A Fourth District Court judge ruled on Wednesday that Pleasant Grove’s transportation utility fee is not actually a fee but a tax, and therefore is being collected illegally.
According to the lawsuit, Pleasant Grove has, for years, “found itself facing a budget shortfall making it almost impossible for the City to maintain roads at an acceptable level unless additional funding was found.”
After a 2017 ballot initiative that would require the city to take $2.6 million from its general fund and put it toward road maintenance failed to pass, Pleasant Grove Mayor Guy Fugal and the City Council passed an ordinance to implement a “Transportation Utility Fee” (TUF) to fund road maintenance in April 2018, the lawsuit said.
The lawsuit focused on whether the TUF implemented was a fee or a tax, the difference being that fees are tied to specific services, such as garbage disposal or electricity, while taxes are used to fund general governmental purposes.
If the TUF implemented by Pleasant Grove was a tax, “then the City would need to go through the additional procedures required by Utah law before a tax increase can be implemented,” according to the lawsuit.
Ultimately, Judge Jared Eldridge ruled that the TUF is a tax and not a fee since the benefit of an improved road system “is a general benefit rather than a specific benefit to those who pay the fees.”
“Based on the current state of the law, this Court is persuaded while the City has authority to implement a TUF, the TUF that was implemented here is clearly a tax and therefore improperly collected until the City satisfies the additional requirements set out by the Utah Code for an increase in the tax rate,” Eldridge wrote in his ruling.
The Lehi-based Libertas Institute, a libertarian group that advocates for limited government and free market principles, funded the lawsuit and identified Pleasant Grove residents who agreed to be plaintiffs, said Connor Boyack, the group’s president.
Boyack said the Libertas Institute funded the lawsuit because Pleasant Grove tried to fund roads using “a mechanism that is illegal.”
“We are pleased with the ruling,” said Boyack, “though certainly not surprised because we think a fair and plain reading of relevant case law and state law clearly show what we argued and what the judge agreed with.”
Other cities have similar utility fees that fund roads and transportation projects, Boyack said, including Provo, Vineyard, Highland, Mapleton and North Ogden.
The lawsuit targeted Pleasant Grove because it was the most recent city to implement such a fee, Boyack said.
“Because Pleasant Grove’s implementation was the newest, we decided that our legal challenge should focus on them rather than another city who had already grown reliant on and had been using these funds,” he said.
Boyack said he hopes other cities will pay attention to the Fourth District Court ruling.
“They’re now on notice that their programs are similarly illegal,” he said.
Pleasant Grove acknowledged the ruling on its Facebook page on Thursday, writing that “the result was a split judgement and we’re consulting with our attorneys regarding the next steps.”
“We will send out more information as it becomes available,” the city wrote.
According to Boyack, the city has been collecting the monthly fee but has not spent it pending the outcome of the litigation. If the city does not appeal the ruling, it will legally have to return the collected fees to residents, he said.