Agenda - Planning Commission - 07/01/2004

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Country Joe, Inc., et al., Respondents, vs. City of Eagan, petitioner, Appellant. C8-95-228... Page 5 of 7 impact fee in a recent session as evidence that the Minnesota legislature has not endorsed the concept of impact fees. See H.F. 988, 79th Leg. (Minn. 1995) (a bill to amend §. 462.358 of the Municipal Planning Act to authorize school impact fees). The city responds by citing a number of decisions from other states that allegedly uphold the imposition of impact fees without express statutory enabling legislation. We conclude, however, that we need not reach the issue of whether impact fees are attthorized in Minnesota in order to pass on the validity of the road unit connection charge imposed by the city. By definition, an impact fee must be "in an amount wh/ch is proportionate to the need for the public facilities generated, by new development." B laesser & Kentopp at 264. In this case, however, the city. essentially ignored its own consulting engineers' recommendation that the road unit connection charge be periodically updated to account for changes in' costs, revenue projections, or patterns of development. Thus, for the period in question, there is insufficient evidence that the charge was proportionate to the need created by the development upon which the burden of payment fell. Accordingly, we reserve the issue of whether impact fees are authorized under Minnesota law, but reject the city's contention that the road unit connection charge draws its authorization as such a fee: III. The city's final argument is that the court of appeals erred in concluding that the road unit connection charge is an unlawful tax. [~] The city argues that the charge is not a tax and suggests that the charge is authorized as a regulatory or license fee under its general welfare powers. See Minn. Stat. § 412.221, subd. 32. We have consistently rejected the argument that the general police power extends to permit revenue raising measures by municipalities. When it has been apparent that a city's true motivation was to raise revenue--and not merely to recover the costs of regulation--we have disregarded the fee label attached by a municipality and held that the charge in question was in fact a tax. See State v. Labo's Direct Serv., 232 Minn. 175, 182, 44 N.W.2d 823,827 (1950) (striking down a fee on gasoline pumps as "a tax for the purpose of producing more revenue for the municipality"); Barton v. Ci~, of Minneapolis, 212 Minn. 566, 570, 4 N.W.2d 622, 624 (1942) (invalidating a license fee after concluding that "[w]hat the city council sought to accomplish, and did accomplish, was the enactment of a revenue measure"). The contractors assert that the road unit connection charge cannot find validity "under the cloak of' the city's police power" ~br two reasons: first, there is already a separate building permit fee which covers the purely regulatory costs of building permit issuance and enforcement; and second, the plain language of the resolution enacting the charge indicates that it was enacted "for the purpose Of funding oversizing of mai or streets" as well as to provide "an equitable source of funding" for such development and was, thus, expressly intended to raise revenue. We agree. We conclude that the charge is a revenue measure, benefiting the public in general, and is not an authorized exercise of the city's police powers, rn reaching this conclusion, we find it significant that revenues collected from the road unit connection charge are not earmarked in any way to fund projects necessitated by new development, but instead fund all major street construction, as well as repairs of existing streets. Because it is not a purely regulatory or license fee but instead a revenue measure, the road unit connection charge is a tax which must draw its authorization, if at all, fi'om the city's powers of taxation. Accord Eastern Diversified, 319 Md. at 54-55,570 A.2d at 854-55 (determining that a road improvement impact fee was a tax because "[n]othing * * * suggests that- * ~ * [the] fees are charged solely on the basis of service provided to the property owner, or to defray expenses of the development 70