Take a look at Denver Street, LLC v Town of Saugus, 78 Mass. App. Ct. 526 (2011). Further Appellate Review was granted in March, but if the decision stands it provides some more clarification regarding the distinction between “fees” (which 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”; are paid by choice; and compensate the government for providing services) and “taxes” which are permissible only when authorized by the Legislature.
In Saugus, like many other Towns, the Town’s sewer system leaked and the Town entered into an Administrative Consent Order with DEP which contained a plan to remedy the leaking The plan included imposing a fee to developers wishing to make a new connection based on the number of gallons of new sewer flow proposed by the development. The Plaintiff paid the fee under protest and filed a complaint in 2005. The Appeals Court agreed with the Superior Court that the fee was an illegal tax because the funds were used to repair existing problems with the system, which would have to be accomplished regardless of the new project proposed by the developer. Not surprisingly, the Court also found that the funds collected by the Town were not exclusively used on repairing the leaks, but $440,000.00 was spent on repairing a pumping station.
The Appeals Court concluded: “Because new sewer users received no benefits that were not shared by other members of the town, and the amount of the [inflow and infiltration] reduction contribution was not reasonably related to the cost of services from which the new users alone derived a benefit, the [inflow and infiltration] reduction contribution was an illegal tax and not a fee.”