend annually for 20 years to fix its roads. Among those were a franchise fee, bonding, a road fee and use of money from the general fund.
But after residents “overwhelmingly rejected” a ballot initiative that would have required the city to put $2.65 million from its general fund into road maintenance, Pleasant Grove began pursuing the fee — despite “much opposition” in public hearings and without publicly citing legal authority to do so, according to the lawsuit.
That’s problematic, Boyack contends, because a fee and a tax are very different.
Most importantly, the cost associated with a fee has to be equivalent to the cost of a service that’s provided, Boyack said. An electricity fee, for example, directly aligns with a household’s energy use.
But he says the city’s road fee, which charges a flat rate for all residences, regardless of household size, isn’t based on actual use.
“I might have five teenagers in my home, all of whom are driving their own cars, and then my wife and I have our own vehicles — so there we’ve got seven cars going all over the place, using the roads. Whereas another residence, maybe a great-grandmother shut-in, isn’t using the road at all, right?” Boyack said. “The whole idea is that those people are all now having to pay the same amount, even though their use is very different.”
Provo passed its utility fee more than four years ago, and Wayne Parker, Provo’s chief administrative officer, said the city hasn’t received legal pushback.
“In Provo, we tried really hard to ensure that our fee acted like a fee as opposed to acting like a tax,” he said, noting that his view that the fee formula is “a little more complex” than Pleasant Grove’s.
Parker said the city will be “watching with interest” to see how the case against Pleasant Grove unfolds. He said the utility fee has offered Provo a much needed way to generate revenue for road maintenance, since nearly half its land owners aren’t subject to property tax.
“A lot of other cities don’t find themselves with a Missionary Training Center, two LDS temples, a large university, county seat, state government buildings and state hospital,” he said.
Parker also noted that many legislators are aware of the utility fee funding mechanism and seem to like it.
“Local governments need tools," he said. "And this is a tool that allows you to effectively maintain your highway infrastructure.”