Northwest Fire District v. U.S. Home of Arizona Construction Company – 9/29/2006

October 5, 2006

Arizona Court of Appeals Division Two Upholds A Fire District’s Authority Under A.R.S. § 48-805 To Impose a Facilities Benefit Assessment On Homes Not Yet Constructed.

Under state law a fire district is required to provide certain emergency services to all homes in its jurisdiction. For newly constructed homes, the fire district is required to provide emergency services from the date construction begins. These fire districts rely heavily on property tax revenue to fund the facilities and services they provide. For newly constructed homes, however, property taxes are not collected for up to fifteen months after construction is completed. Thus, recognizing a gap between services provided and funding for those services, the Northwest Fire District (the “District”) adopted a resolution to impose a “facilities benefit assessment” on homes for which a building permit has issued but which have not yet been constructed. US Home, a homebuilder in the district, refused to pay the assessment and the District brought an action in superior court to compel US Home to pay. US Home argued that the assessment was merely a broad tax disguised as a fee and that the District did not have authority to impose such a tax. The trial court granted summary judgment in favor of US Home, and the District appealed.

The Court of Appeals reversed the trial court’s ruling. The Court first noted that Arizona Revised Statutes (“A.R.S.”) § 48-805 explicitly authorizes fire districts to adopt resolutions imposing, among other things, “facilities benefit assessments.” In ascertaining whether the District’s assessment constitutes a “facilities benefit assessment” under the statute, the Court looked to judicial interpretations of similar statutes in other jurisdictions, and the legislative history of ARS § 48-805. The Court determined that the legislature intended to grant fire districts broad discretion to impose fees and assessments for the services they are required to provide. Moreover, the Court found that “the District’s characterization of its facilities benefit assessment – as a fee ‘to help pay for the costs of developing facilities from which to provide services to new building construction areas’ – fits squarely within the meaning other jurisdictions have given the term.” Finally, the Court applied the standards set forth in May v. McNally, 203 Ariz. 425, ¶ 24, 55 P.3d 768, 773-74 (2002), for determining whether an assessment is a fee or a tax and held that the assessment at issue here was not a discriminatory property tax cloaked as an assessment.

Judge Eckerstrom authored the unanimous opinion joined by Judges Brammer and Espinosa.