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CHAPTER 7. TUFS LEGAL AND REGULATORY ISSUES

Municipalities that are considering establishing TUFs programs usually ensure that their State allows for TUFs, understand any legal issues under State law, and anticipate local legislative and public opposition.

7.1 Ensuring Appropriate Authority

Before a municipality establishes a TUFs program, it needs to ensure that there is a legal basis. This is usually a question that relates to whether the State in which the municipality is located is (1) a "home rule" State that is allowed the autonomy to impose TUFs, or (2) a "Dillon's Rule" State with powers limited to what is explicitly permitted under State law. Appropriate legal counsel typically advises municipal staff on the applicable authority in their jurisdiction.⁹⁵

7.2 Considering Legal Challenges

Municipalities that establish TUFs programs also may benefit from understanding relevant State Supreme Court cases, even if they are not located in those States, because the issues raised in those cases may be relevant for any legislative or legal challenges to their program. Four State Supreme Courts have ruled on municipal TUFs programs. Three of them have struck down such programs and one ruled in favor, yet not for the municipality that was involved in the case. Table 10 summarizes key takeaways from each of the cases.

Table 10. Key takeaways from TUFs legal cases.

Case/State	Takeaway
Brewster v. City of Pocatello, Idaho, 198896	Court holds that revenue to be collected has no relationship to regulation of travel over its streets, but rather to generate funds for street maintenance. The fee is, in reality, a tax.
Bloom v. City of Fort Collins, Colorado, 198997	TUFs is a service fee and not a property tax. The provision allowing the "transfer" of TUFs monies to the general fund may transform the special fee into an "impermissible" tax. That provision negated the Fort Collins legislation, but not the TUFs mechanism per se. The court recognized that TUFs is not conditioned on the voluntary choice of property owners; however, the court does not hold that the service fee must be voluntary.
State v. City of Port Orange, Florida, 199498	TUFs receipts were used to secure revenue bonds. TUFs convert a city's roads into a toll road system with only property owners having to pay the tolls. Court does not find statutory or constitutional authority for such tolls.
Covell v. City of Seattle, Washington, 199599	TUFs varied by the value of the property so that a $60,000 single-family house paid less than a $2,400,000 mansion, even if the trip impact was the same. Court found it difficult to determine that TUFs were (1) intended for services rendered, and (2) fees were intended to regulate street traffic. Court ruled that these were taxes and not fees, and as a tax, it must be imposed in accordance with the requirements of law.

The case law suggests takeaways for the design of TUFs programs. For example, the Colorado Supreme Court's holding highlighted that allowing for TUFs monies to flow into the general fund may blur the line between TUFs being fees or taxes. From a public policy perspective, TUFs benefits are that there is much greater transparency regarding the use of public monies. The Washington State case suggested that TUFs be based on a metric related directly to road use, such as the number of trips. Furthermore, in a major academic review of TUFs, Professor Carole Turley Voulgaris of Harvard University argues that cities in Texas establishing TUFs programs may help their future legal defense of the argument that TUFs are not "voluntary" by reducing the fees for residents who do not own vehicles.100 As with all value capture techniques, practitioners can consult with legal counsel familiar with their State's case law to determine the relevant legal issues.

7.3 Anticipating Legislative Opposition

In addition to challenges based on legal grounds, municipalities might anticipate challenges based on policy grounds. One criticism of the typical TUFs program based on the ITE Trip Generation Manual is that the fees are derived from estimates and not actual traffic generated by a property. In general, courts have found that TUFs programs which are based on a well-thought-out framework that attempts to treat each property in a similar way are acceptable. In the Colorado case, the court ruled that "... where the fee is reasonably designed to defray the cost of the service provided by the municipality, such fee is a valid form of governmental charge within the legislative authority of the municipality [italics added]."101 Furthermore, the U.S. Supreme Court cases, Nollan and Dolan establish that other value capture instruments are acceptable as long as there is a "rational nexus" and "rough proportionality" between the exaction of the fee and the infrastructure that is being provided, and that the fee roughly corresponds to the services provided.¹⁰²

Another criticism is that some categories often do not accurately characterize the traffic impact of some nonresidential properties, especially if the TUFs program only has a handful of nonresidential categories. Wholesalers in Medford, OR, rejected a TUFs program, arguing that they should not have been lumped into a commercial land use category with retailers that generate many more trips. Shortly after the TUFs was implemented, Medford added new categories to its TUFs schedule.¹⁰³ As discussed, another way to remedy this is for municipalities to cap their highest TUFs, as Austin, TX, and Hillsboro, OR, have. In Austin's case, it capped its "traffic generation factor" at five times the residential rate. Food stores and healthcare facilities were charged equal amounts per acre of development, despite food stores generating almost four times as many trips per acre. These caps may be a natural result of political compromise; however, if fees are too far from the being reasonably related to the payers' use of city streets, they risk losing their legitimacy.¹⁰⁴

A third criticism is with regard to application of the fee. In Portland, OR, a TUFs program adopted in 2001 was withdrawn the same year after a successful voter referendum petition. One of the criticisms was that some TUFs uses, such as tow charges for abandoned vehicles, were not directly related to road maintenance.¹⁰⁵

Footnotes

98 650 So.2d 1 (1994). STATE of Florida, Appellant, v. The CITY OF PORT ORANGE, Florida, a political subdivision of the State of Florida, Appellee. No. 83103. November 3, 1994. Rehearing Denied February 17, 1995.

99 127 Wn.2d 874 (1995). 905 P.2d 324, LIBBY COVELL, ET AL., Appellants, v. THE CITY OF SEATTLE, Respondent. No. 61178-5. November 2, 1995.

100 Voulgaris, Carole Turley. 2016. A TUF Sell: Transportation Utility Fees as User Fees for Local Roads and Streets. Public Works Management & Policy, 21(4), 318. doi: 10.1177/1087724X16629961.

101 784 P.2d 304 (1989). Arvid R. BLOOM and Beverly T. Bloom, Plaintiffs-Appellees, v. CITY OF FORT COLLINS, Defendant-Appellant. No. 88SA162. December 18, 1989. As Modified on Denial of Rehearing January 16, 1990.

102 Curtin, Jr., Daniel J. Exactions, Dedications and Development Agreements Nationally and in California: When and How Do the Dolan/Nollan Rules Apply. Presented by the Municipal Legal Studies Center of the Center for American and International Law. Annual Institute on Planning, Zoning and Eminent Domain, San Francisco, CA, April 9-11, 2003, April 10, 2003. https://www.ca-ilg.org/sites/main/files/file-attachments/resources exactions.pdf

103 Ewing, Reid. 1993. Transportation Utility Fees. Research Record No. 1395, pp. 15-24. http://onlinepubs.trb.org/Onlinepubs/trr/1993/1395/1395.pdf#page=23

104 Ibid.

105 Ibid.

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