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In Burns v. Greenville County Council, Op. No. 28041 (S.C. Sup. Ct. filed June 30, 2021), the S.C. Supreme Court concluded that two fees imposed by Greenville County were unlawful taxes rather than user fees and, therefore, violate section 6-1-310 of the South Carolina Code.  The Court declared the two fees invalid.  One of the fees was a road maintenance fee paid by vehicle owners in Greenville County and the other was a telecommunications network fee paid by Greenville County property owners.

The Court found that, because neither of the ordinances establishing the fees imposes a value-based property tax, and because the General Assembly has not authorized Greenville County to impose any other new taxes, the charges must qualify as “uniform service charges” under S.C. Code Ann. § 4-9-30(5)(a) or as a “service or user fee” under S.C. Code Ann. § 6-1-330(A), and that the fees did not meet the statutory requirements.

The Court’s analysis was informed by two authorities:  a 1992 S.C. Supreme Court Opinion in Brown v. Cty. of Horry, 308 S.C. 180, 181, 182, 417 S.E.2d 565, 566 (1992), and a 1997 amendment to S.C. Code Ann. § 6-1-300.  The four analytical factors articulated in Brown are that (1) the revenue generated is used to the benefit of the payers, even if the general public also benefits; (2) the revenue generated is used only for the specific improvement contemplated; (3) the revenue generated by the fee does not exceed the cost of the improvement; and (4) the fee is uniformly imposed on all the payers.  The amendment to S.C. Code Ann. § 6-1-300 defines “service or user fee”—including “uniform service charges”—as “a charge required to be paid in return for a particular government service or program made available to the payer that benefits the payer in some manner different from the members of the general public not paying the fee.”  The Court determined that, while a new fee must arguably meet the four Brown factors, it absolutely must meet the “different benefit” requirement of S.C. Code Ann. § 6-1-300.

The Court ultimately found in Burns that neither the road maintenance fee nor the telecommunications fee benefitted the payer in some different manner than members of the general public, and therefore did not qualify as service or user fees and are therefore unlawful taxes.  One readily apparent example of a unique payer benefit, according to the Court, is improved property values, but the governing body must actually specify the anticipated effect on property values of the object of the service or user fee.  The local governing body simply declaring that a fee will enhance property value does not make the property owner paying the fee the beneficiary of some unique benefit, as required by subsection 6-1-300(6).

It is noteworthy that S.C. Code Ann. § 6-1-330(A) grandfathers service or user fees adopted by local governing bodies prior to December 31, 1996 “until repealed by the enacting local governing body.”  The road maintenance fee ordinance rendered invalid by the Court in Burns was one increasing a previously existing fee that was established in 1993.  It appears, therefore, that the Court is construing the statute to bar not only newly established fees that do not meet the statutory criteria, but also increases to grandfathered fees.  It is also noteworthy that, while the statute requires that the payer be benefitted “in some different manner” than members of the general public, the Court in Burns determined that the payer must receive some “unique” benefit or that the benefit be “peculiar” to the payer of the fee.  These descriptors could augment the burden on local governments in their design and defense of service or user fees, and it is likely that the jurisprudence on this important issue will continue to evolve in coming years as local governments determine how Burns applies to ordinances authorizing various fees around the state.