Commonwealth Court Trashes Landlord’s Attempt To Avoid Borough Fees
Written by: Alan Nochumson
Local governments are given wide latitude in outsourcing their government services to private independent contractors. Pennsylvania courts generally shy away from challenges by the citizenry with respect to the amounts paid on government contracts.
In a prime example, the Commonwealth Court of Pennsylvania in M&D Properties, Inc. v. The Borough of Port Vue recently rejected a landlord’s constitutional challenge to garbage collection fees assessed by the Borough against its apartment complex.
Under the Borough ordinance, all domestic refuse accumulated upon any property within the Borough had to be collected and removed either by the Borough or an approved independent contractor. Since the early 1990s, the Borough contracted with a private contractor to perform that function by through a public bidding process and selecting the lowest bidder from interested trash collection companies. The annual fee charged by the Borough to owners of real estate for trash collection was $105 per dwelling unit.
M&D owned and operated an apartment complex located in the Borough consisting of 72 single-family units. The apartment residents were responsible for depositing their trash into the dumpsters located within the complex. In accordance with the ordinance, the Borough levied, and M&D paid, the annual trash collection fee of $105 for each of the 72 units in the apartment complex.
TRIAL COURT’S RULING
In 1993, M&D filed a complaint challenged the ordinance on the grounds that the Borough’s annual garbage collection fee was “arbitrary, irrational, unreasonable, confiscatory, and not related to the Borough’s incurred costs of collection of trash.” In support of its claim, M&D offered bids it obtained from two private trash haulers for collection of garbage at the apartment complex. Both bids were for less than half of the $105 per dwelling unit.
After judgment was entered in M&D’s favor, the Borough filed a motion for post-trial relief, which was granted, and the case was retried as a de novo non-jury trial. At the new trial, the judge found that M&D failed to sustain its burden of proof that the Borough’s trash collection fee was unreasonable.
On appeal, the Commonwealth Court directly confronted the reasonableness of the assessed trash collection fees.
Under Pennsylvania law, “fees charged by a municipality for services rendered are proper if they are reasonably proportional to the costs of the regulation or the services performed. A municipality may not use its power to collect fees for a service as a means of raising revenue for other purposes. The party challenging the reasonableness of a fee bears the burden of proving it is unreasonable.”
The Commonwealth Court first addressed M&D’s argument that the Borough’s annual fee of $105 dwelling unit is unreasonable when compared to the proposals from two independent contractors to provide trash collection service to the apartment complex for half of the fee.
Agreeing with the trial court’s determination that the evidence submitted did not support M&D’s conclusion that the Borough’s fees was unreasonable, the Commonwealth Court pointed out that the “fees cover[ed] more than just the contractual payments to its designated trash hauler” and that “[t]he fee also include[d] overhead expenses borne by the Borough for personnel, billing, collection, regulation, inspection and enforcement costs.” The Commonwealth Court emphasized that “[a]ny assessment of the reasonableness of the Borough’s $105 fee must take into account whether the fee is ‘reasonably proportional’ to all of the costs associated with trash collection, not just one part of those costs.”
The Commonwealth Court also rejected M&D’s heavy reliance on the Supreme Court of Pennsylvania’s decision in Ridley Arms, Inc. v. Township of Ridley. In Ridley Arms, Inc., the Supreme Court found “that the payment of approximately $58,000 to a municipality for the performance of services which can be, and actually were provided by the private sector for approximately $23,000, less than half the amount charged by government, [wa]s” unreasonable.
The Commonwealth Court found the facts and circumstances in Ridley Arms, Inc. to be distinguishable.
The Commonwealth Court first pointed out that the Township of Ridley conceded that its actual cost per unit for collecting refuse from apartment complexes ranged from “$19.99 to $ 30.00 during the relevant time period, whereas it charged a refuse collection fee of $ 70.00 per unit.” In contrast, the Commonwealth Court noted that the Borough was not “levying a revenue-generating surcharge.”
The Commonwealth also highlighted that the landlord in Ridley Arms, Inc. paid a private contractor for trash removal in addition to paying the township in fees pursuant to the trash collection ordinance. Since “M&D did not pay a fee to the Borough for services which ‘actually were provided by the private sector’ for half the cost”, the Commonwealth Court believed that the trash collection fees were not per se unreasonable.
As illustrated by the Commonwealth Court’s ruling in M&D Properties, Inc., the judiciary refuses to second guess decisions made local governments. This foolhardy approach allows local governments to either intentionally or negligently overcharge their residents for government services. Based upon the language of the court opinion, such challenges are better handled through the electoral process rather than the judicial system.
Reprinted with permission from the March 27, 2006 edition of The Legal Intelligencer © 2006 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, email@example.com or visit www.almreprints.com.