Legal Report, July 2017
General Counsel, Jennifer G. Ashton
Corbett, White, Davis & Ashton, P.A.
1. Corrections Corp. of America, Inc. v. City of Pembroke Pines, 2017 Fla. App. LEXIS 5052, 42 Fla. L. Weekly D 819 (Fla. 4th DCA April 12, 2017). Public Utilities; Municipal Boundaries.
The City of Pembroke Pines (the “City”) operates a potable water and sewer system for properties within its boundaries, as well as some properties outside its boundaries including properties located in the Town of Southwest Ranches (the “Town”). In 2005, Corrections Corporation of America, Inc. (“CCA”) entered into an agreement with the Town to develop a correctional facility. That same year, the Town entered into an interlocal agreement with the City, in which the City agreed not to interfere with the development or operation of CCA’s correctional facility.
In 2011, the City and Town entered into another interlocal agreement, which stated that the City agreed it had sufficient capacity to provide water and sewer service to the proposed correctional facility, and that it would expeditiously approve a water/wastewater utility agreement to provide such services at agreed upon rates when needed. Also in 2011, the City Commission said it would provide water and sewer services so long as the correctional facility was not more than 1,500 beds.
Five months later, in an abrupt departure from its previous position, the City Commission refused to approve the water/wastewater utility agreement. Instead, it formally adopted a resolution expressing its opposition to erecting the correctional facility in the Town. The City Commission also directed the City Attorney to seek declaratory relief that it was not required to provide potable water and wastewater services to the correctional facility. At all times relevant to this dispute, the City admitted that it had the capacity and infrastructure in place to provide water and sewer services to the site.
On appeal, the Fourth District Court of Appeal held that as a general rule, "a municipality has no duty to supply services to areas outside its boundaries." The Florida Supreme Court has recognized two exceptions to this general rule where: 1) a municipality has agreed to extend its services by contract, and 2) where a municipality has assumed a duty to provide such services through its conduct. Here, the Court found that although the City did not have an agreement with the correctional facility to provide water/wastewater services to the site, it was obligated to provide such services under the “conduct” exception. The City, in prior written documents and formal actions, agreed to approve a water/wastewater agreement to provide services to the correctional facility and that it would not interfere with the development and operation of that facility. The City also indicated its willingness to provide these services by directing CCA to limit its request for water and sewer services to a 1,500-bed facility. The Court found that the City’s conduct expressly manifested its desire and intent to assume the duty of providing services.
2. City of Key West v. Key West Golf Club Homeowners', 2017 Fla. App. LEXIS 7804, 42 Fla. L. Weekly D 1209 (Fla. 3d DCA May 31, 2017). Stormwater Utility Fees.
In 2001, the City of Key West (“City”) established a stormwater utility as authorized by Chapter 403, F.S. The fee charged was based on the amount of impervious surface area, such as buildings and parking lots, on a property. A larger impervious surface area resulted in a higher utility fee because the larger such areas, the less stormwater is absorbed into the ground and the more stormwater is discharged. The ordinance exempted certain property, including property that retains its stormwater runoff. The ordinance established a sliding scale for the amount of the utility fee based upon the amount of water retained on site.
In 2003, the City began billing the West Golf Club Homeowners' Association, Inc. (“Association”), Key West Golf Club, LLC (“Golf Course”), and Key West HMA, LLC (“Hospital”) for the stormwater utility fee. In 2009, these owners filed suit against the City, claiming that they received little or no benefit from the stormwater utility, and that the City’s stormwater utility fee was illegal as applied to their properties. After a bench trial, the court agreed and entered a judgment exempting the properties from future stormwater utility fees.
The Third DCA reversed, holding that the City could lawfully charge stormwater utility fees to the Association, Golf Course and Hospital. The undisputed evidence showed that the City owned the stormwater system, the owners contributed to the need for the stormwater utility by discharging stormwater into the City’s system, and that they benefited from the utility's flood control and pollution control measures, which prevented flooding of their properties and protected the quality of the surrounding water. The Court further held that the owners could not prevail on their argument that the fee charged had no reasonable relationship to the benefits received because § 403.0891(6) authorized the City's method of calculating the fee based on impervious surface area. The Court rejected the owners’ claim that they only had to pay fees when their stormwater traveled through specific utility pipes and infrastructure. A stormwater utility funds more than infrastructure. Chapter 403, F.S., recognizes that stormwater management programs shall use a combination of nonstructural and structural best management practices to mitigate environmental degradation and water pollution.
3. Treasure Coast Marina, LC v. City of Fort Pierce, 2017 Fla. LEXIS 1322, 42 Fla. L. Weekly S 650 (Fla. June 15, 2017). Ad valorem tax exemption; municipal marinas - UPDATE
This case was previously reported in the July 2016 legal report. This case commenced in 2011 when owners of a private marina filed a complaint challenging the tax-exempt status of the Fort Pierce City Marina and the Fisherman’s Wharf Marina. The trial court originally held that the City of Fort Pierce (“City”) was not entitled to an exemption from ad valorem taxes on two marinas owned and operated by the City, concluding that they did not serve a “municipal or public purpose” under Article VII, Section 3(a) of the Florida Constitution. The trial court relied on cases finding that Florida Department of Revenue v. City of Gainesville, 918 So. 2d 250 (Fla. 2005), had narrowed the legal standard for the exemption. According to the trial court in interpreting Gainesville, the City’s marinas did not serve a municipal or public purpose because “they previously operated as private marinas and still compete with private marinas.”
On appeal, the Fourth DCA reversed, finding that the Gainesville case did not change the legal standard for municipal purpose under this section of the Florida Constitution. The Fourth DCA held that the City’s marinas, which are open to the public and exclusively owned and operated by the City, “serve a purpose that has been repeatedly and explicitly recognized as a ‘municipal or public purpose’.” The Fourth DCA further concluded that this case presented an issue of great public importance, noting the size of the boating community in Florida and the significant economic impact that the ad valorem exemption provides these marinas. The Court asked the Florida Supreme Court to review this question and provide guidance. The Florida Supreme Court upheld the Fourth DCA’s decision and held that a public marina, owned and operated by a municipality, is a traditional municipal function that carries a presumption of tax-exempt status.