Petition for Writ of Certiorari — City of Danville v. Kentucky River Authority
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~ Supreme Court, U.8.
i) FILED
961308 FEB 10 1997
No. 96-
OFFICE ores 7"
IN THE
SUPREME COURT OF THE UNITED STATES
October Term, 1996
CITY OF DANVILLE,KENTUCKY - -_ Petitioner
versus
KENTUCKY RIVER AUTHORITY;
PHILLIP J. SHEPHERD;
CHARLES W. CARR; TOM DORMAN;
JUDGE W. NEAL CASSIDY;
DR. DONALD C. HANEY;
MARTIN HOWARD LOWRY;
EDWARD FOREE; GREG GINTER;
THOMAS M. JONES;
RALPH E. MCCLANAHAN; and
BETTY F. WHITAKER - - - - # £=Respondents
PETITION FOR A WRIT OF CERTIORARI
TO THE SUPREME COURT OF KENTUCKY
EDWARD D. HAYS
Attorney at Law
Counsel of Record
SHEEHAN, BARNETT & HAYS, P.S.C.
114 South Fourth Street
Danville, Kentucky 40422
(606) 236-2641
Counsel for Petitioner
February 7, 1997
WESTERFIELD-BONTE CO., 619 W. KENTUCKY-P.O. BOX 3251, LOUISVILLE, KY.
i
QUESTIONS PRESENTED
May the Kentucky River Authority, a watershed man-
agement agency of the Commonwealth of Kentucky,
impose a special assessment or fee upon water con-
sumers, including the City of Danville and its resi-
dents, without conferring special or peculiar benefits,
the value of which are reasonably related or roughly
proportional to the amount of the assessment?
Does an absolute rule adopted by Kentucky’s highest
court that persons residing within the watershed ba-
sin of the Kentucky River are conclusively presumed
to receive a benefit from the Kentucky River Author-
ity, a watershed management agency of the Com-
monwealth of Kentucky, violate the due process of
law and equal protection clause of the 14th Amend-
ment of the United States Constitution?
Should the protection against the taking of property
without due process of law of the 5th and 14th Amend-
ments to the United States Constitution be extended
to apply within the context of special assessments or
fees imposed by state administered watershed man-
agement districts?
li
TABLE OF CONTENTS
PAGE
Questions Presented. ...............cccccccsssscccccssscesescceeess i
Table of Contents ...............scsccsscsrserescseescseressseerees ii-iii
"Tee GE PTI nn ciniccinccccccccsccissksdscnbitvcseceacessies iv— v
Citation to Previous Opinion and Opinions
I vccstsssscsnsincectwetsoseianudietecicbenamasstadanenmmeteiaden 2
| TT TOE ETE EERE ee ET dee 2
Constitutional and Statutory Provisions
| AUER TLS A SUPE TENS Ee CEN AAOLE SAE 2—- 3
Seaton GF Cw TS 6..iin skincare 3- 9
How the Federal Questions were Raised and
TI SNE ici cinincecucrssdakensnocaderstrsebinmoaasanmmcyeve 9-10
Reasons for Granting the Writ .....................00cc000 11-24
1. The Decision Below Decided an Impor-
tant Federal Question in a Way That
Conflicts With Relevant Decisions of
This Court, Including Norwood v. Baker,
172 U.S. 269, 19 S.Ct. 187, 43 L.Ed. 443
CO iia ES, ieee 11-17
This Case is Believed to be a Case of First
Impression in the United States, Kentucky
Being the First State Which has Attempted
to Fund a Watershed Management District
Through the Imposition of User Fees Upon
Water Consumers as Opposed to Funding
Through General Tax Revenues, Govern-
mental Grants, or Assessments Against
Property Owners Actually Affected and
eI miteliiiicasssiniitiine savttcarnabeiacnntnlininiaticnicsnnns 17-19
. The Growing Proliferation of Special
Assessment Districts Within this Country
Has Created a Compelling Need for This
Court to Extend and Clarify the Protec-
tions Afforded Every Citizen Under the
Fourteenth Amendment of the United
States Constitution and the Broad Prin-
ciples Enunciated in Norwood v. Baker... 19-24
CCM issiscsniesiicciciiiceietha nich aii caine 24-25
ill
PAGE
Appendix:
Order Denying Discretionary Review entered
No-ember 13, 1996 by the Supreme Court
of Kentucky in City of Danville, Kentucky
v. Kentucky River Authority, et al, 96-SC—
BAG AP OA GA) a cbiah in cacsisccccccssecesckscescsessacse. la
Opinion Reversing and Remanding entered
February 16, 1996 by the Kentucky Court
of Appeals in Kentucky River Authority v.
City of Danville, (No. 95—-CA—000064—MR),
Ky. App., 932 S.W.2d 374 (1996) .......ccccecccseeee 2a— 7a
Opinion and Order Entered December 9, 1994
by the Boyle Circuit Court in City of Dan-
ville, Kentucky v. Kentucky River Authority,
AF ihs WENT acacia cncckccacessovdcdecersivcsooseecesess 8a—lla
Kentucky Revised Statutes 151.700 through
I ee ccacnesecen, 12a-23a
420 KAR 1:010 through 420 KAR 1:050
(Administrative Regulations Adopted by
the Kentucky River Authority) ...............ccccc000. 24a—49a
“User Fees in Lieu of Taxes: Avoiding Constitu-
tional Limitations”, by Laurence J. Zielke,
Urban Lawyer, Vol. 23, No. 3
a i A 50a-61la
iv
TABLE OF AUTHORITIES
PAGE
Cases:
Alamo Rent-A-Car v. Sarasota—Manatee Airport
Auth., 906 F.2d 519 (11 Cir., 1990)...............+4 22
Armstrong v. United ‘states, 364 U ~. 40, 49, 80 |
S.Ct. 1563, 4 L.Ed.2d 1154 (1a 27: .......ccsseseeeees 16 |
Associated Enter., Inc. v. Toltec Watershed Imp.
Dist., 410 U.S. 748, 93 S.Ct. 1237, 35 L.Ed.2d
O76 ORD. aititintieeeiciedinn 18
Barfield v. Gleeson, Ky., 63 S.W. 964 (1901)......... 7
Casey v. Richland County Council, 320 S.E.2d 442
CBC. TRIG) sicisecincsin wae intends ndadiiginen 7
Chicago, B. & Q.R. Co. v. Chicago, 166 U.S. 226,
239, 17 S.Ct. 581, 41 L.Ed. 979 (1897) ............ 16
Curtis v. Louisville and Jefferson County Metro-
politan Sewer District, Ky., 311 S.W.2d 378
LE IED csvanistessstheiielchansianetelciediibialiiitceds naanciiat ceca deal 8, 9, 14, 15
Dolan v. City of Tigard, 512 U.S. 374, 114 S.Ct.
2309, 129 L.Ed.2d 304 (1994).............6+. 15, 16, 17, 24
Federal Deposit Ins. Corp. v. City of New Iberia,
921 F.2d. 610 (Sth Cir., 1991) .......cccccscccsccsceseee 22
Georgia R. & Electric Co. v. Decatur, 295 U.S. 165,
55 S.Ct. 701, 79 L.Ed. 1865 (1935) ...........ccccees 23
Hotel Emp. Ass’n of San Francisco v. Gorsuch, 669
F.2d LSOG CO Civ, LOE) scccsccescceesesvncesossceoceses 22
Long Run Baptist Ass’n v. Louisville & Jefferson
County Metro. Sewer Dist., Ky. App., 775
Fe EE CIID anduicencinntdsincnnasinnduiesdauciinssoances 22
Norwood v. Baker, 172 U.S. 269, 19 S.Ct. 187, 43
Els SU EL BPI akacestncranigouhsasenuavelices T> Atle Bay by XO,
17, 19, 23, 24
Road Dist. v. Mo. Pac. R.R. Co., 274 U.S. 188, 47
BCe. GSS, 72 TB, Se Ces th isccceessesecccsssenesess. 15
Salyer Land Co. v. Tulare Lake Basin Water Stor.
Dist., 410 U.S. 719, 93 S.Ct. 1224, 35 L.Ed.
Dy RRR EEE MAR SE Ula ene RAO, BNR 18
Teter v. Clark County, 104 Wash. 2d 227, 704 P.2d
EE FE Ceres SE sceashcsibelasntenseresincsunaineitianesins 23
PAGE
Statutes:
REP TR csv 7 ERGO ene Oar eo eta 2
Kentucky Revised Statutes (KRS) 151.700
through 151.730, 151.990 ........ceccccccccccee. 3, 4, 5, 6, 19
Kentucky Revised Statutes (KRS) 224.20-050..... 8
Constitutional Provisions:
Kentucky Constitution §171 ......c.ccccccccsesessssesceece. 18
United States Constitution, Fifth Amendment 16, 17, 24
United States Constitution, Fourteenth Amend-
REE ESN de NC TILTED 2,11, 14, 15, 16, 17,
18, 19, 22, 23, 24, 25
Other Authorities:
14 Eugene McQuillan, The Law of Muncipal
Corporations §38.02 (1987 rev. 3rd ed.)........... 7
420 KAR (Kentucky Administrative Regulations)
Fg | PERE SRT a ey ie ts ae ee 3, 4,5
“Political Science: The Past and Future of Water
Resources Policy and Management:, by Dean
E. Mann, Water Resources Administration in
the United States, Martin Reuss ed., 1993...... 21
S. 1114, the Senate Clean Water Act reauthoriza-
tion bill [103rd Cong., 1st Sess. §302 (1993)) .. 21
“The Watershed Protection Approach: Is the
Promise About to be Realized?” by William
E. Taylor and Mark Gerath, NR&E, Fall
Eo ee Nae E EEE oR OR LAUT LURES a 21
“User Fees in Lieu of Taxes: Avoiding Constitu-
tional Limitations”, by Laurence J. Zielke,
Urban Lawyer, Vol. 23, No. 3 (Summer 1991) 20
“Watershed as a Public Natural Resource on the
Federal Lands”, by George Cameron Coggins,
Virginia Environmental Law Journal,
PR as I eras 21
“Watershed Management: Slogan or Solution?”, by
William Goldfarb, Environmental Affairs,
Vol. 21:483, pp. 483-509, 1994.00.00... cece. 19, 20, 21
No.
—_—_—__ +
IN THE
SUPREME COURT OF THE UNITED STATES
October Term, 1996
CITYOFDANVILLE,KENTUCKY - - - Petitioner
versus
KENTUCKY RIVER AUTHORITY:
PHILLIP J. SHEPHERD;
CHARLES W. CARR; TOM DORMAN:
JUDGE W. NEAL CASSIDY;
DR. DONALD C. HANEY;
MARTIN HOWARD LOWRY:
EDWARD FOREE; GREG GINTER;:
THOMAS M. JONES;
RALPH E. MCCLANAHAN; and
og OO SS rr Respondents
PETITION FOR A WRIT OF CERTIORARI
TO THE SUPREME COURT OF KENTUCKY
Petitioner, City of Danville, Kentucky, prays that a writ
of certiorari issue to review the Order Denying Discretion-
ary Review entered by the Supreme Court of Kentucky,
which Order permitted to stand the Opinion Reversing
and Remanding entered by the Kentucky Court of Appeals.
2
CITATION TO PREVIOUS OPINION AND
OPINIONS BELOW
(A) The Order Denying Discretionary Review entered
November 13, 1996 by the Supreme Court of Kentucky, in
City of Danville, Kentucky vs. Kentucky River Authority, et
al, 96-SC-214-D (95-CA- 64), is reproduced in the Ap-
pendix to this Petition at page 1a.
(B) The Opinion Reversing and Remanding entered Feb-
ruary 16, 1996 by the Kentucky Court of Appeals in Ken-
tucky River Authority vs. City of Danville, (No.
95-CA-000064—MR), Ky. App., 982 S.W.2d 374 (1996) is
reproduced in the Appendix to this Petition at 2a to 7a.
(C) The Opinion and Order entered December 9, 1994
by the Boyle Circuit Court in City of Danville, Kentucky vs.
Kentucky River Authority, C.A. #94—CI-00278 (hereinafter
referred to as “Trial Court Opinion”) is reproduced in the
Appendix to this Petition at 8a to 1la.
JURISDICTION
The Order Denying Discretionary Review was entered
on November 13, 1996 by the Kentucky Supreme Court.
This Court’s jurisdiction is invoked pursuant to 28 U.S.C.
§1257(a).
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
(A) This case involves the Fourteenth Amendment to
the Constitution of the United States, which provides in
pertinent part:
No State shall make or enforce any law which shall
abridge the privileges or immunities of citizens of the
United States; nor shall any State deprive any person
of life, liberty, or property, without due process of law;
nor deny to any person within its jurisdiction the equal
protection of the laws.
3
(B) This case involves Kentucky Revised Statutes (KRS)
151.700 through 151.730, 151.990, entitled “Kentucky River
Authority”, the text of which is set out in the Appendix to
this Petition at pages 12a to 23a.
(C) This case involves those administrative regulations
adopted by the Kentucky River Authority and contained in
420 KAR 1:010 through 420 KAR 1:050, the text of which
is set out in the Appendix to this Petition at pages 24a to
49a.
STATEMENT OF THE CASE
The Kentucky River lies completely within the bound-
aries of the Commonwealth of Kentucky. Historically, the
locks and dams located on the Kentucky River were owned,
operated, and maintained by the U.S. Army Corps of Engi.
neers (Corps). In the late 1970s, the Corps began to lose
interest in its continued operation of the locks and dams
and indicated that in time its responsibility with regard to
the river would be terminated. In 1982, the General As-
sembly (legislature) of Kentucky created the Kentucky River
Task Force, which in conjunction with the Kentucky Natu-
ral Resources and Environmental Protection Cabinet
(NREPC), undertook to insure the continued operation and
maintenance of the locks and dams upon the Kentucky
River. In 1986, the General Assembly enacted KRS 151.700
through 151.730, which legislation created the Kentucky
River Authority (KRA), an agency of the Commonwealth of
Kentucky. The statute was amended in 1988, 1990, 1992
(adding 151.725 and pertinent portions of 151.990), and
again in 1996 (subsequent to the commencement of the
subject litigation).
The stated policy of the Kentucky General Assembly in
the creation of the KRA is:
. . » to protect the health and welfare of the citizens
dependent upon this system (Kentucky River) of locks
4
and dams for their source of clean water, and to that
end, the Commonwealth shall provide for the proper
maintenance of the Kentucky River locks and dams
through the Kentucky River Authority. (KRS 151.700)
In order to carry out its purposes and objectives, the KRA
was empowered generally to construct, repair, and main-
tain the locks and dams on the Kentucky River; to issue
revenue bonds payable from fees collected from all facili-
ties using water from the Kentucky River or its tributar-
ies; to promulgate administrative regulations; to coordinate
activities of state agencies impacted by the Kentucky River
resources; to develop p.ans for the protection, conserva-
tion, and preservation of water within the Kentucky River
basin; to develop recreational areas within the basin; and
to “Exercise all other powers necessary to perform its pub-
lic purpose...” [KRS 151.720(10)}.
The watershed management district over which the
KRA has authority includes all or part of 42 counties within
Kentucky. The KRA is the Commonwealth of Kentucky’s
pilot program for watershed based management initiatives.
Kentucky has a total of 120 counties.
Pursuant to the enabling statute, the KRA promulgated
and adopted administrative regulations in December of 1993
(see Appendix). These regulations include a complex sys-
tem of fees to be assessed against those who withdraw
water from the Kentucky River and its tributaries. The
regulations designate two distinct types of water withdrawal
fees. “Tier I” fees provided for in 420 KAR 1:040, are as-
sessed for the purpose of funding administrative expenses.
“Tier II” fees provided for in 420 KAR 1:050, are desig-
nated to effectuate provisions of KRS 151.730 relating to
the payment of the principal and interest of revenue bonds
issued by the KRA to construct and maintain dams, locks,
and related capital projects.
5
At present, the KRA claims the authority to assess
Tier I fees against all consumers of water (users) who with-
draw water from any source lying within the Kentucky
River basin; whereas, Tier II fees are assessed only against
“main stem” users (those who draw water directly from the
Kentucky River). However, there is no assurance that non-
main—stem users will not be assessed Tier II fees in the
future. At present, Danville is being assessed Tier I fees
only.
The original statute enacted by the Kentucky General
Assembly did not prescribe the method or amount of as-
sessments against those entities withdrawing and using
water within the area of the Kentucky River basin, but
vested that power in the directors of the KRA. The KRA’s
adopted regulation 420 KAR 1:040, § 2(2) provides in part:
- ++ @ person who withdraws surface water or ground-
water from the Kentucky River basin shal] pay a Tier
I fee based on gross withdrawal.
In 1996 (subsequent to the trial court decision herein),
the Kentucky legislature enacted KRS 151.723, entitled
“Water Use Fees”, which provides in part:
The rate of the water use fees collected by the author-
ity shall be set for each year of the biennium based
upon a total amount of funds necessary to carry out
only those functions, projects, and expenses authorized
by the General Assembly in the authority’s biennial
budget.
It is significant to note that the KRA determines the
amount of the assessments by first determining the total
amount of its annual budget and then simply funding that
budget by charging the necessary amount for each unit
(gallon of water) of usage. Such was the method of setting
the assessment at the time this case was litigated and that
method has now been codified by the 1996 amendment to
the statute.
6
The City of Danville withdraws no water from the Ken-
tucky River. The City of Danville withdraws water from
Lake Herrington, formed by the damming of the Dix River,
which is a tributary of the Kentucky River. The City of
Danville owns its water plant and it sells water to residen-
tial, commercial, and industrial consumers both inside and
outside the boundaries of the City, and some of which con-
sumers are geographically located outside the Kentucky
River basin.
From and since April 1, 1994, the City of Danville has
been assessed fees by the KRA based upon the amount of
its water withdrawal from Lake Herrington. Pursuant to
KRS 151.720(5), all “facilities”, including Danville, are per-
mitted to “pass on all or any part of the fee” so charged by
the KRA against individual consumers of water.
On July 12, 1994, the City of Danville filed a Com-
plaint for Declaration of Rights (Complaint) in the Boyle
Circuit Court, Civil Action #94—CI-278, challenging the
constitutional authority of the Kentucky River Authority
to impose assessments upon Danville under the enabling
legislation and all regulations promulgated thereunder. Spe-
cifically, in paragraph #20 and #21, the Complaint alleged:
20. The City of Danville and its inhabitants derive no
benefits from the existence or operations of the KRA
which are different from the general benefits enjoyed
by the inhabitants of the entire Commonwealth of Ken-
tucky. The effort of the KRA to impose upon the City
of Danville and its citizens a special tax or assess-
ment for which no benefits are conferred constitutes
an unconstitutional exercise of power, violative of the
constitutional guarantees of due procees of law, equal
protection of the laws, and the prohibition against the
taking of private property without just compensation.
21. In the alternative, the amount of the assessment
against the City of Danville is in excess of any special
benefits conferred upon Danville and its inhabitants
7
and consequently such action violates those constitu-
tional protections enumerated hereinabove.
Although challenged upon other additional grounds, the
foregoing allegations constitute the central theme under
which the case was pursued and decided by the lower courts.
The case was tried before the trial court without jury.
Extensive evidence was meticulously presented by Danville
establishing the fact that Danville and its residents would
receive no actual benefits from the activities of the KRA,
or in the alternative, no benefits commensurate with or
proportional to the assessments or fees imposed. The trial
court stated in its Opinion and Order entered December 9,
1994 (at pages 1-2):
... KRA has imposed a fee upon all entities drawing
water from the Kentucky River basin. This includes
Danville. The fees imposed by KRA, if they can be
sustained at all, must be sustained as user fees and
not as a tax. To impose fees based on local improve-
ments for the benefit of the public at large upon a
select group of individuals, is not taxation but confis-
cation. 14 Eugene McQuillan, The Law of Municipal
Corporations Sec. 38.02 (1987 rev. 3rd ed.). In order
for user fees to be sustained, there must be a reason-
able relationship between the amount of money ex-
tracted and the benefit conferred. Norwood v. Baker,
172 U.S. 269, 19 S.Ct. 187, 43 L. Ed. 443 (1898);
Barfield v. Gleeson, Ky., 63 S.W. 964 (1901); Casey v.
Richland County Council, 320 S.E. 2d 442 (S.C. 1984).
Where no benefit is conferred, the user fees violate
the constitutional constraints of due process of law,
equal protection and the taking of property without
just compensation.
The trial court held (at page 3):
Because no benefit is conferred upon Danville by the
KRA then the fees charged are unconstitutional and
_In violation of due process of law and equal protection
8
by taking property without just compensation.
The KRA appealed the trial court decision to the Ken-
tucky Court of Appeals, which by a 2-1 Opinion reversed
and remanded. The Kentucky Court of Appeals stated (at
pages 5-6):
The validity of special assessments and users fees de-
pends on an analysis of the charge and the benefit
received. Assessments and fees charged without a re-
lationship to a benefit received by the payor are arbi-
trary and capricious and violate due process and the
constitutional prohibition against the taking of pri-
vate property without just compensation. ..
Various fees exist and are used to implement pro-
grams deemed desirable by the Commonwealth. Pur-
suant to KRS 224.20—050, for instance, emission fees
may be collected from entities emitting air pollutants
and may be used to fund the Commonwealth’s air
quality program. Although there may be no direct or
immediate benefit to the payor of such fees, the use of
the air and the contamination of it are sufficient to
justify imposition of the fee.
The fee in this case is based upon the actual use by
the city of the Kentucky River water basin. Despite
the city’s contention that it does not need the services
of the Authority, the General Assembly recognized a
potential depletion of one of this state’s most valued
natural resources and took efforts to preserve the Ken-
tucky River basin. The interest of the Commonwealth
in protecting and regulating Eastern Kentucky’s larg-
est water resource is beyond question. An adequate
and clean water source is essential to all it serves. In
Curtis v. Louisville and Jefferson County Metropoli-
tan Sewer District, Ky., 311 S.W. 2d 378 (1958), the
court rejected the contention that a statute was un-
constitutional because it conclusively presumed that
all land within a designated area would benefit from a
surface drainage improvement.
9
We think that in the case of a surface drainage
improvement area, any property that geographi-
cally is a part of the watershed or drainage basin
may properly be considered to be benefited by the
project through the general improvement of con-
ditions of health, comfort and convenience in the
area and the resulting general enhancement of
values in the area. Id. at 382.
The Kentucky Court of Appeals, in reversing the trial
court's opinion, held (at page 7):
. . . Preservation of the Kentucky River basin is a
benefit which obviously accrues to al] within its bound-
aries. We therefore hold to be clearly erroneous the
trial court’s finding that no benefit to the City of
Danville exists.
Following the decision of the Kentucky Court of Ap-
peals, the City of Danville sought discretionary review be-
fore the Supreme Court of Kentucky. On November 13,
1996, the Supreme Court of Kentucky entered an Order
Denying Discretionary Review.
HOW THE FEDERAL QUESTIONS WERE RAISED
AND DECIDED BELOW
The federal questions raised under the Fourteenth
Amendment of the United States Constitution were raised
initially by Danville in its Complaint for Declaration of
Rights (as set forth above). The predominant theory under
which the case was litigated before the trial court was that
the imposition of an assessment or fee for which no ben-
efits, or no commensurate or proportional benefits, were
conferred, constituted an unconstitutional exercise of power,
violative of the constitutional guarantees of due process of
law, equal protection of the laws, and the prohibition
against the taking of private property without just com-
pensation.
Danville argued the applicability of Norwood v. Baker,
172 U.S. 269, 19 S.Ct. 187, 43 L. Ed. 443 (1898), through-
out the litigation before the trial court and again in the
appeal taken by the KRA before the Kentucky Court of
Appeals.
The trial court, citing Norwood v. Baker, supra, held
that no benefit was conferred upon Danville by the KRA
and that “the fees charged are unconstitutional and in
violation of due process of law and equal protection by
taking property without just compensation.”
Again, in the appeal taken by the KRA to the Kentucky
Court of Appeals, Danville asserted its rights under the
Fourteenth Amendment of the United States Constitution.
The Kentucky Court of Appeals, though recognizing that
the assessment of fees “without a relationship to a benefit
received by the payor are arbitrary and capricious and
violate due process and the constitutional prohibition
against the taking of private property without just com-
pensation”, found that “(p)reservation of the Kentucky River
basin is a benefit which obviously accrues to all within its
boundaries” (emphasis added) and held the trial court’s
finding of “no benefit to the City of Danville” to be clearly
erroneous. The effect of the decision of the Kentucky Court
of Appeals was to establish an absolute rule or conclusive
presumption that a benefit was conferred by virtue of geo-
graphic location alone.
The City of Danville filed a Motion for Discretionary
Review with the Supreme Court of Kentucky, but the mo-
tion was denied by Order Denying Discretionary Review
entered November 13, 1996.
RL Te ee ee
11
REASONS FOR GRANTING THE WRIT
1. THE DECISION BELOW DECIDED AN
IMPORTANT FEDERAL QUESTION IN A WAY
THAT CONFLICTS WITH RELEVANT
DECISIONS OF THIS COURT, INCLUDING
NORWOOD V. BAKER, 172 U.S. 269, 19 S.Ct. 1987,
).
The landmark decision on the subject of special assess-
ments and fees is the United States Supreme Court case of
Norwood v. Baker, 172 U.S. 269, 19 S.Ct. 187, 43 L.Ed.
443 (1898). The City of Norwood, Ohio, sought to assess
adjacent property owners for the costs and expenses con-
nected with condemnation proceedings related to the con-
struction of a new road passing through the property. The
City of Norwood enacted an ordinance assessing the adja-
cent owners on a “per front foot” basis. The United States
Supreme Court held under the Fourteenth Amendment of
the United States Constitution that the assessment was
unconstitutional because it failed to consider whether or
not a benefit was conferred upon the property owners. Al-
though the Court recognized that abutting owners may be
subjected to special assessment if the owners enjoy special
or peculiar benefits accruing from the public improvements,
the powers of the legislative body are not unlimited. At
pages 278-279, Mr. Justice Harlan, speaking for the U.S.
Supreme Court, stated:
But the power of the legislature in these matters is
not unlimited. There is a point beyond which the leg-
islative department, even when exerting the power of
taxation, may not go consistently with the citizen’s
right of property. As already indicated, the principle
underlying special assessments to meet the cost of
public improvements is that the property upon which
they are imposed is peculiarly benefited, and there-
fore the owners do not, in fact, pay anything in excess
of what they receive by reason of such improvement...
12
In our judgment, the exaction from the owner of pri-
vate property of the cost of a public improvement in
substantial excess of the special benefits accruing to
him is, to the extent of such excess, a taking, under the
guise of taxation, of private property for public use
without compensation. We say “substantial excess,”
because exact equality of taxation is not always at-
tainable, and for that reason the excess of cost over
special benefits, unless it be of a material character,
ought not to be regarded by a court of equity when its
aid is invoked to restrain the enforcement of a special
assessment.
In the case at hand, Danville and its residents are
being assessed a flat amount based solely on its geographic
location within the area of the Kentucky River basin and
without regard to any special or peculiar benefits derived
from the activities of the KRA. The trial court found that
“no benefit” was conferred upon Danville by the KRA. The
Kentucky Court of Appeals assumed a benefit based upon
Danville’s geographic location within the area drained by
the Kentucky River. The Kentucky Court of Appeals sim-
ply found “preservation of the Kentucky River basin is a
benefit which obviously accrues to all within its bound-
aries” (emphasis added) and then without explanation or
any basis in fact held the trial court’s finding that no ben-
efit derived to Danville was clearly erroneous.
By refusing to grant discretionary review, the highest
court in Kentucky, the Supreme Court of Kentucky, has
denied Danville the right to “question” the existence of any
peculiar benefits and has established an “absolute rule”
that any person who uses water within a certain geographi-
cal boundary is in fact benefited, without any right of the
person to question the existence of a benefit or show the
assessment is in excess of any benefits received.
We are cognizant that this Court rarely grants a writ
of certiorari when the asserted error consists of erroneous
13
factual findings or the misapplication of a properly stated
rule of law. At first blush, it might be thought that such is
applicable herein. We must acknowledge that the Kentucky
Court of Appeals paid lip service and correctly stated some
of the applicable principles of law. However, a closer analy-
sis of the ruling of the Kentucky Court of Appeals, exam-
ined in light of the specific directives of this Court in
Norwood, supra, clearly reveals that the Kentucky court
has misunderstood and has violated the specific directives
of this Court.
This Court expressly prohibited such action in Norwood,
supra (p. 279):
. . . But the guaranties for the protection of private
property would be seriously impaired, if it were estab-
lished as a rule of constitutional law, that the imposi-
tion by the legislature upon particular private prop-
erty of the entire cost of a public improvement, irre-
spective of any peculiar benefits accruing to the owner
from such improvement, could not be questioned by
him in the courts of the country. (Emphasis added)
This Court went on to say at p. 279:
It is one thing for the legislature to prescribe it as a
general rule that property abutting on a street opened
by the public shall be deemed to have been specially
benefited by such improvement, and therefore should
specially contribute to the cost incurred by the public.
It is quite a different thing to lay it down as an abso-
lute rule (emphasis added) that such property, whether
it is in fact benefited or not by the opening of the
street, may be assessed by the front foot for a fixed
sum representing the whole cost of the improvement,
and without any right in the property owner to show
(emphasis added), when an assessment of that kind is
made or is about to be made, that the sum so fixed is
in excess of the benefits received.
The Kentucky court has done precisely what this Court
has stated it cannot do. The Kentucky court has estab-
14
lished an absolute rule or conclusive presumption based
only upon geographical location that all residents of
Danville are in fact benefited and the alleged recipients of
such benefits have no right to question the matter. The
Kentucky Court of Appeals made no effort to find any spe-
cial benefit, or to quantify or measure the benefit, or to
compare the value of the benefit against the amount of the
assessment. Instead, the Kentucky Court held that the
benefit is “obvious”. Such an arbitrary declaration effec-
tively denies Danville its rights under the Fourteenth
Amendment of the United States Constitution and without
question is a taking of private property without due pro-
cess of law.
In the case at hand, the quotation from the Opinion of
the Kentucky Court of Appeals as set forth above clearly
reveals that the Kentucky court has established an abso-
lute rule or conclusive presumption and has denied affected
persons the right to question the assessment of fees in the
state courts of Kentucky. This attitude of the Kentucky
court is underscored in its adherence to the 1958 case from
the Kentucky Court of Appeals (then the highest court in
Kentucky) of Curtis v. Louisville and Jefferson County Met-
ropolitan Sewer District, supra, noting the Curtis court
had “rejected the contention that a statute was unconstitu-
tional because it conclusively presumed that all land within
a designated area would benefit from a surface drainage
improvement” and then going on to cite Curtis at page 382:
We think that in the case of a surface drainage im-
provement area, any property that geographically is a
part of the watershed or drainage basin may properly
be considered to be benefited by the project through
the general improvement of conditions of health, com-
fort and convenience in the area and the resulting
general enhancement of values in the area.
Pursuant to its rights under the Fourteenth Amend-
ment of the United States Constitution, as enunciated and
15
amplified in Norwood v. Baker, supra, the City of Danville
had sought to question the right of the KRA to impose an
absolute rule under which it imposed an assessment re-
gardless of special benefits inuring to Danville. The trial
court performed an exhaustive analysis of the evidence in
the case and concluded that “no benefits” had been shown
to inure to Danville. Without any effort to weigh or evalu-
ate the benefits, if any, the Kentucky Court of Appeals
simply stated that the benefit was obvious, that geographi-
cal location in and of itself was sufficient, and that it was
permissible to “conclusively presume” that all land within
a designated area would benefit from the improvement
(citing Curtis at page 382).
More recent decisions of the United States Supreme
Court have followed the holding in Norwood. The general
principle that special assessments to meet the cost of pub-
lic improvements must be commensurate with or propor-
tional to the benefits received has been applied by this
Court in various situations. In Road Dist. v. Mo. Pac. R.R.
Co., 274 U.S. 188, 47 S.Ct. 563, 71 L.Ed. 992 (1927), the
state of Arkansas had imposed assessments against prop-
erty owners, including a railroad company, for improve-
ments made to a public road. The railroad company brought
suit to annul the-assessment on the grounds, among oth-
ers, that it was arbitrary and unreasonably discriminatory
and thus in violation of the due process and equal protec-
tion clauses of the Fourteenth Amendment to the U.S. Con-
stitution. This Court held that although some benefits were
shown to accrue to the railroad, the assessments against
the railroad were so excessive as to constitute a violation
of the due process clause of the Fourteenth Amendment.
However, the Court held that a reduced assessment based
upon actual benefits received would be appropriate.
In Dolan v. City of Tigard, 512 US. 374, 114 S.Ct.
2309, 129 L.Ed. 2d 304 (1994), this Court held that the
City of Tigard had failed to show “rough proportionality”
16
between the exaction demanded by the city and the
petitioner’s proposed development. Whereas that case in-
volved a planning and zoning “taking” under the Fifth
Amendment of the United States Constitution, certain prin-
ciples enunciated therein are instructive and applicable to
the case at hand. The Court stated in Dolan at pages 315—
316:
The Takings Clause of the Fifth Amendment of the
United States Constitution, made applicable to the
States through the Fourteenth Amendment, Chicago,
B. & Q.R. Co. v. Chicago, 166 U.S. 226, 239, 41 L.Ed.
979, 17 S.Ct. 581 (1897), provides: “[NJor shall pri-
vate property be taken for public use, without just
compensation.” One of the principal purposes of the
Takings Clause is “to bar Government from forcing
some people alone to bear public burdens which, in all
fairness and justice, should be borne by the public as
a whole.” Armstrong v. United States, 364 US 40, 49,
4 L.Ed. 2d 1554, 80 S.Ct. 1563 (1960).
In the case at bar, the citizens of Danville are being
forced to bear a public burden which, in all fairness and
justice, should be borne by the public of the Commonwealth
of Kentucky as a whole. It is unfair to arbitrarily create
geographical boundaries within the state and then require
the taxpayers within those boundaries to foot the bill for
improvements or services which benefit the state at large
(even if we assume actual services are rendered). The Ken-
tucky River impacts the state of Kentucky as a whole.
Danville residents do not enjoy an equal protection of the
laws when they are forced to financially support the Ken-
tucky River basin, while residents of other river basins
within the state of Kentucky have no similar obligation.
All other water sources throughout Kentucky are protected
through the Kentucky NREPC which is funded from the
general revenues of the state. General improvements must
be funded through general revenues and not by special
assessments.
17
In the absence of clearly definable benefits and ser-
vices to particular recipients, the cost of providing general
governmental services must be borne by the populace at
large. These types of services have historically been paid
from the general revenues of the Commonwealth. It is ar-
bitrary and unfair to assess fees against certain residents
simply because they live within a particular geographic
location.
This Court stated in Dolan, supra, at page 320:
... We think a term such as “rough proportionality”
best encapsulates what we hold to be the requirement
of the Fifth Amendment. No precise mathematical cal-
culation is required, but the city must make some sort
of individualized determination that the required dedi-
cation is related both in nature and extent to the im-
pact of the proposed development.
The “rough proportionality” test adopted in Dolan,
supra, is not unlike the “peculiar benefits” or “substantial
excess” tests enunciated in Norwood, supra. Unfortunately,
the Kentucky court subscribes to none of these tests. The
Kentucky Supreme Court has arbitrarily established an
“absolute rule”, a “conclusive presumption”, which cannot
be scrutinized or questioned by any citizen. The Kentucky
court has denied the people of Danville their right to the
protection of the Fourteenth Amendment of the United
States Constitution.
MANAGEMENT DISTRICT THROUGH THE
IMPOSITION OF USER FEES UPON WATER
CONSUMERS AS OPPOSED TO FUNDING
THROUGH GENERAL TAX REVENUES,
GOVERNMENTAL GRANTS, OR ASSESSMENTS
AGAINST PROPERTY OWNERS ACTUALLY
AFFECTED AND BENEFITED.
18
This case is believed to be a case of first impression in
the United States. Although the watershed management
concept has been present for a number of years, the state
of Kentucky is believed to be the first state or watershed
agency to attempt to fund its operations by the imposition
of user fees or assessments against the consumer. Conse-
quently, we can find no recorded cases, federal or state,
where the validity of user fees and assessments for the
funding of a watershed management agency have been
litigated or judicially determined. Watershed management
agencies are typically funded through the genera! revenues
of the state, governmental grants, or assessments against
the landowners in proportion to the benefits actually re-
ceived. Salyer Land Co. v. Tulare Lake Basin Water Stor.
Dist., 410 U.S. 719, 93 S.Ct. 1224, 35 L.Ed.2d 659 (1973);
Associated Enter., Inc. v. Toltec Watershed Imp. Dist., 410
U.S. 743, 93 S.Ct. 1237, 35 L.Ed.2d 675 (1973).
The City of Danville has complained and asserted from
the beginning that the KRA impacts generally the citizens
of Kentucky and it should be funded from the genera! tax
revenues of the state at large. As an example, proposed
walking trails and recreational facilities would be open to
the general public visiting from outside the state.
If this court does not issue a writ of certiorari, Ken-
tucky will have succeeded in ushering in a system of “taxa-
tion” which is repugnant to both the Constitution of
Kentucky and the Fourteenth Amendment of the United
States Constitution. The Kentucky Constitution §171 re-
quires that taxes “be levied and collected for public pur-
poses only and shall be uniform... and all taxes shall be
levied and collected by general laws.”
If Kentucky is permitted to impose user fees for the
funding and financial support of the KRA, without being
required to meet any specific standard (other than geo-
graphical location) to test the actual benefits received, other
states can be expected to follow a similar course.
19
The denial of fundamental fairness under the due pro-
cess clause of the Fourteenth Amendment of the United
States Constitution could not be more amply demonstrated
than by the fact that many consumers of waier from the
Danville waterworks system do not even reside within the
Kentucky River basin! Some residents of Boyle County (of
which Danville is the county seat) reside within other river
basins, including the Salt River basin and the Chaplin
River basin. Nevertheless, these private citizens purchase
water from the City of Danville and under the statute in
question herein, KRS 151.700 et. seq., those citizens are
subject to the imposition of the assessment upon their wa-
ter bills. Without question, these residents enjoy “no ben-
efits” from the KRA. In the situation of these residents, a
more graphic demonstration of the denial of due process
would be difficult to envision.
3. THE GROWING PROLIFERATION OF SPECIAL
CLARIFY THE PROTECTIONS AFFORDED
EVERY CITIZEN UNDER THE FOURTEENTH
AMENDMENT OF THE UNITED STATES
CONSTITUTION AND THE BROAD PRINCIPLES
ENUNCIATED IN NORWOOD V. BAKER.
The concept of watershed Management enjoys an in-
creasing presence within this country. The creation of the
KRA represented its entrance into Kentucky. Although the
term “watershed management” creates a praiseworthy vi-
sion or image, giving rise to such notions as conservation,
preservation, and environmental protection — ideas uni-
versally accepted as good and beneficial to everyone — the
words watershed management, constitute a vague term or
concept. “The natural resources management field is re-
plete with terms that carry powerful prescriptive and
hortatory meanings but lack descriptive specificity” (“Wa-
tershed Management: Slogan or Solution?”, by William
20
Goldfarb, Environmental Affairs, Vol. 21:483, pp. 483-509,
1994). “Watershed management” is being utilized as a de-
vice which permits state or local governments to exact
money from the citizenry without adherence to certain con-
stitutional limitations. It is akin to other types of assess-
ments and user fees which have allowed governmental units
to enhance revenues without adhering to the constitutional
restrictions against the imposition or increase of taxes. An
excellent article by Laurence J. Zielke, a partner in a law
firm in Louisville, Kentucky, entitled “User Fees in Lieu of
Taxes: Avoiding Constitutional Limitations” can be found
in the Urban Lawyer, Vol. 23, No. 3 (Summer 1991). This
article is reproduced in the Appendix herein at pages 50a
to 61a.
In his article, “Watershed Management: Slogan or So-
lution?”, supra, Prof. Goldfarb provides a comprehensive
analysis of the complexity of watershed management and
the proliferation of watershed agencies throughout the
United States. Goldfarb discusses the transboundary na-
ture of most watersheds, commonly defined as the drain-
age basin of a receiving body of water, and the
intermunicipal, interstate, or international implications
arising therefrom. Watershed management transcends
many subjects or concerns, including water resource devel-
opment, water pollution control, wetlands protection, and
water conservation and allocation. These geographical varia-
tions and differing goals and objectives, which are some-
times competing, give rise to diverse constituencies and
conflicting or overlapping jurisdictions “at the international,
federal, interstate, state, substate regional, and local lev-
els of government” (Goldfarb, at page 485). To illustrate
the complexity and diversity of water resource issues,
Goldfarb states:
On the federal level, thirteen congressional commit-
tees and subcommittees, eight cabinet agencies, six
independent regulatory agencies, and two Whitehouse
21
offices are involved in establishing water policy. “An
estimated 100,000 water-related entities exist locally;
states have over 300 departments having water and
water-related resources functions.” (Citing Dean E.
Mann, “Political Science: The Past and Future of Wa-
ter Resources Policy and Management”, in Water Re-
sources Administration in the United States, Martin
Reuss ed., 1993)
To illustrate the variety of persons and entities inter-
ested in watershed management, Goldfarb reveals that
within the past few years, at p. 498:
. . . Systematic initiatives for implementing watershed
management have been proposed by the Association
of Metropolitan Sewerage Agencies (AMSA), the Wa-
ter Quality 2000 group, EPA, and the drafters of S.
1114, the Senate Clean Water Act reauthorization bill.
[103rd Cong., 1st Sess. § 302 (1993)]
Despite the vast amount of attention which has been
given in recent years to watershed management, it has not
inspired “definite legal rules”. “Watershed as a Public Natu-
ral Resource on the Federal Lands”, by George Cameron
Coggins, Virginia Environmental Law Journal, Vol. 11:1,
1991, at page 1. However, Prof. Coggins confirms that le-
gal interest in watersheds is growing, that “many recent
lawsuits and other disputes have revolved around water-
shed values, and even more are likely to arise in the fu-
ture” (at page 2).
The growth and proliferation of watershed management
agencies is further illustrated in an article entitled “The
Watershed Protection Approach: Is the Promise About to
be Realized?” by William E. Taylor and Mark Gerath,
NR&E, Fall 1996, wherein it is stated at page 18:
Most states are rapidly moving to a watershed based
approach and many hundreds of citizen groups are
becoming directly-involved in those efforts. EPA has
published a number of watershed protection guidance
22
documents in the last year and maintains a site on
the World Wide Web to discuss the approaches differ-
ent states are adopting. EPA has even established a
Watershed Academy to educate state managers on wa-
tershed protection strategies.
In the case at hand, both the City of Danville and the
KRA have agreed from the beginning that the money to be
extracted by the KRA from Danville and others is a special
“assessment” or “user fee” for which a commensurate or
proportional benefit must be conferred. It has never been
claimed by the KRA that the money to be extracted was a
“tax”. As an apparent afterthought, subsequent to the trial
court opinion, the KRA maintained that the assessment
was nothing more than a regulatory fee under the state's
exercise of a valid police power. Whereas the KRA never
explained what was being “regulated” or what police power
was being exercised, it is not really important. Regardless
of whether it be called a special assessment, user fee, or
regulatory fee, the Fourteenth Amendment of the United
States Constitution requires that a proportional or reason-
able benefit be conferred, that the fee charged must reflect
the approximate value of the thing being used, or that the
regulatory fee be reasonably related to the costs incurred
by the regulating authority. Alamo Rent-A-Car v. Sarasota-
Manatee Airport Auth., 906 F.2d 516 (11th Cir., 1990);
Federal Deposit Ins. Corp. v. City of New Iberia, 921 F.2d.
610 (5th Cir., 1991). A “rational basis” must exist between
the system of (sewer) service charges and the costs in-
curred by the governmental authority. Hotel Emp. Ass’n of
San Francisco v. Gorsuch, 669 F.2d 1305 (9th Cir., 1982).
“A tax is universally defined as an enforced contribu-
tion to provide for the support of government, whereas a
fee is a charge for a particular service.” Long Run Baptist
Ass'n v. Louisville & Jefferson County Metro. Sewer Dist.,
Ky. App., 775 S.W.2d 520 (1989), at page 522. The Ken-
tucky court ruled in Long Run Baptist, supra, that the
23
revenues could not be excessive to support the service;
that user fee revenues must be limited to the reasonable
cost of providing the services; and that the process of es-
tablishing the fee and the actual fee itself must bear a
relationship to the service or benefit provided. Otherwise,
the fee is arbitrary, capricious, and violates the rights of
equal protection and due process.
In distinguishing between a “fee” and a “tax”, the ap-
pellate Court in the state of Washington has stated that if
charges are intended to raise money, they are actually
taxes. Conversely, if the charges are primarily tools of regu-
lation, they are not taxes, Teter v. Clark County, 104 Wash.
2d 227, 704 P.2d 1171 (Wash. 1985).
These principles and applications of the Fourteenth
Amendment of the United States Constitution are consis-
tent with the rulings of the United States Supreme Court
in Norwood v. Baker, supra; and Georgia R. & Electric Co.
v. Decatur, 295 U.S. 165, 55 S. Ct. 701, 79 L.Ed. 1365
(1935).
The area of watershed management is an expanding
phenomenon in the United States. Whereas the purposes
and objectives of watershed management are laudatory,
the method of funding such agencies present an important
Fourteenth Amendment question. The funding mechanism
employed by the state of Kentucky clearly violates the pro-
tections of the Fourteenth Amendment. The simplicity of
the Kentucky user fee system makes it an attractive mecha-
nism for other jurisdictions. Undoubtedly, if permitted to
go unchecked, it will be utilized increasingly as watershed
management districts spread further throughout the coun-
try.
It is of compelling importance that this court require a
test, a set of criteria, or a standard for the imposition of
fees which comports with the due process protections af-
forded under the Fourteenth Amendment. Whether the test
24
be that of “rough proportionality”, “rational basis”, “pro-
portional benefit”, “substantial excess”, or some other simi-
lar standard, the urgency for some equitable test or
standard is indisputable. The state of Kentucky has adopted
“no test”. The state of Kentucky has adopted an absolute
rule that geographical location is a singularly sufficient
criteria, a conclusive presumption not subject to question
or scrutiny.
It is of critical importance that this Court expressly
declare that states cannot “tax” their citizens under the
guise of “user fees”, and that if user fees are to be imposed,
they must bear a relationship to the service or benefit
provided. The imposition of user fees or assessments must
be included within the protections of the Fourteenth Amend-
ment of the United States Constitution. The same prin-
ciples which were applied by this Court in Norwood v.
Baker, supra, must be applied to the funding mechanisms
within the area of watershed management agencies.
CONCLUSION
The Supreme Court of Kentucky has denied those per-
sons within the Kentucky River basin, including Danville,
the protections of the due process clause of the Fourteenth
Amendment of the United States Constitution. The Su-
preme Court of Kentucky has established an absolute rule
or a conclusive presumption, not subject to judicial chal-
lenge, that anyone located within a certain geographical
boundary may be assessed a special fee without regard as
to whether or not the amount of the fee is reasonably re-
lated, roughly proportional, or substantially in excess of
any actual benefit conferred upon the payor. This result is
squarely in conflict with the principles enunciated in
Norwood v. Baker, supra, Dolan v. City of Tigard, supra,
and the Fifth and Fourteenth Amendments of the United
States Constitution.
25
With the recent explosion of the watershed manage-
ment concept throughout this country, and the prolifera-
tion of watershed management agencies created by the
states, it is of critical importance that this Court grant this
Petitioner’s Writ of Certiorari, not only for the purpose of
requiring Kentucky to comport to the law, but for the pur-
pose of extending the protections of the Fourteenth Amend-
ment to the growing field of watershed Management
districts throughout this nation.
Respectfully submitted,
Epwarp D. Hays
Counsel of Record
SHEEHAN, BARNETT & Hays, P.S.C.
114 South Fourth Street
Danville, Kentucky 40422
(606) 236-2641
Counsel for Petitioner
APPENDIX
la
SUPREME COURT OF KENTUCKY
96-SC-214-D
(95-CA-64)
Cr7y OF DANVILLE, KENTUCKY - - - - - Movant
v.
KENTUCKY River AutHority, Et Al. - - - Respondent
ORDER DENYING DISCRETIONARY REVIEW
The motion for review of the decision of the Court of
Appeals is denied.
Stephens, C.J., would grant discretionary review.
ENTERED: November 13, 1996.
/s/_ Robert F. Stephens
Chief Justice
Be Re een ee
2a
RENDERED: FEBRUARY 16, 1996; 2:00 P.M.
ORDERED PUBLISHED: JULY 5, 1996; 2:00 P.M.
COMMONWEALTH OF KENTUCKY
COURT OF APPEALS
NO. 95-CA-000064-MR
KENTUCKY RIVER AUTHORITY;
PHILLIP J. SHEPHERD;
CHARLES W. Carr;
Tom Dorman;
JUDGE W. NEAL Cassipy;
Dr. DonaLp C. Haney;
MARTIN HowarbD Lowry;
EDWARD FOoREE;
GREG GINTER;
Tuomas M. JONES;
Ra.pH E. McCLANAHAN; we
Betty F. WHITAKER” - - - - + + Appellants
v.
Crry or DANVILLE, KENTUCKY - - - - - Appellee
Appeal From Boyle Circuit Court
Honorable Stephen M. Shewmaker, Judge
Action No. 94-CI-00278
OPINION REVERSING AND REMANDING
BEFORE: LESTER, Chief Judge; DYCHE and
EMBERTON, Judges.
EMBERTON, JUDGE. The appellants, Kentucky River
Authority and its members, appeal from a judgment en-
tered by the Boyle Circuit Court holding that the appellee,
City of Danville, received no benefit from the Authority,
and therefore, the Authority is constitutionally precluded
from collecting water use fees from Danville.
The controversy in this case arises from the Authority's
interpretation of its enabling statute Ky. Rev. Stat. (KRS)
|
3a
151.720, which was enacted in response to continuing prob-
lems and potential depletion of a valued natural resource,
the Kentucky River. In 1990, the General Assembly en-
acted KRS 151.720 which mandates that the Authority
protect the Kentucky River basin through watershed man-
agement. In 1993, the Authority enacted administrative
regulations to implement the statutes including a two-tier
fee schedule by which it charged the users of water from
the river basin. Tier II fees are collected from entities
withdrawing water directly from the main stem of the Ken-
tucky River and are used by the Authority to finance spe-
cific capital construction projects designed to enhance the
water available for the basin. Tier I fees, which Danville
is designated to pay, apply to entities withdrawing water
from anywhere in the Kentucky River basin, whether from
groundwater or tributaries. These fees are used for projects
benefiting the entire basin and are assessed at a uniform
rate based upon use of the Kentucky River basin. They
are not used for the general fund but only for Kentucky
River basin management.
Danville withdraws no water directly from the Ken-
tucky River but does from Lake Herrington on the Dix
River which is a Kentucky River tributary. It also dis-
charges water from its waste water treatment plant into a
Kentucky River tributary.
Danville maintains that in order to assume jurisdiction
over the Kentucky River basin the Authority must: (1)
assume ownership of all U. S. Army Corps of Engineers
property on or adjacent to the Kentucky River; and (2)
publish a legal notice for ninety days of its intention to
assume ownership. In 1982, when the Kentucky River
Task Force was created in conjunction with the Natural
Resources and Environmental Protection Cabinet, there
was concern that the Corps would fail to maintain and
operate the Kentucky River locks and dams. In such event,
the legislature established a procedure, including a ninety-
day notice requirement, for the Commonwealth to assume
ownership. KRS 151.700(2).
4a
There is no dispute, that pursuant to the original ver-
sion of KRS 151.700(2), the Commonwealth did not as-
sume ownership of the Kentucky River locks and dams.
However, in 1990, the statute was amended by House Bill
920 and no longer requires ownership of the locks and
dams to activate the authority of the Kentucky River Au-
thority. It was the legislature’s intent to enlarge the pow-
ers of the Authority and render it responsible for the con-
servation of the Kentucky River basin waters. Although
criticized by the trial court as a practice subject to abuse,
it is well established that the legislature is vested with the
power to emend its statutes in a budget bill. Common-
wealth, ex. rel. Armstrong v. Collins, Ky., 709 S.W.2d 437
(1986). Under current law, ownership of the locks and
dams of the Kentucky River is not a statutory prerequisite
to the implementation of the Authority’s powers.
Danville apparently has a well functioning water sys-
tem with adequate water supplies and leakage controls. It
also has various programs in place to provide continuing
conservation education. Arguing its self-sufficiency,
Danville denies that it can benefit from the activities of
the Authority and complains it should not pay the fees.
The trial court agreed.
The parties have continually debated whether the fees
assessed by the Authority are special assessments, taxes,
or user fees. Obviously, if the fees are in effect taxes, the
Authority is not a taxing district and any such delegation
by the legislature would violate Sections 27 and 28 of the
Kentucky Constitution. Long Run Baptist Association, Inc.
v. Louisville and Jefferson County Metropolitan Sewer Dis-
trict, Ky. App., 775 S.W.2d 520 (1989); KRS 65.180. “A tax
is universally defined as an enforced contribution to pro-
vide for the support of government, whereas a fee is a
charge for a particular service.” Id. at 522. Taxes are a
means for the government to raise general revenue with-
out regard to direct benefits which may inure to the payor
or to the property taxed. Krumpeiman v. Louisville &
Jefferson County Meiropolitan Sewer District, Ky., 314
ne kanal
‘
5a
S.W.2d 557, 561 (1958). The fees imposed by the Author-
ity for the purpose of fulfilling the statutory mandates
cannot be equated with taxes. The funds generated from
the fees are to be used for the specific purpose of conserv-
ing and controlling the waters in the Kentucky River basin
and are incidental to the statute.
The validity of special assessments and users fees de-
pends on an analysis of the charge and the benefit re-
ceived. Assessments and fees charged without a relation-
ship to a benefit received by the payor are arbitrary and
capricious and violate due process and the constitutional
prohibition against the taking of private property without
just compensation. See Skidmore v. City of Elizabethtown,
Ky., 291 S.W.2d 3 (1956); Portwood v. Falls City Brewing
Company, Ky., 318 S.W.2d 535 (1958); Woolsley v. Big Reedy
Creek Watershed, Ky., 383 S.W.2d 135 (1964). Sewers,
lighting and street improvements are, if used by adjoining
property owners, benefits which directly accrue to the real
property. Casey v. Richland County Council, 282 S.C. 387,
320 S.E.2d 443 (1984), relied on by the trial court, involved
a county surcharge on water and sewer. The plaintiff,
however, received no water and sewer services from the
city. Since no benefit was received by the plaintiff, the
court held that the surcharge violated the state constitu-
tion and was, in fact, a tax. Id. at 444,
Various fees exist and are used to implement programs
deemed desirable by the Commonwealth. Pursuant to KRS
224.20-050, for instance, emission fees may be collected
from entities emitting air pollutants and may be used to
fund the Commonwealth’s air quality program. Although
there may be no direct or immediate benefit to the payor of
such fees, the use of the air and the contamination of it are
sufficient to justify imposition of the fee.
The fee in this case is based upon the actual use by the
city of the Kentucky River water basin. Despite the city’s
contention that it does not need the services of the Author-
ity, the General Assembly recognized a potential depletion
of one of this state’s most valued natural resources and
ae
6a
took efforts to preserve the Kentucky River basin. The
interest of the Commonwealth in protecting and regulat-
ing Eastern Kentucky’s largest water resource is beyond
question. An adequate and clean water source is essential
to all it serves. In Curtis v. Louisville and Jefferson County
Metropolitan Sewer District, Ky., 311 S.W.2d 378 (1958),
the court rejected the contention that a statute was uncon-
stitutional because it conclusively presumed that all land
within a designated area would benefit from a surface drain-
age improvement.
We think that in the case of a surface drainage im-
provement area, any property that geographically is a
part of the watershed or drainage basin may properly
be considered to be benefited by the project through
the general improvement of conditions of health, com-
fort and convenience in the area and the resulting
general enhancement of values in the area.
Id. at 382.
Danville’s primary contention is that it can, and has,
taken care of the concerns of the General Assembly through
its own efforts. While Danville’s initiative is to be com-
mended, the General Assembly believes that only state
intervention and a uniform approach can assure the future
of the Kentucky River basin. Perhaps, with the implemen-
tation of the new services provided by the Authority,
Danville can divest itself of some of the responsibilities it
has assumed. Preservation of the Kentucky River basin is
a benefit which obviously accrues to all within its bound-
aries. We therefore hold to be clearly erroneous the trial
court’s finding that no benefit to the City of Danville ex-
ists. Yount v. Calvert, Ky. App., 826 S.W.2d 833 (1991).
The Tier I fees imposed by the Authority are desig-
nated for the payment of administrative costs while capi-
tal improvement projects are financed with Tier II fees.
The language of KRS 151.720-730 provides that fees are to
be collected from all facilities using the Kentucky River or
its tributaries. In the 1994-96 Budget Bill, the General
Assembly provided that Tier I fees shall be used for the
7a
establishment of an administrative staff for the Authority
and contractual services for water supply and quality stud-
ies. Although contained in the Budget Bill, it is an effec-
tive and lawful amendment. Armstrong, supra.
We find no merit in Danville’s contention that the
Commonwealth cannot claim ownership to the waters of
the Kentucky River because of the Supremacy Clause and
the Commerce Clause of the United States Constitution.
A state has the power to control and conserve its water
resources, and unless Congress expressly invokes reserved
rights or the navigation servitude, the state has authority
to control its internal waters. City of Trenton v. New Jer-
sey, 262 U.S. 182, 43 S.Ct. 534, 67 L.Ed. 937 (1923); Cali-
fornia v. United States, 438 U.S. 645, 662, 98 S.Ct. 2985,
57 L.Ed.2d 1018 (1978).
The judgment is reversed and the case is remanded for
entry of a judgment consistent with this opinion, including
the award of past fees owed with interest at the statutory
rate. We find no basis, however, for the imposition of a
penalty.
LESTER, CHIEF JUDGE, CONCURS.
DYCHE, JUDGE, DISSENTS.
BRIEF FOR APPELLANTS:
Donald S. Dott
Jack B. Bates
Susan Rose Green
Frankfort, Kentucky
ORAL ARGUMENT FOR APPELLANTS:
Jack B. Bates
Frankfort, Kentucky
BRIEF AND ORAL ARGUMENT FOR APPELLEES:
Edward D. Hays
Danville, Kentucky
8a
COMMONWEALTH OF KENTUCKY
50TH JUDICIAL DISTRICT
BOYLE CIRCUIT COURT
Civil Action No. 94-CI-00278
Crry oF DANVILLE, KENTUCKY, - - - - - Plaintiff,
v.
KENTUCKY RIVER AUTHORITY, - - - - Defendant.
OPINION AND ORDER
This cause is before the . ourt pursuant to a Complaint
for Declaration of Rights filed by the Plaintiff, City of
Danville, Kentucky, (Danville). The Defendant is the Ken-
tucky River Authority (KRA).
Danville is a Kentucky Municipal Corporation of the
third class located in Boyle County, Kentucky. KRA is an
agency of the Commonwealth of Kentucky created by the
Kentucky General Assembly pursuant to KRS 151.700, et
seq. Danville challenges the constitutionality of KRA, KRS
151.700 - 151.730 and any and all regulations promul-
gated therefrom. KRA has imposed a fee upon all entities
drawing water from the Kentucky River basin. This in-
cludes Danville. The fees imposed by KRA, if they can be
sustained at all, must be sustained as user fees and not as
a tax. To impose fees based on local improvements for the
benefit of the public at large upon a select group of indi-
viduals, is not taxation but confiscation. 14 Eugene
McQuillan, The Law of Municipal Corporations Sec. 38.02
(1987 rev. 3rd ed.). In order for user fees to. be sustained,
there must be a reasonable relationship between the
amount of money extracted and the benefit conferred.
Norwood v. Baker, 172 U.S. 269, 19 S.Ct. 1987, 43 L. Ed.
443 (1898); Barfield v. Gleason, Ky., 63 S.W. 964 (1901);
Casey v. Richland County Council, 320 S.E. 2d 442 (S.C.
9a
1984). Where no benefit is conferred, the user fees violate
the constitutional constraints of due process of law, equal
protection and the taking of property without just compen-
sation.
KRA plans to provide benefits to Danville. Danville
draws its water from Herrington Lake. KRA claims they
will provide information and do studies of the quality of
the water in Herrington Lake. The Natural Resources and
Environmental Protection Cabinet, Division of Water, has
already contracted with the U.S. Environmental Protec-
tion Agency to study the water quality in Lake Herrington
specifically with regard to phosphorus concentration. Taste
and odor is not a problem for Danville. There is no algae
problem and thus no need for a charcoal filtration system.
KRA provides no benefit for Danville under any plan of
study of water quality.
KRA further claims they will provide services to dis-
cover leaks in the water systems of Danville. Danville’s
water line is already better than the subscribed limits that
KRA finds acceptable. Further, Danville is already a mem-
ber of the Kentucky Rural Water Association which pro-
vides a service of water leak detection for no more charges
than are presently paid by Danville. KRA also provides
training and education. All of the above comes for the sum
of $300.00 per year.
KRA further claims they will provide information and
instruction concerning a commercial//industrial retrofit au-
dit program. This would be helpful if Danville had a water
usage problem. Danville has no water usage problem and
in fact, uses only 40% of capacity for water usage.
KRA further indicates that they will provide tourism
assistance for recreational use at Herrington Lake. Tour-
ism in Frankfort already takes care of and addresses the
recreational needs of Herrington Lake.
KRA further indicates that they will provide continu-
ing education concerning conservation of our precious re-
source of water. Danville is already deeply involved in an
extensive education program concerning conservation.
10a
After examining all the benefits KRA claims they may
provide Danville, the bottom line is Danville has already
covered those areas and there is no resulting benefit from
the money extracted pursuant to this user fee.
Because no benefit is conferred upon Danville by the
KRA then the fees charged are unconstitutional and in
violation of due process of law and equal protection by
taking property without just compensation.
Not dispositive of the issue, but as interesting aside,
KRS 151.700 - 151.730 has been amended and the Com-
monwealth of Kentucky is no longer required to acquire
ownership of the locks and dams on the Kentucky River as
a prerequisite to the functioning of the Kentucky River
Authority.
Of great concern to this Court and greater concern to
the legal community as a whole, is the amendment of stat-
utes through the budget bill by the legislature. Statutes
limiting the ability of the legislature to amend Kentucky
Revised Statutes in the budget bill have now been repealed.
See the old KRS 446.085 (repealed effective July 15, 1994)
and the old KRS 48.310 (amended in 1990). The Kentucky
Supreme Court has affirmed the ability of the legislature
to amend statutes in the budget bill in Commonwealth ex
rel Armstrong v. Collins, Ky., 709 S.W.2d 437 (1986).
The problem created by this process is the budget bill
is not published and disseminated to the practicing bar as
a whole. Further, there are no notations explaining such
danger in by the budget bill other than a notation under
the affected section of the statute indicating it was ad-
dressed in that budget bill. Because attorneys have no
ready access to the budget bill this seems to set a danger-
ous precedent of changing the law without sufficient notifi-
cation, or education of those charged to interpret this for
the public as a whole. It seems in these days of distrust of
systems by the public, our legislature and our court sys-
tem permitting such a hidden methodology for the amend-
ment and change of the laws of the Commonwealth of Ken-
tucky may contribute to and justify such cynicism. The
detriments of this system seem to outweigh any benefits.
— 4
lla
WHEREFORE, IT IS HEREBY ORDERED the City of
Danville receives no benefit from the fees collected by the
Kentucky River Authority and consequently, the Kentucky
River Authority is constitutionally precluded from collect-
ing such fees from the City of Danville. :
Given under my hand this 9th day of December, 1994.
/S/ Stephen M. Shewmaker
Stephen M. Shewmaker
Circuit Judge
iil
[EXCERPTS FROM KENTUCKY RIVER AUTHORITY]
151.700 Declaration of Policy
(1) The general assembly declares that based upon an
implied contract between the Commonwealth and the U.S.
government through the secretary of the U.S. army and
his predecessors, the validity of which is evidenced by over
one hundred (100) years of performance by the federal gov-
ernment, it is the responsibility of the U.S. Army Corps of
Engineers, and the U. S. Congress to operate and main-
tain the locks and dams on the Kentucky River and there-
fore urges the congress and the corps to provide the funds
necessary to properly maintain the locks and dams, the
condition of which the general assembly finds is deterio-
rating.
12a
(2) The general assembly recognizes the historic im-
portance of the Kentucky River locks and dams in provid-
ing a source of clean water supply for several hundred
thousand citizens of the Commonwealth. Therefore, if the
congress and the corps fail to fulfill their responsibility for
the Kentucky River locks and dams as stated in subsection
(1) of this section and the Commonwealth thereby must
assume ownership of the locks and dams, it shall be the
public policy of the Commonwealth to protect the health
and welfare of the citizens dependent upon this system of
locks and dams for their source of clean water, and to that
end, the Commonwealth shall provide for the proper main-
tenance of the Kentucky River locks and dams through the
Kentucky River Authority. It shall be the public policy of
the Commonwealth that should the U.S. Army Corps of
Engineers and the United States Congress fail to fulfill ;
their responsibility to maintain and operate the Kentucky ‘
River locks and dams, and should all efforts on the part of
the Commonwealth fail to force the corps and congress to
fulfill their responsibility, then the Commonwealth shall
assume ownership of all U.S. Army Corps of Engineers
property, both real and personal, on or adjacent to the
Kentucky River after ninety (90) days from the date on
which the corps obtains final authority to dispose of such
13a
property. During that ninety (90) day period, the Com-
monwealth shall publish legal notice of its intention to
assume ownership of the property.
HISTORY: 1988 c 295, § 1, eff. 7-:15-88
1986 c 383, § 1
151.710 Kentucky River Authority
(1) The Governor shall appoint members to the Ken-
tucky River Authority, created to carry out the essential
public purpose of protecting the health and welfare of the
people of the Commonwealth as declared in KRS 151.700.
(2) The Governor shall appoint the secretary of the
Natural Resources and Environmental Protection Cabinet
and ten (10) other persons as the members of the author-
ity. The secretary may designate an alternate. Of the ten
(10) persons, one (1) shall be a registered engineer, on (1)
an expert in water quality, one (1) a mayor, and one (1) a
county judge/executive. The mayor and the county judge/
executive shall be officers from counties which obtain the
major portion of their water supply from the Kentucky
River. Five (5) members shall reside in a county adjacent
to the main stem of the Kentucky River, one (1) of the five
(5) members residing in counties adjacent to locks and
dams one (1) through four (4); and one (1) member shall
reside in a county adjacent to either the North Fork, Middle
Fork, or South Fork of the Kentucky River.
(3) Of the ten (10) members first appointed, two (2)
shall continue in office for terms of one (1) year, two (2) for
terms of two (2) years, three (3) for terms of three (3)
years, and three (3) for terms of four (4) years, as the
Governor designates, At the expiration of the original terms
and for all succeeding terms, the Governor shall appoint a
successor to the authority for a term of four
(4) years in each case. Members may be reappointed.
A vacancy in an unexpired term shal] be filled for the
unexpired portion of the term in the same manner as the
original appointment to that term.
l4a
(4) Each member shall receive as compensation one
hundred dollars ($100) per day for attending a meeting of
the authority.
(5) Any member who misses three (3) consecutive
meetings of the authority shall be deemed to have vacated
the office. The authority shall declare the office vacant
and the office shall be filled as provided by subsections (2)
and (3) of this section.
(6) The authority annually shall elect one (1) of its
members as chairman. A quorum for the transaction of
business shall be six (6) members, and a majority of the
members present at a meeting may take action on any
matter legally before the authority.
(7) Members shall be paid their necessary travel ex-
penses incurred in attending meetings and in the perfor-
mance of their official duties, in addition to the per diem
compensation of one hundred dollars ($100).
(8) The authority shall meet at least quarterly, and
may meet upon the call of the chairman.
(9) The chairman shall be paid necessary travel ex-
penses and a one hundred dollar ($100) per diem compen-
sation for conducting official business of the authority.
(10) The authority shall be attached for administrative
purposes to the Natural Resources and Environmental Pro-
tection Cabinet, and the cabinet shall provide the neces-
sary personnel to provide administrative services for the
authority.
(11) The necessary travel expenses and per diem com-
pensation of the members of the authority in attending
meetings and in the performance of their official duties
shall be paid by the authority.
(12) The authority shall promulgate administrative
regulations necessary to carry out its duties, and shall
report annually to the Governor and the Legislative Re-
search Commission.
HISTORY: 1996 c 229, § 1, eff. 7-15-96
1990 c 500, § 1, eff. 7-13-90; 1986 c 383, § 2
og, —_—___
15a
151.720 Powers of authority
The Kentucky River Authority is authorized and em-
powered to:
(1) Construct, reconstruct, provide for the major main-
tenance, or repair the locks and dams on _ the Kentucky
River and all real and personal property pertaining thereto,
as well as maintain the channel;
(2) Acquire by purchase, exercise of the rights of emi-
nent domain, grant, gift, devise, or otherwise, the fee simple
title to or any acceptable lesser interest in any real or
personal property and by lease or other conveyance, con-
tract for the right to use and occupy any real of personal
property selected in the discretion of the authority as con-
stituting necessary, desirable, or acceptable sites to fulfill
its statutory authority and power;
(3) Lease its real or personal property to other state
agencies, political subdivisions of the Commonwealth, cor-
porations, partnerships, associations, foundations, or per-
sons as the authority deems necessary to carry out the
purposes of this section;
(4) Sell or otherwise dispose ofits real or personal
property in accordance with KRS 56.463 and 45A.045;
(5) Collect water use fees from all facilities using wa-
ter from the Kentucky River basin, except those facilities
using water primarily for agricultural purposes. Facilities
charged such a fee may pass on all or any part of the fee;
(6) Issue revenue bonds in accordance with KRS
151.730;
(7) Employ persons to carry out the authority’s re-
sponsibilities with revenue from the water use fees, in-
cluding an executive defector who shall serve at the plea-
sure of the authority;
(8) Contract for services with other state agencies, po-
litical subdivisions of the Commonwealth, corporations,
partnerships, associations, foundations, or persons to per-
form its duties;
16a
(9) Promulgate administrative regulations providing
for clean water, which shall not be less stringent than the
state and federal regulations for clean water;
(10) Exercise all other powers necessary to perform its
public purpose to implement and enforce the plans devel-
oped by the authority pursuant to this section, and to en-
force administrative regulations promulgated by the au-
thority. The long-range water resource plan and drought
response plan shall be implemented for the basin upon the
direction of the authority;
(11) Develop comprehensive plans for the management
of the Kentucky River within the basin, including a long-
range water resource plan and a drought response plan.
Each county within the basin shall develop a long-range
water resource plan and submit it to the authority. The
authority shall develop a unified long-range water resource
plan for the basin. ‘The authority shall conduct a public
hearing on the plan, and submit its final unified plan for
the basin to the Natural Resources and Environmental
Protection Cabinet. The cabinet shall act upon the plan
within six (6) months and shall approve the plan, unless it
objects for good reason shown. A drought response plan
for the basin shall be developed by the authority, and this
plan shall be implemented for the basin upon the direction
of the authority;
(12) Develop and promote a plan for the protection and
use of groundwater within the basin. Administrative regu-
lations may be promulgated implementing the plan, and
these regulations shall not be less stringent than state and
federal regulations protecting groundwater;
(13) Develop recreational areas within the basin. These
recreational areas may be operated and funded by the state
Department of Parks, Kentucky State Nature Preserves
Commission, or other governmental entity as specifically
authorized or permitted within the biennial executive bud-
get. There is hereby created the Kentucky River Park to
be located as determined by the authority;
¥)
4
y
17a
(14) Utilize funds provided for recreational purposes
the biennial executive budget for major or minor mainte-
nance if the authority certifies to the secretary of the Fi-
nance and Administration Cabinet that a significant need
exists for the repairs and no other funds are available for
the maintenance;
(15) Coordinate the Kentucky River basin water re-
sources activities among state agencies;
(16) Report quarterly on all of its activities to the legis-
lative Committee on Appropriations and Revenue;
(17) Receive reports from state agencies on litigation
concerning the Kentucky River, which agencies are hereby
directed to report to the authority;
(18) Credit to the authority any income derived from
the interest earned on the investment of the water use fees
collected, which shall be available for the authority's ex-
penditure; and
(19) Accomplish the watershed management mission of
the authority, which is to fulfill the provisions of this sec-
tion for the Kentucky River basin, the boundary of which
shall be defined by a hydrologic map promulgated in an
administrative regulation.
HISTORY: 1996 c 229, § 2, eff. 7-15-96
1992 c 453, § 1, eff. 7-14-92; 1990 c 500, § 2 c 496, § 44
31986 c 383, § 3
151.723 Water use fees
(1) The rate of the water use fees ccllected by the
authority shall be set for each year of the biennium based
upon a total amount of funds necessary to carry out only
those functions, projects, and expenses authorized by the
General Assembly in the authority’s biennial budget.
(2) At the time the authority submits its budget to
the Governor's Office of Policy and Management, it shall
certify to the General Assembly and the secretary of the
Revenue Cabinet the total amount of water use reporied
;
18a
for the preceding biennium by users subject to the water
use fees. At least thirty (30) days prior to the effective date
of the authority’s budget, the secretary of the Revenue
Cabinet shall establish a rate for each water use fee based
upon an amount of water use projected for each year of the
biennium from the amount reported, calculated to gener-
ate the amount of funds necessary to carry out the func-
tions, projects, and expenses which have been authorized
by the General Assembly. The rate shall be an amount for
each one thousand (1,000) gallons of water use and shall -
be effective for at least one (1) year.
(3) The authority shall define by administrative regu-
lation those uses of the Kentucky River or the waters of
the Kentucky River basin subject to a water use fee. Wa-
ter use fees shall not apply to facilities using water for
agricultural purposes. The authority shall collect the fees
on a quarterly basis and pay the collected fees into the
State Treasury to the credit of a restricted rind for use by
the authority.
HISTORY: 1996 c 229, §4, eff. 7-15-96
151.725 Authority’s duty to bring action for penalties
or injunctive relief; venue
(1) The authority shall bring an action for the recov-
ery of penalties provided for in KRS 151.990, the payment
of fees provided for in KRS 151.720, or for a restraining
order, or a temporary or permanent injunction for the pre-
vention or correction of a condition constituting or threat-
ening to constitute a violation of the administrative regu-
lations promulgated by the authority, the long-range water
resource plan, or a drought response plan developed by the
authority.
(2) All actions for penalties and injunctive relief for
violations of the administrative regulations promulgated
by the authority, the long-range water resource plan, or a
drought response plan developed by the authority shall be
brought by the authority in the:
aetna
19a
(a) Circuit Court having jurisdiction of the defen-
dant;
(b) Circuit Court of the county in which the con-
dition constituting or threatening to constitute a vio-
lation of the administrative regulations of the author-
ity, the long-range water resource plan or a drought
response plan developed by the authority is occurring;
} or
(c) In the Franklin Circuit Court
HISTORY: 1996 c 229, § 6, eff. 7-15-96
1992 c 453, § 2, eff. 7-14-92
151.730 Revenue bonds
(1) The authority is hereby authorized to provide, at
one (1) time or from time to time, for the issuance of its
revenue bonds for the purpose of paying all or any part of
the cost of any one (1) or more projects undertaken pursu-
ant to KRS 151.720. The principal of and the interest on
such bends shall in each instance be payable solely from a
special fund provided for the payment, with revenues de-
rived from water use fees collected from all facilities using
water from the Kentucky River basin, except those facili-
ties using water primarily for agricultural purposes, pledged
to be set aside and deposited in such special funds. The
bonds of any issue may be, in one (1) or more series and
any one (1) or more such series may enjoy equal or subor-
dinate status with respect to the pledge of funds from which
they are payable, shall be dated, suall bear interest, shall
mature at such time or times not exceeding the thirtieth
anniversary of their respective dates all as may be pro-
vided by the authority, and may be made redeemable be-
fore maturity, at the option of the authority, at such price
or prices and under such terms and conditions as may be
fixed by the authority prior to the issuance of the bonds.
The authority shall determine the form of bonds including
any interest coupons to be attached thereto, and shall fix
the denomination or denominations of the bonds and the
place or places for payment of principal and interest, which
20a
may be at any bank or trust company within or without
the Commonwealth. The bonds shall be signed by the
facsimile signature of the chairman of the authority, and
the seal of the authority or a facsimile thereof shall be
affixed thereto and attested by the manual signature of
the treasurer of the authority, and any coupons attached
thereto shall bear the facsimile signature of the chairman
of the authority. In case any officer whose signature or a
facsimile of whose signature shall appear on any bonds or
coupons shall cease to be such officer before the delivery of
such bonds, such signature or such facsimile shall never-
theless be valid and sufficient for all purposes the same as
if he had remained in office until such delivery. All bonds
issued under the provisions of this section shall have and
are hereby declared to have all qualities and incidents of
negotiable instruments under the uniform commercial code
of the Commonwealth. The bonds may be issued in coupon
or in registered form, or both, as the authority may deter-
mine, and.provision may be made for the registration of
any coupon bonds as to principal alone and also as to both
principal and interest, and for the reconversion into cou-
pon bonds of any bonds registered as to both principal and
interest. The authority may sell such bonds at public sale,
and for such price as it may determine will best effect the
purposes of KRS 151.720.
(2) The proceeds of the bonds of each issue shall be
used solely for the payment of the cost of the project or
projects for which such bonds shall have been issued, and
shall be disbursed in such a manner and under such re-
strictions, if any, as the authority may provide in the pro-
ceedings authorizing the issuance of such bonds or in the
trust indenture securing the same. If the proceeds of the
bonds of any issue, by error of estimates or otherwise,
shall be less than such cost, additional bonds may in like
manner be issued to provide the amount of such deficit,
and, unless otherwise provide in the proceedings authoriz-
ing the issuance of such bonds or in the trust indenture
securing the same, shall be deemed to be of the same issue
and shall be entitled to payment from the same fund with-
2la
out preference or priority of the bonds first issued. If the
proceeds of the bonds of any issue shall exceed such cost,
the surplus shall be deposited to the credit of the sinking
fund or funds for such bonds or any account or accounts
therein as the authority shall have provided in the pro-
ceedings or trust indenture authorizing and securing such
bonds.
(3) Prior to the preparation of definitive bonds the
authority may, under like restrictions, issue interim re-
ceipts or temporary bonds, with or without coupons, ex-
changeable for definitive bonds when such bonds shall have
been executed and are available for delivery. The author-
ity may also provide for the replacement of any bonds which
shall become mutilated or shall be destroyed or lost.
(4) The authority may issue revenue bond anticipa-
tion notes.
(5) Any holder of bonds issued under the provisions of
this section or any of the coupons appertaining thereto,
and the trustee under any trust indenture, except to the
extent of the rights given in this section, may be restricted
by such trust indenture or proceedings, may, either at law
or in equity, by suit action, mandamus, or other proceed-
ings, protect and enforce any and all rights under the laws
of the Commonwealth or granted under this section or
under such trust indenture or the proceedings authorizing
the issuance of such bonds, and may enforce and compel
the performance of all duties required by this section or by
such trust indenture or proceedings to be performed by the
authority or by any officer or employee thereof
(6) Revenue bonds issued under the provisions of this
section shall not be a debt, liability, or obligation of the
Commonwealth or any political subdivision thereof and
shall not be a pledge of the faith and credit of the Com-
monwealth or any political subdivision thereof
(7) Revenue bonds issued by the authority shall be
subject to the jurisdiction and approval of the State Prop-
erty and Buildings Commission and the Capital Projects
and Bond Oversight Committee and shall be subject to
22a
review by the Office of Financial Management and Eco-
nomic Analysis.
(8) The authority shall not be required to pay any
taxes and assessments to the Commonwealth or any county,
municipality, or other governmental subdivision of the Com-
monwealth upon any of its property or upon its obligations
or other evidences of indebtedness pursuant to the provi-
sions of this section, or upon any moneys, funds, revenues,
or other income held or received by the authority and the
bonds or notes of the authority and the income therefrom
shall at all times be exempt from taxation, except for death
and gift taxes and taxes of transfers.
(9) Contractual expenses to construct, reconstruct, pro-
vide for the major maintenance, or repair the Kentucky
River locks and dams, or to maintain the channel, or to
acquire real or personal property pertaining thereto, or to
construct, reconstruct, maintain repair such property, shall
be paid from the proceeds of the revenue bonds. Expenses
for administrative services and necessary travel expenses
and per diem compensation of authority members, shall
not be paid from the proceeds of the revenue bonds. Nor
shall the cabinet’s cost of operating the locks be paid from
the proceeds of the revenue bonds.
HISTORY:1996 c 229, §3, eff. 7-15-96
1986 c 383, 84, eff. 7-15-86
23a
151.990 Penalties
(1) Any person, city, county, or other governmental sub-
(2)
division who violates KRS 151.100 to 151.460 shall be
liable to a civil penally of not more than $1,000 for
said violation and in addition may be enjoined from
continuing said violation. Each day upon which such
violation occurs or continues shall constitute a sepa-
rate offense.
Any person who violates any determination, permit,
administrative regulation, order, long-range water re-
source plan, or drought response plan of the Kentucky
River Authority shall be liable for a civil penalty not
to exceed the sum of one hundred dollars ($100) for
each day during which the violation continues, and, in
addition, may be concurrently enjoined from any vio-
lations as provided in KRS 151.725.
HISTORY: 1992 c 458, § 4, eff. 7-14-92
1966 c 23, § 38
24a
CHAPTER I
KENTUCKY RIVER AUTHORITY
010. Definitions.
020. Administrative procedures of the authority.
030. Management of surface water and groundwater in
the Kentucky River Basin.
040. Tier 1 water use fees.
050. Tier 11 water use fees.
420 KAR 1:010. Definitions.
RELATES TO: KRS 151.100 to 151.600, 151.700 to
151.730,151.990,223.400 to 223.460,224.70,224.73
STATUTORY AUTHORITY: KRS
151.710,151.720,151.725, 151.730
NECESSITY AND FUNCTION: KRS 151.700 through
151.730 authorize the Kentucky River Authority to man-
age the surface water and groundwater of the Kentucky
River basin. The authority has the power and duty to
develop and to implement programs relating to the locks
and dams on the Kentucky River; to acquire, to sell and to
lease property; to develop recreational areas; to issue rev-
enue bonds; to assess fees for water use; to contract for
services; to adopt administrative regulations protecting wa-
ter in the Kentucky River basin to develop and to imple-
ment comprehensive plans for protecting the water of the
Kentucky River basin; and to collaberate with the Natural
Resources and Environmental Protection Cabinet and other
state agencies in coordinating Kentucky River basin water
resource and water quality activities. This administrative
regulation establishes definitions pertaining to those pow-
ers and duties.
Section 1. Definitions. (1): Administrative services
means clerical assistance provided by the cabinet in accor-
dance with KRS 151.710(10), including secretarial and book-
keeping assistance.
(2) “Annual report” means the report the authority
submits annually to the Governor and to the Legislative
Research Commission pursuant to KRS 151.710(12).
25a
(3) “Best management practices” or “BMPs” means
those practices which are effective and practical structural
or nonstructural methods which prevent or reduce the move-
ment of pollutants from the land to surface water or ground-
water, or which otherwise protect surface water or ground-
water from potential adverse effects of land use activities
such as agricultural or silvicultural activities, stormwater
run-off, spills or leaks, and land application or land dis-
posal of waste.
(4) “Cabinet” means the Natural Resources and Envi-
ronmental Protection Cabinet created pursuant to KRS
224.10-010.
(5) “County long-range water resource plan” means
the county long-range water resource plan submitted by a
county for the authority’s review pursuant to KRS
151.720(9) and 420 KAR 1:030.
(6) “Discharge” or “discharge of a pollutant” means
any addition of any pollutant or combination of pollutants
to surface water or groundwater of the Kentucky River
basin from any point source’ This includes additions of
pollutants into waters of the Kentucky River basin from
surface run-off which is collected or channeled by man;
discharges through pipes, sewers or other conveyances
whether publicly or privately owned; and discharges
through pipes, sewers, or other conveyances leading into
privately or publicly owned treatment works.
(7) “Disposal” means the discharge, deposit, injection,
dumping, spilling, leaking, or placing of any waste into or
on any land or water so that the waste or any waste con-
stituent may enter the environment or be emitted into the
air or discharged into water.
(8) “Diversion” means a nonconsumptive redirecton of
all or part of the flow of a stream.
(9) “Drought response plan” means the drought re-
sponse plan for the Kentucky River basin developed by the
authority pursuant to KRS 151.720(9) and 420 KAR 1:030.
(10) “Effluent limitations” means any restrictions or pro-
hibitions established by 401 KAR Chapter 5.
26a
(11) “Fee” means a water use fee for protection of the
surface water and groundwater of the Kentucky River ba-
sin, paid to the authority by persons who use that water.
(12) “Floodplain” means the normally dry area or wet-
land adjoining a stream or lake that is inundated during a
flood event.
(13) “Floodway” means that area of a stream or water-
course necessary to carry off flood water as determined by
the cabinet or by the authority.
(14) “Gross withdrawal” means the amount of water
withdrawn.
(15) “Groundwater” or “ground water” means all water
which fills the natural openings under the earth’s surface,
inducing all underground watercourses, artesian basins,
reservoirs, lakes, and other bodies of water below the earth’s
surface.
(16) “Kentucky River Authority” or “authority” means
the Kentucky River Authority created pursuant to KRS
151.710.
(17) “Kentucky River basin” or “basin” means all geo-
graphic areas of the Commonwealth contained within the
watershed of the Kentucky River and its tributaries, in-
cluding surface water and groundwater, and delineated as
hydrologic unit code 0510020 in the document entitled “Hy-
drologic Unit Map- 1974, State of Kentucky”, published in
1974 and reprinted in 1988, and incorporated by reference
in Section 2 of this edministrative regulation.
(18) “Leakage” or “leak” means the amount of water
lost due to leaks in a water supply or water distribution
system after it has been withdrawn by the water supplier
or purchased by the water supply distributor.
(19) “Long-range water resource plan” means the wa-
ter supply plan described in 401 KAR 4:220, with the addi-
tions required by 420 KAR 1:030.
(20) “Mainstream Kentucky River” means the Kentucky
River, including Pool 14, which extends from the North
Fork of the Kentucky River at River Mile 261.6 above the
27a
confluence of Walkers Creek the Middle Fork of the Ken-
tucky River at River Mile 6.0 below the confluence of Coal
Branch, and the South Fork of the Kentucky River at River
Mile 4.0 below the confluence of Paw Paw Creek, to River
Mile 0 at the confluence with the Ohio River at Carrollton.
(21) “Map of poténtial sources of water pollution” means
the map of potential sources of contamination described in
401 KAR 4:220, Section 6 with the addition required by
420 KAR 1-030.
(22) “Net Withdrawal” means the difference between
the amount of water withdrawn for noncontact cooling wa-
ter and the amount of that water discharged.
(23) “Noncontact cooling water” means surface water
or groundwater withdrawn from the Kentucky River basin
for the purpose of reducing the temperature of a product or
equipment used in making a product, if the following con-
ditions exist:
(a) The noncontact cooling water does not come
into contact with the product;
(b) The noncontact cooling water is discharged in
accordance with a Kentucky Pollutant Discharge Elimi-
nation System (KPDES) permit that identifies the wa-
ter as noncontact or once-through cooling water;
(c) The noncontact cooling water is discharged in
accordance with water quality standards;,
(d) The noncontact cooling water is discharged
within 300 linear feet of the withdrawal point or into
the same pool of water; and
(e) Net withdrawal is no greater than ten (10)
percent.
(24) “Nonpoint source pollution” means pollution caused
by diffuse sources, including land run-off, atmospheric depo-
sition, or percolaton through soils and rocks.
(25) “Person” means an individual, trust firm, joint stock
company, corporation (including a government corporation),
partnership, association, federal agency, state agency, city,
commission, political subdivision of the Commonwealth,
interstate body, estate, or other entity.
28a a
(26) “Point source” means any discernible, confined, and
discrete conveyance, including but not limited to any pipe,
ditch, channel, tunnel, conduit, well, discrete fissure, con-
tainer, rolling stock, concentrated animal feeding opera-
tion, vessel, or other floating craft, from which pollutants
are or may be discharged. This term does not include
return flows from irrigated agriculture.
(27) “Pollutant” means dredged spoil, solid waste, haz-
ardous waste, special waste, incinerator residue, sewage,
sewage sludge, garbage, chemical materials, biological ma-
terials, radioactive materials, heat, wrecked or discarded
equipment, rock, sand, soil, industrial waste, munic.pal
waste, silvicultural waste, agricultural waste, and any sub-
stance resulting from the development, processing, or re-
covery of any natural resource which may be discharged
into water.
(28) “Project” means a project authorized by KRS
151.700 to 151.730 and approved by the authority, includ-
ing staff and overhead.
(29) “Quarterly report” means the report the author-
ity submits quarterly to the General Assembly’s Commit-
tee on Appropriations and Revenue pursuant to KRS
151.720(14).
(30) “Revenue bond” or “bond” means a revenue bond
described by KRS 151.720(5) and KRS 151.730.
| (31) “Semipublic water supplier” means any water sup-
' ply system that serves more than three (3) families, but is
not a water supplier or distributor.
(32) “Seven (7) day, ten (10) year low flow” or “7Q10”
means that minimum average flow which occurs for seven
(7) consecutive days with a recurrence interval of ten (10)
years.
(33) “Standard” or “water quality standard” means an
administrative regulation adopted by the authority, or by
the cabinet if the authority fails to adopt it, establishing
the use to be made of a surface water or groundwater and
the water quality criteria necessary to maintain and pro-
tect that use.
a ek a A aR i ca
29a
(34) “Stream” means a river, creek or channel, having
well-defined banks, in which water flows for substantial
periods of the year to drain a given area, or any lake or
other body of water.
(35) “Surface waters” means those above-ground wa-
ters having well-defined banks and beds, either constantly
or intermittently flowing; lakes and impounded waters;
marshes and wetlands; and any subterranean waters flow-
ing in well-defined channels and having a demonstrable
hydrologic connection with the surface.
(36) “Tier I fee” means a fee:
(a) Funding watershed management projects of
benefit to the entire watershed of the Kentucky River
basin and funding the authority’s general expenses;
(b) Set by the authority based on the authority's
budget; and
(c) Paid by all persons who use surface water or
groundwater of the Kentucky River basin.
(37) “Tier II fee” means a fee:
(a) Funding any project of benefit to a certain
part of the Kentucky River basin;
(b) Set by the authority based on the authority's
budget; and |
(c) Paid by all persons who use surface water or
groundwater of the Kentucky River basin and who
derive a direct benefit from that project.
(38) “Transfer” means an interbasin diversion of sur-
face-waters or groundwaters to or from the Kentucky River
basin.
(39) “Unified long-range water resource plan” or “uni-
fied plan” means the unified long-range water resource
plan for the Kentucky River basin developed by the au-
thority pursuant to KRS 151.720(g) and 420 KAR 1:030.
(40) “Use” or “using”, if referring to the use of water
in the Kentucky River basin described in KRS 151.720(5),
means the withdrawal of surface water from the Kentucky
River or its tributaries, the withdrawal of groundwater
30a
within the Kentucky River basin, the point source discharge
of pollutants to the Kentucky River or its tributaries, the
point source discharge of pollutants to groundwater within
the Kentucky River basin, the use of surface water from
the Kentucky River or its tributaries for generation of hy-
droelectric power, the diversion or transfer of waters in the
Kentucky River basin, and the use of the Kentucky River
or its tributaries for navigation or recreation. “Use” or
“using” shall not apply to those facilities using water pri-
marily for agricultural purposes.
(41) “Water” means all rivers, streams, creeks, lakes,
ponds, impounding reservoirs, springs, wells, marshes and
wetlands, and a!l other bodies of surface or underground
water, natural or artificial, situated wholly or partly within
or bordering upon the Kentucky River
basin.
(42) “Water conservation” means methods and appli-
cations of passive and active water savings and reuse de-
vices, components and processes to reduce demand for wa-
ter supply.
(43) “Water pollution” means the alteration of the
physical, thermal, chemical, biological, or radioactive prop-
erties of water in such a manner, condition, or quantity
that will be detrimental to the public health or welfare, to
animal or aquatic life or marine life, to the use of such
waters as present or future sources of public water supply
or to the use of such waters for recreational, commercial,
industrial, agricultural, or other legitimate purposes.
(44) “Water resources map” means the water resources
map described in 401 KAR 4:220, Section 6, and required
by 420 KAR 1:030.
(45) “Water shortage emergency” means the authority's
declaration that a significant number of citizens in the
emergency area are served by water suppliers that are
experiencing deficits in the amount of water available for
use.
3la
(46) “Water shortage response plan” means the water
shortage response plan described by 401 KAR 4:220, Sec-
tion 6 and required by 420 KAR 1:030.
(47) “Water shortage warning” means the authority's
declaration that some water suppliers in the warning area
are experiencing deficits in the amount of water available
for use.
(48) “Water shortage watch” means the authority's dec-
laration that hydrologic conditions exist in the watch area
that indicate the potential for deficits in the amount of
water available for use by water suppliers.
(49) “Water supplier” means any system that provides
water to the public for human consumption, has at least
fifteen (15) service connections or regularly serves an aver-
age of at least twenty-five (25) individuals daily at least
sixty (60) days of the year, and withdraws more than fifty
(50) percent of the water it distributes.
(50) “Water supply distributor” means any system that
provides water to the public for human consumption, has
at least fifteen (15) service connections or regularly serves
an average of at least twenty-five (25) individuals daily at
least sixty (60) days of the year, and depends on a water
supplier to provide fifty (50) percent or more of the water
it distributes.
(51) “Water supply plan” means the final plan docu-
ment approved by the cabinet pursuant to KRS 151.110
through 151.118 and 401 KAR 4:220.
(52) “Water supply protection area” means the desig-
nated watershed of a surface water supply source, or the
designated recharge area of a groundwater supply source,
or a designated wellhead protection area.
(53) “Water supply source” means a particular site or
classification of site where water is withcrawn.
(54) “Watershed” means all the area from which all
drainage passes a given point downstream.
(55) “Wetlands” means land that has a predominance
of hydric soils and that is inundated or saturated by sur-
32a
face or groundwaters at a frequency and duration suffi-
cient to support, and that under normal circumstance does
support, a prevalence of vegetation typically adapted for
life in saturated soil conditions. Wetlands generally in-
clude swamps, marshes, bogs, floodplains and similar ar-
eas.
(56) “Withdraw” or “withdrawal of water” means the
actual removal or taking of water from any surface waters
or groundwaters of the Kentucky River basin.
Section 2. Incorporation by Reference. The document
entitled “Hydrologic Unit Map - 1974, State of Kentucky”,
published in 1974 and reprinted in 1988, is hereby incor-
porated by reference. It is available for public inspection
and copying, subject to copyright law, at the office of the
Kentucky River Authority, 107 Mero Street, Frankfort, Ken-
tucky 40601, between the hours of 8 a.m. and 4:30 p.m.,
Mondays through Fridays, excluding siate holidays. (20
Ky.R.873; Am .1619; 1792; eff. 12-17-93.)
420 KAR 1:020. Administrative procedures of the au-
thority.
RELATES TO: KRS 151.100 to 151.600,151.700 to
151.730, 151.990, 223.400 to 223.460, 224.70, 224.73
STATUTORY AUTHORITY: KRS 151.710, 151.720.
151.725, 151.730
NECESSITY AND FUNCTION: KRS 151.700 through
151.730 authorize the Kentucky River Authorize to man-
age the surface water and groundwater of the Kentucky
River basin. The authority has the power and duty to
develop and to implement programs relating to the locks
and dams on the Kentucky River; to acquire, to sell and to
lease property; to develop creational areas; to issue rev-
enue bonds; to assess fees for water use; to contract for
services; to adopt administrative regulations protecting wa-
ters in the Kentucky River basin to develop and to imple-
ment comprehensive plans for protecting the water of the
33a
Kentucky River basin; and to collaborate with the Natural
Resources and Environmental Protection Cabinet and other
state agencies in coordinating Kentucky River basin water
resource and water quality activities. This administrative
regulation establishes administrative procedures employed
by the authority in implementing those powers and duties.
Section 1. Election of Vice-chairman. In addition to
electing a chairman as provided by KRS 151.710(6), the
authority shall elect one (1) of its members as vice-chair-
man. The vice-chairman may act for the authority in the
absence or unavailability of the chairman.
Section 2. Meetings of the Authority. Meetings of the
authority shall be conducted in accordance with the Ken-
tucky Open Meetings Law, KRS 61.805 through 61.850.
Section 3. Inspection of Public Records. (1) Public
records of the authority shall be made available for public
inspection in accordance with the Kentucky Open Records
Act, KRS 61.870 through 61.884.
(2) The authority shall make available to a public li-
brary located in each county contained in whole or in part
within the Kentucky River basin copies of the following
documents:
(a) The authority's quarterly and annual reports;
(b) The authority’s draft and final unified long-
range water resource plans;
(c) The authority's draft and final drought re-
sponse plans;
(d) The authority's letter approving a county long-
range water resource plan;
(e) A county’s draft and final long-range water
resource plans; and
(f) The authority's administrative regulations.
Section 4. Mailing List. The authority shall maintain
a list of members of the public, including members of the
media, to whom copies of the public notices described by
this administrative regulation may be provided. Any per-
34a
_ son may request to be placed upon or removed from the
authority's mailing list. The authority may periodically
revise its list to remove the names of persons who do not
respond to the authority's request to update the mailing
list.
Section 5. Public Participation. (1) Scope and applica-
bility. This section applies to the following activites:
(a) The authority's development of a drought re-
sponse plan;
(b) The authority's development of a unified long-
range water resource plan.
(2) Public notice.
(a) Before the authority prepares a draft drought
response plan or a draft unified long-range water re-
source plan, it shall notify the public that it is seeking
public participation in the preparation of those drafts. :
The authority shall notify the public by publishing a
notice in the Lexington Herald-Leader and in a local
newspaper serving each county located in whole or in
part within the Kentucky River basin; and by mailing
the notice to the county judge-executive of each county
located in whole or In part within the Kentucky River
basin. The notice shall schedule public meeting or a
series of public meeting.
(b) After the authority prepares a draft drought |
response plan a draft unified long-range water resource |
plan, it shall notify the public by publishing a notice
In the Lexington Herald-Leader and in a local news-
paper serving each county located in whole or in part
within the Kentucky River basin; and by mailing the
notice to the county judge-executive of each county
located in whole or In part within the Kentucley River
basin. The public notice shall comply with KRS
424.130, shall state that a draft drought response plan |
or a draft unified long-range water resource plan has
been prepared, that cOpies are available for inspection
in accordance with the Kentucky Open Records Act,
- Le
ee a _
35a
that copies have been delivered to local libraries, and
that the public shall have thirty (30) days from the
date of newspaper publication to comment and to re-
quest a public hearing.
(3) Public meeting. The authority shall hold a public
meeting or a series of public meetings prior to preparing a
draft drought response plan or a draft unified long-range
water resource plan.
(4) Public comment period. There shall be thirty (30)
days from the data set in the newspaper publication pur-
suant to KRS 424.130 for the public to comment upon a
draft drought response plan or a draft unified long-range
water resource plan.
(5) Public hearing. If requested within the first fif-
teen (15) days of the thirty (30) day public comment period
described in subsection (4) of this section, the authority
shall conduct a public hearing before the close of the public
comment period on the draft drought response plan or the
draft unified long-range water resource plan. The public
hearing shall be conducted in Frankfort unless the author-
ity determines it Is more appropriate to hold the public
hearing in another county located within the Kentucky
River basin. Any person may appear at the public hearing
and offer written or oral comments. The authority may
limit oral testimony to five (5) minutes or less per speaker.
(6) Consideration of public comments. The authority
shall consider all oral and written comments received dur-
ing the public comment period described in subsecton (4)
of this section. The authority may prepare a written re-
sponse to those oral and written comments, and may dis-
seminate copies of the response to commentors and to oth-
ers requesting copies.
(7) Final action. The authority shall not take final
action on a draft drought response plan or a draft unified
long-range water supply plan until it has completed its
consideration of all public comments. The authority shall
publish notice that it has taken final action by publishing
36a
a notice in the Lexington Herald-Leader and in a local
newspaper serving each county located in whole or in part
within the Kentucky River basin, and by mailing the no-
tice to the county judge-executive of each county located in
whole or in part within the Kentucky River basin.
Section 6. Advisory Committees. (1) The authority may
appoint advisory committees to assist and to advise the
authority.
(2) In appointing advisory committees, the authority
shall consider appointing representatives of the public, rep-
resentatives of federal, state, county or municipal govern-
ments; representatives of water resource and water qual-
ity agencies; representatives of water-using industries;
representatives of water utilities, representatives of groups
interested in water-related issues;and representatives of
labor and argiculture.
(3) Any person who wishes to serve on an advisory
committee may contact the authority in writing and so
request.The authority shall consider each request
Section 7. Request for Authority Action.(1) Any person
may request that the authority consider any matter whhin
its jurisdiction.The request shall be made In writing to the
chairman of the authority and shall be submitted at least
thirty (30) days in advance of a meeting of the authority in
order to be considered at that meeting.
(2) The chairman shall notify the remaining members
of the authority of the request for considerabon of the mat-
ter prior to the next meeting of tho authority.
(3) The person making the request for consideration
of a matter may appear before the authority at the next
meeting and discuss that matter. The authority may limit
the time spent on that person’s presentation or in consid-
eration of the matter.
(4) The authority may take final action at that meet-
ing, defer final, action to a later meeting, or decline to
consider the matter.(20Ky.R.877;Am.1794;eff 12-17-93.)
37a
420 KAR 1:030.Management of surface water and
groundwater in the Kentucky River basin.
RELATES TO: KRS 151.100 to 151.600, 151.700 to
151.730, 151.990, 223.400 to 223.460, 224.70, 224.73
STATUTORY AUTHORITY: KRS 151.710, 151.720,
151.725, 151.730
NECESSITY AND FUNCTION: KRS 151.700 through
151.730 authorize the Kentucky River Authority to man-
age the surface water and groundwater of the Kentucky
River basin. The authority has the power and duty to
develop and to implement programs relating to the locks
and dams on the Kentucky River; to acquire. to sell and to
lease property; to develop recreational areas; to issue rev-
enue bonds; to assess fees for water use; to contract for
services; to adopt administrative regulations protecting wa-
-ter in the Kentucky River basin; to develop and to imple-
ment comprehensive plans for protecting the water of the
Kentucky River basin; and to collaborate with the Natural
Resources and Environmental Protection Cabinet and other
state agencies in coordinating Kentucky River basin water
resource and water quality activities. This administrative
regulation explains certain powers and duties and imposes
certain requirements relating to management of surface
water and groundwater in the Kentucky River basin.
Section 1 .Scope and Applicability. (1) Purpose. It
shall be the purpose of this administrative regulation to
manage the surface water and groundwater of the Ken-
tucky River basin.
(2) Compatibility. The authority's administrative regu-
lations set forth in this chapter shall be interpreted to be
compatible with the statutes and administrative regula-
tions administered by the cabinet.
Section 2. Collection and Dissemination of Information.
The authority may conduct research, collect and interpret
data, assemble a data base, and disseminate reports on
water management issues. Those water management is-
sues include:
38a
(1) The relationship of water to other natural re-
sources;
(2) Wastewater treatment technology;
(3) Groundwater movement and other hydrogeologic
conditions;
(4) The relationship between water price and water
demand;
(5) Hydrologic conditions;
(6) Groundwater and surface water quality;
(7) Water use;
(8) Water resource planning needs;
(9) Conservation and development issues;
(10) Allocation of water resources;
(11) Management, including operation, maintenance
and replacement of locks and dams; and
(12) Social, economic, demographic and political issues
affecting water resources.
Section 3. County Long-range Water Resource Plans.
(1) Scope. Each county located in whole or in part within
the Kentucky River basin shall develop and submit to the
authority a long-range water resource plan.
(2) Contents of the plan. Each long-range water re-
source plan shall include the following:
(a) A water supply plan;
(b) A water shortage response plan for each wa-
ter supplier and water supply distributor in the county
that uses water withdrawn from the Kentucky River
basin or serves customers in the Kentucky River
(c) A water resources map providing coverage for
the portions of the county that lie within the Ken-
tucky River basin; and
(d) A map of all potential sources of water pollu-
tion for the portions of the county that lie within the
Kentucky River basin, including potential sources of
water pollution affecting the water supply protection
39a
area of a water supplier, if the authority is able to
provide the funding necessary for creating the map.
(3) Deadline for submitting the plan. Each county
shall submit to the authority its long-range water resource
plan within thirty (30) days after the county obtains the
cabinets approval of its water supply plan.
Section 4. Unified Long-range Water Resource Plan.
The authority shall prepare a unified long-range water
resource plan for the Kentucky River basin, which shall at
a minimum address the following:
(1) Physical, chemical and biological conditions exist-
ing in the surface water and groundwater of the Kentucky
River basin;
(2) The construction, acquisition, operation and con-
trol of projects and facilities for the storage and release of
water;
(3) The regulation of flows and allocation of supplies
of surface water and groundwater within the basin;
(4) Protection of public health;
(5) Means of controlling surface water and groundwa-
ter quality;
(6) Economic development;
(7) Improvement of fisheries;
(8) Development of recreational opportunities and rec-
reational areas;
(9) Abatement of water pollution;
(10) The design, construction, operation and mainte-
nance of projects and facilities for floodplain protection
and flood damage reduction;
(11) Control of run-off, erosion, and agricultural and
urban nonpoint source pollution;
(12) Stormwater management,
(13) Encouragement and promotion of soil conservation,
land reclamation and land management to prevent and to
control erosion and to improve water quality;
40a
(14) The use of water within the basin for the genera-
tion of hydroelectric power;
(15) Control of withdrawals and diversions of surface
water and groundwater;
(16) Commercial and recreational navigation on the
Kentucky River;
(17) Acquisition and utilization of the Kentucky River
lock and dam system;
(18) The relationship of county long-range water re-
source plans to the authority’s unified long-range water
resource plan;
(19) The need for basin-wide and specific local land and
water conservation measures and practices; and
(20) Any approval criteria established by the cabinet.
Section (5)Drought Response Plan. (1) The authority
shall prepare a drought response plan for the Kentucky
River basin, which shall at a minimum address the follow-
ing:
(a) Identification of those flow rates in the main-
stream Kentucky River at which the authority would
declare a water shortage watch, a water shortage warn-
ing or a water shortage emergency for persons using
the mainstream Kentucky River as a water supply
source;
(b) Identification of criteria for declaring a water
shortage watch, a water shortage warning, or a water
shortage emergency for water suppliers and other per-
sons using water in the Kentucky River basin who do
not use the mainstream Kentucky River as a water
supply source;
(c) Development of a methodology for equitably
reducing withdrawals, diversions or transfers from the
mainstream Kentucky River and for using the locks
or other devices to manipulate flows and water stored
in the dams on the mainstream Kentucky River;
4la
(d) Identification of alternatives for emergency
public water supplies, such as large springs or
interbasin transfers; and
(e) Inclusion of any approval criteria established
by the cabinet.
(2) The authority may declare a water supply watch,
a water supply warning, or a water supply emergency for
all or a portion of the Kentucky River basin if conditions
cause an actual or threatened shortage of water supply
sources within the Kentucky River basin. The authority
shall base its declaration on its drought response plan.
The declaration shall identify the area affected and the
types of water supply sources affected. The authority shall
consult the cabinet before declaring a water supply emer-
gency. The authority may request that the governor de-
clare a water emergency as provided by KRS 151.200.
Section 6. Review of Applications for Cabinet Permits.
While the cabinet is reviewing applications for permits,
the authority may also review those applications and may
offer to the cabinet comments on whether those permit
applications comply with the requirements of KRS 151.700
through 151.730 and this chapter.
Section 7. Leak Detection Program. The authority may
administer a leak detection program for water suppliers
and water supply distributors in the Kentucky River ba-
sin.
(1) Eligibility shall be based on such factors as:
(a) Size of the service area;
(b) Suspected extent of leakage;
(c) Number of customers; and
(d) Ability to pay for a leak detection program
without financial assistance.
(2) The authority may pay up to 100 percent of the
cost of a leak detection program for a water supplier or a
water supply distributor. (20 Ky. R.879; eff. 12-17-93.)
42a
420 KAR 1:040. Tier I water use fees.
RELATES TO: KRS 151.100 to 151.600,151.700 to
151.730, 151.990, 223.400 to 223.460, 224.70, 224.73
STATUTORY AUTHORITY: KRS 151.710, 151.720,
151.725, 151.730
NECESSITY AND FUNCTION: KRS 151.700 through
151.730 authorize the Kentucky River Authority to man-
age the surface water and groundwater of the Kentucky
River basin. The authority has the power and duty to
develop and to implement programs relating to the locks
and dams on the Kentucky River; to acquire, to sell and to
lease property; to develop recreational areas; to issue rev-
enue bonds; to assess fees for water use; to contract for
services; to adopt administrative regulations protecting wa-
ter in the Kentucky River basin; to develop and to imple-
ment comprehensive, plans for protecting the water of the
Kentucky River basin; and to collaborate with the Natural
Resources and Environmental Protection Cabinet and other
state agencies in coordinating Kentucky River basin water
resource and water quality activities. This administrative
regulation establishes Tier I water use fees.
Section 1. Purpose. This administrative regulation es-
tablishes Tier I fees and incidental charges for the with-
drawal of surface water and groundwater from the Ken-
tucky River basin.
Section 2. Persons Required to Pay Tier I Fee. The
persons identified in this section of this administrative regu-
lation shall pay to the authority the Tier I fee and inciden-
tal charges established by this administrative regulation,
unless exempted by Section 3 of this administrative regu-
lation.
(1) A person who withdraws surface water or ground-
water from the Kentucky River basin for noncontact cool-
ing water shall pay a Tier I fee based on net withdrawal,
which shall be 1 50 percent of the Tier I fee for gross
withdrawal.
(2) Unless entitled to a fee based on net withdrawal
in accordance with subsection (1) of this section, a person
atreresmnaietaeaiamenniiiiaid
43a
who withdraws surface water or groundwater from the Ken-
tucky River basin shall pay a Tier I fee based on gross
withdrawal.
Section 3. Persons Exempted from Paying Tier I Fee.
The following persons are exempted from paying the Tier I
fees and incidental charges established by this administra-
tive regulation:
(1) A person who withdraws surface water or ground-
water from the Kentucky River basin primarily for agricul-
tural use; and
(2) A person whose gross withdrawal of surface water
or groundwater from the Kentucky River basin is less than
10,000 gallons per day.
Section 4. Tier I Fee Rates. (1) The Tier I fee for gross
withdrawal shall be $0.028 per 1000 gallons and any por-
tion thereof from the effective date of this administrative
regulation through June 151.720. The Tier I fee for gross
withdrawal shall be $0.022 per 1,000 gallons and any por-
tion thereof from July 1,1995 through June 30,1996.
(2) The Tier I fee for net withdrawal shall be $0.028
per 1000 gallons or any portion thereof, multiplied by one
and five-tenths (15), from the effective date of this admin-
istrative regulation through June 151.720. The Tier I fee
for not withdrawal shall be $0.022 per 1000 gallons and
any portion thereof, multiplied by one and five-tenths (15),
from July 1,1995 through June 30,1996.
(3) The Tier I fees may be amended as necessary to
fund the Tier I projects budgeted by the authority, the
authority shall submit to the General Assembly with its
budget request a fee structure necessary to fund those Tier
I projects. The authority shall set the amended fees based
on the approved budget
(4) Charges incidental to Tier I fees. The authority
may assess a person required to pay a Tier I fee the follow-
ing charges incidental to collection of that fee:
(a) A deposit of up to three (3) months estimated
billings, except for bills of local governments, with
44a
interest to accrue at six (6) percent per annum and
the deposit to be returned in a year if prior payments
were timely;
(b) A late payment charge of up to five (5) per-
cent of the last quarter’s bill for payments that are
twenty (20) days late or, for local governments, more
than ten (10) days after the last regular meeting of
local government, whichever is later;
(c) A returned check charge of fifteen (15) dol-
lars; and
(d) A field collection charge, with a minimum
charge of fifty (50) dollars and a maximum charge of
$500.
Section 5. Collection of Fees. (1) A person required by
this administrative regulation to pay a Tier I fee shall pay
that fee quarterly, and shall pay any charge incidental to
the Tier I fee upon the authority’s request. Payment shall
be made within ten (10) days of receipt of a bill from the
authority.
(2) Fees and incidental charges shall be paid by check
or money order, and made payable to the Kentucky State
Treasurer. The authority may require a check to be certi-
fied if any previous check to the authority has been re-
turned for insufficient funds.
(3) A person paying a Tier I fee for gross or net with-
drawal shail complete and submit to the authority the wa-
ter withdrawal reporting form incorporated by reference in
Section 6 of this administrative regulation, identifying the
number of gallons withdrawn during that quarter. A per-
son paying a Tier I fee for net withdrawal shall also com-
plete and submit to the authority the water discharge re-
porting form incorporated by reference in Section 7 of this
administrative regulation, identifying the number of gal-
lons discharged. The water withdrawal and discharge re-
porting forms shall be submitted within fifteen (15) calen-
dar days after the end of the quarter. A person paying a
Tier I fee may use the water withdrawal reporting form
required by KRS 151.160 and 401 KAR 4:010 in lieu of the
oO
45a
water withdrawal reporting form incorporated by refer-
ence in Section 6 of this administrative regulation.
Section 6. Incorporation by Reference of Water With-
drawal Reporting Form. The document entitled ‘Water
~ Withdrawal Reporting Form’ is hereby incorporated by ref-
erence. The effective date shal] be the effective daie of this
administrative regulation. It is available for public inspec-
tion and copying, subject to copyright law, at the office of
the Kentucky River Authority, 107 Moro Street, Frankfort
Kentucky 40601, between the hours of 8 a.m. and 4:30
p.m. Mondays through Fridays, excluding state holidays.
Section 7. Incorporation by Reference of Water Dis-
charge Reporting Form. The document entitled"Water Dis-
charge Reportng Form” is hereby incorporated by refer-
ence. The effective date shall be the effective date of this
administrative regulation. It is available for public inspec-
tion and copying, subject to copyright law, at the office of
the Kentucky River Authority, 107 Mero Street, Frankfort,
Kentucky 40601, between the hours of 8 a.m. and 4:30
p.m., Mondays through Fridays, excluding state holidays.
(20 Ky. R.881; Am. 1621; eff. 1217-93.)
420 KAR 1-050. Tier ll water use fees.
RELATES TO: KRS 151.100 to 151.600,151.700 to
151.730, 151.990, 223.400 to 223.460, 224.70, 224.73
STATUTORY AUTHORITY: KRS 151.710, 151.720,
151.725, 151.730
NECESSITY AND FUNCTION: KRS 151.700 through
151.730 authorize the Kentucky River Authority to man-
age the surface water and groundwater of the Kentucky
River basin. The authority has the power and duty to
develop and to implement programs relating to the locks
and dams on the Kentucky River; to acquire, to sell and
to lease property; to develop recreational areas; to issue _
revenue bonds; to assess fees for water use; to contract for
services; to adopt administrative regulations protecting wa-
ter in the Kentucky River basin; to develop and to imple-
ment comprehensive plans for protecting the water of the
46a
Kentucky River basin; and to collaborate with the Natural
Resources and Environmental Protection Cabinet and other
state agencies in coordinating Kentucky River basin water
resource and water quality activities. This administrative
regulation establishes Tier 11 water use fees.
Section 1. Purpose. This administrative regulation es-
tablishes Tier 11 fees and incidental charges for the with-
drawal of surface water from the main siem of the Ken-
tucky River.
Section 2. Persons Required to Pay Tier 11 Fees. The
persons identified in this section of this administrative regu-
lation shal] pay to the authority the Tier 11 fees and inci-
dental charges established by this administrative regula-
tion, unless exempted by Section 3 of this administrative
regulation.
(1) A person who withdraws surface water from the
mainstem of the Kentucky River downstream of lock and
dam 14 for noncontact cooling water shall pay a Tier 11 fee
based on net withdrawal, which shall be 150 percent of the
Tier 11 fee for gross withdrawn.
(2) Unless entitled to a fee based on not withdrawal
in accordance with subsection (1) of this section, a person
who withdraws surface water from the main stem of the
Kentucky River downstream of lock and dam 14 shall pay
a Tier 11 fee based on gross withdrawal.
Section 3. Persons Exempted from Paying Tier 11 Fees.
The following persons are exempted from paying the Tier
11 fees and incidental charges established by this adminis-
trative regulation:
(1) A person who withdraws surface water from the
main stem of the Kentucky River downstream of lock and
dam 14 primarily for agricultural use; and
(2) A person whose gross withdrawal of surface water
from the main stem of the Kentucky River downstream of
leck and dam 14 is less than 10,000 gallons per day.
Section 4. Tier 11 Fee Rates. (1) The Tier 11 fee for
gross withdrawal shall be $0.016 per 1 000 gallons and
47a
any portion thereof, from the effective date of this admin-
istrative regulation through retirement of any revenue bond
for which the Tier 11 fee provides debt service.
(2) The Tier 11 fee for net withdrawal shall be $0.016
per 1000 gallons and any portion thereof, multiplied by
one and five-tenths (15), from the effective date of this
administrative regulation through retirement of any rev-
enue bond for which the Tier 11 fee provides debt service.
(3) The Tier '11 fees may be amended as necessary to =a
fund the Tier 11 projects budgeted by the authority. The
authority shall submit to the General Assembly with its
budget request a fee structure necessary to fund those Tier
11 projects. The authority shall set the amended fees based
on the approved budget.
(4) Charges incidental to Tier 11 fees. The authority
may assess a person required to pay a Tier 11 fee the
following charges incidental to collection of that fee:
(a) A deposit of up to three (3) months estimated
billings, except for bills of local governments, with
interest to accrue at six (6) percent per annum and
the deposit to be returned in a year if prior payments
were timely;
(b) A late payment charge of up to five (5) per-
cent of the last quarter's bill for payments that are
twenty (20) days late or, for local governments, more
than ten (10) days after the last regular meeting of
local government, whichever is later;
c) A returned check charge of fifteen (15) dol-
lars; and
(d) A field collection charge, with a minimum
charge of fifty (50) dollars and a maximum charge of
$500.
Section 5. Collection of Fees. (1) A person required by
this administrative regulation to pay a Tier 11 fee shall
pay that fee quarterly and shall pay charges incidental to
that fee upon the authority’s request. Payment shall be
made within ten (10) days of receipt of a bill from the
authority.
48a
(2) Fees and incidental charges shall be paid by check
or money order, made payable to the Kentucky State Trea-
surer. The authority may require a check to be certified if
a previous check to the authority was returned for insuffi-
cient funds.
(3) A person paying a Tier 11 fee for gross or net
withdrawal shall complete and submit to the authority the
water withdrawal reporting form incorporated by refer-
ence in Section 6 of this administrative regulation, identi-
fying the number of gallons withdrawn during that quar-
ter. A person paying a Tier 11 fee for net withdrawal shall
also complete and submit to the authority the water dis-
charge reporting form incorporated by reference in Section
7 of this administrative regulation, identifying the number
of gallons discharged. The water withdrawal and discharge
reporting forms shall be submitted within fifteen (15) cal-
endar days after the end of the quarter. A person paying a
Tier 11 fee may use the water withdrawal reporting form
required by KRS 151.160 and 401 KAR 4:010 in lieu of the
water withdrawal reporting form incorporated by refer-
ence in Section 6 of this administrative regulation.
Section 6. Incorporation by Reference of Water With-
drawal Reporting Form. The document entitled “Water
Withdrawal Reporting Form” is hereby incorporated by ref-
erence. The effective date shall be the effective date of this
administrative regulation. It is available for public inspec-
tion and copying, subject to copyright law, at the office of
the Kentucky River Awthority, 107 Mero Street, Frankfort,
Kentucky 40601, between the hours of 8 a.m. and 4:30
p.m., Mondays through Fridays, excluding state holidays.
49a
Section 7. Incorporation by Reference of Water Dis-
charge Reporting Form. ‘che document entitled “Water
Discharge Reporting Form” is hereby incorporated by ref-
erence. The effective date shall be the effective date of this
administrative regulation. It is available for public inspec-
tion and copying, subject to copyright law, at the office of
the Kentucky River Authority, 107 Mero Street, Frankfort,
Kentucky 40601, between the hours of 8 a.m. and 4:30
p.m., Mondays through Fridays, excluding state holidays.
(20 Ky. R.881; Am. 1621; eff. 12-17-93.)
Comment
User Fees in Lieu of Taxes:
Avoiding Constitutional Limitations
Laurence J. Zielke
I. Introduction
As The cost of providing government services continues
to increase, municipalities are seeking methods to enhance
revenue without increasing taxes. The loss of federal rev-
enue sharing and the burgeoning federal deficit have meant
that local communities must absorb a greater cost of pro-
viding government services at the local level without a
corresponding increase in revenue.
One method that enables local governments to increase
revenues and avoid the legal restrictions and political con-
sequences of taxation, is through the imposition of user
fees, also known as service charges, for municipal services.’
A service fee, unlike a tax, does not have to meet the
requirements and restrictions concerning municipal and
state taxation set forth within the Kentucky Constitution.’
In 1986 the Kentucky General Assembly enacted legis-
lation concerning user fees which provides as follows:
“User fee” means the fee or charge imposed by a local
government on the user of a public service for the use of
any particular service not also available from a non-gov-
ernment provider.*®
User fees shall not generate revenues or profits in excess
of the reasonable costs associated with providing a public
service.‘
(1) Local governments imposing user fees shall establish a
special revenue account for each user fee.
1Board of Educ. v. Lexington-Fayette Urban County Gov't, 691
S.W.2d 218, 221 (Ky.Ct. App. 1985).
2Ky Const. §§157-59, 170-75.
3Ky. Rev. Stat. Ann. §91A.510 (Miche-Dobbs-Merrill Supp. 1990).
47d. at § 91A.520
5la
(2) All user fees collected and all disbursement of such
fees shall be administered according to generally accepted
principles of governmental accounting.®
The legislation does not resolve the issue of whether a
charge for services is really a user fee or a tax in disguise.
This article will explain how courts determine whether a
charge is a fee or a tax.
II. Taxes vs. Service Charges
The difference between a tax and a service charge is not
always clear. In making this determination, a great deal
of emphasis is placed on whether the service charge is
ancillary to a form of regulation and whether the charge is
dedicated to the cost of a particular service. In determin-
ing whether a fee is a tax or service charge, courts analyze
the difference between what is a tax and what is a service
charge. A “tax” is a rate or duty, levied each year for the
purposes of general revenue, regardless of the direct ben-
efit accruing to the person or property taxed.® Contrawise,
a “service charge” is a fee for a particular service.’ The
polar star that courts look for in determining whether a
~ charge is a service fee or a tax is whether there exists a
rational basis for the charge for a specific purpose, as op-
posed to the charge being made for a general revenue pro-
ducing measure, or in the nature of a general benefit. The
general rule is that where a public entity furnishes “some
form of public service for profit, or at least for compensa-
tion,” these charges are not taxes.* The rule in Kentucky
has been stated as follows: “A tax is universally defined as
an enforced contribution to provide for the support of gov-
®Id. at § 91A.530
®Krumpelman v. Louisville & Jefferson County Metro. Sewer
Dist., 314 S.W.2d 557, 561 (Ky. 1958)
"Dickson v. Jefferson County Bd. of Educ., 311 Ky. 781, 225
S.W.2d 672 (1950).
871 Am. Jur.2d State and Local Taxation §12 (1973).
52a
ernment, whereas a fee is a charge for a particular ser-
vice.”®
III.User Fees Incidental to Regulation
One of the earliest examples of a user fee is the revenue
collected from parking meters. A parking meter extracts a
charge for the use of a public street at a particularly desig-
nated place for a specified amount of time. Parking meter
revenue can produce significant funds from which munici-
palities can construct additional public parking facilities.
One of the first challenges to user fees resulted from a
dispute over parking meters. In the case of City of Louis-
ville v. Louisville Automobile Club,” plaintiffs alleged that
an ordinance providing for parking meter was a method of
producing revenue rather than being a proper exercise of
police power."
The court did not discuss the difference between user
fees and taxes, but instead focused on whether the pri-
mary purpose for the installation of parking meters was to
regulate the use of city streets or to create revenue. The
city, in adopting the parking meter program, recited that
the fee was “for the regulation and control of traffic and
the streets of the City.”"* However, plaintiffs insisted that
the amount of revenue would be grossly in excess of the
costs of installation and maintenance of the parking meter
program and, therefore, the meter fee was in the nature of
producing general revenue and should be voided.”* The
court disagreed and held that, since the ordinance provid-
ing for parking meters had as its basis a regulatory scheme,
the city was not compelled to have a precise formula of
matching the receipts with the expenses in order for the
%Long Run Baptist Assn. v. Louisville & Jefferson COunty Metro
Sewer Dist., 775 S.W.2d 520, 522 (Ky. Ct. App. 1989).
10290 Ky. 241, 160 S.W.2d 663 (1942).
Id. at 664.
127d. at 665.
137d.
53a
parking meter program to be a proper exercise of police
power as opposed to an improper imposition of a tax."
The court recited as follows:
If the City has the power to regulate parking, it has
the power to enact a fee of sufficient amount to cover
_ the expenses of maintaining the regulation. ... The
courts will not seek to avoid an ordinance by nice
calculations of the expense of enforcing police regula-
tions, but will promptly arrest any clear abuse of
power. !®
Consequently, One of the early challenges of a user fee
for the privilege of using streets that were ostensibly con-
structed with tax dollars resulted in a finding by the court |
that as long as a nexus existed which connected the ser-
vice fee with a regulatory power, the courts would find
that the fee being charged was for a service and was not a
general tax revenue measure. Furthermore, the court ruled
that the revenues could not be excessive to support the
service. This ruling has now been refined by legislation
limiting user fee revenues to the reasonable costs of pro-
viding the services.'’
IV. Charges for Use of Public Facilities
Another service charge which was attacked as a tax con-
cerned the imposition by the Louisville and Jefferson
County Metropolitan Sewer District of a fee for the use of
sewers.'®
In 1948, the Louisville and Jefferson County Metro-
politan Sewer District (MSD) was created pursuant to Chap-
M4Td.
18Td. at 665 (quoting Ex Parte Duncan, 179 Okla. 355, 365, 65
P.2d 1015, 1017 (1937)).
16 Td.
M7Ky. Rev. Stat. Ann. § 91A.510 (Michie/Bobbs-Merrill Supp.
1990).
18See Veail v. Louisville & Jefferson County Metro. Sewer Dist.,
303 Ky. 248, 197 S.W.2d 413 (1946).
54a
ter 76 of the Kentucky Revised Statutes.’ The custodian-
ship of the existing drainage and sanitary sewer facilities
previously owned, operated, constructed, and financed by
the City of Louisville was transferred to MSD. When MSD
obtained these facilities, in enacted a schedule of rates,
rentals, and charges for the use of the facilities.” MSD
began charging for sewer service which previously had been
provided to users of the city sewer system as part of the
city’s general provision for municipal services. A taxpayer,
who was previously being provided sewer service as part of
his taxes, challenged the collection of sewer service charges
because the sewer system had been constructed out of tax
receipts.” The taxpayer argued that MSD’s sewer service
charges took private property without compensation,” im-
paired the obligation of contracts, and violated the Ken-
tucky Constitution,~ and that as a result, the service
charges were a form of double taxation.“ The allegation of
double taxation was made because the City of Louisville,
Kentucky, constructed the sewer system from tax receipts
and now the Metropolitan Sewer District was charging a
fee for the use of that system, and, therefore, this was a
form of double taxation.” The court found that there was
no taxation in the charging for sewer service and stated as
follows:
Undoubtedly, a great deal of money is spent annually -
in maintaining and operating the system; and it is
entirely equitable and legal, as we have said, to charge
- 18Ky Rev. Stat. Ann. §§ 76.010-76.200 (Michie/Bobbs-Merrill
1982).
20Td, at § 76.090.
21197 S.W.2d at 416.
221d.
Ky. Const. §§ 157-159.
24197 S.W.2d at 418.
257d.
Id. at 416.
55a
the users of the system a reasonable rate to defray
the expenses of operations, instead of directly assess-
ing the taxpayers of the city through its general fund.”
In regard to the allegation of a double taxation, the
court stated as follows:
Finally, it is insisted that the Act [chapter 76 of the
Kentucky Revised Statutes] is contrary in public policy,
in that it authorized double taxation. We find it un-
necessary to discuss the public policy of this State in
respect to double taxation, since the Act provides for
no tax whatever. Charges for sewer service are not
taxes, any more than are bridge tolls or water rents.”
V. Requiring Use of a Charged Service
Service charges have been established by municipalities in
providing garbage services. The City of Bowling Green,
Kentucky, enacted on ordinance providing that all prop-
erty owners use a municipal garbage disposal system.”
The ordinance provided that every parcel of property would
be charged a user fee for the service.” This ordinance used
the regulatory powers over public health and safety coupled
with a fee for the service.” In Cassidy v. City of Bowling
Green,*' a suit challenging this fee, the court held that the
city was under no obligation to provide sanitation service,
but if it chose to do so there was no prohibition to provide
the service and require payment for the service.** In that
case, the court held that the city could require the use of
the city garbage service and could charge for the required
use.*%
277d. at 418.
28 See Cassidy v. City of Bowling Green, 368 S.W.2d 318, 319
(Ky. 1963).
22See id.
See id. at 319-20.
317d at 318.
82 Td. at 319-20.
a
56a
VI. Indicia of User Fees vs. Taxes
When construing whether a charge is a valid user fee or is
a tax in disguise, the courts look to certain indicia of a tax
as opposed to a service charge. One item that is reviewed
is whether the service charge is incidental to a regulatory
scheme supporting the charge. It was under a regulatory
scheme that the parking meter fees were upheld.* The
court found the meter program to be incidental to the proper
exercise of police power.® Another indicia is whether the
charge has as its primary purpose the raising of general
rewenue or whether the charge is for a specific purpose.
The holding in Teter v. Clark County,® provides a succinct
summary of how courts analyze whether a charge is valid
as a service fee or whether the charge is invalid as a tax.
The court in Teter stated as follows:
The charges were only incidental to the regulatory
scheme: the payments went only toward the cost of
that program: none of the money went into general
revenue. Thus, because the money was collected for a
specific purpose (to pay the cost of a public health
program)the charge was deemed valid.”
The service charge at issue in Teter concerned the charg-
ing of fees for storm and surface water drainage services.®
The court made the distinction between service charges
and taxes clearly dependent on whether the charges in-
vollved regulation by stating as follows:
In distinguishing between a “fee” and a “tax” we staied
that if charges are intended to raise money, they are
actually taxes. Conversely, if the charges are prima-
———
City of Louisville v. Louisville Automobile Club, 290 Ky. 241,
160 S.W.2d 663 (1942).
Teter v. Clark County, 104 Wash.2d 227, 704 P.2d 1171 (1985).
37Iid. at 1177.
ad (FI
57a
rily tools of regulation, they are not taxes. Finding
that the ordinances in Hillis clearly provided that the
fees be applied to offset costs of specific services, and
that the ordinances made no provision for regulations,
this court held that the fees were actually taxes.”
A similar holding was made by the Kentucky Court of
Appeals in the case of Long Run Baptist Association v.
Louisville and Jefferson County Metropolitan Sewer Dis-
trict. In Long Run, the Louisville and Jefferson County
Metropolitan Sewer District’s creation of stormwater drain-
age services with a concomitant service charge was upheld
on the basis that the service charge was not a tax, but was
a charge for services rendered by facilities of the District.*!
In the case of Zelinger v. City and County of Denver,”
the Supreme Court of Colorado found that a storm drain-
age service charge was not a tax since “the Ordinance in
question does not raise revenue for general municipal pur-
poses as a sole or principal objective.”**
The hallmark of each of these cases is that the service
charge was not for general municipal purposes, but was
for a specific purpose relating to the program. Addition-
ally, in each of the cases, there was a regulatory scheme
providing for a public health or safety which accompanied
the charge.
VII. Calculation of the Service Fee
Another attack on the imposition of service charges is that
the precise measurement of the service is not possible and,
397d at 1180 (citing Hillis Homes, Inc. v. Shehomish Court 97
Wash. 2d 804, 650 P.2d 193 (1982).
4°Long Run Baptist Ass’n. v. Louisville & Jefferson County Metro.
Sewer Dist. 775 S.W. 2d 520 (Ky. Ct. App. 1989).
4l7d. at 523.
42Zelinger v. City & County of Denver, 724 P.2d 1356 (Colo.
1986).
437d. at 1359.
58a
therefore, the charge is really a tax.“* The issue of preci-
sion in matching the service charge with the expense asso-
ciated with the charge was dealt with in City of Louisville
v. Louisville Automobile Club. It is universally held that -
a precise matching of the service with the expenses is not
required.” It also is not required that the charge itself be
capable of precise measurement.’ In the case of parking
meters, it is clear that one hour of service is provided for a
certain fee. Less precise, but still acceptable, is the charge
for sewer service based upon the consumption of water.
However, the courts also upheld lesser quantified services,
such as drainage charges which are based upon the amount
of impervious surface on a parcel of property which con-
tributes to runoff.”
In Long Run, the plaintiff contended that, while sewers
were capable of accurate measurement, stormwater ser-
vices were incapable of accurate measurement, and, there-
fore;it' was really a tax. This issue was squarely ad-
dressed in Teter v. Clark County,®*' where the court stated:
Respondents are not required to measure each residential
lot to ascertain the exact amount of impervious surface on
44See Barber v. Commissioner, 674 S.W.2d 18 (Ky Ct. App. 1984);
Board of Educ. of Fayette County v. Lexington-Fayette Urban
County Gov't, 691 S.W.2d 218 Ky. Ct. App. 1986).
“8City of Louisville v. Louisville Automobile Club, 290 Ky. 241,
160 S.W.2d 663 (1942).
467d. at 665.
‘7Teter v. Clark County, 104 Wash. 2d 227, 704 P.2d 1171, 1179
(1985).
48Veail v. Louisville & Jefferson County Metro. Sewer Dist., 303
Ky. 248, 197 S.W.2d 413 (1946).
49Long Run Baptist Ass’n v. Louisville & Jefferson County Metro.
Sewer Dist., 775 S.W.2d 520 (Ky. Ct. App. 1989).
507d. at 522.
5lTeter, 704 P.2d at 1171.
59a
each one. Further, only a practical basis for the rates is
required, not mathematical precision.™
The Kentucky Court of Appeals in Long Run upheld the
same reasoning.™
VIII. Rational Relationship of the Service to the Fee
Attacks are made on service charges on the basis that the
process of establishing the fee and the actual fee itself bear
no relationship to the service. Therefore the fee is arbi-
trary, capricious, and violates the rights of equal protec-
tion and due process.* However, the standard of review is
one which places the burden to prove arbitrariness and
capriciousness on the person attacking the charge. As the
court in Teter stated: “To be void for unreasonableness, an
ordinance or resolution must be ‘clearly and plainly’ un-
reasonable.”©
As shown in Long Run, as long as a municipality estab-
lishes charges that are based upon a reasonable and ratio-
nal classification, the charge will withstand attacks that it
is arbitrary, capricious, or not uniform. In Long Run, the
Louisville and Jefferson County Metropolitan Sewer Dis-
trict established that the average amount of impervious
surface on one and two-family residential properties and
charged a drainage service fee for each parcel of property
in the amount of $1.75 per month for services provided.”
For all commercial and industrial property, the sewer dis-
trict charged $1.75 per each 2.500 square feet of impervi-
ous surface. The court found the investigations by the
Louisville and Jefferson County Metropolitan Sewer Dis-
trict as to the amount of run-off and impervious surface to
527d. at 1179.
58775 S.W.2d at 520.
547d.
55704P2d at 1178.
56775S.W.2d at 520.
577d at 523.
587d.
60a
be rationally related to the charge.®® Thus, the service fee
was valid and not a tax.© As long as the service charge is
uniform and there exists a rational basis for different clas-
sifications of charges, the fee will not violate section 3 of
the Kentucky Constitution.®!
IX. Collection of Service Fees
Another area which must be explored in evaluating whether
a fee is a service charge or a tax is the determination of
how the charges are collected and the enforcement of that
collection. In the case of the sewer districts, a statute
provides that water will not be provided until the sewer
service charge is paid.” In some cases, service charges for
one service may be compelled through the discontinuance
of another service, such as stopping water service for the
nonpayment of garbage fees. This is a very effective en-
forcement procedure and is lawful. In Cassidy v. City of
Bowling Green,® the court stated:
The final contention is that the City may not enforce
collections of its garbage disposal charges by discon-
tinuance of its water services. We are unable to grasp
from appellant’s brief what constitutional right is be-
ing breached by this method of collecting bills. It is
shown by this record that for public health and sani-
tation purposes, the City furnishes water service, sew-
erage service, and garbage disposal service. They are
all inter-related and the City is under no obligation to
furnish any or all of these services except upon the
payment of reasonable charges. This public health
program, while divided into separate administrative
units, is a single program. Any reasonable method of
597d.
607d. at 523-24.
61 Id
62Ky Rev.Stat.Ann. § 76.090(4) (Michie/Bobbs-Merrill 1980).
63368S, W.2d 318 (Ky. 1963).
6la
collection is justified and certainly deprives appellants
of no constitutional rights.™
The Court went on to say that interdependence of the ser-
vice in regard to enforcement procedures is not necessarily
a controlling factor.©
There are situations where a municipality may attempt
to have the user fee charged annually along with the tax
bill. While there is no prohibition to this procedure, it may
blur the distinction between the user fee and the tax. For
that reason, it may be better to avoid this method of col-
lecting user fees. Additionally, if the service fee is in-
cluded on a tax bill, the collection of the charges is compli-
cated since the sheriff is the tax collector and has no
independent authority to collect service charges.©
X. Conclusion
The ability of municipalities to enact user fees for services
provided by the municipality seems to be the growing trend
and, if done properly, is enforceable, collectible, and legal.
Furthermore, the use of service fees in order to
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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.