Could a Cameron Parish water board accumulate a surplus from customer water fees?

Plain-English summary

Cameron Parish's Sewerage and Water Board for District No. 1 had accumulated a surplus through ordinary operations. It asked whether there was a limit on how much it could hold. The 1998 attorney general opinion did not give a fixed dollar or percentage cap. It instead focused on whether the customer charge remained a water user fee or functioned as an unauthorized tax.

The office said the board could set water rates and collect enough to run its operations. A reasonable, occasional surplus incidental to those operations was permissible. A charge primarily intended to raise revenue, or one clearly and materially exceeding the cost of regulation or the special benefit supplied, was a tax in the office's analysis. The opinion also said user fees should be fairly applied to similarly situated residents seeking the service.

Currency note

This opinion was issued in 1998. 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.

Water board members at the time

The opinion found authority to set and collect water user fees sufficient for operations. It permitted an incidental, reasonable, occasional surplus but distinguished a revenue-raising charge from that operating fee.

Utility customers at the time

The office said water user fees had to be applied fairly to similarly situated residents who wanted service. It did not identify a numerical surplus threshold.

Parish finance officials at the time

The opinion treated the charge's purpose and relation to costs or special benefits as decisive. Its answer did not classify every particular future rate or surplus in advance.

Common questions

Q: Did the opinion set a maximum dollar amount for the board's surplus?
A: No. It allowed a reasonable, occasional surplus incidental to operations and assessed the charge's purpose and size against its costs and benefits.

Q: Did any surplus make a water fee an illegal tax?
A: No. The opinion said incidental revenue did not itself convert a service charge into a tax.

Q: When would the opinion call the charge a tax?
A: It identified a charge chiefly meant to raise revenue or one clearly and materially above the cost of regulation or special benefits conferred.

Q: Who could set the water rate?
A: The opinion read R.S. 33:3820 as placing that authority with the water district's commissioners.

Background and statutory framework

R.S. 33:4067 established the board and assigned it waterworks and sewerage district powers. The opinion quoted R.S. 33:3820 authorizing commissioners to set water rates. It then discussed Louisiana decisions distinguishing service charges from taxes and applied that distinction to the board's operating surplus.

Citations and references

• R.S. 33:4067 (board powers)
• R.S. 33:3820 (water-rate authority)

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/98-0401

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

One American Place
301 Ma~n Street, Suite 600
DEPARTMENT OF JUSTICE
P.O. Box 94005
CIVIL DIVISION
TEL.: (504) 342~70"13
BATON ROUGE
FAX: (504) 342-2090

R~CHARD P. IE¥OUB
70804-9005
ATTORNEY GENERAL

9C’[0BER 28’1998

OPINION NUMBI=R D8-40"1

46: Fees & Costs
Hon. Glenn Alexander, D.A.
172-A: Water Districts
AG Op Nos. 93-582, 92-287, 91-260, 89-311, 80-720 and 80-82
38th JDC - Cameron Parish
R.S. 33:3811 R.S. 33:3820 R.S. 33:4067
Post Office Drawer 280
Cameron Parish Sewerage and Water Board for Distnct No. 1 may set the
Cameron, LA 70631
rate of a water user fee for its customers. The fact that it generates
incidental revenues does not render the fee an illegal tax.

Dear Mr. Alexander:

You have requested an opinion of the Attorney General, in your capacity as legal advisor to the Cameron Parish Sewerage and Water Board for District No. 1. You state that, as the result of its operations over the past few years, a surplus of funds has been accumulated by the Board from its normal operations. You specifically ask whether there is a limit on the amount of funds that can be accumulated by the Board and, if so, what is the limit and how is it determined.

R.S. 33:4067 establishes the Board and vests in it all the powers and duties granted boards of waterworks districts and sewerage districts enumerated in R.S. 33:3811, et seq., and 33:3881, et seq., respectively. Among these powers is the authority to set water rates pursuant to R.S. 33:3820:

§3820. Water rates

The commissioners of a waterworks district may fix the rates at which it will supply water to persons within as well as outside the district and may dispense water from its waterworks system upon a flat rate or upon a meter rate. The cost of connecting and installing meters shall be borne entirely by the person using them.

As can be gleaned from the above, Section 3820 clearly states that the authority to fix water rates is vested in the commissioners of the water district. Attorney General Opinion No. 80-720.

Page 2

Opinion No. 98-401
Glenn W. Alexander, D.A.
38th JDC - Cameron Parish
Page -2-

This office has held that the right to collect a reasonable user fee (e.g., water user fee) to defray the operating expenses for services provided is a reasonable means for the exercise of a governmental entity’s power to protect and preserve the health and welfare of its citizens. Attorney General Opinion No. 93-582. The imposition of such a fee is an express power granted by the legislature and does not require electoral approval. However, while states and their political subdivisions are accorded wide latitude in the regulation of their local economies under their police powers, any regulation imposed by the governmental entity for a user fee must be applied fairly and in a manner reasonably related to the entity’s objective in accordance with due process. City of Lake Charles v. Henning, 414 So. 2d 331 (La. 1982). Thus, the fee should not be excessive so as to constitute an illegal tax, and must be applicable to all residents similarly situated and desiring this service. Attorney General Opinion Nos. 93-582, 92-287, 91-260, 89-311 and 80-82. We believe the answer to your query is contingent upon whether the fee being charged by the Board is a regulatory fee or an illegal tax.

The distinction between a fee and a tax is discussed in Audubon Insurance Company v. Bemard, 434 So. 2d 1072 (La. 1983). In accordance with that decision, if the imposition of a charge or fee by a government has not as its principal object the raising of revenue, but is merely incidental to the making of rules and regulations to promote the general public welfare, it is an exercise of the police power. If, however, revenue is the primary purpose for an assessment and regulation is merely incidental, or if the imposition clearly and materially exceeds the cost of regulation or conferring special benefits upon those assessed, the imposition is a tax.

In City of Lake Charles v. Wallace, 247 La. 285, 170 So. 2d 654 (1965), the validity of a municipal ordinance imposing a service charge was challenged. On rehearing, the Court expanded its ruling and concluded:

A state or one of its subdivisions frequently receives income from sources other than taxation, so that all forms of public revenue cannot with accuracy be called taxes. Thus, a city or town is frequently authorized to furnish some form of public service for profit, or at least for compensation. Such charges are not in any just sense taxes. Thus, it is well settled that the charges made upon consumers by municipal waterworks are not taxes, but merely the price paid for commodity sold. Nor may the following exactions be regarded as taxes.., a fee charged for.., removing garbage ....

¯.. Because the city charges a fee, and it may be hence argued that some incidental revenue would come to the municipality, does not convert the ordinance into a revenue measure .... Collection and disposal of refuse gathered by the city resulting in some small incidental revenue creates no municipal liability.

Page 3

Opinion No. 98-401
Glenn W. Alexander, D.A.
38th JDC - Cameron Parish
Page -3-

We do not find that the instant charge assessed for the collection and disposal of garbage is a tax; it is a service charge. The fact that revenue was received from the collection of such service charge levied under the police power of the city.., does not ipso facto convert the ordinance into a tax measure.

As can be gleaned from the above, a service charge does not constitute a tax merely because revenue was received from the collection of same. A fee is a tax if the imposition clearly and materially exceeds the cost of the special benefits conferred. Attorney General Opinion No. 91-260.

It is the opinion of this office, based on the above, that it is within the general police power of the Board to set and collect water user fees which generate sufficient revenues to carry out its operations. Further, as long as the revenues generated are merely incidental to the Board’s operations, a reasonable/occasional surplus is permissible. If, however, revenue is the primary purpose for the fee, or if the imposition clearly and materially exceeds the cost of regulation, the imposition and resulting surplus constitutes and illegal tax.

Trusting this adequately responds to your inquires, I am

Very truly yours,

RICHARD P. IEYOUB
ATTORNEY GENERAL

By: _~~~--~~~
~ ~ . ~
ROBERT’E’EHARROUN, III
Assistant Attorney General

RPI / Rob3/cla