Can a city in Arkansas raise its sanitation fee to pay for animal control, code enforcement, and nuisance abatement without a public vote?

Plain-English summary

The City of Pine Bluff was looking at raising its existing sanitation fee (charged per water meter on each residence) to cover the operating expenses of its Animal Control Division and Quality of Life Division (nuisance abatement, code enforcement, lot clearance) inside the Police Department. State Representative Kenneth Ferguson asked the AG whether Arkansas law allowed that.

AG Leslie Rutledge concluded that the answer turned on whether the increased charge was a true "fee" or a disguised "tax." The Arkansas Supreme Court has been clear that a city can charge a fee for a service without a vote, but cannot levy a tax without one. Based on the limited facts before her, the AG suspected the increased "fee" would actually be a tax, which would require voter approval under Ark. Code Ann. § 26-73-103. The AG reserved that the ultimate determination is fact-intensive and would have to be made by a court if challenged.

Currency note

This opinion was issued in 2017. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The Arkansas tax-vs-fee test, summarized

The Arkansas Supreme Court has applied a consistent framework to distinguish a "fee" from a "tax":

• Fee: a charge for a specific service or to cover the cost of administering a specific regulatory program. City of Marion v. Baioni, 312 Ark. 423 (1993). Must be "fair and reasonable," "bear a reasonable relationship to the benefits conferred on those receiving the services," and be used exclusively to fund those services. Morningstar v. Bush, 2011 Ark. 350.
• Tax: a charge levied to fund public services at large, typically a traditional governmental function already in effect.

The Court has emphasized it "is not bound by how the enactment or levy labels it." Baioni, 312 Ark. at 425. Courts look at substance.

How the AG applied the test

The AG drew the comparison directly to City of North Little Rock v. Graham, 278 Ark. 547 (1983):

Here, it is undisputed that the people never voted on the $3.00 charge and that the charge is to pay for a salary increase for policemen and firemen. Therefore, it is a payment exacted by the municipality as a contribution toward the cost of maintaining the traditional governmental functions of police and fire protection.... It is not for a specific, special service such as the spraying for insects but is a means of raising revenue to pay additional money for services already in effect. Therefore, we conclude that this $3.00 charge is a tax and not a fee.

Pine Bluff's situation matched the Graham pattern closely:

• Animal control and Quality of Life functions are traditional governmental services.
• Both functions had historically been paid from general revenues plus permit/license fees.
• The Animal Control Division had previously been a separate department; Quality of Life was previously part of Inspection & Zoning. Both were absorbed into the Police Department in 2013-2014.
• The fee increase would not be tied to any specific new service to the fee-payer; it would just shift funding for existing functions onto the sanitation bill.

The AG distinguished Holman v. Dierks, 217 Ark. 677 (1950), where a $4.00 annual sanitation charge for fogging insecticide three times a year was upheld as a fee because it bought a specific recurring service. The Pine Bluff plan did not have that direct service-for-charge link.

The AG also noted Morningstar v. Bush, 2011 Ark. 350, where a stormwater utility fee survived as a fee because it was tied to specific federal Clean Water Act compliance. Pine Bluff's plan lacked the same regulatory program tie.

What the City could do legally

The opinion did not list every option, but the legal pathways are:

1. Hold an election. Ark. Code Ann. § 26-73-103 permits voter approval of a tax for the same purposes.
2. Use general revenues. That had been the historical practice and remained an option.
3. Restructure as a true regulatory fee. If the city could redesign the charge so it was tied to a specific regulatory program (e.g., licensing dog owners or charging code-enforcement-violation fees only to violators), it might survive as a fee. The plan as described would not.

Common questions

Why does the label "fee" not save it?
Because Arkansas courts look at substance over form. Baioni expressly held the Court "is not bound by how the enactment or levy labels it." A label that says "fee" but functions as general-revenue raising is treated as a tax.

What if some of the work generates direct benefits to fee-payers?
That argument helps but does not necessarily win. Under Morningstar, a fee must "bear a reasonable relationship to the benefits conferred on those receiving the services" and must be used exclusively for those services. A bill increase used for general police-department operations does not meet that test even if police functions benefit citizens generally.

Could the city charge code-enforcement violators directly?
Yes, and that's a closer fit to a fee. Charges tied to actual enforcement actions (lot clearing, abatement of specific nuisances) are commonly upheld. The opinion does not address that alternative directly, but it implicitly recognizes the difference.

Do all sanitation-related charges work this way?
No. The classic sanitation fee for trash pickup is a fee because each customer gets the service. The problem with the Pine Bluff plan was that the new use (animal control and code enforcement) had no service-for-charge nexus with sanitation customers.

What happens if the city does it anyway?
The AG's caveat is real: only a court reviewing the actual ordinance and full administrative record can say definitively. A taxpayer could bring a challenge. If a court finds the increase is a disguised tax, it can be enjoined, and refunds may be required.

Background and statutory framework

Ark. Code Ann. § 26-73-103(a) states that "no ordinance levying an income tax ... or any other tax not authorized shall be valid until adopted at a special or general election." This is the operative voter-approval requirement for new taxes.

The tax-vs-fee distinction grew from a series of Arkansas cases:

• Holman v. Dierks, 217 Ark. 677 (1950) (insecticide fogging fee upheld as fee)
• City of North Little Rock v. Graham, 278 Ark. 547 (1983) ($3 "public safety fee" struck down as tax)
• Baioni v. City of Marion, 312 Ark. 423 (1993) (synthesized the test)
• Barnhart v. City of Fayetteville, 321 Ark. 197 (1995)
• Harris v. City of Little Rock, 344 Ark. 95 (2001) (reaffirmed the test)
• Morningstar v. Bush, 2011 Ark. 350 (stormwater utility fee upheld as fee)

The Baioni Court warned that the "rule's application is not always an easy one for the courts," reflecting that close calls turn on facts and on how the charge is structured.

Citations

• Ark. Code Ann. § 26-73-103 (no unauthorized tax without voter approval)
• City of Marion v. Baioni, 312 Ark. 423, 850 S.W.2d 1 (1993)
• Morningstar v. Bush, 2011 Ark. 350, 383 S.W.3d 840
• Harris v. City of Little Rock, 344 Ark. 95, 40 S.W.3d 214 (2001)
• Barnhart v. City of Fayetteville, 321 Ark. 197, 900 S.W.2d 539 (1995)
• Holman v. Dierks, 217 Ark. 677, 233 S.W.2d 392 (1950)
• City of North Little Rock v. Graham, 278 Ark. 547, 647 S.W.2d 452 (1983)

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2016-116
February 7, 2017

STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE

The Honorable Kenneth B. Ferguson
State Representative
P.O. Box 5661
Pine Bluff, AR 71611-5661

Dear Representative Ferguson:

This is in response to your request for my opinion concerning the possible increase in a certain fee by the City of Pine Bluff to pay for expenses of the "Animal Control Division" and "Quality of Life Division" of the City's Police Department. The fee in question is a sanitation fee that, according to the background information you have provided, the City assesses per water meter corresponding to a residence. As further background for your question, you report the following:

Animal Control was a separate department prior to July 2013 and the functions of Quality of Life [i.e., nuisance abatement and remediation, code enforcement, and lot clearance] were part of the Inspection & Zoning Department prior to November 2014.... Operating expenses for [the] Inspection & Zoning, Quality of Life, and Animal Control units have historically been paid from the general revenues of the city, plus any fees for permits, licenses, etc., generated by the units. Since the primary functions of the Quality of Life and Animal Control Divisions concern public health, safety and welfare, the city is considering an increase in its sanitation fee to pay for part or all the expenses of the two units.

With this background information in mind, you ask:

Does Arkansas law prohibit the city from financing all or part of the costs of its animal control, nuisance abatement and remediation, code enforcement, and lot clearance functions by a sanitation fee assessed to residents of the city?

RESPONSE

In my opinion, the answer to this question turns on whether the increased sanitation fee would truly be a "fee," and not a tax. Generally, a tax may not be imposed without an election. Based on the limited information before me, I suspect the increased "fee" would be a constitutionally suspect tax imposed without an election. However, only a court presented with all the pertinent facts can determine whether the true character of a certain levy is a tax or a fee.

DISCUSSION

According to Arkansas Supreme Court case law, a fee is a charge for a service or to cover the cost of administering a specific regulatory program, and a tax is levied to fund public services at large. Morningstar v. Bush, 2011 Ark. 350, 383 S.W.3d 840; City of Marion v. Baioni, 312 Ark. 423, 425, 850 S.W.2d 1, 2 (1993). The distinction between a "tax" and a "fee" is important because, as stated by the Court, "[a] city may assess a fee for providing a service without obtaining public approval; however, a city cannot levy a tax unless it has received approval by the taxpayers." Harris v. City of Little Rock, 344 Ark. 95, 105, 40 S.W.3d 214, 221 (2001) (citing Barnhart v. City of Fayetteville, 321 Ark. 197, 900 S.W.2d 539 (1995), in turn citing Ark. Code Ann. 26-73-103(a), which provides that "no ordinance levying an income tax ... or any other tax not authorized shall be valid until adopted at a special or general election ....").

In Baioni, the Court outlined some precedents illustrating the factual distinction between a fee and a tax:

An example of a fee charged in the exercise of the city's police power is found in Holman v. Dierks, 217 Ark. 677, 233 S.W.2d 392 (1950). There, the court held that an "annual sanitation charge" of $4.00 per business and residence which was to pay for fogging the city with insecticide three times a year was a fee, not a tax, for services to be rendered. On the other hand, the Graham court considered the validity of a North Little Rock ordinance which imposed a $3.00 per month "public safety fee" on the water bill of each household, business and apartment resident for the purpose of increasing the salaries of the city policemen and firemen and held such a fee was in actuality a tax because the so-called fee was for the cost of maintaining a traditional governmental function and services already in effect and not for a special service as was the case in the Holman case.

312 Ark. at 425, 850 S.W.2d at 2 (further observing that when determining the validity of a purported fee, the Court "is not bound by how the enactment or levy labels it.").

The above excerpt from Baioni, along with the cases cited therein, supports the general test noted above for distinguishing between a fee and a tax. If a charge is imposed for the purpose of providing specific services or for administering a specific regulatory program, the charge constitutes a "fee" rather than a "tax." But if the charge is imposed in order to maintain a traditional governmental function, it will likely be viewed as a general revenue-raising scheme, and hence a tax rather than a fee.

To avoid being "denominated a tax," a fee must be "fair and reasonable" and it must "bear a reasonable relationship to the benefits conferred on those receiving the services." Baioni, 312 Ark. at 426, 850 S.W.2d at 2. It must also be used exclusively to fund the services for which it was established. See Morningstar, 2011 Ark. at 9, 383 S.W.3d at 846; Harris, 344 Ark. at 106, 40 S.W.3d at 221. See also Morningstar*, supra (finding that the "Stormwater Utility Fee" in question was a fee and not a tax, where the fee was established to cover services required to meet additional federal mandates under the Clean Water Act).

Based on the limited information before me regarding the City of Pine Bluff's "sanitation fee," I believe the most relevant case is City of North Little Rock v. Graham, 278 Ark. 547, 647 S.W.2d 452 (1983), involving the three-dollar "public safety fee" to increase the salary of policemen and firemen. The Court stated:

Here, it is undisputed that the people never voted on the $3.00 charge and that the charge is to pay for a salary increase for policemen and firemen. Therefore, it is a payment exacted by the municipality as a contribution toward the cost of maintaining the traditional governmental functions of police and fire protection. [Citation omitted.] It is not for a specific, special service such as the spraying for insects but is a means of raising revenue to pay additional money for services already in effect. Therefore, we conclude that this $3.00 charge is a tax and not a fee.

Graham, 278 Ark. at 549, 647 S.W.2d at 453.

The background information provided in your request for my opinion indicates that the increase in the City's sanitation fee would pay for expenses arising from animal control and the enforcement of land-use regulations and other environmental-related codes. These matters appear to be traditional governmental functions and services that are already in effect, factors cited in Graham in concluding that the "fee" levied in that case was actually a tax. The background for your question offers no indication that the fee increase would correlate to specific services or regulations. Rather, the limited facts before me only show that the increase would cover the operating expenses of the Animal Control and Quality of Life divisions of the Police Department.

It seems likely, under the limited facts before me, that the "fee" increase would fail to meet the Court's test for classification as an actual fee which, as noted above, requires that a fee bear a reasonable relationship to the benefits conferred on those receiving the specific services. Based on the information you have provided, I believe the Court would probably conclude that an increase in the sanitation charge is not a fee to cover a regulatory scheme or to provide a service, but rather is a general revenue raising scheme devised to maintain traditional governmental functions, and hence a tax. Such a tax would not be valid until approved by a vote of the people, as required by Ark. Code Ann. § 26-73-103 (Repl. 2008).

I must emphasize, however, that only a court acquainted with all of the pertinent facts could definitively determine whether the true character of a certain levy is a tax or a fee. Additionally, while the test for determining whether a "fee" is actually a tax is relatively clear under the case law, the Court has noted that "the rule's application is not always an easy one for the courts." Baioni, 312 Ark. at 425, 850 S.W.2d at 2.

Sincerely,

LESLIE RUTLEDGE
Attorney General