McMinn County v. Ocoee Environmental ( 2003 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
March 31, 2003 Session
McMINN COUNTY v. OCOEE ENVIRONMENTAL SERVICES, INC., ET
AL.
Appeal from the Chancery Court for McMinn County
No. 20324 John B. Hagler, Judge by Interchange
FILED JULY 9, 2003
No. E2002-00702-COA-R3-CV
This appeal questions the validity of a resolution enacted by Appellant McMinn County
imposing a surcharge for solid waste disposal at all Class I landfills located in McMinn County. The
resolution as initially passed imposed a surcharge of $4.00 per ton of waste, and was subsequently
reduced by McMinn County to $2.75 per ton. Appellee Environmental Trust Company (“ETC”),
which owns one of the two landfills in the county, refused to pay the surcharge, asserting that it was
actually an unlawful tax. McMinn County filed this action to require ETC to pay the surcharge. The
Trial Court held that the resolution imposed an unlawful tax, and granted summary judgment in
favor of ETC. We affirm the judgment of the Trial Court.
Tenn.R.App.3 Appeal as of Right; Judgment of the Chancery Court Affirmed; Cause
Remanded
HOUSTON M. GODDARD , P.J., delivered the opinion of the court, in which CHARLES D. SUSANO, JR.
and D. MICHAEL SWINEY, JJ., joined.
Vance L. Baker, Jr., Athens, Thomas J. Walsh, Jr., Memphis, and Brian L. Kuhn, Memphis, for the
Appellant, McMinn County
H. Chris Trew, Athens, for the Appellee, Environmental Trust Company
OPINION
There are presently two Class I landfills located in McMinn County. The McMinn County
landfill is owned and operated by the County. The Meadow Branch landfill, formerly known as the
Mine Road landfill, is owned and operated by ETC. On February 21, 2000, the McMinn County
Commission passed a resolution imposing a surcharge of $4.00 on each ton of solid waste processed
at all Class I solid waste disposal facilities or incinerators in McMinn County. After the Commission
subsequently realized that the funds generated by this surcharge could not be legally used to defray
the cost of building water lines down gradient of the Meadow Branch landfill, as was its original
intention, the Commission passed a resolution reducing the surcharge to $2.75 per ton.
ETC refused to pay the surcharge, arguing that it is actually an unauthorized and unlawful
tax. McMinn County filed this action on December 8, 2000, asking the Court to require ETC to pay
the surcharge plus late penalties, interest and attorney’s fees. Both parties moved for summary
judgment. After a hearing, the Trial Court granted ETC’s motion, denied the County’s motion, and
dismissed the action.
Tenn.R.Civ.P. 56.04 provides that summary judgment "shall be rendered forthwith if the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law." In the present case, the facts are not in dispute, and the
only issues are questions of law. Consequently, the scope of review is de novo with no presumption
of correctness. See Tenn.R.App.P. 13(d); Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91
(Tenn.1993).
In support of its argument on appeal that the Court erred in finding that its ordinance was an
unauthorized tax, McMinn County cites the following sections of T.C.A. 68-211-835, a part of the
statute known as the Solid Waste Management Act of 1991:
(f)(1) In addition to any fee authorized by title 5, and to any
tipping fee imposed by any local government under this section, a
county, municipality or solid waste authority is authorized to impose:
(A) A surcharge on each ton of municipal solid waste received
at a solid waste disposal facility or incinerator for expenditure for
solid waste collection or disposal purposes consistent with this part;
and/or
(B) A solid waste disposal fee authorized by subsection (g).
(2) The surcharge authorized to be imposed by a county by
subdivision (f)(1)(A) shall not take effect until a regional solid waste
plan is approved for such county.
(g)(1) In addition to any power authorized by title 5, a county,
municipality or solid waste authority is authorized to impose and
collect a solid waste disposal fee. Funds generated from such fees
may only be used to establish and maintain solid waste collection and
disposal services, including, but not limited to, convenience centers.
All residents of the county shall have access to these services. The
amount of the fee shall bear a reasonable relationship to the cost of
providing the solid waste disposal services. Such fees shall be
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segregated from the general fund and shall be used only for the
purposes for which they were collected.
The Supreme Court has provided the following guidance in determining whether an
assessment such as the ordinance at bar is an unauthorized tax or an authorized fee:
Whether the charge for depositing waste in a landfill is a tax or a fee,
even though denominated a tax, is determined by its purpose. A tax
is a revenue raising measure levied for the purpose of paying the
government's general debts and liabilities. . .A fee is imposed for the
purpose of regulating a specific activity or defraying the cost of
providing a service or benefit to the party paying the fee.
City of Tullahoma v. Bedford County, 938 S.W.2d 408, 412 (Tenn.1997)(citations omitted). In the
earlier case of Memphis Retail Liquor Dealers’ Ass’n. v. City of Memphis, 547 S.W.2d 244
(Tenn.1977), the Court stated:
In Tennessee, taxes are distinguished from fees by the objectives for
which they are imposed. If the imposition is primarily for the purpose
of raising revenue, it is a tax; if its purpose is for the regulation of
some activity under the police power of the governing authority, it is
a fee.
547 S.W.2d at 245-46. The Memphis Retail Liquor Dealers Court upheld the general principle that
a regulatory fee “must bear ‘some reasonable relation’ to the expenses involved in the supervision
and inspection of the licensed business.”1 547 S.W.2d at 246; accord Porter v. City of Paris, 201
S.W.2d 688 (Tenn.1947) (“The fact, that the fees charged produce more than the actual cost and
expense of the enforcement and supervision, is not an adequate objection to the exaction of the fees.
The charge made, however, must bear a reasonable relation to the thing to be accomplished.”); City
of Chattanooga v. Bellsouth Telecommunications, Inc., an unreported opinion of this Court filed in
Knoxville on January 26, 2000.
The Trial Court in the present case found as follows regarding the objectives or purposes of
the McMinn County Commission in enacting the ordinance:
The record reflects two reasons for the imposition of the surcharge.
First, the county sought to recover $122,745.79 which was its share
in the construction of a water line around the Meadow Branch
1
The Court in the Me mp his Retail Liquor Dea lers case held this general proposition inapplicable in an instance
where “the license charge is imposed on those occupations which, while they are tolerated, are recognized as being
hurtful to public morals, productive of disorder, or injurious to the public[.]” 547 S.W.2d at 246. No argument is made
here that the solid waste industry is such an occupation that would fall within this exception.
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Landfill after several contaminates were found in wells in the vicinity.
The county also intended to put an additional water line in the
vicinity. However, the state engineer would not certify, and the
county does not urge, that defendant’s landfill caused these problems.
The second reason for the surcharge is the county’s desire to recover
the annual $277,000 shortfall in the operation of its own landfill. It
is . . .“the county’s intent that this fund (for its landfill) should not be
supplemented by the tax rate but. . .from funds generated by solid
waste activities.” (County’s Statement of Fact #12).
* * *
Upon being advised that a surcharge could not be imposed for any
past or future water line, the county by Resolution 544 (Exhibit 2 to
complaint) amended Resolution 533 to reduce the surcharge to $2.75
per ton. Again, there is nothing to connect the surcharge with any
costs except for the shortfall at the county’s own landfill. No costs
are enumerated for any regulation of the Meadow Branch Landfill.
(Parentheses and ellipses in original).
The record contains the deposition of each of the ten members of the McMinn County
Commission and that of the County Executive, Ron Banks. Mr. Banks testified that the services
provided by the McMinn County landfill are paid for in part by tipping fees paid by users of the
County landfill, and in part by tax dollars taken from the County’s general fund. He stated that for
the fiscal year beginning July 1, 2000, the tax expenditures from the general fund for the County
landfill amounted to a total of $277,438.00.
Mr. Banks testified that he made the recommendation to the County Commission to impose
the surcharge at the $4.00 per ton rate and the subsequently reduced $2.75 per ton rate. When asked
how he determined the rates which he recommended, Mr. Banks stated that “I sat down and figured
out. . .what it was going to take to replace some of the tax dollars that was in there [going to the
McMinn County landfill].” Mr. Banks further testified as follows:
Q: Okay. So since you didn’t know how much money you were
going to bring in and you really didn’t know how much money it was
going to cost to do whatever these future plans were, your calculation
was based upon trying simply to raise revenue.
A: Raise revenue. As I say, first of all, take care of the tax dollars
that was [sic] going into our facility, you know, operation.
Q: Replace the tax dollars.
A: Replace the tax dollars, and number two, to upgrade services.
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The depositions of the County Commissioners confirm that the primary purpose of the
surcharge was to replace revenue from the County’s general fund. Commissioner Rick Brown
testified that the recommendation from Mr. Banks was based on “the replacement of the general fund
monies that were going into the landfill budget.” Commissioner James Gaston stated that there was
no other plan in place to spend the revenue from the surcharge “other than replacing the monies
spent on the water line and replacing the monies that typically go in through the general fund.”
Commissioner Bob Lamb stated that he did not remember any justification given for the surcharge
“other than the fact that $2.75 allowed us to get the general fund money out of the landfill.”
Commissioner Wayne Shell stated that “when we cut it [the surcharge] to $2.75, that was the number
that they g[a]ve us to offset the general fund money that we was [sic] taking out and putting into the
operations of our landfill[.]”
The other McMinn County Commissioners made statements to similar effect in their
depositions. The official minutes of the Commission meeting at which the surcharge was approved
state that “[t]here was also a lengthy discussion concerning legislation that says the extra money
must be used for landfill operation, but Mr. Banks added that this will free up some general fund
monies for other purposes.”
The Trial Court found that the County made no showing of any costs or expenditures
incurred by it resulting from the operation of the privately-owned Meadow Branch landfill, stating
as follows in relevant part:
The county admits that the surcharge is not related to any direct
expenditures associated with collection and disposal at E.T.C.’s
landfill but is to be used exclusively for expenses associated with
collection and disposal at its own landfill.
* * *
There is nothing in the record showing any cost to the county
associated with E.T.C.’s collection or disposal activities; nor showing
any cost associated with regulating the activity at E.T.C.’s landfill;
nor showing any cost for providing a service or benefit to E.T.C. or
its customers which the county is entitled to defray.
The record fully supports these findings. Mr. Banks’ testimony suggests that any cost or
responsibility of regulating the Meadow Branch landfill was at the state, not local, level:
Q: But there was no effort made or investigation made to see what
types of specific services they were providing at the Meadow Branch
landfill.
A: No, there was not. Those things are governed by the state
regulations, as we were, and so, the only thing we had a problem with
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was trying to let the people know that they were governed by the state
regulations and not by us.
The Trial Court found one additional fact “of particular significance,” which is undisputed:
[T]hat after enacting the $2.75 per ton surcharge on all Class I solid
waste facilities in McMinn County, the county then reduced its
tipping fee to its customers at its landfill so that the real cost to them
remained exactly the same as before the imposition of the surcharge.
Thus, due to McMinn County’s offsetting reduction of its tipping fees, the result is that the only
additional revenue raised by the surcharge comes from ETC and its Meadow Branch landfill
customers. It is undisputed that neither ETC nor its customers are to receive any benefit from the
surcharge monies, which, as the Trial Court found, are to be used only for expenditures related to
the McMinn County landfill.
In the case of Lamar Advertising of Tennessee, Inc. v. City of Knoxville, an unreported
opinion of this Court filed in Knoxville on April 11, 1997, we applied the following principle which
is pertinent to the case at bar:
Since a municipality incurs costs in discharging certain duties created
by this type of ordinance, it is only reasonable to require those
benefitting from the service to defray the costs commensurate with
the expenses incurred by the municipality. It is only required that the
fees bear some reasonable relation to the expense involved and it is
no objection to a regulatory license that it produces more income than
is required for its administration and enforcement.
(Emphasis added.) In Lamar Advertising, we held the City of Knoxville’s sign inspection fee to be
an invalid tax because it was not shown to bear a reasonable relation to the actual expenses involved
with the sign inspections.
In the present case, Mr. Banks estimated that the $2.75 per ton surcharge would result in ETC
being required to pay approximately $250,000 per year to McMinn County. Knox Horner, part
owner of ETC, estimated the cost of the surcharge at $300,000 per year. As already noted, the
County did not demonstrate that it has incurred any cost of regulating the Meadow Branch landfill.
Under these circumstances, we find that the McMinn County ordinance imposing the surcharge is
in fact an unauthorized and improper tax.
The Trial Court further found that the surcharge, as imposed, along with the County’s
decision to “absorb” the surcharge with respect to its own landfill, violated the Commerce Clause
of the United States Constitution. In light of our holding affirming the Court’s ruling that the
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surcharge is an invalid tax, we do not find it necessary to reach this constitutional issue and it is
pretermitted.
On appeal, ETC raises the issue, as stated in its brief, of whether the Trial Court erred in
holding that T.C.A. 68-211-835(f)(1)(A) authorizes a surcharge applicable to a privately-owned
landfill. The Trial Court reasoned and ruled as follows on this issue:
E.T.C.’s argument that this section applies only to publicly owned
landfills cannot be considered. It was applied to a private landfill in
County of Benton v. H & W Environmental Servs., [an unreported
opinion of this Court filed in Jackson on December 2, 1998]. Also,
two Attorney General Opinions have advised local governments that
the section applies to privately owned landfills. See
Op.Tenn.Atty.Gen. 00-053 (3/22/00); Op.Tenn.Atty.Gen. 99-088
(4/8/99).
We agree and affirm the Court’s ruling that T.C.A. 68-211-835(f)(1)(A) authorizes a surcharge
applicable to a privately-owned landfill under the appropriate circumstances.
For the foregoing reasons the judgment of the Trial Court is affirmed and the cause remanded
for collection of costs below. Costs of appeal are adjudged against the Appellant, McMinn County.
_________________________________________
HOUSTON M. GODDARD, PRESIDING JUDGE
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