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IN THE SUPREME COURT OF FLORIDA
CITY OF FERNANDINA BEACH,
Appellant,Case No. SC14-299
v. Lower Tribunal No. 13-CA-485
STATE OF FLORIDA, et al.,
Appellees.
On Appeal from the Circuit Court of the Fourth JudicialCircuit in and for Nassau County, Florida
INITIAL BRIEF OF APPELLANTCITY OF FERNANDINA BEACH
Thomas B. ConstantineFlorida Bar. No. 869112Bryant Miller Olive P.A.111 Riverside Avenue, Suite 200Jacksonville, FL 32202
Elizabeth W. NeibergerFlorida Bar No. 0070102Jason M. BrethFlorida Bar No. 0040742Bryant Miller Olive P.A.101 North Monroe Street, Suite 900Tallahassee, FL 32301
Susan H. ChurutiFlorida Bar No. 284076Bryant Miller Olive P.A.One Tampa City Center, Suite 2700Tampa, FL 33602
Tammi E. BachFlorida Bar No. 179086City AttorneyCity of Fernandina Beach204 Ash StreetFernandina Beach, FL 32034
Attorneys for Appellant
Filing # 10629816 Electronically Filed 02/24/2014 05:02:53 PM
RECEIVED, 2/24/2014 17:03:51, John A. Tomasino, Clerk, Supreme Court
i
TABLE OF CONTENTSTABLE OF CONTENTS........................................................................................... i
TABLE OF CITATIONS ......................................................................................... ii
STATEMENT OF THE CASE AND FACTS ..........................................................1
SUMMARY OF ARGUMENT ...............................................................................10
ARGUMENT ...........................................................................................................12
I. STANDARD OF REVIEW...........................................................................12
II. THE TRIAL COURT APPLIED THE WRONG STANDARD OF REVIEW.......................................................................................................................13
A. This is a bond validation proceeding, not an “action challenging animpact fee” ...............................................................................................13
B. Even if this were an “action challenging an impact fee,” the trial courtimproperly applied section 163.31801(5) retroactively...........................14
i. The Capacity Fee pre-dates section 163.31801(5)...................................15
ii. Section 163.31801(5) does not operate retroactively ...........................16
iii. Section 163.31801(5) does not apply to impact fees imposed before2009, regardless of when the lawsuit is filed........................................19
C. If section 163.31801(5) applies retroactively, it cannot be construed tothe remove “rational” component from the dual rational nexus test .......21
III. GIVING PROPER DEFERENCE TO THE CITY’S LEGISLATIVEFINDINGS, IT SATISFIED THE DUAL RATIONAL NEXUS TEST ......23
A. The City made a legislative decision to purchase Excess Capacity toaccommodate future growth for $7.5 million ..........................................24
B. The City properly relied on its engineering consultant and theinformation before it.................................................................................26
IV. THE CITY WAS NOT REQUIRED TO PREPARE A FORMAL IMPACTFEE STUDY..................................................................................................31
V. THE “NEED” FOR THE CAPACITY FEES IS OUTSIDE THE SCOPE OFINQUIRY IN BOND VALIDATIONS.........................................................33
VI. ALTERNATIVELY, THE CAPACITY FEE IS A VALID USER FEE ...34
CONCLUSION........................................................................................................40
CERTIFICATE OF SERVICE ................................................................................42
CERTIFICATE OF COMPLIANCE.......................................................................44
ii
TABLE OF CITATIONS
CasesAlachua Cnty. v. Cretul
No. 10-CA-0478 ...................................................................................................19Arrow Air, Inc. v. Walsh
645 So. 2d 422 ......................................................................................................21Bhoola v. City of St. Augustine Beach
588 So. 2d 666 ......................................................................................................16Borden v. E.-European Ins. Co.
921 So. 2d 587 ......................................................................................................24Boschen v. City of Clearwater
777 So. 2d 958 ......................................................................................................30City of Parker v. State
992 So. 2d 171 ......................................................................................................14Coleman v. City of Key West
807 So. 2d 84 ........................................................................................................16Conlon v. City of Fernandina Beach
Case No. 2011-CA-000426 ....................................................................................7Contractors & Builders Ass'n of Pinellas County v. City of Dunedin
329 So. 2d 314 ......................................................................................................28Crawford v. Barker
64 So. 3d 1246 ......................................................................................................12Curson v. W. Conshohocken Mun. Auth.,
611 A.2d 775 (Pa. Commw. Ct. 1992).................................................................43Dep't of Rev. v. Zuckerman–Vernon Corp.
354 So. 2d 353 ......................................................................................................18Donovan v. Okaloosa Cnty.
82 So. 3d 801 ........................................................................................................30Florida Insurance Guaranty Ass’n, Inc. v. Devon Neighborhood Ass’n, Inc.
67 So. 3d 187 ........................................................................................................12Global Travel Mktg., Inc. v. Shea
908 So. 2d 392 ......................................................................................................16Hollywood, Inc. v. Broward Cnty.
431 So. 2d 606 ......................................................................................................20Keystone Water Co. v. Bevis
278 So. 2d 606 ......................................................................................................18Lodwick v. Sch. Dist. of Palm Beach Cnty.
506 So. 2d 407 ......................................................................................................37
iii
Metro. Dade Cnty v. Chase Fed. Hous. Corp.737 So. 2d 494 ............................................................................................... 17, 21
Miccosukee Tribe of Indians of Fla. v. S. Fla. Water Mgmt. Dist.48 So. 3d 811 ........................................................................................................11
Mohme v. City of Cocoa,328 So. 2d 422 ......................................................................................................43
Murphy v. City of Port St. Lucie666 So. 2d 879 ......................................................................................................27
Panama City Beach Cmty. Redevelopment Agency v. State831 So. 2d 662 ................................................................................... 11, 13, 14, 34
Partridge v. St. Lucie Cnty.539 So. 2d 472 ......................................................................................................37
Paul v. Wells Fargo Bank, N.A.68 So. 3d 979 ........................................................................................................12
Pinellas Cnty. v. State776 So. 2d 262 ................................................................................... 38, 39, 40, 43
Poe v. Hillsborough Cnty.695 So. 2d 672 ............................................................................................... 27, 44
Raymond James Financial Services, Inc. v. Phillips126 So. 3d 186 ......................................................................................................12
Save Our Septic Sys. Comm., Inc. v. Sarasota Cnty.957 So. 2d 671 ......................................................................................................21
Smith v. Woodruff2 So. 2d 583 ..........................................................................................................16
State v. City of Daytona Beach,158 So. 300 ...........................................................................................................37
State v. City of Miami Springs,245 So. 2d 80 ........................................................................................................41
State v. Sunrise Lakes Phase II Special Recreation Dist.383 So. 2d 631 ......................................................................................................37
Town of Medley v. State162 So. 2d 258-59.................................................................................................36
Town of Redington Shores v. Redington Towers, Inc.,354 So. 2d 942 ......................................................................................................42
Town of Riviera Beach v. State53 So. 2d 828 ........................................................................................................14
Statutes§ 2(b), article VIII, Florida Constitution..................................................................22§163.3180(2), Florida Statutes...................................................................................3
iv
§163.31801(1), Florida Statutes...............................................................................23§163.31801(5), Florida Statutes....................................................................... passim§163.31801, Florida Statutes ...................................................................................22§180.02(3), Florida Statutes.....................................................................................43§180.13, Florida Statutes .........................................................................................42§180.301, Florida Statutes .........................................................................................2§9, ch. 06-218, Laws of Florida...............................................................................22Article II, section 3, Florida Constitution ................................................................19Article VII, section 18, Florida Constitution .................................................... 15, 19Ch. 09-49, Laws of Florida ............................................................................... 15, 18Ch. 11-149, Laws of Florida ............................................................................. 15, 19Ch. 180, Florida Statutes..........................................................................................45Ch. 75, Florida Statutes..............................................................................................1Fla. Admin. Code R. 62-555.348(6) ..........................................................................4
Other Authorities§2-543, City of Fernandina Beach Code of Ordinances..........................................3483 Fla. B.J. 92, 92, 95 (2009)...................................................................................23Bryan A. Mantz & Henry L. Thomas, Utility Impact Fees: Practices and
Challenges 104 J. Am. Water Works Ass'n E218, E219 (Apr. 2012) .................31Fla. S. Comm. on Rules, SB 410 (2011), Staff Analysis 5 (Mar. 14, 2011) .... 19, 24James R. Wolf & Sarah Harley Bolinder, The Effectiveness of Home Rule: A
Preemption and Conflict Analysis ........................................................................23McQuillin Mun. Corp. §21:46 .................................................................................16
1
STATEMENT OF THE CASE AND FACTS
This is a direct appeal from the trial court’s final judgment refusing to
validate bonds in a validation proceeding under chapter 75, Florida Statutes. The
City of Fernandina Beach (“City”) brought this action to validate the issuance of its
Utility System Refunding Revenue Bonds, Series 2013B (“2013B Bonds”). (App.
26-44.) The purpose of the 2013B Bonds is to refinance debt the City incurred to
purchase capacity to supply potable water to future customers. The 2013B Bonds
would be repaid, in part, by a capacity fee paid by new customers connecting to
City’s water utility for the first time. City resident Joanne Conlon intervened,
arguing that the capacity fee was invalid and, therefore, the City lacked authority to
issue the 2013B Bonds. (App. 45-48.) The trial court agreed.
Water System Purchase and Financing
In 2002, the City became interested in purchasing a potable water treatment
and distribution system (“Water System”) owned by the Florida Public Utilities
Company (“FPUC”). (App. 912.) The City retained the engineering consulting
firm Hartman & Associates, Inc. (“Hartman”), to gather information, perform a
valuation, and conduct due diligence on the potential acquisition. (App. 572, 986-
88.) Hartman had worked on the City’s then-existing wastewater system and was
familiar with the City and its needs. (App. 987.)
2
Hartman presented its preliminary due diligence findings at a public
workshop meeting held to discuss the potential acquisition. (App. 115-304, 988-
92.) At a later public hearing, the City determined the acquisition was in the public
interest, a prerequisite to purchasing a utility under section 180.301, Florida
Statutes.1 (App. 510.) The City considered various reports and information in
making this determination, including two reports prepared by Hartman: (i) Florida
Statute 180.301 Briefing Document: Florida Public Utilities Company Water
System (“Briefing Document”);2 and (ii) Engineering Valuation for the Florida
Public Utilities Water System (“Engineering Valuation”).3 (App. 104, 506-10,
914-15.) The City then discussed the terms of the proposed Agreement for
Purchase and Sale of Water Assets (“Purchase Agreement”). (App. 506-10.)
Based on Hartman’s valuations and participation in negotiations with FPUC,
the Purchase Agreement provided that the City would purchase two separate
assets, each with a separate purchase price. (App. 518-19, 1012; see App. 506-07.)
Hartman determined that the Water System was worth $19,400,000, based on its
existing users as of December 2, 2002. (App. 334, 361, 1008-09.) The Purchase
Agreement provided that the City would pay $18,950,000 in cash for the Water
1 Section 180.301 requires a municipality to determine that the utility purchasewould be in the public interest, taking several enumerated factors into account.2 App. 305-58.3 App. 359-502.
3
System as it existed on that date, which the Purchase Agreement referred to as the
“Purchased Assets.” (App. 518-19, 1012.)
However, the Water System had the ability to serve substantially more users.
FPUC had already improved the Water System to give it enough capacity to meet
the demands of additional users connecting as a result of future development.
(App. 334-35; see App. 105.) These improvements, which created significantly
more capacity than needed for its existing users (“Excess Capacity”), had value:
the ability to collect additional charges and fees from additional users, without the
immediate need to invest in additional upgrades to the Water System. (App.
334.)
Relying on Hartman’s analysis, the City found that there was sufficient
Excess Capacity to meet the demands of future growth and development through
the year 2020. (App. 777; see App. 105.) The City had a need for the Excess
Capacity because state concurrency and annexation laws required it to have enough
capacity to support growth as it occurred. 4 The Excess Capacity had distinct
4 See § 163.3180(2), Fla. Stat. (“adequate . . . potable water facilities shall be inplace and available to serve new development no later than the issuance by thelocal government of a certificate of occupancy or its functional equivalent”);§ 171.042(1)(c), Fla. Stat. (municipality can only annex property if it has theability to provide water and sewer services to property owners in area to beannexed); Fla. Admin. Code R. 62-555.348(6) (when local government’s waterdemand capacity will be exceeded in less than five years, it must submit a capacityanalysis to the Department of Environmental Protection that includes a plan toobtain increased capacity).
4
value to the City because it did not want to impose a moratorium on construction.
(App. 105, 1001.) Nor did the City did want to increase water rates to pay for the
Excess Capacity. (App. 1009.) The City’s policy is that “existing citizens
shouldn’t pay for growth.” (App. 914.) Water capacity fees are in line with this
policy because they require new growth “to pay for itself.” (App. 913.) In 2003,
capacity fees were a common and accepted way to accomplish this objective in
acquisitions of excess capacity. (App. 1038-39.)
Hartman conducted a valuation of the Excess Capacity by (i) determining
the amount of water capacity fee the City could charge new users connecting to the
Water System per Equivalent Meter Connection (“EMC”), 5 and (ii) multiplying
that amount by the number of EMCs the Water System had of Excess Capacity.
(App. 1013; see App. 788, 795, 1019.) It determined that the Water System had
approximately 5,000 EMCs of Excess Capacity and the City could charge a $1,500
per EMC water capacity fee to new users. (Id.) Therefore, Hartman valued the
Excess Capacity at $7,500,000 (5,000 EMCs of Excess Capacity times $1,500
capacity fee per EMC). The Purchase Agreement provided that the City would pay
that amount for the Excess Capacity over the next seven years. (App. 519.) The
City agreed to use all water capacity fees it collected within the seven-year period
to make these future payments to FPUC. (Id.)
5 An EMC is a standard unit of water use.
5
Based on a review of historical water use and growth projections, Hartman
estimated that new growth would use 250 EMCs of the Excess Capacity each year
during the seven-year period. (App. 335-36, 338-341.) Therefore, Hartman
estimated the City would collect $2,700,000 in water capacity fees over that
period, which would require the City to make a final payment of $4,800,000 in
2010 ($7,500,000 purchase price for Excess Capacity less $2,700,000 capacity fees
collected through 2010). (App. 335-41, 1019.)
No one spoke in opposition to the Purchase Agreement at the public hearing.
(App. 920.) At the hearing, the City specifically considered and questioned the
$7,500,000 payment. The Vice Mayor asked Hartman to explain what exactly the
City would be purchasing for $7,500,000, and whether that was a reasonable price.
(App. 506-09.) The City accepted Hartman’s explanation, found that the
acquisition was in the public interest, and approved the Purchase Agreement.
(App. 503-04, 511.) The Purchase Agreement was executed on December 3, 2002.
(App. 548.)
To finance the $18,950,000 payment for the Purchased Assets, the City
issued its Utility Acquisition and Improvement Revenue Bonds, Series 2003
(“2003 Bonds”). (App. 755.) The offering statement specifically stated that water
capacity fees would not be used to repay the 2003 Bonds. (Id.)
6
Capacity Fees Imposed
To pay for the Excess Capacity, in 2003, the City adopted an ordinance
authorizing it to impose water capacity fees on new users of the Water System
(“Capacity Fees”). (App. 776-79; see App. 105.) The City also adopted a
resolution establishing the amount of the Capacity Fees at $1,500 per EMC, the
amount Hartman recommended as a result of the impact fee analysis it conducted
in connection with the acquisition. (App.780-87; see App. 107.) Because the
Capacity Fees would be used to pay for the City’s purchase of a non-depreciable
asset (excess water capacity), Hartman determined that the equity buy-in method
was the industry standard most appropriate to calculate the Capacity Fees. (App.
196, 1013-15, 1034-35.) Hartman also analyzed the fees FPUC charged to new
users to connect to the Water System. At the public meeting, no one spoke or
offered information in opposition to the Capacity Fee. (App. 920-21.)
Over the next seven years, the City paid FPUC all Capacity Fees it collected.
(App. 838, 922.) In 2010, the City issued bonds to finance the remaining balance
due for the Excess Capacity (“2010 Bonds”). (App. 108.) The 2010 Bonds were
secured, in part, by the Capacity Fees.
The 2013B Bonds
In 2013, the City started to explore options to obtain debt service savings by
refinancing all of its outstanding debt associated with the utility system at lower
7
interest rates. As part of the due diligence associated with refinancing, the City
informed its financing team that the Capacity Fees, which secured the 2010 Bonds,
had since been challenged in a pending declaratory judgment action, Conlon v.
City of Fernandina Beach, Case No. 2011-CA-000426) (Fla. 4th Cir. Ct.) (comp.
filed 2011). In light of this legal action, the City and its financing team decided to
bifurcate the refinancing of its outstanding utility system debt into two separate
bond issues. By doing so, the City was able to immediately refinance the
outstanding utility system debt not secured by the Capacity Fees and achieve
millions of dollars in debt service savings. After the City closed the first
refinancing,6 the City adopted a resolution authorizing it to refinance the 2010
Bonds by issuing the 2013B Bonds, which are the subject of this validation. (App.
108-09; see App. 26, 42.)
The proposed 2013B Bonds will be repaid, in part, by the Capacity Fees.
(App. 109.) The Capacity Fees are earmarked exclusively for that purpose. (App.
1010-11.) To provide assurance that the 2013B Bonds are marketable, the City
brought this bond validation proceeding to adjudicate their validity. (App. 110.)
Final Judgment Denying Validation
6 The City refinanced a portion of its outstanding utility system debt, including the2003 Bonds, by issuing its Utility System Refunding Revenue Bonds, Series2013A.
8
After a two-day trial, the trial court entered a final judgment denying
validation. (App. 1-25.) The trial court determined that section 163.31801(5),
Florida Statutes, supplied the standard of review. (App. 9.) Applying section
163.31801(5), the trial court did not give deference to the City’s legislative
determinations.
The material fact findings in the final judgment are based on the testimony
of two competing expert witnesses: (1) Gerald Hartman, an engineer and the
principal of Hartman, who provided professional advice to the City regarding the
Water System acquisition and the need for and amount of the Capacity Fees; and
(2) John Guastella, an unlicensed engineer retained by the intervenor to testify at
trial. (App. 12-22.) The trial court found that the City improperly used the
Capacity Fee to pay for the entire Water System, rather than the Excess Capacity
alone. (App. 22.) It also accepted Mr. Guastella’s opinion as to the proper method
of calculating the Capacity Fee, and rejected Mr. Hartman’s opinions. (Id.) It
further concluded that the City did not prepare a formal “impact fee study” (App.
12), and did not “need” the Capacity Fees to pay for the Excess Capacity (App. 6,
20, 21-22).
The trial court concluded that the City does not have authority to issue the
2013B Bonds because the Capacity Fee does not meet the “dual rational nexus”
test for validity of impact fees. (App. 22, 25.)
9
The final judgment was rendered on January 2, 2014 (App. 1), and the City
timely filed its notice of appeal on February 3, 2014.
10
SUMMARY OF ARGUMENT
The trial court erred as a matter of law by applying the standard of review
contained in section 163.31801(5), Florida Statutes, which prevents courts from
applying a deferential standard of review in actions challenging impact fees.
Section 163.31801(5) does not apply to bond validation proceedings. Because this
is an action to validate bonds, it is instead governed by decades of precedent firmly
establishing that deference must be accorded to a local government’s legislative
determinations. Even if section 163.31801(5) applies in bond validations
involving impact fees, it does not apply here because the Capacity Fee was
imposed before the statute was enacted, and the legislature did not intend it to
apply retroactively. Assuming section 163.31801(5) could be applied retroactively
to the Capacity Fee, the trial court improperly construed it as removing the
deference or reasonableness built into the dual rational nexus test itself. Section
163.31801(5) leaves the dual rational nexus test completely intact. At most, it only
prohibits courts from using a more deferential standard. As a result, the City’s
legislative findings and policy decisions were entitled to deference.
Because the trial court failed to give any degree of deference to the City, it
committed a legal error that resulted in incorrect fact findings. Viewing the
evidence with proper deference, the Capacity Fees are valid impact fees under the
dual rational nexus test. Alternatively, the Capacity Fees are authorized user fees.
11
12
ARGUMENT
I. STANDARD OF REVIEW
The scope of inquiry in a bond validation proceeding, both at the trial court
and this Court, is limited to three issues: (1) whether the public body has authority
to issue the bonds; (2) whether the purpose of the obligation is legal; and (3)
whether the bond issue complies with the requirements of law. Miccosukee Tribe
of Indians of Fla. v. S. Fla. Water Mgmt. Dist., 48 So. 3d 811, 817 (Fla. 2010). In
this case, the dispute is over the first prong: the City’s authority to issue the 2013B
Bonds. The only issue is whether the Capacity Fees pledged to secure the 2013B
Bonds are valid. If so, the City has authority to issue the 2013B Bonds and the
final judgment should be reversed. City of Gainesville v. State, 863 So. 2d 138,
141, 143 (Fla. 2003).
This appeal is based on the trial court’s incorrect legal conclusions. Whether
the trial court applied the wrong legal standard or misapplied the law are questions
of law, which the Court reviews de novo. Panama City Beach Cmty.
Redevelopment Agency v. State, 831 So. 2d 662, 665 (Fla. 2002) (questions of law
reviewed de novo in bond validation appeal); Paul v. Wells Fargo Bank, N.A., 68
So. 3d 979, 986 (Fla. 2d DCA 2011) (determination of applicable legal standard
reviewed de novo). Legal issues include statutory interpretation, Raymond James
Financial Services, Inc. v. Phillips, 126 So. 3d 186, 190 (Fla. 2013), and
13
determining a statute’s prospective or retroactive application, Florida Insurance
Guaranty Ass’n, Inc. v. Devon Neighborhood Ass’n, Inc., 67 So. 3d 187, 194 (Fla.
2011). The trial court’s interpretation of written documents is also reviewed de
novo. E.g., Crawford v. Barker, 64 So. 3d 1246, 1251 (Fla. 2011).
II. THE TRIAL COURT APPLIED THE WRONG STANDARD OFREVIEW
A. This is a bond validation proceeding, not an “action challenging animpact fee”
The trial court incorrectly analyzed the City’s authority to issue the 2013B
Bonds under the standard governing impact fee challenges under section
163.31801(5), Florida Statutes. Because this is an action to validate bonds under
chapter 75, Florida Statutes—not an “action challenging an impact fee”—section
163.31801(5) does not apply. Instead, the trial court was required to determine the
City’s authority to issue the 2013B Bonds under the well-established legal
standards for bond validations. The fact that the Capacity Fees were pledged to
repay the 2013B Bonds did not transform this bond validation into an action
challenging an impact fee.
Because the standard of review in section 163.31801(5) is materially
different from the standard of review in bond validations, the trial court’s entire
analysis is flawed. Section 163.31801(5) provides that, in an “action challenging
an impact fee,” the court cannot use a deferential standard of review in
14
determining whether the Capacity Fee meets the requirements of legal precedent.
But in bond validations, courts “must maintain a very deferential standard of
review” of the government’s legislative determinations. E.g., Panama City Beach
Cmty. Redevelopment Agency, 831 So. 2d at 665 (emphasis added).7 This
comports with the general rule that a court cannot substitute its judgment for that
of a local legislative body unless the legislative process was tainted by an improper
purpose. Town of Riviera Beach v. State, 53 So. 2d 828, 831 (Fla. 1951). In this
case, the trial court specifically found that the City did not act with an improper
purpose. (App. 11.)
Just as in any other bond validation, here, the City’s legislative
decisionmaking is entitled to deference. By applying the wrong standard of
review, the trial court failed to give deference to the City. As a result, its fact
findings are incorrect.
B. Even if this were an “action challenging an impact fee,” the trialcourt improperly applied section 163.31801(5) retroactively
Assuming section 163.31801(5) could be applied in bond validation
proceedings involving impact fees, the trial court incorrectly applied it in this case.
7 Accord Panama City Beach Cmty. Redev. Agency, 831 So. 2d at 667 (in bondvalidations, trial court reviews government’s legislative findings to determinewhether they are “patently erroneous”); City of Parker v. State, 992 So. 2d 171,178 (Fla. 2008) (legislative determinations entitled to a presumption of correctnessin bond validation).
15
Section 163.31801(5) was not enacted until years after the City imposed the
Capacity Fee, and cannot be applied retroactively.
i. The Capacity Fee pre-dates section 163.31801(5)
The legislature first attempted to enact section 163.31801(5) in 2009. Ch.
09-49, Laws of Fla. (2009) (App. 1443). The enactment was challenged on
multiple constitutional grounds, including that it was an unfunded mandate not
adopted pursuant to the procedures of article VII, section 18 of the Florida
Constitution. In 2011, while that litigation was still pending, the legislature
readopted section 163.31801(5), this time, following the constitutional procedures
for unfunded mandates. Ch. 11-149, Laws of Fla. (2011) (App. 1444). While it
has not been determined whether either the 2009 or 2011 enactment is
constitutional, it is clear that section 163.31801(5) did not become law before
2009.
The trial court incorrectly concluded that the Capacity Fee was “reinstated”
in 2013, after section 163.31801(5) was enacted. It is undisputed that the City (1)
imposed the Capacity Fee by ordinance in 2003; (2) attempted to amend the
Capacity Fee by ordinance in 2009, but the 2009 ordinance was invalid for
procedural reasons; and (3) in 2013 enacted an ordinance repealing the invalid
2009 ordinance. (App. 9.) The trial court gave the wrong legal effect to these
16
facts. Global Travel Mktg., Inc. v. Shea, 908 So. 2d 392, 396 (Fla. 2005) (question
of law arising from undisputed facts is reviewed de novo).
The 2013 ordinance did not “reinstate” the Capacity Fee—it had no legal
effect whatsoever. An invalid ordinance has no effect—it is “as though the
ordinance does not exist.” Bhoola v. City of St. Augustine Beach, 588 So. 2d 666,
667 (Fla. 5th DCA 1991).8 Because the 2009 ordinance was invalid, neither the
2009 ordinance nor the 2013 ordinance repealing it changed the Capacity Fee. The
Capacity Fee has remained in place—continuously and unchanged—since adopted
in 2003. Therefore, the Capacity Fee pre-dates section 163.31801(5).
ii. Section 163.31801(5) does not operate retroactively
The legislature explicitly addressed retroactivity: it provided that section
163.31801(5) operates retroactively to July 1, 2009. Given the unequivocal
language and intent of the enactment, section 163.31801(5) does not apply to the
Capacity Fee imposed in 2003.
Where there is no clear expression of legislative intent, procedural laws are
presumed to operate retrospectively, while substantive laws are presumed to
operate prospectively. E.g., Fla. Ins. Guar. Ass’n, Inc., 67 So. 3d at 194-95. But
8 See McQuillin Mun. Corp. §21:46 (3d ed.); Smith v. Woodruff, 2 So. 2d 583, 585(Fla. 1941) (invalid ordinance had no effect on prior ordinance); Coleman v. Cityof Key West, 807 So. 2d 84, 85 (Fla. 3d DCA 2001) (ordinances which fall withinthe ambit of statutory notice requirements must be strictly enacted pursuant to thestatute’s notice provisions or they are null and void).
17
substantive statutes that impair vested rights or impose new burdens cannot apply
retroactively, even where there is a clear legislative expression of retroactivity.
Metro. Dade Cnty v. Chase Fed. Hous. Corp., 737 So. 2d 494, 499-500 (Fla.
1999). Here, there is no need to determine whether section 163.31801(5) is
substantive or procedural—it is clear the legislature did not intend it to reach
impact fees imposed before 2009. Keystone Water Co. v. Bevis, 278 So. 2d 606,
608 (Fla. 1973) (a statute “is not to be given retrospective application unless it is
required by the terms of the [s]tatute or it is unequivocally implied”).
The legislature’s inclusion of an effective date “rebuts any argument that
retroactive application of the law was intended.” Dep't of Rev. v. Zuckerman–
Vernon Corp., 354 So. 2d 353, 358 (Fla.1977). Accord Fla. Ins. Guar. Ass'n, Inc.,
67 So. 3d at 196 (effective date evidenced that legislature did not intend statute to
apply retroactively). Here, the 2009 session law originally enacting section
163.31801(5) provided that it would take effect on July 1, 2009. Ch. 09-49, Laws
of Fla. (App. 1443). Nothing in its language or legislative history suggests (let
alone “clearly evidences”) that it was intended to apply retroactively. Therefore,
the 2009 enactment of section 163.31801(5) was intended to apply prospectively
from July 1, 2009.
The legislature made its intent explicitly clear in 2011, when it reenacted
section 163.31801(5) in response to a lawsuit challenging the 2009 enactment as
18
(1) a violation of separation of powers under article II, section 3 of the Florida
Constitution; and (2) an unfunded mandate adopted without approval of two-thirds
of each house of the legislature, as required by article VII, section 18 of the Florida
Constitution. Fla. S. Comm. on Rules, SB 410 (2011), Staff Analysis 5 (Mar. 14,
2011) (citing Alachua Cnty. v. Cretul, No. 10-CA-0478 (Fla. 2d Cir. 2010)) (App.
1445-54). The purpose of the 2011 reenactment was to eliminate uncertainty over
whether section 163.31801(5) was an unconstitutional mandate by readopting it
with approval of two-thirds of each chamber. Id.; Ch. 11-149, Laws of Fla. (2011).
The 2011 enactment specifically provides that section 163.31801(5) “shall
operate retroactively to July 1, 2009,” the effective date of the 2009 enactment.
Ch. 11-149, Laws of Fla. (emphasis added) (App. 1444). The staff analysis of the
2011 enactment shows that the legislature carefully considered Florida case law
interpreting the prospective or retroactive effect of statutes, and concluded that
section 163.31801(5) would be applied retroactively to July 1, 2009, under the
enactment’s explicit language to that effect. (App. 1452-53.)
The legislature never intended section 163.31801(5) to apply retroactively—
it intended it to apply prospectively from the 2009 enactment. If the 2009
enactment operated retroactively, there would have been no need to address
retroactivity in the 2011 reenactment. In any event, the 2011 reenactment controls
19
over the 2009 enactment it replaced. Under the 2011 reenactment, section
163.31801(5)’s retroactive reach is explicitly limited to July 1, 2009.
iii. Section 163.31801(5) does not apply to impact fees imposedbefore 2009, regardless of when the lawsuit is filed
Because section 163.31801(5) changed pre-existing law governing the
validity of impact fees, the critical date for determining whether it applies is the
date the impact fee was imposed, not the date the lawsuit was filed.
Section 163.31801(5) states that the “court may not use a deferential
standard” in determining whether an impact fee is valid. The effect of this
language is to change the common law “dual rational nexus” test Florida courts
have used to determine the validity of impact fees for over 30 years. See generally
Hollywood, Inc. v. Broward Cnty., 431 So. 2d 606 (Fla. 4th DCA 1983).
Under the dual rational nexus test, deference to the government is built into
the substantive law governing impact fees. The test provides that an impact fee is
valid if there is: (1) “a reasonable connection or rational nexus between the need
for additional capital facilities and the anticipated new users of the system who will
pay this fee”; and (2) “a reasonable connection or rational nexus between the
intended expenditures of the collected funds and the benefits accruing to those new
users.” Save Our Septic Sys. Comm., Inc. v. Sarasota Cnty., 957 So. 2d 671, 674
(Fla. 2d DCA 2007) (emphasis added).
20
Because section 163.31801(5) alters the dual rational nexus test, it would
attach “new legal consequences to events completed before its enactment” if
applied to impact fees imposed before 2009. Metro. Dade Cnty., 737 So. 2d at
499. Accord Arrow Air, Inc. v. Walsh, 645 So. 2d 422, 424 (Fla. 1994). Impact
fees validly imposed and collected years before its enactment (like the Capacity
Fees here) would be subject to invalidation. Certainly, if the legislature had
intended section 163.31801(5) to invalidate countless impact fees already in place
throughout Florida, it would have made that intent clear. But there is nothing to
that effect in the language or legislative history of section 163.31801(5).
This is especially true given that, until section 163.31801, Florida Statutes
(“Impact Fee Act”), was adopted in 2006, impact fees were not governed by
statute—cities imposed impact fees pursuant to their constitutionally vested home
rule powers to legislate for any municipal purpose that is not prohibited by the
constitution or state legislation. §9, ch. 06-218, Laws of Fla. (2006) (Impact Fee
Act) (App. 1428-42); § 2(b), art. VIII, Fla. Const. (Municipal Home Rule). The
Impact Fee Act expressly recognizes that impact fees are a product of home rule
power and an important revenue source for local governments:
The Legislature finds that impact fees are an important source ofrevenue for a local government to use in funding the infrastructurenecessitated by new growth. The Legislature further finds that impactfees are an outgrowth of the home rule power of a local governmentto provide certain services within its jurisdiction. Due to the growth ofimpact fee collections and local governments’ reliance on impact
21
fees, it is the intent of the Legislature to ensure that, when a county ormunicipality adopts an impact fee by ordinance or a special districtadopts an impact fee by resolution, the governing authority complieswith this section.
§163.31801(1), Fla. Stat. (emphasis added). This language cannot be interpreted
as an express pronouncement of legislative intent to retroactively abrogate action
previously taken under a City’s constitutional home rule authority. When section
163.31801(5) was added, it became part of the same act and subject to these same
legislative findings.
If the legislature intended to retroactively invalidate prior action (taken
under local governments’ constitutional home rule powers) adopting impact fees
(which it recognized as an important revenue source relied on by many local
governments), it would have made that intent clear. Without a clear expression of
legislative intent to achieve such drastic results, the Court should not read section
163.31801(5) in a way that would amount to an after-the-fact deprivation of the
City’s constitutional rights. James R. Wolf & Sarah Harley Bolinder, The
Effectiveness of Home Rule: A Preemption and Conflict Analysis, 83 Fla. B.J. 92,
92, 95 (2009) (“The courts should be careful in imputing an intent on behalf of the
Legislature to preclude a local elected governing body from exercising its home
rule powers”).
C. If section 163.31801(5) applies retroactively, it cannot be construedto the remove “rational” component from the dual rational nexustest
22
If section 163.31801(5) does apply retroactively to the Capacity Fee, it
cannot be construed to remove “rational” from the dual rational nexus test. Section
163.31801(5) requires the government to show that the impact fee meets the
requirements of “state legal precedent.” This language must be given meaning.
Borden v. E.-European Ins. Co., 921 So. 2d 587, 595 (Fla. 2006) (“courts should
avoid readings that would render part of a statute meaningless”) (internal quotation
and citation omitted). Giving effect to this language, section 163.31801(5) allows
courts to apply the dual rational nexus test in the same way as in this Court’s then-
existing precedent.
Section 163.31801(5) should be construed only to preclude courts from a
applying a standard more deferential than the dual rational nexus test. The
legislative staff analysis of section 163.31801(5) supports this reading. See Fla. S.
Comm. on Rules, SB 410 (2011), Staff Analysis 8 (Mar. 14, 2011) (App. 1452).
The staff analysis explains that section 163.31801(5) “prohibits courts from using a
more deferential standard” than the standards set out in case law. Id. (emphasis
added). This indicates that the legislature did not intend for courts to reduce the
level of deference under the dual rational nexus test. Rather, it only intended to
prohibit courts from adopting a more deferential standard.
What is more, under this Court’s precedent, the dual rational nexus test is
satisfied if a “reasonable connection or rational nexus” is established under each
23
prong. “Reasonableness” and “rationality” are the very essence of the dual
rational nexus test. Even if section 163.31801(5) does remove the deference
accorded under case law, it cannot be construed to remove “reasonableness” and
“rationality” from the equation.
Therefore, if the Court concludes that section 163.31801(5) applies, it should
not be construed to change the dual rational nexus test. The City’s legislative
findings were still entitled to deference, and it was only required to show a
“reasonable” or “rational” nexus.
III. GIVING PROPER DEFERENCE TO THE CITY’S LEGISLATIVEFINDINGS, IT SATISFIED THE DUAL RATIONAL NEXUS TEST
In making fact-findings, the trial court failed to give any degree of deference
to the City’s legislative findings, which were based on a wealth of information and
the opinions of an engineering consulting firm. Instead, the trial court substituted
its judgment for that of the City, based on an after-the-fact review of evidence
(including the opinions of the intervenor’s expert) that was not presented to the
City when it imposed the Capacity Fee. The City imposed the Capacity Fee in the
exercise of its legislative function and constitutional home rule powers, reasonably
relying on the evidence adduced in the multiple hearings held by the City during its
evaluation of the acquisition of the Water System. Giving proper deference to the
City’s legislative determinations, the City satisfied the dual rational nexus test as a
matter of law.
24
A. The City made a legislative decision to purchase Excess Capacity toaccommodate future growth for $7.5 million
The trial court ignored unrefuted evidence that the City purchased two
separate assets from FPUC, for two separate purchase prices. The Purchase
Agreement itself, as well as the information presented to the City as it considered
the acquisition, show that the City purchased the (i) Purchased Assets, which
included the physical assets of the Water System and its existing users as of
December 2, 2002, for $18,950,000; and (ii) the Excess Capacity, which would
allow the City to meet the needs of future population growth until 2020, for
$7,500,000. (App. 1008-09, 1012.) The City did not need the Excess Capacity to
serve its existing users—the City purchased the Excess Capacity to accommodate
new users and comply with growth management laws. Id.
Based on the detailed information and reports before it—which were
prepared based on the extensive due diligence conducted to evaluate the
acquisition—the City made legislative findings that the Purchased Assets and the
Excess Capacity were two different assets with independent values. These
legislative determinations were entitled to deference, but the trial court completely
disregarded them, and instead, made its independent conclusion on what the City
purchased and for what price.
The trial court concluded that the City really only purchased a single asset
for a single purchase price of $26,450,000 ($18,950,000 plus $7,500,000).
25
(App. 4.) The final judgment does not even mention the Excess Capacity. By
failing to respect the negotiated purchase of two separate assets in the City’s arms’
length negotiated transaction with FPUC, the trial court impermissibly substituted
its judgment for that of the City. Murphy v. City of Port St. Lucie, 666 So. 2d 879,
880 (Fla. 1996) (“whether the City failed to consider the reasonable price of the
utility during the acquisition from the county is a collateral issue and beyond the
scope of these validation proceedings.”); see Poe v. Hillsborough Cnty., 695 So. 2d
672, 679 (Fla. 1997) (respecting price negotiated in arms’ length transaction to
validate bonds).
The finding that the City purchased a single asset for a single purchase price
is central to the decision to invalidate the bonds. Uncontroverted evidence shows
that the City has only used the Capacity Fees to pay for the debt incurred to buy the
Excess Capacity, and the Capacity Fees are only pledged for that purpose. (App.
108-11, 838, 922.) However, because the trial court rejected the City’s conclusion
that it purchased the Excess Capacity as a separate asset for $7,500,000, it found
that the City used the Capacity Fees to “to purchase the water utility as a whole (by
paying the “futures” component of the purchase price for the entire utility).”
(App. 22) (emphasis added).
As a result, the trial court concluded that the Capacity Fees unfairly required
new users to pay for the entire utility acquisition, citing Contractors & Builders
26
Ass'n of Pinellas County v. City of Dunedin, 329 So. 2d 314 (Fla. 1976). In
Dunedin, the Court explained that a city cannot “impose the entire burden of
capital expenditures, including replacement of existing plant, on persons
connecting to a water and sewer system after an arbitrarily chosen time certain.”
Id. at 320 (emphasis added). But there is “nothing wrong with transferring to new
users of a municipally owned water or sewer system a fair share of the costs new
use of the system involves.” Id. at 317-18. Under the City’s finding that the Excess
Capacity was a separate asset purchased for $7,500,000, it was completely proper
to impose the Capacity Fee and use the revenue solely to repay that amount.9 By
failing to give weight to the City’s findings, the trial court incorrectly concluded
that the Capacity Fees were used to pay for more than the Excess Capacity.
B. The City properly relied on its engineering consultant and theinformation before it
The trial court heard testimony from two expert witnesses: (1) Mr. Guastella,
the expert witness Conlon hired to testify at the trial; and (2) Mr. Hartman, the
principal of the consulting engineering firm the City actually used and relied on in
the FPUC transaction and in imposing the Capacity Fee. Faced with conflicting
opinions held by Mr. Guastella and Mr. Hartman, the trial court concluded that Mr.
9 FPUC recovered approximately $1,500 for each new EMC that was used throughan allowance for funds used during construction, allowance for funds prudentlyinvested, contribution in aid of construction, cash property services, anddevelopment agreements.
27
Guastella was more credible, accepted his testimony and opinions, and rejected
Mr. Hartman’s testimony and opinions. (App. 22.)
In doing so, the trial court improperly second-guessed the City’s legislative
determination to rely on Mr. Hartman. The trial court’s role was not to decide for
itself in the first instance which expert was correct. Instead, it was required to give
deference to the City’s decision to rely on Mr. Hartman, and accept that decision
unless patently erroneous. Boschen v. City of Clearwater, 777 So. 2d 958, 967
(Fla. 2001). “Evidence of the ‘mere disagreement of experts’ is insufficient basis
for disturbing the [local government’s] findings.” Donovan v. Okaloosa Cnty., 82
So. 3d 801, 811-12 (Fla. 2012) (citing City of Winter Springs v. State, 776 So. 2d
255, 261 (Fla. 2001) (“[A] mere disagreement of experts as to the choice of
methodology is legally inconsequential” in bond validation). The fact that Mr.
Guastella’s opinions conflicted with Mr. Hartman’s opinions is not sufficient to
overcome the presumption that the City’s legislative findings are valid.
The City reasonably relied on Hartman’s reports, valuations, and
recommendations. Mr. Hartman was (and is) a reputable and experienced licensed
engineer, who has worked on approximately 350 public utility acquisitions and
impact fee analyses in Florida since 1976. (App. 363-69, 907-09, 980-86 ). Mr.
Hartman’s practice focused on government-owned utilities. (App. 985.) Because
Hartman previously did work for the City in connection with its wastewater
28
system, Mr. Hartman was familiar with the City and its needs. (App. 986-87.)
After conducting extensive due diligence on the proposed transaction with FPUC,
Hartman generated valuations, reports, and recommendations, and also discussed
with the City the pros and cons of various alternative approaches to value the
Water System and the Excess Capacity. (App. 115-502, 506-11, 987-88.)
At trial, Hartman extensively described the steps he took in preparing the
reports and the methodology used to value the Excess Capacity and calculate the
Capacity Fees. (App. 987-1039, 1111.) He testified the method he used was the
industry standard for calculating Capacity Fees where a government acquires
additional capacity to support new residents. (App. 1012-19.)
At Mr. Hartman’s recommendation, the City calculated the Capacity Fee
using the equity, excess capacity or buy-in approach, which is used when an
existing facility has “the capacity to serve new growth.” Bryan A. Mantz & Henry
L. Thomas, Utility Impact Fees: Practices and Challenges 104 J. Am. Water
Works Ass’n E218, E219 (Apr. 2012) (App. 1469; see also App. 1459-67, 1470-
75.) Because the City was acquiring a water system with excess capacity, this
approach was most appropriate.
Under the equity, excess capacity or buy-in approach, a capacity fee is
calculated by dividing (i) the equity or value of the system (ii) by its capacity. In
determining “the equity or value of the system,” Mr. Hartman used the
29
“replacement cost new” method of valuation. Under this method, if the capacity
fee will be used to pay for capacity alone, depreciation is not a factor. (App. 1013-
14, 1068-70, 1075.) This is because capacity is perpetual and does not decrease
over time. (App. 1015-16.) Mr. Hartman valued the Water System at $19,792,000,
and divided that amount by the total number of the Water System’s EMCs, 13,363.
(App. 1017-18, 166-68.) This resulted in replacement cost new value of $1,481 per
EMC as of December 2, 2002. (App. 1066-68; see App. 788-99.) Since the
Capacity Fee was to be applied starting in 2003, the replacement cost new value of
$1,481 per EMC was adjusted for inflation to $1,499.51. Rounding this up to the
closest dollar, Mr. Hartman recommended a water capacity fee equal to $1,500 per
EMC. (App. 1067.)
Given Mr. Hartman’s qualifications, extensive experience with public
utilities in Florida, and the City’s familiarity with his work, it was reasonable for
the City to rely on his analyses. The City considered this information at public
meetings held on the proposed acquisition of the Water System and imposition of
the Capacity Fee. No one at the public meetings presented conflicting
information. In fact, Mr. Guastella’s testimony at trial—held a decade after the
City imposed the Capacity Fee—was the first time the City was presented with any
opinion to the contrary. Without any conflicting information or any other reason
not to rely on Mr. Hartman, the City was fully within its rights to do so. Boschen,
30
777 So. 2d at 967 (“Although testimony of the expert traffic engineer conflicted
with the City's ultimate conclusions regarding the level of service, these contrary
conclusions were never submitted to the City”). On the information before it, the
City properly exercised its legislative judgment in imposing the Capacity Fee in
the amount of $1,500.
However, because the trial court gave no deference to the City’s
decisionmaking, it chose to accept Mr. Guastella’s opinion based on nothing more
than a difference in opinion. Mr. Guastella testified that the City should have used
an approach that would take depreciation into account. (App. 21.) This is directly
in conflict with Mr. Hartman’s opinion that it is inappropriate to do so where water
capacity fee revenue will be used to pay for capacity, a non-depreciable asset.
Mr. Guastella also opined that the City’s calculation should have been based on a
cost-recovery approach, which uses the actual cost to make the improvements to
the utility. (App. 21.) This, too, is directly in conflict with Mr. Hartman’s opinion
that the calculation should have been based on value because the City did not make
the improvements itself.10 Instead, it purchased the Water System from FPUC
based on its value.
10 It also interferes with the City’s ongoing legislative process of reevaluating itsCapacity Fee every five years. § 2-543, City of Fernandina Beach Code ofOrdinances (“The water capacity fee amount shall be reviewed as necessary by thecity in order to determine if the fee continues to accurately reflect costs associatedwith the capacity available in the system. At a minimum such review shall be
31
In accepting Mr. Guastella’s opinion, the trial court second-guessed the
City’s judgment based on testimony (i) that merely conflicted with Mr. Hartman’s
opinions; and (ii) was not presented to the City before it imposed the Capacity Fee.
Neither of these factors has any bearing on the reasonableness of the City’s
reliance on Hartman in imposing the Capacity Fee. Instead, the trial court
improperly substituted its judgment for that of the City. Panama City Beach Cmty.
Redevelopment Agency, 831 So. 2d at 669.
IV. THE CITY WAS NOT REQUIRED TO PREPARE A FORMALIMPACT FEE STUDY
Although the trial court faulted the City for not preparing a formal impact
fee study, the City did in fact conduct a full impact fee analysis. The City was not
required to prepare a separate document specifically entitled “Impact Fee Study”
for the Capacity Fee to be valid.
In substance, an impact fee study was conducted in connection with the
Water System acquisition. The reason there is no separate document entitled
“Impact Fee Study” is because the impact fee study was conducted in connection
with the City’s acquisition of the Water System and the Excess Capacity from
FPUC and is incorporated in the transaction and finance documents associated with
the acquisition. In an acquisition, the level of effort needed for the impact fee
conducted every five years.”) A 2008 impact fee study conducted by a differentoutside consultant concluded that the Capacity Fees could be raised. (App. 800-13.)
32
study is relatively low because all of the information and analyses required in
calculating an impact fee is obtained and conducted as a part of the acquisition.
For instance, Hartman already valued the Water System, determined the capacity,
and obtained other information as part of its due diligence. Since the necessary
components of an impact fee study were already being done with respect to the
acquisition, the only step left was for Hartman to calculate the impact fee using
that information.
Therefore, the lack of an “Impact Fee Study” does not mean that the
Capacity Fee was determined arbitrarily without any supporting documentation.
Much to the contrary, the amount of the Capacity Fee was based on the due
diligence, reports, and valuations prepared Mr. Hartman and submitted to the City.
Ten years later, in connection with the issuance of the 2013B Bonds, Hartman was
able to summarize in detail its impact fee analysis for the current City Commission
using information contained in the original reports. (App. 788-99.)
While it is arguable that the process to impose the Capacity Fees would be
different today in light of the Impact Fee Act, the Impact Fee Act does not apply
retroactively to the City’s imposition of the Capacity Fees. In 2003, when the City
imposed the Water Capacity Fees, the vast majority of utility acquisitions did not
include a separate impact fee study; the substance of the fact-finding and
calculation was all rolled into the other acquisition documents. The City not only
33
complied with then-existing law, but also complied with the common practices
within the industry. (App. 1017-18, 1034-35, 1049-52, 1158-59.)
V. THE “NEED” FOR THE CAPACITY FEES IS OUTSIDE THESCOPE OF INQUIRY IN BOND VALIDATIONS
The final judgment is in part based on the trial court’s conclusion that the
City had no “need” to impose impact fees to pay for the Excess Capacity or the
debt service on the 2013B Bonds. (App. 6, 20-22). However, the need for revenue
is outside the limited scope of inquiry in bond validations and, therefore, is not a
legitimate basis for refusing to validate the 2013B Bonds.
This Court has repeatedly rejected arguments that bonds should not be
validated for reasons involving the government’s business policy and judgment,
such as financial feasibility or need. E.g., Town of Medley v. State, 162 So. 2d
258-59 (Fla. 1964) (“questions of business policy and judgment . . . are beyond the
scope of judicial interference and are the responsibility and prerogative of the
governing body of the governmental unit”); Lodwick v. Sch. Dist. of Palm Beach
Cnty., 506 So. 2d 407 (Fla. 1987) (affirming trial court’s decision that need for
bonds collateral to validation); State v. City of Daytona Beach, 158 So. 300 (Fla.
1934) (courts cannot be concerned with the wisdom of a city's business policy to
“anticipate and borrow against the future earnings of its water supply system in
order to enlarge and improve the facilities forming a part of it so as to extend and
increase its capacity and ability for service”); Partridge v. St. Lucie Cnty., 539 So.
34
2d 472, 473 (Fla. 1989) (whether drainage improvements were needed was
political question that fall exclusively within power of the board); State v. Sunrise
Lakes Phase II Special Recreation Dist., 383 So. 2d 631, 632 (Fla. 1980) (“The
wisdom or desirability of this type of bond issue is not a matter for our
consideration. Our review concerns only the legal validity of the bonds.”).
The City’s decision to impose the Capacity Fee to pay FPUC for the Excess
Capacity and to repay the 2013 Bonds issued to pay the remaining balance due on
the Excess Capacity are matters of business policy and judgment. The Capacity
Fees were imposed because the City made a policy decision not to require existing
users pay for new development. The decision to use Capacity Fees to repay the
2013B Bonds is one for the City, not the courts. Likewise are the City’s
determinations of how to use its revenue sources.
VI. ALTERNATIVELY, THE CAPACITY FEE IS A VALID USER FEE
Even if the Capacity Fees do not meet the requirements of the dual rational
nexus test, it is a valid utility facilities user fee. See Pinellas Cnty. v. State, 776 So.
2d 262, 266-69 (Fla. 2001). User fees are
charges based upon the proprietary right of the governing bodypermitting the use of the instrumentality involved. Such fees sharecommon traits that distinguish them from taxes: they are charged inexchange for a particular governmental service which benefits theparty paying the fee in a manner not shared by other members ofsociety, and they are paid by choice, in that the party paying the fee
35
has the option of not utilizing the governmental service and therebyavoiding the charge.
City of Gainesville v. State, 863 So. 2d 138, 144 (Fla. 2003). See also Pinellas
Cnty., 776 So. 2d at 267 (user fees “are charged in exchange for a particular
governmental service which benefits the party paying the fee in a manner not
shared by other members of society”). In determining whether a fee constitutes a
user fee a court considers the following:
the name given to the charge; the relationship between the amount ofthe fee and the value of the service or benefit; whether the fee ischarged only to users of the service or is charged to all residents of agiven area; whether the fee is voluntary-that is, whether a propertyowner may avoid the fee by refusing the service; whether the fee is amonthly charge or a one-time charge; whether the fee is charged torecover the costs of improvements to a defined area or infrastructureor for the routine provision of a service; whether the fee is for atraditional utility service; and whether the fee is statutorily authorizedas a fee.
City of Gainesville, 863 So. 2d at 145. But “[n]one of these factors is controlling;
nor are they necessarily exclusive.” Id. Each factor must be considered “in light
of the circumstances as a whole in each particular case.” Id.
In Pinellas County, the county “proposed to incorporate into its existing
water and sewer facilities a reclaimed water service component.” 776 So. 2d at
263. The county proposed to fund the reclaimed water service with revenue bonds
secured by an availability charge or "readiness to serve" charge. Id. at 264. The
availability charge was imposed only on properties that would have access to the
36
reclaimed water service. Id. The availability charge was calculated to cover part
of the cost of the capital improvements associated with the reclaimed water
service. Id. Once the cost of the capital improvements was recovered, the
availability charge would no longer be assessed. Id. The Court held that the
availability charge “provides a special benefit to those paying the fee: unlimited
access to reclaimed water.” Id. at 267. “Rather than going into the general fund,
the money which is recouped through the [a]vailability [c]harge is tied directly to
payment for the reclaimed water distribution line improvements extending to the
individual properties . . ., and collection of the charge ceases when those costs have
been recovered.” Id. “[T]hose paying the fee receive unlimited access to
reclaimed water, a benefit which is not shared by persons not required to pay the
fee.” Id. at 267-68. For these reasons, the Court held the availability charge is not
a tax, but a valid utility facilities user fee. Id. at 268.
While there are some factors that might weigh against the Capacity Fee
being a user fee,11 the more persuasive factors point in favor of it. The Capacity
Fees are based on the value of the benefit (connection to and use of the Excess
Capacity) received by the payer of the Capacity Fee. Also, the money that is
11 For instance, the City officially calls the fee a “water capacity fee,” but doesrefer to such fee as an "impact fee" throughout chapter 2, article VII, division 7 ofthe Code of Ordinances of the City. However, "the name given to the charge is notcontrolling; it is the reason for the charge which controls its nature . . . ." City ofGainesville, 863 So. 2d at 144.
37
recouped through the Capacity Fees are tied directly to the financing of the Excess
Capacity, which provides the available capacity necessary to accommodate the
new users required to pay the Capacity Fees. The Capacity Fees are only charged
to new customers connecting properties and improvements to the Water System for
the first time. In other words, the Capacity Fees provide the capacity necessary to
access the Water System.
Importantly, the Capacity Fees are voluntary as they may be avoided by
refusing use of the Water System. The City only requires new users actually using
the available capacity of the Water System to pay the Capacity Fee. Properties that
are undeveloped do not pay it. See id. at 146. Additionally, citizens can avoid
paying the Capacity Fees by choosing to purchase homes or businesses that are
already connected to the Water System. See id. Even if the Water Capacity Fee is
deemed to not be voluntary, “where a governmental entity provides access to
traditional utility services, the Court has not hesitated to uphold local ordinances
imposing mandatory fees, regardless of whether an individual customer actually
uses or desires the service.” Pinellas Cnty., 776 So. 2d at 268-69. Accord State v.
City of Miami Springs, 245 So. 2d 80 (Fla. 1971) (flat rate sewer charge for all
single family residences, unrelated to actual use, was not unreasonable, arbitrary or
in conflict with state or federal constitutions and law); Town of Redington Shores
v. Redington Towers, Inc., 354 So. 2d 942 (Fla. 2d DCA 1978) (mandatory sewer
38
charges against unoccupied property applied from the date the sewer main was
available to be used, and that sewage charges were reasonably related to the value
of service rendered either as actually consume or as readily available).
In addition, a “strong factor” in favor of the Capacity Fees being user fees, is
that the creation, construction, extension, purchase, operation and maintenance of
the Water System are all statutorily authorized. See id. at 145. Section 180.06,
Florida Statutes, authorizes a municipality to provide water for domestic,
municipal or industrial uses and to construct capital projects associated therewith.
Section 180.13, Florida Statutes, authorizes the City Commission to “establish just
and equitable rates or charges to be paid to the municipality for the use of the
utility by each person, firm or corporation whose premises are served thereby . . . .
There is ample authority under Florida's statutory law for local governments to
recoup the costs of providing water service in general.” Pinellas Cnty., 776 So. 2d
at 268 n.11 (citing section 180.02(3), Florida Statutes). It is not an arbitrary
decision for a local government to base the amount of a connection fee upon the
cost of financing the construction of the entire sewer system as opposed to the
actual cost of the connection itself when the connection fee is part of the overall
financing scheme. See Curson v. W. Conshohocken Mun. Auth., 611 A.2d 775,
777 (Pa. Commw. Ct. 1992). It is a “well-settled principle that the establishment
of utility rates is generally a legislative function.” City of Gainesville, 863 So. 2d
39
at 147 (citing Mohme v. City of Cocoa, 328 So. 2d 422, 424 (Fla. 1976)). In setting
these utility rates, municipalities “enjoy a certain latitude.” Id.
In Curson, the West Conshohocken Municipal Authority imposed a
connection fee of $1,200 per equivalent dwelling unit for connection to its sanitary
sewer system. Curson, 611 A.2d at 776. An apartment building was assessed a
separate connection fee for each of the 22 residential units in the building. Id. The
owners of the apartment building challenged the connection fee on the grounds that
the connection fee “was imposed without regard to the actual cost of the
connection.” Id. The Court held not basing a “connection fee on the actual cost of
the connection . . . is not necessarily an arbitrary decision.” Id. at 777. The Court
noted that the amount of the connection fee:
was an integral part of the financing scheme to construct the entiresewer system. . . . The connection fee was arrived at by subtractingthe proceeds of the bond issue and grant proceeds from the total costof construction, and then dividing the resulting amount by the numberof [equivalent dwelling units] in West Conshohocken. Thus, theconnection fee was based upon the cost of financing the constructionof the entire sewer system, not just the cost of connecting eachindividual [equivalent dwelling unit] to the system. Because eachdwelling unit uses the entire sewage system, and the entire systembenefits each unit in an identical manner, each unit is therefore madeto bear an equal share of the cost. Such a plan is not unreasonable andthe West Conshohocken Borough secretary testified at trial that theconnection fee was charged uniformly to all apartment buildings.
Id. (emphasis in original).
40
Here, not only was the Capacity Fee based on the value of the available
capacity being accessed and used by the new user, but it was also an integral part
of the financing scheme to purchase the Purchased Assets and the Excess Capacity.
See Poe v. Hillsborough Cnty., 695 So. 2d at 679 (“the court cannot micromanage
the arms-length business negotiations of the parties by striking discrete portions of
a complex arrangement”). As evidenced by the Purchase Agreement, the Briefing
Report and the Consulting Engineer's Report, the use of the Capacity Fees to
finance the Excess Capacity was integral to the overall transaction and the City’s
plan from the very beginning. It was not an arbitrary decision on the part of the
City Commission to include the Capacity Fees as part of the overall financing
structure of the Capacity Improvements. Each new user connecting to the Water
System benefits from the unused capacity that is available as a result of the
Capacity Improvements. For the foregoing reasons, the Capacity Fees are a valid
utility facilities user charge, authorized to be imposed by the City pursuant to
chapter 180.
CONCLUSION
The trial court’s entire analysis is flawed because it applied the incorrect
standard review. The Impact Fee Act does not apply because (i) this is a bond
validation, not “an action challenging an impact fee;” and (ii) the Impact Fee Act
does not apply retroactively to the Capacity Fee imposed before it was enacted.
41
Even if the Impact Fee Act does apply, it does not change the dual rational nexus
test. Rather, it only prevents Courts from giving governments a greater degree of
deference than under then-existing case law. Therefore, the trial court was required
to give deference to the City’s legislative decisionmaking.
But the trial court gave no regard to the structure of the City’s transaction
with FPUC, under which it purchased two separate assets for separate purchase
prices. Similarly, the trial court rejected the opinions of the engineering firm that
the City retained to provide professional services and advice, in favor of opinions
that were not presented to the City until the trial. Based on the information before
the City, its decisions were not patently erroneous.
Because the trial court committed legal error by failing to give deference to
the City’s legislative findings, its final judgment should be reversed. Giving proper
deference to the City’s legislative findings based on the information before it, the
Capacity Fee satisfies the dual rational nexus test as a matter of law. Therefore,
the case should be remanded to the trial court with instructions to validate the
2013B Bonds.
Respectfully submitted on February 24, 2014.
42
/s/Elizabeth W. NeibergerSusan H. ChurutiFlorida Bar No. 284076Bryant Miller Olive P.A.One Tampa City Center, Suite 2700Tampa, FL 33602
Thomas B. ConstantineFlorida Bar. No. 869112Bryant Miller Olive P.A.111 Riverside Avenue, Suite 200Jacksonville, FL 32202
Elizabeth W. NeibergerFlorida Bar No. 0070102Jason M. BrethFlorida Bar No. 0040742Bryant Miller Olive P.A.101 North Monroe Street, Suite 900Tallahassee, FL 32301
Tammi E. BachFlorida Bar No. 179086City AttorneyCity of Fernandina Beach, Florida204 Ash StreetFernandina Beach, Florida 32034
Attorneys for Appellant
CERTIFICATE OF SERVICE
I certify that on February 24, 2014, a true and correct copy of the foregoing
has been furnished by email to:
Thomas E. Bishop, Esq.tbishop@tannerbishop.comMichael G. Tanner, Esq.mtanner@tannerbishop.com
Angela B. Corey, Esq.State Attorneyacorey@coj.netStephen W. Siegal, Esq.
43
Gilbert L. Feltel, Jr.gfeltel@tannerbishop.comC. Matthew Detzel, Esq.mdetzel@tannerbishop.comE. Clinch Kavanaugh, III, Esq.clinchkavanaugh@gmail.comYvonne Arnoldyarnold@tannerbishop.com,Stacy Hofnershofner@tannerbishoplaw.comSecondary E-mailservice@tannerbishop.comWells Fargo CenterOne Independent Dr., Suite 1700Jacksonville, Florida 32202
Attorneys for Joanne Conlon,Intervenor-Appellee
Assistant State Attorneyssiegel@coj.net.Nassau County Courthouse76347 Veterans Way, Suite 2105Yulee, Florida 32097
Attorneys for the State of Florida,Defendant-Appellee
/s/Elizabeth W. NeibergerElizabeth W. Neiberger
44
CERTIFICATE OF COMPLIANCE
I certify that the foregoing was word-processed using Times New Roman,
14-point font, in compliance with Rule 9.210(a)(2) of the Florida Rules of
Appellate Procedure.
/s/Elizabeth W. NeibergerElizabeth W. Neiberger
Recommended