Opposition Brief — City of Huntington v. United States

OCTOBER TERM, 1993

City OF HUNTINGTON, WEST VIRGINIA,

PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

DreEw S. Days, ITI

Solicitor General

LORETTA C. ARGRETT

Assistant Attorney General

DAVID ENGLISH CARMACK

EDWARD T. PERELMUTER

Attorneys

Department of Justice

Washington, D.C. 20530

(202) 514-2217

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——gommy eer

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QUESTION PRESENTED

Whether the court of appeals correctly held that

the United States is constitutionally immune from

liability for a municipal service charge assessed

against federal property.

(1)

TABLE OF CONTENTS

Page

sia cintenatinmmnionationstuiesenies 1

Tee coietenedueewatemmmupoteans 1

LS SEES Ae 2

TTT 4

Conclusion ..... SR RSENS SER SL aS a 12

TABLE OF AUTHORITIES

Cases:

City of Fairmont v. Pitrolo Pontiac-Cadillac Co.,

308 S.E.2d 527 (W. Va. 1983), cert. denied, 466

ER a Re a 7

Duling Bros. Co. v. City of Huntington, 120 W. Va.

I 2

Federal Reserve Bank v. Metro Center Improve-

ment District #1, 657 F.2d 183 (8th Cir. 1981),

og RO is SS | ee 6

Hare v. City of Wheeling, 298 S.E.2d 820 (W. Va.

EES aC a ee ibisibniiitanbeied 7

Huse V. Glover, 119 U S. 543 (1886) . tT 6

Massachusetts v. United States, 435 U, S. ‘444

SN 4

Michelin Tire Corp. v. Wages, 423 U.S 276 (1976)... 5

Mullen Benevolent Corp. v. United States, 290 U.S.

a 4, 5-6

National Cable Television Ass’n v. United States,

I 6-7

Packet Co. v. Keokuk, 95 U.S. 80 (1877) ...... iseliada 6

South Carolina v. Baker, 485 U.S. 505 (1988) ....... 4

United States v. City of Columbia, Mo., 914 F.2d

I 4,5

United States v. County of Allegheny, 322 U.S. 174

(EOE oll le LD 4,8

United States v. County of Fresno, 429 U.S. 452

a SAE See 4

United States v. Harford County, 572 F. Supp. 239

kG Re a 7-8

IV

Cases—Continued: Page

United States v. LaFranca, 283 U.S. 568 (1931)... 5,7

United States v. New Mexico, 455 U.S. 720 (1982).. 4

United States v. River Coal Co., 748 F.2d 1103

| Ree et se 7

United States v. Tax Commission of Mississippi,

ee Se ee CD hea eenscidieoiene 5,7

Van Brocklin v. Tennessee, 117 U.S. 151 (1886)... 4

Constitution, statutes, and ordinance:

U.S. Const.:

Oe I ick icessdnnsiteidiiucccstsinmciteaiantinsiaialddiatlonioneds 6

Art. VI, Cl. 2 (Supremacy Clause) ..................... 6

I ge acaakenineas 10

OO 10

I oad 10

ae ar dasnsalabaadinapinabmeien 8,9

I oracle eacnicestnacasicsaenpclshiceieticetetinaisaneiids 9

ig SFR, EER EROS LS eee OS 9

I i 10

Rea ERSTE OL Se ONE oN 11

RR a ee ee 11

City of Huntington, W. Va., Ordinance:

a es ee I tes cciesncierentnneenniehintioonens 2

pg. OE & IRR eeeyeeetseenenee 3

by FTES A 2% __ | Rae nee 2

§ 778.04(b) (July 30, 1985) ................................ 3

ob, Ff Fs YS ene Shree 3

§ 955.20 (June 8, 1987) .........0.2.002.. ee. Neen Ns 2

Miscellaneous:

MRR a mre DNC TR 11

Iu the Supreme Court of the United States

_OCTOBER TERM, 1993

No. 93-538

Ciry OF HUNTINGTON, WEST VIRGINIA,

PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. Al-

A6) is reported at 999 F.2d 71. The opinion of the

district court (Pet. App. A9-A12) is reported at 793

F. Supp. 1370.

JURISDICTION

The judgment of the court of appeals was entered

on June 10, 1993. The petition for rehearing was de-

nied on July 6, 1993. The petition for a writ of cer-

(1)

2

tiorari was filed on October 1, 1993. The jurisdiction

of this Court is invoked under 28 U.S.C. 1254(1).

STATEMENT

1. Beginning in 1985, the city of Huntington,

West Virginia (petitioner) enacted a series of ordi-

nances imposing municipal service charges on owners

of residential and commercial property located in the

municipality (Pet. App. A2). The original ordinance

assessed a charge for fire protection services. In 1987,

petitioner enacted a second ordinance imposing a

charge for flood protection’ in addition to the fire

protection charge. Subsequently, petitioner combined

the fire and flood protection charges into a single

“municipal service fee.” Under a 1991 amendment,

the municipal service fee finances improvements to

streets and municipal infrastructure as well as fire

and flood protection services (ibid.). The charges im-

posed by petitioner have been assessed at rates based

primarily on the square footage of the property.’

1The revenue supports a floodwall maintained by the city.

The floodwall was constructed almost entirely with federal

funds. See Duling Bros. Co. v. City of Huntington, 120 W. Va.

85, 87 (1938) (federal government to provide $3 million of

$3,410,000 cost of floodwall).

2 The fire protection charge imposed in 1985 was assessed at

the rate of $.03 per square foot. City of Huntington, W. Va.,

Ordinance §§ 773.04(a) and (b) (July 30, 1985). The 1987

ordinance provided that the fire and flood protection charges

would be assessed at the combined rate of $.0375 per square

foot. Id. § 955.20 (June 8, 1987). The Municipal Service

Fee enacted in 1990 was assessed at the rate of $.0375 per

square foot plus an annual assessment of $70 per lot. Jd.

§ 773.03 (Feb. 13, 1990). The Municipal Service Fee is

presently assessed at the rate of $.0575 per square foot plus

3

Prior to 1990, the charges were enforceable through

civil and criminal sanctions. The 1990 ordinance im-

poses a civil penalty on delinquent accounts but does

not provide for the imposition of criminal penalties.’

2. Petitioner has consistently assessed the munici-

pal service charge against federal property owned by

the United States Postal Service (Postal Service) and

the United States General Services Administration

(GSA). In 1992, the Postal Service and GSA filed an

action for declaratory and injunctive relief contend-

ing that the assessments against federal property vio-

lated the federal government’s constitutional immu-

nity from state taxation. The district court rejected

this contention on the ground that the municipal serv-

ice charge was a “user fee” and not a “tax” (Pet.

App. A10-A11). The court concluded that the exac-

tion represented a reasonable attempt to charge users

for fire and flood protection services (id. at Al0).

3. The court of appeals reversed. Looking to the

“real nature” of the municipal service charge, the

court of appeals concluded that the assessment was

“a tax in the most classic sense of the term” (Pet.

App. A4). The court held that the Postal Service

and GSA were constitutionally immune from liability

because the municipal service -charge was only “a

thinly disguished tax” (id. at A6).

an annual assessment of $80 per lot. Jd. § 773.03(a) (Apr.

2, 1991).

8 City of Huntington, W. Va., Ordinance § 773.05 (Feb. 13,

1990).

4

ARGUMENT

The decision of the court of appeals is correct and

does not conflict with any decision of this Court or

any other court of appeals. Further review is there-

fore not warranted.

1. It is axiomatic that a State may not assess a

tax directly upon the United States. South Carolina

v. Baker, 485 U.S. 505, 523 (1988) ; United States v.

New Mexico, 455 U.S. 720, 733-735 (1982); United

States v. County of Fresno, 429 U.S. 452, 459 (1977).

This principle applies as well to taxes assessed against

federal property. Mullen Benevolent Corp. v. United

States, 290 U.S. 89, 91 (1933); Van Brocklin v. Ten-

nessee, 117 U.S. 151, 179-180 (1886). In determining

whether an assessment on the federal government or

on federal property constitutes an impermissible “tax”

or a permissible “user fee,” the appropriate analysis

focuses on the “real nature” of the exaction. United

States v. County of Allegheny, 322 U.S. 174, 184

(1944) ; United States v. City of Columbia, Mo., 914

F.2d 151, 154 (8th Cir. 1990) .*

* This Court has adopted a three-part test in determining

whether a federal exaction infringes on the States’ immunity

trom federal taxation. In Massachusetts v. United States,

435 U.S. 444 (1978), the Court held that the States are not

constitutionally immune from liability for federal exactions

that (i) do not discriminate against state functions, (ii) are

based on a fair approximation of the benefits received, and

(iii) are structured to produce revenues that will not exceed

the total cost to the federal government of the benefits to be

supplied. Jd. at 466-467. As the court of appeals noted (Pet.

App. A4), this three-part test is inapplicable in this case

because (as discussed in South Carolina v. Baker, 485 U.S.

at 523) the federal government’s immunity from state tax-

ation is broader than the States’ immunity from federal tax-

ation and arises from a different constitutional source. See

United States v. City of Columbia, Mo., 914 F.2d at 153-154.

5

As the court of appeals correctly observed, petition-

er’s municipal service charge “is a tax in the most

classic sense of the term” (Pet. App. A4). To begin

with, the assessment is a compulsory exaction enforce-

able through civil and (prior to 1990) criminal sanc-

tions. See United States v. Tax Commission of

Mississippi, 421 U.S. 599, 606 (1975) (noting that

the standard definition of a tax is “an ‘enforced con-

tribution to provide for the support of government’ ”’) ;

United States v. LaF ranca, 282 U.S. 568, 572 (1931);

United States vy. City of Columbia, Mo., 914 F.2d at

155. Second, the municipal service charge supports

core governmental services that benefit the general

public. See Michelin Tire Corp. v. Wages, 423 U.S.

276, 287 (1976) (observing that property taxes are

devices through which a State apportions the cost of

such services as police and fire protection). Third,

the municipal service charge is assessed at regular

intervals against owners of residential and commer-

cial buildings in Huntington without regard to actual

use of municipal services. The asserted liability for

the charge “arise[s] automatically * * * from the

United States’ status as a property owner” in the

municipality. United States v. City of Columbia, Mo.,

914 F.2d at 155-156. Finally, the ordinances impos-

ing the municipal service charge were enacted pur-

suant to a provision of the West Virginia Code dele-

gating the State’s taxing power, and the revenues

from the exaction are placed in the city’s general

revenue fund. The court of appeals properly recog-

nized (Pet. App. A6) that petitioner’s municipal serv-

ice charge is thus only a “thinly disguised tax” that

may not be assessed against federal property.

This case is indistinguishable for intergovern-

mental tax immunity purposes from Mullen Benevo-

6

lent Corp. v. United States, 290 U.S. 89, 91 (1933).

In that case, the city of American Falls, Idaho, levied

assessments against all property in the municipality in

order to finance the construction of sewers and side-

walks. After the initial assessment was made, the

United States acquired property in the city. When

the initial assessment proved insufficient to finance

the contemplated services, the city reassessed the

property. The Court held that the city’s assessment

on land owned by the United States “was a nullity”

under the Supremacy Clause. /bid. See also Federal

Reserve Bank v. Metro Center Improvement District

#1, 657 F.2d 183 (8th Cir. 1981) (federal instru-

mentality immune from liability for annual assess-

ment that financed local improvements), aff’d, 455

U.S. 995 (1982).°

2. Petitioner’s contention (11-13) that the muni-

cipal service charge is a “user fee” and not a “tax” is

without merit. To begin with, petitioner’s assertion

reflects a fundamental misunderstanding of the dif-

ference between a “fee” and a “tax.” A fee is a

charge imposed on an individual or small group that

has voluntarily sought and received a benefit not

conferred on the general public. See National Cable

Television Ass’n v. United States, 415 U.S. 336, 340-

5 Petitioner’s reliance (Pet. 11) on Packet Co. v. Keokuk,

95 U.S. 80 (1877), and Huse v. Glover, 119 U.S. 543 (1886),

is misplaced. In those cases, the Court held that Article 1,

Section 10, Clause 3 of the Constitution—which provides that

“Tnjo State shall, without the Consent of Congress, lay any

Duty of Tonnage”’—did not prohibit States from levying

charges against private parties who utilized state property.

Keokuk and Huse, however, have no bearing on the immunity

of the federal government from general state and local ex-

actions imposed on federal property.

7

341 (1974). A fee, by definition, does not encompass

a compulsory exaction (such as the municipal service

charge in this case) that supports services provided

to the general public. An exaction of this nature

is a “tax” and not a “fee.” See United States v.

Tax Commission of Mississippi, 421 U.S. at 606;

United States v. LaFranca, 283 U.S. at 572; United

States v. River Coal Co., 748 F.2d 1103, 1106 (6th

Cir. 1984) (“the chief distinction is that a tax is an

exaction for public purposes while a fee relates to an

individual privilege or benefit to the payer”). Be-

cause petitioner’s municipal service chargé supports

benefits provided to the general public and is assessed

without regard to actual use of municipal services,

it represents a proscribed tax, not a “user fee,”

under the established principles of these decisions.°

3. Petitioner’s reliance (Pet. 15-16) on the fact

that the municipal service charge is assessed pri-

marily (though not exclusively) at rates based on

square footage of property, as opposed to property

value, is without force. The square footage method

adopted by petitioner merely represents an alterna-

tive method of assessing the tax: it does not change

the fact that the municipal service charge is a tax

on federal property.7 See United States v. Harford

* Petitioner is merely imposing a property tax and identi-

fying the governmental services supported by the exaction.

As the court of appeals correctly recognized (Pet. App. A5),

that tactic, if approved here, would eviscerate the principle

of intergovernmental tax immunity.

7 The square footage method of assessment was a response

to the West Virginia Supreme Court’s decisions in Hare v.

City of Wheeling, 298 S.E.2d 820 (W. Va. 1982), and City of

Fairmont v. Pitrolo Pontiac-Cadillac Co., 308 S.E.2d 527

W. Va. 1983), cert. denied, 466 U.S. 958 (1984). In those

8

County, 572 F. Supp. 239, 242 (D. Md. 1983) (United

States constitutionally immune from liability for an-

nual front foot benefit assessment that financed water

and sewer services). Furthermore, petitioner’s sug-

gestion (Pet. 16) that the square footage method of

assessment “is reasonably calculated to charge the

property owner on the basis of use” misses the mark.

There is no correlation between the size of property

and any actual use of fire and flood protection services.

4. Petitioner errs in contending (Pet. 13-15) that,

in enacting 15 U.S.C. 2210, Congress waived the

government’s immunity from liability for the city’s

municipal service charge. This statute provides, in

relevant part (ibid.) :

Reimbursement for costs of firefighting

on federal property

Filing of Claims

(a) Each fire service that engages in the

fighting of a fire on property which is under the

jurisdiction of the United States may file a claim

with the Administrator for the amount of direct

expenses and direct losses incurred by such fire

service as a result of fighting such fire. The

cases, the court held that municipal service charges assessed

at rates based upon property value constituted ad valorem

property taxes and were therefore subject to the limitations

imposed by the Tax Limitation Amendment to the West Vir-

ginia Constitution. Petitioner errs in relying (Pet. 11-12)

on state trial court decisions holding that municipal service

charges assessed at rates based on square footage do not vio-

late the West Virginia Constitution. The federal constitu-

tional issue presented here is governed by federal law. United

States v. County of Allegheny, 322 U.S. at 184.

claim shall include such supporting information

as the Administrator shall prescribe.

Determination

(b) Upon receipt of a claim filed under sub-

section (a) of this section, the Administrator

shall determine—

(1) what payments, if any, to the fire

service or its parent jurisdiction, including

taxes or payments in lieu of taxes, the

United States has made for the support of

fire services on the property in question;

(2) the extent to which the fire service

incurred additional firefighting costs, over

and above its normal operating costs in con-

nection with the fire which is the subject of

the claim; and

(3) the amount, if any, of the additional

costs referred to in paragraph (2) of this

subsection which were not adequately cov-

ered by the payments referred to in para-

graph (1) of this subsection.

Section 2210 does not address the federal govern-

ments’ immunity from general or annual assessments

that finance local fire services. Indeed, the provision

does not directly address the question of intergovern-

mental tax immunity. As the title of the statute

indicates, and as the court of appeals recognized

(Pet. App. A5 n.6), Section 2210 is designed to com-

pensate state and local governments for expenses that

they actually incur in combatting fires on federal

property. Subsection (a) provides that state and

local governments may file claims for reimbursement

of direct expenses and direct losses incurred in

rendering fire fighting services. Subsection (b) in

10

turn provides a mechanism for computing the

amount of such claims to be reimbursed and further

provides that this amount must reflect any prior pay-

ments made by the United States in the form of taxes

or payments “in lieu of taxes” to finance the fire

services. 15 U.S.C. 2210(b) (1).

While Section 2210(b)(1) provides that such

claims against the United States are to be offset by

any taxes (or payments in lieu of taxes) that have

been paid for the support of local fire services, the

statute does not waive the federal government’s im-

munity from state and local taxes. Instead, the stat-

ute merely reduces the amount of reimbursement when

federal agencies or instrumentalities already have

paid taxes that support local fire services pursuant to

other federal statutes that waive federal immunity

from state and local taxation.* For example, Section

2210(b)(1) provides for a reduction in fire-control

claims against Federal Reserve Banks which must pay

state and local real estate taxes under 12 U.S.C. 531.

See note 8, supra. Similarly, the statute provides for

8’ Other federal statutes explicitly waive federal immunity

from state and local taxation in specific circumstances. See,

e.g., 12 U.S.C. 531 (“Federal reserve banks * * * shall be

exempt from Federal, State and local taxation except taxes

upon real estate’); 12 U.S.C. 1452(d) (the Federal Home

Loan Mortgage Corporation “shall be exempt from all tax-

ation * * * except that any real property of the Corporation

shall be subject to State, territorial, county, municipal or

local taxation to the same extent according to its value as

other real property is taxed”); 15 U.S.C. 713a-5 (same for

taxation of real property owned by Commodity Credit Cor-

poration). As these statutes demonstrate, when Congress

wishes ty waive federal immunity from state and local tax-

ation, it expresses its will clearly.

a reduction in claims against the United States when

the federal government has made payments “in lieu of

taxes,” which are payments made pursuant to federal

statutes that compensate local governments for the

loss of revenue occasioned by their inability to assess

taxes against federal property located in the munici-

pality. See 60 Comp. Gen. 637, 640 (1981). Statutes

such as 31 U.S.C. 6902 often provide for payments

by the federal government to units of local govern-

ments in which tax exempt land owned by the federal

government is located. Such “in lieu” payments,

when made, may be used “for any governmental pur-

pose.” 31 U.S.C. 6902(a).

5. Petitioner’s suggestion (Pet. 10-11) that the

decision of the court of appeals in this case will result

in financial hardship is both irrelevant and erroneous.

It is irrelevant because considerations of fiscal need

do not justify imposition of an unconstitutional tax.

It is erroneous because the decision of the court of

appeals merely precludes petitioner from assessing

the municipal service charge against the few federal

buildings in the municipality and has no effect on the

assessment of the charge against other property own-

ers. Furthermore, petitioner ignores the fact that the

benefits it receives from the federal presence in the

municipality (such as employment for its residents)

outweigh the modest tax revenues that it will be un-

able to collect under the decision in this case. Peti-

tioner’s insistence that the federal government pay

the city for “flood protection” services is particularly

unpersuasive in view of the fact that the city’s prin-

cipal flood protection system was constructed almost

entirely with federal funds. See note 1, supra.

12

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

DrEw S. Days, III

Solicitor General

LORETTA C, ARGRETT

Assistant Attorney General

DAVID ENGLISH CARMACK

EDWARD T. PERELMUTER

Attorneys

JANUARY 1994

bg U. S. GOVERNMENT PRINTING OFFicE; 1994 301157 66093