Keller v. Marion County Ambulance District , 1991 Mo. LEXIS 128 ( 1991 )

BENTON, Judge.

On November 4, 1980, the people of Missouri adopted an amendment, popularly known as the Hancock Amendment, to the Missouri Constitution.¹ With the passage of this amendment, the people limited the power to raise taxes that they had traditionally given the governments of Missouri. Since that time, the courts of this state have frequently been called upon to clarify the resulting new relationships between the people, the state, and local governments.² This Court, once again, undertakes this crucial task.

Appellant, Marion County Ambulance District (“the District”), was organized in 1974 in accordance with the Ambulance District Law, §§ 190.005-190.085 RSMo 1986. In 1986, the voters of the District approved, as required by the Hancock Amendment, doubling the property tax rate. At the time the 1986 tax increase passed, the District was in a poor financial condition. By January 1989, this problem had been reversed; the District was in strong financial condition. In January 1989, the District established a new schedule of charges, effective February 1, 1989, for its services. As with the previous charges, these charges were for actual services rendered, rather than a subscriber charge of all consumers in the service area. Most of these charges were increases over the previous charges, and none were submitted to the voters for approval. In addition, according to the circuit court, these increases were not needed to maintain the level of service in the District. Respondents — a group of taxpayers who live in the District — sued as a class claiming that these increases violated Article X, § 22(a) of the Missouri Constitution. The circuit court held that these charges qualified as “fees” as that term is used in § 22(a) and, as such, the increases are invalid. On appeal, the District contends that the circuit court’s interpretation of the Hancock Amendment is erroneous. This Court agrees that the circuit court’s interpretation is in error. The decision below is reversed, and the case is remanded.

Respondent taxpayers rely on the language of § 22(a) which provides: “Counties and other political subdivisions are hereby prohibited ... from increasing the current levy of an existing tax, license or fees ... without the approval of the required majority of the qualified voters of that ... political subdivision voting thereon.” Respondents argue that the term “fees” includes the District’s charges described above.

The fundamental purpose of constitutional construction is to give effect to the intent of the voters who adopted the Amendment. Boone County Court v. State, 631 S.W.2d 321, 324 (Mo. banc 1982). Traditional rules of construction dictate looking at words in the context of both the particular provision in which they are located and the entire amendment in which the provision is located. See McDermott v. Nations, 580 S.W.2d 249, 253 (Mo. banc) (“The meaning of a term must be determined from the context in which it is used and from the intention of its draftsmen.”) cert, denied, 444 U.S. 901,100 S.Ct. 213, 62 L.Ed.2d 138, cert, dismissed, 444 U.S. 958, 100 S.Ct. 441, 62 L.Ed.2d 331 (1979).

Context determines meaning. Consider this sentence: The batter flew out. Without knowing context, one cannot determine whether that sentence describes what happened when the cook tripped while carrying a bowl of cake mix, or the final act of a baseball game.

Article X, § 16 of the Missouri Constitution is the introductory and principal clause of the Hancock Amendment. It declares that “property taxes and other local taxes and state taxes and spending” cannot be increased without voter approval in accordance with the Missouri Constitution. Section 16 explicitly declares that the remaining provisions of the Amendment are “implementation” of section 16. Appellant District claims that the “spending” referenced in section 16 is only state spending while respondent taxpayers claim that it refers to both state and local spending. If the respondents were correct, then the terms of section 16 bolster the concept that § 22(a) is designed to place a limit on all revenue increases by local governments.

The remainder of the Amendment, however, supports the appellants’ claim that the spending limit applies only to the state. Spending — in the context of total revenue — is mentioned in only four other sections. In two of the four, §§ 19 and 20, only state spending is mentioned. In the other two, §§ 18(d) and 21, local expenditures are relevant only if the state mandates new spending at the local level by either statute or constitutional amendment. See Boone County Court v. State, 631 S.W.2d 321, 326 (Mo. banc 1982) (“This [Hancock] Amendment contains no limit on the level of spending by county or local governments.”). Thus, not all revenue increases by local governments are subject to the Hancock Amendment. See Zahner v. City of Perryville, 813 S.W.2d 855 (Mo. banc 1991) (special assessment for street work not subject to Hancock Amendment); Oswald v. City of Blue Springs, 635 S.W.2d 332 (Mo. banc 1982) (utility charges for operation and maintenance of sewer plant not subject to Hancock Amendment). These cases make.it clear that there are two types of local revenue increases: those subject to the Hancock Amendment and those not subject to the Amendment.

The question becomes which revenue increases are subject to the Hancock Amendment. “License” and “fees” are mentioned in connection with revenue twice in the Amendment. The first time, in § 17(1), they are mentioned as part of the definition of total state revenue, and as alternatives to “general and special revenues.” The second time, in § 22(a), “license” and “fees” are mentioned as alternatives to a “tax” in the list of prohibited increases by localities.³ The difference between these two sections implies a narrower definition for the term “fees” in § 22(a). If the people of Missouri intended to prohibit localities from increasing any source of revenue without voter approval, a general term like “revenue” or “revenue increase” could have been used. Instead, the people of Missouri characterized “fees” in § 22(a) as an alternative to a “tax.” This characterization suggests that what is prohibited are fee increases that are taxes in everything but name.⁴ What is allowed are fee increases which are “general and special revenues” but not a “tax.”

Additional support for this interpretation comes from the language of § 22 which prohibits “levying” or “increasing the current levy of” a “tax, license or fees.” In ordinary usage, a tax is levied, but a fee is charged. See Webster’s Third New International Dictionary 1301 (Unabr. ed. 1961); see also Black’s Law Dictionary 907 (6th ed. 1990). Reading “levy” in this ordinary sense — as a term related to the power of government to impose a tax — it is clear that a “fee” can only be levied if the “fee” is actually a tax. This reading of the term “levy” is consistent with the remainder of § 22, which deals with alterations in the “levy” of various taxes when revenue from the items subject to the Hancock Amendment increases faster than the rate of inflation.

Respondent taxpayers argue that there is no difference between a “true” user fee and a nominal fee that is really a tax.⁵ Just months ago, this Court restated its traditional distinction between “true” user fees and taxes denominated as fees:

Fees or charges prescribed by law to be paid by certain individuals to public officers for services rendered in connection with a specific purpose ordinarily are not taxes ... unless the object of the requirement is to raise revenue to be paid into the general fund of the government to defray customary governmental expenditures ... rather than compensation of public officers for particular services rendered....

Zahner v. City of Perryville, 813 S.W.2d 855, 859 (Mo. banc. 1991), citing Roberts v. McNary, 636 S.W.2d 332, 336 (Mo. banc. 1982), citing Craig v. City of Macon, 543 S.W.2d 772, 774 (Mo. banc 1976) (omitting citations), citing Leggett v. Missouri State Insurance Company, 342 S.W.2d 833, 875 (Mo. banc 1960).

In addition, the history and logic of the Hancock Amendment leads this Court to reject the contention that all fees — whether user fees or tax-fees — are subject to the Hancock Amendment.

Since the Great Depression, there has been a trend toward special districts or “quasi-governmental organizations.”⁶ While accomplishing noble purposes, each new district necessitates additional taxes for its operation. While some statutes give the people control over the tax rates of some of these organizations, the Hancock Amendment created a constitutional basis to control the tax rates of all these organizations. The Hancock Amendment, in order to keep the public burden of taxation under control, does not prohibit these organizations from shifting the burden to the private users of these services.⁷ How much to charge users is for those elected to run the organizations.⁸ If the decisions are unpopular, the directors may be voted out of office.⁹ The only requirement placed on the directors by the Hancock Amendment is that any increase in taxes must be approved by the voters.¹⁰

The case of Roberts v. McNary, 636 S.W.2d 332, 336 (Mo. banc 1982), suggests that all revenue increases, including “fee” increases, are subject to the Hancock Amendment. To the extent that this language constitutes the holding of Roberts, it has been overruled by this Court sub silen-tio in several cases. See Zahner v. City of Perryville, 813 S.W.2d 855 (Mo. banc 1991); Tax Increment Financing Comm’n v. J.E. Dunn Construction Co., Inc., 781 S.W.2d 70 (Mo. banc 1989); Pace v. City of Hannibal, 680 S.W.2d 944 (Mo. banc 1984); cf. Oswald v. City of Blue Springs, 635 S.W.2d 332 (Mo. banc 1982). Nor is Roberts of much help. Roberts lifts the word “fees” from its constitutional context, and attempts to define “fees” as though it stood alone. The result of this error is that Roberts speaks far too broadly to be of much use as precedent.¹¹ The phrase “license or fees” in § 22 indicates an intent to prevent political subdivisions from circumventing the Hancock Amendment by labeling a tax increase as a license or fee. Cf R. Thomas, Recent Developments in Missouri: Local Government Taxation, 49 UMKC L.Rev. 491, 498-505 (1981). This language requires courts to examine the substance of a charge, in accordance with this opinion, to determine if it is a tax without regard to the label of the charge. Cf. Zahner, 813 S.W.2d at 858. To the extent that Roberts is inconsistent with this opinion, it is overruled.

Therefore, this Court holds that increases in the specific charges for services actually provided by an ambulance district are not subject to the Hancock Amendment.

The judgment of the circuit court is reversed, and the case is remanded with orders to enter judgment for the appellants.

ROBERTSON, C.J., and BLACKMAR, and THOMAS, JJ., concur. HOLSTEIN, J., dissents in separate opinion filed. RENDLEN and COVINGTON, JJ., dissent and concur in dissenting opinion of HOLSTEIN, J.

1 . Mo. Const., Art. X, §§ 16-24.

2 . See, e.g„ Zahner v. City of Perryville, 813 S.W.2d 855 (Mo. banc 1991); Tax Increment Financing Com'n v. J.E. Dunn Construction Co., Inc., 781 S.W.2d 70 (Mo. banc 1989); Scholle v. Carrollton R-VII School District, 771 S.W.2d 336 (Mo. banc 1989); Missouri Municipal League v. Brunner, 740 S.W.2d 957 (Mo. banc. 1987); Tannenbaum v. City of Richmond Heights, 704 S.W.2d 227 (Mo. banc 1986); Pace v. City of Hannibal, 680 S.W.2d 944 (Mo. banc 1984); Wenzlaff v. Lawton, 653 S.W.2d 215 (Mo. banc 1983); Buechner v. Bond, 650 S.W.2d 611 (Mo. banc 1983); Roberts v. McNary, 636 S.W.2d 332 (Mo. banc 1982); Oswald v. City of Blue Springs, 635 ,S.W.2d 332 (Mo. banc 1982); Boone County Court v. State, 631 S.W.2d 321 (Mo. banc 1982); Buchanan v. Kirkpatrick, 615 S.W.2d 6 (Mo. banc 1981); State ex rel. City of Springfield v. Public Service Com’n, 812 S.W.2d 827 (Mo.App.1991); St. Louis County v. Hanne, 761 S.W.2d 697 (Mo.App.1988); Loving v. City of St. Joseph, 753 S.W.2d 49 (Mo.App.1988).

3 . Compare “‘Total state revenues’ includes all general and special revenues, license and fees_” Mo. Const. Art. X, § 17(1); with "Counties and other political subdivisions are hereby prohibited from levying any tax, license or fees_” Mo. Const. Art. X, § 22(a).

4 . In fact, the drafter’s notes on § 22 emphasize that the purpose of the relevant sentence was to prohibit the levy of new taxes or increasing the rate of an existing tax. See Drafters’ Notes — Tax Limitation Amendment at 7, included in the record on appeal in Roberts v. McNary, 636 S.W.2d 332 (Mo. banc 1982). See generally id. at 7-10. For further reasons why the Hancock Amendment is only concerned about the "taxing” power of local governments, see R. Thomas, The Hancock Amendment: The Limits Imposed on Local Governments, 52 U.M.K.C.L.Rev. 22, 31-32 n. 28 (1983).

5 . The respondents do, however, have a point that how the General Assembly or another governmental entity describes a charge does not determine whether it is subject to the Hancock Amendment. See Zahner v. City of Perryville, 813 S.W.2d 855, 858 (Mo. banc 1991). In fact, the General Assembly in giving different types of special districts the power to charge users for services and consumers for goods has used various terms to describe the charges. E.g., “tuition fees," §§ 167.141, 178.850 RSMo 1986; "admissions and fees," § 184.351.4 RSMo 1986; "charge,” §§ 184.362, 205.989.2 RSMo 1986; "fees and compensation,” §§ 190.060.1(4), 198.-300.1(4), 206.110.1(4) RSMo 1986; "rates and charges,” § 247.050(14) RSMo 1986; "fees,” § 257.200(8) RSMo 1986; “rents, rates, or other compensation,” § 305.310.1 RSMo 1986. There are even statutes that either do not name the charge or merely imply the power to charge. E.g., §§ 71.796, 167.211, 205.042.3, RSMo 1986.

6 . These are organizations set up by governments to fulfill purposes inadequately served by private organizations. In addition to ambulance districts, other special districts with the power to tax and to charge for goods and/or services include community mental health services, conservancy districts, county airport authorities, county health centers, county library districts, hospital districts, junior college districts, metropolitan park and museum districts, nursing home districts, public water supply districts, school districts, and special business districts.

7 . The Hancock Amendment does not require that a greater portion of the burden be placed on the users of these organizations. In the case of ambulance districts, the record below shows that the property tax revenue assures minimal ambulance service in rural areas of the state. In addition, the record shows that many of the users cannot afford increases in these fees.

8 . The drafters’ notes specifically state that it was not the intent of the drafting committee "to include user charges that are specific charges for services rendered" among the items covered by § 22. Drafters’ Notes — Tax Limitation Amendment at 10.

9 . The directors of the District have the power to set "reasonable fees" for the services provided. § 190.060.1(4) RSMo 1986. The directors are elected from single member districts and serve three-year terms. § 190.050.1 RSMo Supp.1990.

10 . In order to determine whether a revenue increase by a local government is an increase in a "tax, license or fees” that requires voter approval under the Hancock Amendment, the following are critical:

1) When is the fee paid? — Fees subject to the Hancock Amendment are likely due to be paid on a periodic basis while fees not subject to the Hancock Amendment are likely due to be paid only on or after provision of a good or service to the individual paying the fee.

2) Who pays the fee? — A fee subject to the Hancock Amendment is likely to be blanket-billed to all or almost all of the residents of the political subdivision while a fee not subject to the Hancock Amendment is likely to be charged only to those who actually use the good or service for which the fee is charged.

3) Is the amount of the fee to be paid affected by the level of goods or services provided to the fee payer? — Fees subject to the Hancock Amendment are less likely to be dependent on the level of goods or services provided to the fee payer while fees not subject to the Hancock Amendment are likely to be dependent on the level of goods or services provided to the fee payer.

4) Is the government providing a service or good? — If the government is providing a good or a service, or permission to use government property, the fee is less likely to be subject to the Hancock Amendment. If there is no good or service being provided, or someone unconnected with the government is providing the good or service, then any charge required by and paid to a local government is probably subject to the Hancock Amendment.

5) Has the activity historically and exclusively been provided by the government? — If the government has historically and exclusively provided the good, service, permission or activity, the fee is likely subject to the Hancock Amendment. If the government has not historically and exclusively provided the good, service, permission or activity, then any charge is probably not subject to the Hancock Amendment.

Based on these criteria, property taxes, sales taxes, franchise taxes, and income taxes, among others, tire subject to the Hancock Amendment. See Wenzlaff v. Lawton, 653 S.W.2d 215, 217 (Mo. banc 1983); Goode v. Bond, 652 S.W.2d 98 (Mo. banc 1983). The above criteria are helpful in examining charges denominated as something other than a tax. No specific criterion is independently controlling; but, rather, the criteria together determine whether the charge is closer to being a “true" user fee or a tax denominated as a fee.

11 . Buechner v. Bond, 650 S.W.2d 611 (Mo. banc 1983), partakes of the same error of reasoning, lifting the word "revenues” for the constitutional phrase “total state revenues” to interpret the Hancock Amendment in the most government-constricting manner possible.