Northwest Fire District v. U.S. Home of Arizona Construction Company – 6/29/2007

July 24, 2007

Arizona Supreme Court Holds That Fire District’s “Facilities Benefit Assessment” Exceeds District’s Authority Under A.R.S. § 48-805(B)(14).

Northwest Fire District (“Northwest”) provides emergency services to residents in the district, which covers more than 140 square miles in northwest Tucson – an area that has experienced rapid development in the last decade. A.R.S. § 48-805(B)(14) permits fire districts to “adopt resolutions establishing fee schedules for providing fire protection services and services for the preservation of life including emergency fire and medical services . . . facilities benefit assessments or any other fee schedule that may be required.” The rapidly developing district put a strain on Northwest because the value of a new residential structure is not included in the tax assessment until construction is complete, and even then, the value may not be placed on the tax rolls for up to fifteen months.

In 2003, Northwest responded to fires at three partially constructed new homes, and because the value of these structures was not on the tax rolls, Northwest’s resources were expended to protect property that had not yet been fully taxed. This prompted Northwest to impose a fee under § 48-805(B)(14). In December 2004, Northwest authorized a “facilities benefit assessment” on new construction and began assessing it in January 2005. U.S. Home of Arizona Construction Company and U.S. Home Corporation (“U.S. Home”) refused to pay the assessment, and Northwest sued. The superior court granted summary judgment in favor of U.S. Home. Division Two of the Arizona Court of Appeals reversed.

On de novo review, the Arizona Supreme Court held that the “facilities benefit assessment” charged by Northwest was not a valid exercise of its statutory authority. The Court noted that fire districts are statutory entities and can only exercise those limited powers granted to them by the legislature. One of those powers is the power to raise revenue, which districts may only do through certain means, including “charging fees in accordance with permitted fee schedules” per § 48-805(B)(14). The legislature did not define “facilities benefit assessment.” The superior court interpreted the statute narrowly, while the court of appeals gave it a broader interpretation, finding that it permitted “a special assessment against real property for public improvements.”

The Supreme Court held that it need not decide between the two interpretations, as the facilities benefit assessment is not a special assessment. A special assessment is “an assessment against real property based on the proposition that, due to a public improvement of some nature, such real property has a received a benefit.” But such assessment cannot be levied against a particular property if the property will not receive a specific benefit from the improvement funded by the assessment, i.e. a benefit “over and above that received by the general public.” Here, Northwest did not demonstrate, inter alia, “that the funds collected under this assessment will be spent on facilities that uniquely benefit the assessed property.” The assessment was thus not a special assessment and not authorized under § 48-805(B)(14).

Justice Ryan authored the opinion for a unanimous Court.