Alabama Advisory Opinions November 08, 1988: AGO 89-00032 (November 08, 1988)

Advisory Opinion Text

Honorable Betty Waites Hall

Tax Assessor

Elmore County

P.O. Box 396

Wetumpka, AL 36092

Fees - Fire Districts - Exemptions

Service charge levied under authority of Act 88-620 constitutes "fee" rather than "tax."

Such fee applies to both real and personal property; is computed based on assessed value of property; is collected at same time as ad valorem tax; and is not subject to ad valorem tax exemptions.

County general fund receives no commission out of fees collected.

Act provides no limitation on frequency of elections held thereunder.

Dear Ms. Hall:

This opinion is issued in response to your request for an opinion from the Attorney General.

QUESTION 1.

May persons be exempted from the service charge for the same reasons that they are exempted from ad valorem taxation, such as because of disability, age and income and because the property is a homestead?

FACTS AND ANALYSIS

The answer to this question (as well as some of the following ones) depends upon whether the service charge may properly be categorized as a tax or as a fee. If it is a tax, then other provisions of the law applicable to ad valorem taxes will apply to the service charge levied by the Act. However, if the service charge is properly determined to be a fee, then other provisions applicable to ad valorem taxation may not apply to it.

Act No. 88-620 provides for the creation and maintenance of fire districts in Elmore County. Section 11 of the Act provides that the districts shall constitute public corporations which shall have the power, among other things, to levy and collect service charges as provided in the Act. Section 1 of the Act defines se rvice charge to be "the fees levied by this act for the maintenance of the fire districts created by this act." Section 14 provides for the levy of a service charge and §15 refers to fees and service charges:

Section 14. The expense of establishing and maintaining a district shall be paid for by the proceeds of a service charge which shall be levied and collected in an amount not more than three (3) mills per dollar valuation on all taxable property within the district. Said service charge shall be levied upon and collected from persons and properties within the district by the tax assessor and tax collector of the county. Such charge shall be a personal obligation of the property owner and shall be due at the same time as the property tax payment; and to secure the collection of the service charge there shall be a lien against said property in favor of the fire district, which lien shall be enforceable by the sale thereof in the same manner in which the foreclosure of a municipal assessment for public improvements is authorized.

Section 15. The fees collected by the tax collector of the county shall be distributed to the fire districts. Ninety-five percent (95%) of the service charge collected shall be returned to the district from which the service charges were collected. Five percent (5%) of the total amount of the service charges collected shall be placed in a special fund to be used by the Elmore County Fire Protection Board in accordance with this act. (Emphasis added)

Section 17 also refers to a service charge.

The distinction between fees and taxes has been addressed by the courts on numerous occasions. In Attorney General v. Wi sconsin Construction, 268 N.W. 238, 222 Wis. 279, the Court stated that taxes are imposed for the purpose of general revenue, while license fees and other fees are ordinarily imposed to cover the costs and expense of supervision or regulation. In Gunby v. Yates, 214 GA. 17, 102 S.E.2d 548, the Court stated that a tax is an enforced contribution exacted pursuant to legislative authority for the purpose of raising revenue to be used for public or governmental purposes, and not as payment for a special privilege or service rendered by a public officer, which is a fee. In the case of Dickson v. Jefferson County Bd. of Ed., 311 KY. 781, 225 S.W.2d 672, the Court stated that any payment exacted by the State or its municipal subdivisions as a contribution toward the cost of maintaining governmental functions, where special benefits derived from their performance are merged in the general benefit, is a tax, while a fee is generally regarded as a charge for some particular service. In the case of Memphis Retail Liquor Dealers Ass'n, Inc. v. City of Memphis, 547 S.W.2d 244, the Court stated that if an imposition is primarily for the purpose of raising revenue, it is a tax; if its purpose is for the regulation of some activity under the police power of the governing authority, it is a fee. In Valandra v. Viedt, 259 N.W.2d 510, the Court stated that the distinction between fees and taxes is that taxes are imposed for the purpose of general revenue while license or other fees are ordinarily imposed to cover the costs and expense of supervision or regulation. In the case of U. S. v. River Coal Co., Inc. , 748 F.2d 1103, the Court stated that the chief distinction between a non-dischargeable tax under the Bankruptcy Act and a fee is that a tax is an exaction for public purposes, while a fee relates to an individual privilege or benefit to the payer.

Section 3 of the Act provides for the creation of districts for fighting fires, preventing fires and other related services. Section 11 of the Act provides that such districts shall constitute public corporations having the power to do all things necessary and convenient for carrying out the purposes for which they are created. Section 14 of the Act provides that the expense of establishing and maintaining a district shall be paid for by the proceeds of a service charge to be levied upon and collected from persons and properties within the district. Section 15 of the Act provides that 95% of the service charges or fees collected shall be returned to the district from which the service charges were collected, and that 5% of the fees shall be for the use of the Elmore County Fire Protection Board, which is a board established by §21 of the Act, consisting of all the chiefs of all the legally organized fire departments in Elmore County, the director of the Elmore County Emergency Management Agency, and the County Forest Supervisor of the Alabama Forestry Commission. The Board has general supervisory authority over the creation of fire districts as provided by the Act.

It is apparent from reading the Act that the service charges provided therein constitute fees rather than taxes, inasmuch as they confer a particular benefit to property owners, and that a particular service (fire protection) is provided to such owners under the police power of the government. Therefore, both the intent of the Legislature as established by the terminology contained in the Act, and the practical effect of the Act, is to establish a fee rather than a tax.

Since the service charge does not constitute an ad valorem tax, provisions of law applicable to ad valorem taxes in general do not apply to the service charge levied by Act No. 88-620. Therefore, the Act is not subject to any exemptions that apply to the ad valorem tax, such as the homestead exemption.

CONCLUSION

The fee provided by Act No. 88-620 is not subject to ad valorem tax exemptions.

QUESTION 2.

Is the service charge provided by Act No. 88-620 levied on real estate only or is it to be levied on personal property also?

FACTS AND ANALYSIS

The Act provides that it shall be levied on "all taxable property within the district." Therefore, it applies to personal property as well as to real property.

CONCLUSION

The service charge provided by Act No. 88-620 applies to both real and personal property.

QUESTION 3.

Act No. 88-620 provides for a service charge which shall not exceed "three (3) mills per dollar of value." Is the service charge to be computed on the assessed value of the property or on the appraised value of the property?

FACTS AND ANALYSIS

The Act provides that the service charge shall not exceed three mills per dollar of valuation. This would normally refer to the appraised market value of the property. However, the Legislature clarified this question in House Joint Resolution 27, 1988 First Special Session, in which it is stated that "the service charge imposed in Section 14 of the Act shall be on assessed property value."

CONCLUSION

The service charge levied pursuant to Act No. 88-620 is to be computed on the assessed value of the property.

QUESTION 4.

Section 21 of the Act provides that "the board may by majority vote spend funds from the special fund established by Section 15 of this act in the furtherance of any of the purposes set out in Section 20 of the Act." Section 20 of the Act does not set forth any purposes for the expenditure of funds. What are the purposes for which the funds may be spent?

FACTS A ND A NALYSIS

The allusion in §21 to §20 is apparently a clerical error of some sort. The funds may be spent for any of the purposes stated in §21 of the Act.

CONCLUSION

The Elmore County Fire Protection Board may by a majority vote spend funds from the special fund established by §15 of the Act in furtherance of any of the purposes set out in §21 of the Act.

QUESTION 5.

Does the county general fund receive any commission on the service charges collected to compensate it for its expenses in collecting the service charge?

FACTS AND ANALYSTS

The Act does not provide any commission on the service charges collected for the county general fund. Therefore, the general fund may not receive any commission on said service charges.

CONCLUSION

No commission may be paid to the county general fund out of the service charges collected under the Act to compensate the commission for its expenses in collecting the service charge.

QUESTION 6.

After a fire district is created and a service fee is imposed, when thereafter is the service fee to be included on the ad valorem tax statement, and should any proration of the service charge be made based on the portion of the year that the tax has been in effect? For instance, on July 19, 1988, the voters passed a resolution creating the Redland Fire Protection District and levying a 3 mill service charge. Is this initial 3 mill service charge to be included with the ad valorem tax notice that becomes payable after October 1, 1988? Is any proration of the charge to be made for the period from July 18 to September 30, 1988, or are property owners to be charged an entire 3 mills even though the fire district was in operation less than 3 months?

FACTS AMD ANALYSIS

Section 14 of the Act provides that the service charge "shall be due at the same time as the property tax payment." Therefore, the same rules apply with regard to the service charge as apply to the ad valorem tax regarding collection of the tax. There is no proration of ad valorem taxes. The owner of property on October 1 of a given tax year owes the tax for the entire year. A lien arises for the tax on October 1, the first day of the tax year. However, the tax is not collected until the following October 1. Therefore, in your hypothetical question the service charge would not be included with the ad valorem tax notice that becomes payable after October 1, 1988. The service charge will be paid for the first time on October 1, 1989.

CONCLUSION

A service charge provided by Act 88-620 is to be collected at the same time as ad valorem taxes are collected.

QUESTION 7.

Immediately after the voters created the Redland Fire Protection District, a petition was started to dissolve the fire district. The Act provides that an election shall be held concerning the creation of a fire district whenever 75 property owners petition the Probate Judge, and an election shall be held about dissolving a fire district whenever 100 property owners petition the Probate Judge. Is there any limit to the number of times or the frequency with which the voters can be asked to vote about the existence of a fire district?

FACTS AND ANALYSIS

Section 6 of the Act provides as follows:

The provisions of the election laws governing the registration of voters, equipment at polling places, furnishing of supplies, appointment of election officers, voting and canvassing returns at a general election shall apply to any election held under this act.

Except as limited by the general election laws and the requirements contained in the Act for obtaining an election, there is no limit to the number of times or the frequency with which the voters can be asked to vote regarding the existence of a fire district. Presumably, a new petition could be started after every election.

CONCLUSION

There is no specific limit on the frequency of elections provided by the Act, so long as the requirements contained therein for calling an election are met.

Sincerely,

DON SIEGELMAN Attorney General.

RON BOWDEN, Assistant Attorney General