Is it a tax, a fee or does it matter?

Civil suit will decide the legitimacy of Vista West Improvement and Services District “general maintenance fee”

By Sarah Pridgeon

If an improvement district sends a monthly bill to every resident without county approval and with no specific use in mind, does that count as a tax or a fee? This question will be considered by District Court in a civil suit filed against the Vista West Improvement and Services District.

The court will be asked to decide whether a monthly “general maintenance fee” that has been charged to residents of the Vista West subdivision since 2010 is actually within the district’s power to collect. While the complainants claim it violates the Constitution, the district believes it is well within its rights to collect money for services and improvements.

The question may well come down to interpretation of Wyoming statutes. Each side will argue that a different subsection of the law is applicable.

“It’s a fairly simple proposition: is it a tax or a fee? If it’s a tax, then we believe that, statutorily, they don’t have the authority to enact it,” says Bruce Moats, attorney on behalf of John Stang and the S.T. Bennett Revocable Trust, who together own a total of three lots within the subdivision.

The district enacted the general maintenance fee in 2010. At present, according to the complainants, the fee is not tied to any specific service or improvement provided to homeowners.

“John was on the board when they brought it up and he actually voted for it, though he had some reservations. At the time he was told it was fine, but he always suspected there was an issue with it,” says Moats.

“He later found out that there was and has been trying to urge the board…to discontinue it, which they have not done.”

The complainants’ argument focuses on the idea that the fee is actually a tax because the money collected each month is not earmarked. Much like property tax, it is allocated according to need rather than being collected for a specific reason in the first place.

“If it’s a tax, do the statutes authorize the district to do a tax, as opposed to an assessment that’s tied to some improvement?” asks Moats.

An assessment can be tied, for example, to the installation of water lines, or the water service that would come from them. A tax, on the other hand, can be used for any general government need.

“The board would be free to use that money in whatever way it would wish, and we say that’s not proper under the statutes and that they have to do assessments,” says Moats.

Without an assessment, argues Moats, a resident is not paying for a service; rather, they are, “paying something into the coffers that can then be used for anything that the district would want to use it for,” he says. “We say they can’t do that.”

The complainants’ case also hinges on the idea that, while Wyoming statute does authorize an improvement district to raise revenue for services and to cover the cost of operating and maintaining improvements; to institute a special assessment for a specific improvement; or to raise revenue through a bond election, this must be done with the approval of the County Commissioners and with an assessment roll created by the County Assessor’s Office to facilitate collection.

The petitioners argue that this was not the case for Vista West’s maintenance fee. According to their argument, the district has not requested approval and no assessment rolls have been created; nor has the fee been tied to any service or improvement, they say.

“The fee is not authorized by the statutes governing special improvement districts,” declares the complaint, stating that the fee is beyond the district’s legal power and therefore void.

Regardless of how the fee was instituted, however, the complainants do not believe it is legal.

“Really, our contention here is that, regardless of how they do it, they can’t do a tax,” says Moats.

The district sees the situation differently. According to its attorney, J. David Horning, the statute subsection being referenced is simply not applicable to this kind of maintenance fee.

“The argument from our side of the equation is that…we do believe the district has the authority by statute to have charges and fees for services it provides – it’s that simple,” Horning says.

In its response, the district says the fee is generally used for services and improvements provided by the district. The district also maintains that the fee is not assessed; rather, it is, “charged, established and collected each month by means of an invoice from the district”.

The district contends that it does have the authority to charge the fee in question, says Horning, because it falls under a different subsection to the one being referenced in the complaint. According to the subsection that the defendants believe applies, a district has the power to, “establish and collect charges for water, sanitation and related services and the use of improvements or services provided”.

As to permission from the County Commissioners to set up the fee, Horning continues, the district does not believe it was needed.

“There are certain fees or charges that, if they are related to an improvement, can go through the County Commissioners and then be collected that way and notice will go out through the county,” Horning says.

“We don’t believe this general maintenance charge that they’re challenging here needed to be approved by the County Commissioners. That’s under a different subsection of the statute.”

The subsection the claimants reference states that permission is needed to establish a fee to fund a specific improvement. “We don’t believe that has any application here,” says Horning.

“Somebody has to be right and somebody has to be wrong, but it’s a question of law and the court has to make that decision based on the arguments of the parties,” he says.

“We contend that they are referencing a portion of the statute that doesn’t apply.”

The district also alleges that the fee has been charged to Vista West residents for seven years – that’s a long time to wait before filing a protest.

“This charge has been in place for quite some time, including when Mr. Stang was a member of the board,” he says. “Now is a little late to be complaining about the legitimacy of the charge.”

The question put before the court will be whether or not there is a basis in state law for the district to charge a general maintenance fee in the manner that it is currently being charged. A scheduling conference has been set for August 15.