Yesterday, the Florida Supreme Court declined to review a very important case regarding the billing of fire fees on utility bills. In Discount Sleep of Ocala, LLC, et al. v. City of Ocala (2020), the 5th District Court of Appeal ruled in favor of a class of plaintiffs who challenged the constitutionality of the City of Ocala’s (the “City”) fire service fee. The Fifth District’s decision now becomes final based upon the Florida Supreme Court’s decision to decline review.
As background, between 2006 and 2010 the City enacted a fire service fee that was intended to offset a portion of the general operating costs of the City’s fire department. The Appellants, after being certified as a class, filed suit alleging that the fee was actually an unconstitutional tax and sought an order requiring a class-wide refund. Ultimately the trial court ruled in favor of the City, concluding that the fire service fee was not a tax and this appeal followed.
In this appeal, the Court examined whether the City’s fire service fee is a valid user fee or an unconstitutional tax. The Court analyzed 3 prongs which distinguished a valid user fee from a tax: (1) whether the charge is in exchange for a particular governmental service, (2) whether the service benefits the party paying the fee in a manner not shared by other members of society, and (3) whether the fee is paid by choice.
As to the first prong, the Fifth District Court of Appeals concluded that the fee was a charge not paid in exchange for a service, nor authorized by statute, and used to fund services typically funded by ad valorem taxes. As to the second prong, the Court found that the class members did receive a special benefit apart from the rest of society (ex. lower insurance premiums). And, finally, as to the third prong, the Court found that there was no reasonable choice to opt out of the fee in that either the class members had to disconnect from the City’s water, sewer, and electric services, or move outside of the City. Also, the Court noted that the fee, when charged, was bundled together with other City utility fees, which would coerce involuntary payment.
Based on the foregoing, the Fifth District determined that the City’s fire service fee was an unconstitutional tax and the case was remanded for purposes of establishing a manner to refund the illegally collected fees.
In light of the Court’s ruling in this case, if your local government is currently billing fire fees on utility bills, you should carefully review the situation and consider whether to change the manner by which you are collecting fire revenues. The Fifth Circuit decision did not address the propriety of collecting revenues for fire services through special assessments, which have previously been approved by multiple Florida courts.
The information contained in this document does not constitute legal advice.
