The Borough of West Chester v. PASSHE and West Chester University of PA ( 2019 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
The Borough of West Chester, :
Petitioner :
:
v. :
:
Pennsylvania State System of :
Higher Education and West Chester :
University of Pennsylvania of the :
State System of Higher Education, : No. 260 M.D. 2018
Respondents : Argued: March 13, 2019
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE ELLEN CEISLER, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE FIZZANO CANNON FILED: July 15, 2019
Before this Court in our original jurisdiction is the preliminary
objection of the Pennsylvania State System of Higher Education (PASSHE) and
West Chester University of Pennsylvania of PASSHE (the University) (collectively,
Respondents) filed in response to the Borough of West Chester’s (the Borough)
declaratory judgment action (Declaratory Judgment Action).
On April 13, 2018, the Borough filed a Declaratory Judgment Action
against Respondents in this Court’s original jurisdiction, seeking to establish that the
Stormwater Charge1 is a fee for service, rather than a tax, which Respondents are
obligated to pay. Declaratory Judgment Action at 22, ¶¶ 107-10. The Borough
makes the following factual allegations.
The Borough is a home rule municipality organized and existing under
the laws of the Commonwealth of Pennsylvania including, without limitation, the
Pennsylvania Home Rule Charter and Optional Plans Law.2 Declaratory Judgment
Action at 2, ¶ 2. Pursuant to Section 2002-A(a) of the Public School Code of 1949,3
PASSHE is a body corporate and politic constituting a public corporation and
government instrumentality, of which the University is a constituent institution. Id.
at 2, ¶ 6. Approximately 57 acres of the University’s campus is situated within the
south-central portion of the Borough and is generally known as the North Campus.
Id. at 3, ¶¶ 11-12. PASSHE, in the name of the Commonwealth of Pennsylvania, is
the title owner in fee simple of a portion of the property forming the North Campus,
and the University is title owner in fee simple of another portion of that property.
Id. at 3-4, ¶¶ 13-14.
The Borough owns and operates a Small Municipal Separate Storm
System (Stormwater System or MS4), as that term is defined in the Code of Federal
Regulations. Declaratory Judgment Action at 7, ¶ 31 (citing 40 C.F.R. §
122.26(b)(16), (17)). The Borough maintains a National Pollutant Discharge
1
The Borough refers to this charge as the Stream Protection Fee and Respondents refer to
it as the Stormwater Tax. Because whether the charge is a fee or a tax is at issue in this case, we
will instead utilize the neutral term “Stormwater Charge.”
2
53 Pa.C.S. §§ 2901-2984.
3
Act of March 10, 1949, P.L. 30, added by Section 2 of the Act of Nov. 12, 1982, P.L.
660, No. 188, as amended, 24 P.S. § 20-2002-A(a).
2
Elimination System Permit (NPDES), a prerequisite for the lawful operation of its
Stormwater System. Id. at 7-8, ¶¶ 34-39. On July 20, 2016, the Borough Council
enacted the Borough’s Stream Protection Fee Ordinance (Ordinance). Declaratory
Judgment Action at 4, ¶ 15; Exhibit C, Ordinance, Section 16, p. 12.4 For purposes
of determining the appropriate assessment rate for the Stormwater Charge, the
Ordinance categorizes property into different tiers, ranging from tier 1 to tier 6, based
on total impervious surface area. Declaratory Judgment Action at 17, ¶ 80; Exhibit
C, Ordinance, Section 6, p. 7.5 The assessment rate is determined by multiplying the
base rate by the corresponding percentage amount for each tier. The Stormwater
Charge is then calculated by multiplying the assessment rate by the number of base
units6 in a given property. On September 21, 2016, the Borough Council adopted
Resolution No. 11-2016 in order to impose the Stormwater Charge7 upon the owners
4
“Courts reviewing preliminary objections may consider not only the facts pleaded in the
complaint, but also documents or exhibits attached to the complaint . . . .” Diess v. Dep’t of
Transp., 935 A.2d 895, 903 (Pa. Cmwlth. 2007).
5
For example, a tier 4 property is one “where the total impervious surface area is greater
than 2,000 square feet and less than or equal to 2,500 square feet.” Declaratory Judgment Action
at 17, ¶ 82; see also Ordinance, Section 6, p. 7.
6
Each base unit is 1,000 square feet of impervious surface. Ordinance, Section 5, p. 4.
7
The Ordinance refers to the Stormwater Charge as the “Stream Protection Fee” which is
defined as follows:
[A]n assessment levied by the Borough to cover the cost of
constructing, operating, and maintaining stormwater management
facilities and to fund expenses related to the Borough’s compliance
with [Pennsylvania Department of Environmental Protection]
NPDES permit requirements under applicable state law based on the
impact of stormwater runoff from impervious areas of developed
land in the Borough.
Ordinance, Section 5, p. 16.
3
of all developed properties within the jurisdictional limits of the Borough that are
connected to, use, or are serviced or benefit from the Stormwater System.
Declaratory Judgment Action at 4, ¶ 17; see also Ordinance, Section 5, p. 5 (defining
the term “developed” to include “[p]roperty where manmade changes have been
made which add impervious surfaces to the property . . . .”). For purposes of
calculating the Stormwater Charge, this resolution established a monthly base fee of
$6.70 per 1,000 square feet of impervious cover on a given property. Declaratory
Judgment Action at 18, ¶¶ 86-87. The Borough adopted the Stormwater Charge as
the mechanism by which the Borough would raise revenue to fund pollution
remediation measures.8 Id. at 15-16, ¶ 73. The Borough contends that there is a
direct relationship between the amount of impervious surface within a given
watershed and the health and quality of the watercourse and its tributaries within that
watershed, in addition to public health, safety, and welfare concerns related to
flooding and other stormwater-related issues. Id. at 11, ¶ 50. The Borough avers
that the impervious area of the portion of the North Campus that lies in the Borough
covers 32 acres, constituting nearly 8% of the total impervious area within the
Borough. Id. at 11-12, ¶¶ 51-52. The Borough further avers that stormwater which
8
The Stormwater Charge is set forth in Section 94A-6.A of the Borough’s Code and
provides:
For the use of, benefit by and the services rendered by the
[Stormwater System], including its operation, maintenance, repair,
replacement and improvement of said system and all other expenses,
a stream protection fee . . . as described, defined, and calculated
herein is imposed upon each and every developed property within
the Borough that is connected with, uses, is serviced by or is
benefitted by the Borough’s [Stormwater System], either directly or
indirectly, and upon the owners of such developed property as set
forth herein.
Declaratory Judgment Action at 16 (quoting Section 94A-6.A of the Borough’s Code).
4
flows from the impervious areas of the North Campus situated in the Borough either
enters and flows through the Borough’s Stormwater System or flows directly into a
nearby watercourse. Id. at 12, ¶¶ 53-54.
The Borough maintains that each of the North Campus properties
subject to the Stormwater Charge is “developed” for purposes of the Ordinance, and
that these properties are connected with, use, are served by, or are benefitted by the
Borough’s Stormwater System. Declaratory Judgment Action at 17, ¶¶ 76-77. The
Borough notes that the amount of the Stormwater Charge for which the owner of a
developed property is responsible is dependent upon the amount of impervious
surface on the property. Id. at 17, ¶ 78. The Borough states that the Borough Council
established several impervious area property tiers, based upon the total square
footage of impervious surface area, with different corresponding assessment rates
for the Stormwater Charge. Id. at 17-18, ¶¶ 80-84. The Borough avers that all
revenue generated by the Stormwater Charge is deposited into the Borough’s
Stormwater Management Fund, and that this money is only used for the purposes set
forth in the Ordinance, which include funding pollution remediation measures to
comply with state and federal regulatory requirements. Id. at 18-19, ¶¶ 88-89.
Counsel for PASSHE informed the Borough by letter dated January 18,
2018 that the University would not pay the Stormwater Charge. Declaratory
Judgment Action at 5, ¶¶ 20-21. Through letters sent on February 23, 2018, and
March 5, 2018, the Borough rejected PASSHE’s and the University’s refusal to pay
the Stormwater Charge. Id. at 5, ¶¶ 22-24. The Borough sent PASSHE Stormwater
Charge invoices listing the aggregate amount due for 2017 as $105,760.85. Id. at
19, ¶¶ 91-92. The Borough sent the University Stormwater Charge invoices
indicating a total amount due of $5,855.81 for 2017. Id. at 19-20, ¶¶ 93-94.
5
Respondents missed the deadline for payment of the 2017 Stormwater Charge. Id.
at 20, ¶ 96. The Borough avers that Respondents owe similar amounts for the 2018
Stormwater Charge, which they also declined to pay. Id. at 20-21, ¶¶ 99-102. The
Borough does not dispute that PASSHE and the University are immune to local
taxation, but alleges that the Stormwater Charge is a fee for service, rather than a
tax. Id. at 22, ¶¶ 106-07.
Respondents filed a preliminary objection in the nature of a demurrer,
alleging that the Borough’s pleading is legally insufficient pursuant to Pennsylvania
Rule of Civil Procedure No. 1028(a)(4) because the Stormwater Charge is not a fee
for service, but rather a tax from which they are immune as Commonwealth entities.
Preliminary Objection to the Borough’s Declaratory Judgment Action (Preliminary
Objection) at 4-5, ¶¶ 15-25. Respondents assert that “[t]he [Stormwater Charge] is
a form of real estate tax—a payment by a property owner assessed based on a
condition of the subject property.” Id. at 6, ¶ 22. Respondents contend that the
Stormwater Charge is a tax, because it compels the payment of money in order to
generally aid the environment without providing any special benefit to
Commonwealth property. Id. at 6, ¶ 23. Respondents also assert that even if the
Stormwater Charge is considered an assessment rather than a general tax because it
is limited to stormwater infrastructure projects, it is still a tax subject to the
Commonwealth’s tax immunity. Id. at 6, ¶ 24. Respondents additionally contend
that the Stormwater Charge is not reasonably proportional to the value of any product
or service provided to the Commonwealth in a quasi-private capacity, such as the
provision of gas or garbage collection. Id. at 6-7, ¶ 26 (citing Supervisors of
Manheim Twp., Lancaster Cty. v. Workman, 38 A.2d 273, 276 (Pa. 1944)).
Respondents maintain that “[t]he authority to levy any kind of tax or charge against
6
a Commonwealth entity must be made expressly.” Id. at 7, ¶ 29 (citing Sw. Del. Cty.
Mun. Auth. v. Aston Twp., 198 A.2d 867, 872 (Pa. 1964)). Respondents assert that
although the Ordinance identifies two possible sources of the Borough’s authority
under state law—the Storm Water Management Act (SWMA)9 and The Clean
Streams Law10—neither authorizes the Borough to impose any tax, assessment or
fee upon a Commonwealth entity to raise revenue to comply with the Borough’s
obligations. Id. at 8-9, ¶¶ 31 & 34.
In response, the Borough asserts that the Stormwater Charge is a fee for
service imposed on Respondents by authority of Section 2961 of the Home Rule
Charter and Optional Plans Law, 53 Pa.C.S. § 2961. Borough’s Response to
Respondents’ Preliminary Objections (Borough’s Response) at 13 & 16-17, ¶¶ 22 &
28. The Borough further contends that the Stormwater Charge is reasonably
proportional to the value of the service provided to Respondents, id. at 16, ¶ 27, and
that Respondents are not the equivalent of the Commonwealth and enjoy only
qualified immunity from taxation. Id. at 2, ¶ 17 (citing Pa. State Sys. of Higher
Educ. v. Indiana Area Sch. Dist. (Pa. Cmwlth., No. 184 M.D. 2011, filed April 5,
2012), slip op. at 15). Further, the Borough maintains that Respondents realize a
special benefit from the Borough’s Stormwater System. Borough’s Response at 14,
¶ 23.
In their brief in support of their preliminary objection, Respondents
note that “[a]n assessment is defined as a type of charge that ‘pays for a public,
though a local, improvement’ and ‘therefore relieves the public from the necessity
of contributing to the cost or expense of the improvement.’” Respondents’ Brief at
9
Act of October 4, 1978, P.L. 864, as amended, 35 P.S. §§ 680.1 – 680.17.
10
Act of June 22, 1937, P.L. 1987, as amended, 35 P.S. §§ 691.1 – 691.1001.
7
10 (quoting Sw. Del. Cty. Mun. Auth., 198 A.2d at 870). Respondents assert that the
fact that the Stormwater Charge is dedicated to a particular purpose indicates that it
is an assessment, which is still a species of tax subject to the Commonwealth’s tax
immunity. Id. at 11. Respondents contend that the Stormwater Charge resembles
the sewer assessment in Southwest Delaware County Municipal Authority, in which
a municipal authority attempted to assess a public school to cover the cost of
installing a sewer system. Id. at 11. Respondents note that the Pennsylvania
Supreme Court found in that case that the school district and the school authorities
were immune from the sewer assessments, even though they benefited from the
sewer construction. Id. at 11 (citing Sw. Del. Cty. Mun. Auth., 198 A.2d at 869 &
874). Respondents therefore maintain that the fact that they might benefit from the
Borough’s Stormwater System does not preclude a finding that the Stormwater
Charge is a tax or an assessment, rather than a fee. Id. at 11-12. Respondents also
point out that “[t]he Borough does not allege that it will make improvements to, or
even touch, property owned by” Respondents. Id. Respondents further contend that
they are equivalent to the Commonwealth and entitled to tax immunity. Id. at 10.
Respondents note that “[a]s a general rule, political subdivisions like a borough
cannot levy taxes on real property unless the . . . General Assembly has granted
taxing authority to the subdivision.” Id. at 6 (citing Lehigh-Northampton Airport
Auth. v. Lehigh Cty. Bd. of Assessment Appeals, 889 A.2d 1168, 1175 (Pa. 2005)).
Respondents also assert that “political subdivisions like the Borough do not have
general authority to compel payment from Commonwealth entities” and that “[t]he
authority to levy any kind of tax or charge against a Commonwealth entity must be
made expressly” by the General Assembly. Id. at 15-16 (citing Lehigh-Northampton
Airport Auth., 889 A.2d at 1175; Del. Cty. Solid Waste Auth. v. Berks Cty. Bd. of
8
Assessment Appeals, 626 A.2d 528, 530 (Pa. 1993)); Sw. Del. Cty. Mun. Auth., 198
A.2d at 872.11
In its brief in opposition to Respondents’ preliminary objection, the
Borough argues that the Stormwater Charge is a fee for service. Borough’s Brief in
Opposition to Respondents’ Preliminary Objection at 16. The Borough contends
that it has the authority to impose the Stormwater Charge pursuant to its home rule
charter and asserts that Respondents fail to point to any provision of the home rule
charter, statutes or the Pennsylvania Constitution that would limit the Borough’s
power to impose the Stormwater Charge. Id. at 20. The Borough notes that a
municipality may charge a fee for service when performing certain functions in a
proprietary or quasi-private capacity, but only if that fee is reasonably proportional
to the value of the service received. Id. at 16-17 (citing Workman, 38 A.2d at 276).
The Borough further argues that the Stormwater Charge is a fee, because it is
“imposed as a charge for services which a municipality renders ‘to particular persons
or groups of persons within the’ municipality[,]” and asserts that the Stormwater
Charge is not a general revenue generating measure. Id. at 14 & 16-17. The Borough
contends that its Stormwater System benefits property owners, because they “do not
have to incur the expense which would otherwise be necessary to maintain on their
own properties the scope of systems which would be necessary to” manage
stormwater. Id. The Borough also asserts that “the amount of [the Stormwater
Charge] which the owner of a given [d]eveloped [p]roperty must pay is directly
related to the amount of impervious cover at that . . . [p]roperty.” Id. at 18.
In ruling on preliminary objections,
11
We note that the cases cited by Respondents pertain to tax immunity and do not state
that Commonwealth entities are immune from “charges” imposed by municipalities. See Sw. Del.
Cty. Mun. Auth., 198 A.2d at 872.
9
our review is limited to the pleadings. . . . We are required
to accept as true the well-pled averments set forth in the
. . . complaint, and all inferences reasonably deducible
therefrom. . . . Moreover, the court need not accept as true
conclusions of law, unwarranted inferences from facts,
argumentative allegations, or expressions of opinion. . . .
Pa. State Lodge, Fraternal Order of Police v. Dep’t of Conservation & Nat. Res.,
909 A.2d 413, 415-16 (Pa. Cmwlth. 2006) (citations omitted).12 A preliminary
objection to the legal sufficiency of a pleading, commonly known as a demurrer,
raises questions of law, and we “must decide whether it is clear from the well-
pleaded facts and reasonable inferences from those facts that the claimant has not
established a right to relief.” Yocum v. Pa. Gaming Control Bd., 161 A.3d 228, 233-
34 (Pa. 2017) (emphasis added). “Preliminary objections in the nature of a demurrer
should be sustained only in cases that clearly and without a doubt fail to state a claim
for which relief may be granted.” Id. at 234. “[T]he question presented by [a]
demurrer is whether, on the facts averred, the law says with certainty that no
recovery is possible. Where a doubt exists as to whether a demurrer should be
sustained, this doubt should be resolved in favor of overruling it.” Bilt–Rite
Contractors, Inc. v. The Architectural Studio, 866 A.2d 270, 274 (Pa. 2005).
In PPL Electric Utilities Corporation v. City of Lancaster, 125 A.3d
837 (Pa. Cmwlth. 2015), we considered a public utility corporation’s application for
summary relief following its declaratory judgment action asking this Court to
declare invalid an annual right-of-way maintenance fee imposed on the public utility
12
Courts reviewing preliminary objections may also consider documents and exhibits
attached to the complaint. See supra note 4.
10
by a city. Id. at 844.13 Noting that, as a home rule municipality, the city could
“assess fees for recovery of costs under its home rule powers” and “undertake
government action unless preempted by a law of statewide applicability,” we
identified the central issue as “whether the fee is reasonable and not a tax.” Id. at
851-52. We denied summary relief, reasoning that “[t]his issue [could not] be
determined at this summary stage of the proceedings and may require further factual
development[.]” Id. at 852. Similarly, here, whether the Borough has established a
right to declaratory relief depends on whether the Stormwater Charge constitutes a
tax or a fee—a question necessitating further factual development. For example,
questions remain, inter alia, as to: whether the Borough’s Stormwater System
provides a discrete benefit to Respondents, as opposed to generally aiding the
environment and the public at large; whether the value of the Stormwater System to
Respondents is reasonably proportional to the amount of the Stormwater Charge;
and, apart from general operation, maintenance and repair of the Borough’s
Stormwater System, how exactly does the Borough utilize the funds generated by
the Stormwater Charge.
Based on the present facts as averred and reasonable inferences
therefrom, it is not certain that the law precludes the Borough’s requested
declaratory relief. See Bilt–Rite Contractors, Inc., 866 A.2d at 274. Further factual
development and the resolution of pending questions may enable the Borough to
establish that the Stormwater Charge constitutes a fee for service that is reasonably
proportional to the value of the benefit conferred to Respondents in a quasi-private
capacity. Thus, the Borough has not “clearly and without a doubt failed to state a
claim for which relief may be granted.” Yocum, 161 A.3d at 234. As settling the
13
Prior to this point, we had also overruled the City’s preliminary objection in the nature
of a demurrer. PPL Elec. Utils., 125 A.3d at 843.
11
question of law presented by the Borough’s request requires further factual
development, we therefore conclude that it would be premature to sustain
Respondents’ demurrer. See McNeill by McNeill v. City of Philadelphia, 522 A.2d
174, 178-79 (Pa. Cmwlth. 1987) (holding that the trial court’s decision to sustain a
demurrer was premature where questions of law could not be settled without
“amplification of the factual record”). Accordingly, we overrule Respondents’
preliminary objection.
__________________________________
CHRISTINE FIZZANO CANNON, Judge
12
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
The Borough of West Chester, :
Petitioner :
:
v. :
:
Pennsylvania State System of :
Higher Education and West Chester :
University of Pennsylvania of the :
State System of Higher Education, : No. 260 M.D. 2018
Respondents :
ORDER
AND NOW, this 15th day of July, 2019, the preliminary objection of
the Pennsylvania State System of Higher Education (PASSHE) and West Chester
University of PASSHE (collectively, Respondents) is OVERRULED. Respondents
shall file an answer to the Borough of West Chester’s declaratory judgment action
within thirty (30) days of the date of this order.
__________________________________
CHRISTINE FIZZANO CANNON, Judge