The Borough of West Chester v. PASSHE and West Chester University of PA

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

The Borough of West Chester, :

Petitioner :

:

v. :

:

Pennsylvania State System of :

Higher Education and West Chester :

University of Pennsylvania of the :

State System of Higher Education, : No. 260 M.D. 2018

Respondents : Argued: March 13, 2019

BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge

HONORABLE RENÉE COHN JUBELIRER, Judge

HONORABLE PATRICIA A. McCULLOUGH, Judge

HONORABLE ANNE E. COVEY, Judge

HONORABLE MICHAEL H. WOJCIK, Judge

HONORABLE CHRISTINE FIZZANO CANNON, Judge

HONORABLE ELLEN CEISLER, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION

BY JUDGE FIZZANO CANNON FILED: July 15, 2019

Before this Court in our original jurisdiction is the preliminary

objection of the Pennsylvania State System of Higher Education (PASSHE) and

West Chester University of Pennsylvania of PASSHE (the University) (collectively,

Respondents) filed in response to the Borough of West Chester’s (the Borough)

declaratory judgment action (Declaratory Judgment Action).

On April 13, 2018, the Borough filed a Declaratory Judgment Action

against Respondents in this Court’s original jurisdiction, seeking to establish that the

Stormwater Charge1 is a fee for service, rather than a tax, which Respondents are

obligated to pay. Declaratory Judgment Action at 22, ¶¶ 107-10. The Borough

makes the following factual allegations.

The Borough is a home rule municipality organized and existing under

the laws of the Commonwealth of Pennsylvania including, without limitation, the

Pennsylvania Home Rule Charter and Optional Plans Law.2 Declaratory Judgment

Action at 2, ¶ 2. Pursuant to Section 2002-A(a) of the Public School Code of 1949,3

PASSHE is a body corporate and politic constituting a public corporation and

government instrumentality, of which the University is a constituent institution. Id.

at 2, ¶ 6. Approximately 57 acres of the University’s campus is situated within the

south-central portion of the Borough and is generally known as the North Campus.

Id. at 3, ¶¶ 11-12. PASSHE, in the name of the Commonwealth of Pennsylvania, is

the title owner in fee simple of a portion of the property forming the North Campus,

and the University is title owner in fee simple of another portion of that property.

Id. at 3-4, ¶¶ 13-14.

The Borough owns and operates a Small Municipal Separate Storm

System (Stormwater System or MS4), as that term is defined in the Code of Federal

Regulations. Declaratory Judgment Action at 7, ¶ 31 (citing 40 C.F.R. §

122.26(b)(16), (17)). The Borough maintains a National Pollutant Discharge

1

The Borough refers to this charge as the Stream Protection Fee and Respondents refer to

it as the Stormwater Tax. Because whether the charge is a fee or a tax is at issue in this case, we

will instead utilize the neutral term “Stormwater Charge.”

2

53 Pa.C.S. §§ 2901-2984.

3

Act of March 10, 1949, P.L. 30, added by Section 2 of the Act of Nov. 12, 1982, P.L.

660, No. 188, as amended, 24 P.S. § 20-2002-A(a).

2

Elimination System Permit (NPDES), a prerequisite for the lawful operation of its

Stormwater System. Id. at 7-8, ¶¶ 34-39. On July 20, 2016, the Borough Council

enacted the Borough’s Stream Protection Fee Ordinance (Ordinance). Declaratory

Judgment Action at 4, ¶ 15; Exhibit C, Ordinance, Section 16, p. 12.4 For purposes

of determining the appropriate assessment rate for the Stormwater Charge, the

Ordinance categorizes property into different tiers, ranging from tier 1 to tier 6, based

on total impervious surface area. Declaratory Judgment Action at 17, ¶ 80; Exhibit

C, Ordinance, Section 6, p. 7.5 The assessment rate is determined by multiplying the

base rate by the corresponding percentage amount for each tier. The Stormwater

Charge is then calculated by multiplying the assessment rate by the number of base

units6 in a given property. On September 21, 2016, the Borough Council adopted

Resolution No. 11-2016 in order to impose the Stormwater Charge7 upon the owners

4

“Courts reviewing preliminary objections may consider not only the facts pleaded in the

complaint, but also documents or exhibits attached to the complaint . . . .” Diess v. Dep’t of

Transp., 935 A.2d 895, 903 (Pa. Cmwlth. 2007).

5

For example, a tier 4 property is one “where the total impervious surface area is greater

than 2,000 square feet and less than or equal to 2,500 square feet.” Declaratory Judgment Action

at 17, ¶ 82; see also Ordinance, Section 6, p. 7.

6

Each base unit is 1,000 square feet of impervious surface. Ordinance, Section 5, p. 4.

7

The Ordinance refers to the Stormwater Charge as the “Stream Protection Fee” which is

defined as follows:

[A]n assessment levied by the Borough to cover the cost of

constructing, operating, and maintaining stormwater management

facilities and to fund expenses related to the Borough’s compliance

with [Pennsylvania Department of Environmental Protection]

NPDES permit requirements under applicable state law based on the

impact of stormwater runoff from impervious areas of developed

land in the Borough.

Ordinance, Section 5, p. 16.

3

of all developed properties within the jurisdictional limits of the Borough that are

connected to, use, or are serviced or benefit from the Stormwater System.

Declaratory Judgment Action at 4, ¶ 17; see also Ordinance, Section 5, p. 5 (defining

the term “developed” to include “[p]roperty where manmade changes have been

made which add impervious surfaces to the property . . . .”). For purposes of

calculating the Stormwater Charge, this resolution established a monthly base fee of

$6.70 per 1,000 square feet of impervious cover on a given property. Declaratory

Judgment Action at 18, ¶¶ 86-87. The Borough adopted the Stormwater Charge as

the mechanism by which the Borough would raise revenue to fund pollution

remediation measures.8 Id. at 15-16, ¶ 73. The Borough contends that there is a

direct relationship between the amount of impervious surface within a given

watershed and the health and quality of the watercourse and its tributaries within that

watershed, in addition to public health, safety, and welfare concerns related to

flooding and other stormwater-related issues. Id. at 11, ¶ 50. The Borough avers

that the impervious area of the portion of the North Campus that lies in the Borough

covers 32 acres, constituting nearly 8% of the total impervious area within the

Borough. Id. at 11-12, ¶¶ 51-52. The Borough further avers that stormwater which

8

The Stormwater Charge is set forth in Section 94A-6.A of the Borough’s Code and

provides:

For the use of, benefit by and the services rendered by the

[Stormwater System], including its operation, maintenance, repair,

replacement and improvement of said system and all other expenses,

a stream protection fee . . . as described, defined, and calculated

herein is imposed upon each and every developed property within

the Borough that is connected with, uses, is serviced by or is

benefitted by the Borough’s [Stormwater System], either directly or

indirectly, and upon the owners of such developed property as set

forth herein.

Declaratory Judgment Action at 16 (quoting Section 94A-6.A of the Borough’s Code).

4

flows from the impervious areas of the North Campus situated in the Borough either

enters and flows through the Borough’s Stormwater System or flows directly into a

nearby watercourse. Id. at 12, ¶¶ 53-54.

The Borough maintains that each of the North Campus properties

subject to the Stormwater Charge is “developed” for purposes of the Ordinance, and

that these properties are connected with, use, are served by, or are benefitted by the

Borough’s Stormwater System. Declaratory Judgment Action at 17, ¶¶ 76-77. The

Borough notes that the amount of the Stormwater Charge for which the owner of a

developed property is responsible is dependent upon the amount of impervious

surface on the property. Id. at 17, ¶ 78. The Borough states that the Borough Council

established several impervious area property tiers, based upon the total square

footage of impervious surface area, with different corresponding assessment rates

for the Stormwater Charge. Id. at 17-18, ¶¶ 80-84. The Borough avers that all

revenue generated by the Stormwater Charge is deposited into the Borough’s

Stormwater Management Fund, and that this money is only used for the purposes set

forth in the Ordinance, which include funding pollution remediation measures to

comply with state and federal regulatory requirements. Id. at 18-19, ¶¶ 88-89.

Counsel for PASSHE informed the Borough by letter dated January 18,

2018 that the University would not pay the Stormwater Charge. Declaratory

Judgment Action at 5, ¶¶ 20-21. Through letters sent on February 23, 2018, and

March 5, 2018, the Borough rejected PASSHE’s and the University’s refusal to pay

the Stormwater Charge. Id. at 5, ¶¶ 22-24. The Borough sent PASSHE Stormwater

Charge invoices listing the aggregate amount due for 2017 as $105,760.85. Id. at

19, ¶¶ 91-92. The Borough sent the University Stormwater Charge invoices

indicating a total amount due of $5,855.81 for 2017. Id. at 19-20, ¶¶ 93-94.

5

Respondents missed the deadline for payment of the 2017 Stormwater Charge. Id.

at 20, ¶ 96. The Borough avers that Respondents owe similar amounts for the 2018

Stormwater Charge, which they also declined to pay. Id. at 20-21, ¶¶ 99-102. The

Borough does not dispute that PASSHE and the University are immune to local

taxation, but alleges that the Stormwater Charge is a fee for service, rather than a

tax. Id. at 22, ¶¶ 106-07.

Respondents filed a preliminary objection in the nature of a demurrer,

alleging that the Borough’s pleading is legally insufficient pursuant to Pennsylvania

Rule of Civil Procedure No. 1028(a)(4) because the Stormwater Charge is not a fee

for service, but rather a tax from which they are immune as Commonwealth entities.

Preliminary Objection to the Borough’s Declaratory Judgment Action (Preliminary

Objection) at 4-5, ¶¶ 15-25. Respondents assert that “[t]he [Stormwater Charge] is

a form of real estate tax—a payment by a property owner assessed based on a

condition of the subject property.” Id. at 6, ¶ 22. Respondents contend that the

Stormwater Charge is a tax, because it compels the payment of money in order to

generally aid the environment without providing any special benefit to

Commonwealth property. Id. at 6, ¶ 23. Respondents also assert that even if the

Stormwater Charge is considered an assessment rather than a general tax because it

is limited to stormwater infrastructure projects, it is still a tax subject to the

Commonwealth’s tax immunity. Id. at 6, ¶ 24. Respondents additionally contend

that the Stormwater Charge is not reasonably proportional to the value of any product

or service provided to the Commonwealth in a quasi-private capacity, such as the

provision of gas or garbage collection. Id. at 6-7, ¶ 26 (citing Supervisors of

Manheim Twp., Lancaster Cty. v. Workman, 38 A.2d 273, 276 (Pa. 1944)).

Respondents maintain that “[t]he authority to levy any kind of tax or charge against

6

a Commonwealth entity must be made expressly.” Id. at 7, ¶ 29 (citing Sw. Del. Cty.

Mun. Auth. v. Aston Twp., 198 A.2d 867, 872 (Pa. 1964)). Respondents assert that

although the Ordinance identifies two possible sources of the Borough’s authority

under state law—the Storm Water Management Act (SWMA)9 and The Clean

Streams Law10—neither authorizes the Borough to impose any tax, assessment or

fee upon a Commonwealth entity to raise revenue to comply with the Borough’s

obligations. Id. at 8-9, ¶¶ 31 & 34.

In response, the Borough asserts that the Stormwater Charge is a fee for

service imposed on Respondents by authority of Section 2961 of the Home Rule

Charter and Optional Plans Law, 53 Pa.C.S. § 2961. Borough’s Response to

Respondents’ Preliminary Objections (Borough’s Response) at 13 & 16-17, ¶¶ 22 &

28. The Borough further contends that the Stormwater Charge is reasonably

proportional to the value of the service provided to Respondents, id. at 16, ¶ 27, and

that Respondents are not the equivalent of the Commonwealth and enjoy only

qualified immunity from taxation. Id. at 2, ¶ 17 (citing Pa. State Sys. of Higher

Educ. v. Indiana Area Sch. Dist. (Pa. Cmwlth., No. 184 M.D. 2011, filed April 5,

2012), slip op. at 15). Further, the Borough maintains that Respondents realize a

special benefit from the Borough’s Stormwater System. Borough’s Response at 14,

¶ 23.

In their brief in support of their preliminary objection, Respondents

note that “[a]n assessment is defined as a type of charge that ‘pays for a public,

though a local, improvement’ and ‘therefore relieves the public from the necessity

of contributing to the cost or expense of the improvement.’” Respondents’ Brief at

9

Act of October 4, 1978, P.L. 864, as amended, 35 P.S. §§ 680.1 – 680.17.

10

Act of June 22, 1937, P.L. 1987, as amended, 35 P.S. §§ 691.1 – 691.1001.

7

10 (quoting Sw. Del. Cty. Mun. Auth., 198 A.2d at 870). Respondents assert that the

fact that the Stormwater Charge is dedicated to a particular purpose indicates that it

is an assessment, which is still a species of tax subject to the Commonwealth’s tax

immunity. Id. at 11. Respondents contend that the Stormwater Charge resembles

the sewer assessment in Southwest Delaware County Municipal Authority, in which

a municipal authority attempted to assess a public school to cover the cost of

installing a sewer system. Id. at 11. Respondents note that the Pennsylvania

Supreme Court found in that case that the school district and the school authorities

were immune from the sewer assessments, even though they benefited from the

sewer construction. Id. at 11 (citing Sw. Del. Cty. Mun. Auth., 198 A.2d at 869 &

874). Respondents therefore maintain that the fact that they might benefit from the

Borough’s Stormwater System does not preclude a finding that the Stormwater

Charge is a tax or an assessment, rather than a fee. Id. at 11-12. Respondents also

point out that “[t]he Borough does not allege that it will make improvements to, or

even touch, property owned by” Respondents. Id. Respondents further contend that

they are equivalent to the Commonwealth and entitled to tax immunity. Id. at 10.

Respondents note that “[a]s a general rule, political subdivisions like a borough

cannot levy taxes on real property unless the . . . General Assembly has granted

taxing authority to the subdivision.” Id. at 6 (citing Lehigh-Northampton Airport

Auth. v. Lehigh Cty. Bd. of Assessment Appeals, 889 A.2d 1168, 1175 (Pa. 2005)).

Respondents also assert that “political subdivisions like the Borough do not have

general authority to compel payment from Commonwealth entities” and that “[t]he

authority to levy any kind of tax or charge against a Commonwealth entity must be

made expressly” by the General Assembly. Id. at 15-16 (citing Lehigh-Northampton

Airport Auth., 889 A.2d at 1175; Del. Cty. Solid Waste Auth. v. Berks Cty. Bd. of

8

Assessment Appeals, 626 A.2d 528, 530 (Pa. 1993)); Sw. Del. Cty. Mun. Auth., 198

A.2d at 872.11

In its brief in opposition to Respondents’ preliminary objection, the

Borough argues that the Stormwater Charge is a fee for service. Borough’s Brief in

Opposition to Respondents’ Preliminary Objection at 16. The Borough contends

that it has the authority to impose the Stormwater Charge pursuant to its home rule

charter and asserts that Respondents fail to point to any provision of the home rule

charter, statutes or the Pennsylvania Constitution that would limit the Borough’s

power to impose the Stormwater Charge. Id. at 20. The Borough notes that a

municipality may charge a fee for service when performing certain functions in a

proprietary or quasi-private capacity, but only if that fee is reasonably proportional

to the value of the service received. Id. at 16-17 (citing Workman, 38 A.2d at 276).

The Borough further argues that the Stormwater Charge is a fee, because it is

“imposed as a charge for services which a municipality renders ‘to particular persons

or groups of persons within the’ municipality[,]” and asserts that the Stormwater

Charge is not a general revenue generating measure. Id. at 14 & 16-17. The Borough

contends that its Stormwater System benefits property owners, because they “do not

have to incur the expense which would otherwise be necessary to maintain on their

own properties the scope of systems which would be necessary to” manage

stormwater. Id. The Borough also asserts that “the amount of [the Stormwater

Charge] which the owner of a given [d]eveloped [p]roperty must pay is directly

related to the amount of impervious cover at that . . . [p]roperty.” Id. at 18.

In ruling on preliminary objections,

11

We note that the cases cited by Respondents pertain to tax immunity and do not state

that Commonwealth entities are immune from “charges” imposed by municipalities. See Sw. Del.

Cty. Mun. Auth., 198 A.2d at 872.

9

our review is limited to the pleadings. . . . We are required

to accept as true the well-pled averments set forth in the

. . . complaint, and all inferences reasonably deducible

therefrom. . . . Moreover, the court need not accept as true

conclusions of law, unwarranted inferences from facts,

argumentative allegations, or expressions of opinion. . . .

Pa. State Lodge, Fraternal Order of Police v. Dep’t of Conservation & Nat. Res.,

909 A.2d 413, 415-16 (Pa. Cmwlth. 2006) (citations omitted).12 A preliminary

objection to the legal sufficiency of a pleading, commonly known as a demurrer,

raises questions of law, and we “must decide whether it is clear from the well-

pleaded facts and reasonable inferences from those facts that the claimant has not

established a right to relief.” Yocum v. Pa. Gaming Control Bd., 161 A.3d 228, 233-

34 (Pa. 2017) (emphasis added). “Preliminary objections in the nature of a demurrer

should be sustained only in cases that clearly and without a doubt fail to state a claim

for which relief may be granted.” Id. at 234. “[T]he question presented by [a]

demurrer is whether, on the facts averred, the law says with certainty that no

recovery is possible. Where a doubt exists as to whether a demurrer should be

sustained, this doubt should be resolved in favor of overruling it.” Bilt–Rite

Contractors, Inc. v. The Architectural Studio, 866 A.2d 270, 274 (Pa. 2005).

In PPL Electric Utilities Corporation v. City of Lancaster, 125 A.3d

837 (Pa. Cmwlth. 2015), we considered a public utility corporation’s application for

summary relief following its declaratory judgment action asking this Court to

declare invalid an annual right-of-way maintenance fee imposed on the public utility

12

Courts reviewing preliminary objections may also consider documents and exhibits

attached to the complaint. See supra note 4.

10

by a city. Id. at 844.13 Noting that, as a home rule municipality, the city could

“assess fees for recovery of costs under its home rule powers” and “undertake

government action unless preempted by a law of statewide applicability,” we

identified the central issue as “whether the fee is reasonable and not a tax.” Id. at

851-52. We denied summary relief, reasoning that “[t]his issue [could not] be

determined at this summary stage of the proceedings and may require further factual

development[.]” Id. at 852. Similarly, here, whether the Borough has established a

right to declaratory relief depends on whether the Stormwater Charge constitutes a

tax or a fee—a question necessitating further factual development. For example,

questions remain, inter alia, as to: whether the Borough’s Stormwater System

provides a discrete benefit to Respondents, as opposed to generally aiding the

environment and the public at large; whether the value of the Stormwater System to

Respondents is reasonably proportional to the amount of the Stormwater Charge;

and, apart from general operation, maintenance and repair of the Borough’s

Stormwater System, how exactly does the Borough utilize the funds generated by

the Stormwater Charge.

Based on the present facts as averred and reasonable inferences

therefrom, it is not certain that the law precludes the Borough’s requested

declaratory relief. See Bilt–Rite Contractors, Inc., 866 A.2d at 274. Further factual

development and the resolution of pending questions may enable the Borough to

establish that the Stormwater Charge constitutes a fee for service that is reasonably

proportional to the value of the benefit conferred to Respondents in a quasi-private

capacity. Thus, the Borough has not “clearly and without a doubt failed to state a

claim for which relief may be granted.” Yocum, 161 A.3d at 234. As settling the

13

Prior to this point, we had also overruled the City’s preliminary objection in the nature

of a demurrer. PPL Elec. Utils., 125 A.3d at 843.

11

question of law presented by the Borough’s request requires further factual

development, we therefore conclude that it would be premature to sustain

Respondents’ demurrer. See McNeill by McNeill v. City of Philadelphia, 522 A.2d

174, 178-79 (Pa. Cmwlth. 1987) (holding that the trial court’s decision to sustain a

demurrer was premature where questions of law could not be settled without

“amplification of the factual record”). Accordingly, we overrule Respondents’

preliminary objection.

__________________________________

CHRISTINE FIZZANO CANNON, Judge

12

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

The Borough of West Chester, :

Petitioner :

:

v. :

:

Pennsylvania State System of :

Higher Education and West Chester :

University of Pennsylvania of the :

State System of Higher Education, : No. 260 M.D. 2018

Respondents :

ORDER

AND NOW, this 15th day of July, 2019, the preliminary objection of

the Pennsylvania State System of Higher Education (PASSHE) and West Chester

University of PASSHE (collectively, Respondents) is OVERRULED. Respondents

shall file an answer to the Borough of West Chester’s declaratory judgment action

within thirty (30) days of the date of this order.

__________________________________

CHRISTINE FIZZANO CANNON, Judge