Northwest Fire District v. U.S. Home of Arizona Construction Co.

SUPREME COURT OF ARIZONA
En Banc

NORTHWEST FIRE DISTRICT, an ) Arizona Supreme Court
Arizona fire district, ) No. CV-06-0377-PR
)
Plaintiff/Appellant, ) Court of Appeals
) Division Two
v. ) No. 2 CA-CV 06-0061
)
U.S. HOME OF ARIZONA ) Pima County
CONSTRUCTION COMPANY, an Arizona ) Superior Court
corporation; and U.S. HOME ) No. C20054558
CORPORATION, a Delaware )
corporation, )
)
Defendants/Appellees. ) O P I N I O N
)
__________________________________)

Appeal from the Superior Court in Pima County
The Honorable Carmine Cornelio, Judge

AFFIRMED
________________________________________________________________

Opinion of the Court of Appeals, Division Two
213 Ariz. 489, 143 P.3d 1030 (2006)

VACATED
________________________________________________________________

BENAVIDEZ LAW GROUP, P.C. Tucson
By Thomas A. Benavidez
Christopher B. Wencker
Attorneys for Northwest Fire District

GALLAGHER & KENNEDY, P.A. Phoenix
By Jeffrey D. Gross
Attorneys for U.S. Home of Arizona Construction Company
and U.S. Home Corporation

BANCROFT SUSA & GALLOWAY, P.C. Tucson
By James M. Susa
Michael G. Galloway
Attorneys for Amicus Curiae Arizona Tax Research Association
MILLER LASOTA & PETERS, P.L.C. Phoenix
By Donald M. Peters
Attorneys for Amicus Curiae The Arizona Fire District
Association
________________________________________________________________

R Y A N, Justice

¶1 Arizona Revised Statutes (“A.R.S.”) section 48-

805(B)(14) (Supp. 2004), permits fire districts to “[a]dopt

resolutions establishing fee schedules for providing fire

protection services and services for the preservation of life.”1

Included among the permissible fee schedules are those for

“facilities benefit assessments.” Id. In this case, we must

determine whether the “facilities benefit assessment” charged by

Northwest Fire District constitutes a valid exercise of its

statutory authority. We conclude that it does not.

I

¶2 Northwest Fire District was organized under Title 48,

Chapter 1, Articles 10 and 11 of the Arizona Revised Statutes,

to provide emergency services to district residents. The

District covers more than 140 square miles in the northwest

portion of metropolitan Tucson – an area that has seen some of

the most rapid development in Pima County over the past decade.

1
Section 48-805 has since been amended, and the applicable
provision has been renumbered as (B)(13). 2006 Ariz. Sess.
Laws, ch. 315, § 9. Because the District passed the Resolution
at issue here before this amendment, we will refer to the
provision as (B)(14).

2
This rapid development has strained the District’s resources and

its ability to adequately meet its statutory duties.

¶3 This economic strain results in part from the timing

of property tax assessments. According to the affidavit of the

Pima County Assessor, the value of a residential structure is

not included in the tax assessment until construction is

complete; even then, the value may not be placed on the tax

rolls for up to fifteen months.

¶4 In 2003, the District responded to fires at three

partially constructed homes. Because the value of these

structures was not on the property tax rolls, District resources

were expended to protect property that had not yet been fully

taxed. This situation prompted the District to consider

imposing a fee, due upon application for a building permit, on

new construction.

¶5 In December 2004, the District’s board, relying on

A.R.S. § 48-805(B)(14), approved Resolution 2004-048 authorizing

a facilities benefit assessment on new construction. Section

48-805(B)(14) states that fire districts may:

[a]dopt resolutions establishing fee schedules for
providing fire protection services and services for
the preservation of life including emergency fire and
emergency medical services, plan reviews, standby
charges, fire cause determination, users’ fees,
facilities benefit assessments or any other fee
schedule that may be required.

(Emphasis added.)

3
¶6 According to the Resolution, a facilities benefit

assessment was necessary to pay “the costs of developing

facilities from which to provide services to new construction

areas.” The Resolution stated that because of the delay in

placing new construction on the property tax rolls, current

taxes did not generate sufficient revenue to cover these

expenses, leaving other District residents to bear the added

burden of providing services to new construction.

¶7 The District began assessing new construction on

January 14, 2005, the effective date of the Resolution, by

sending out invoices that stated:

The purpose of this [facilities benefit] assessment is
to provide funding for the purchase of land and the
construction of new fire facilities as needed within
the District. This assessment enables the District to
recoup property taxes not collected due to delays in
placing property improvements, such as a new home or
commercial building, on the property tax rolls.

U.S. Home of Arizona Construction Company and U.S. Home

Corporation (collectively “U.S. Home”), one of the home builders

in the District, refused to pay the assessment. The District

filed a complaint to recover the unpaid facilities benefit

assessments.

¶8 The superior court granted summary judgment in favor

of U.S. Home. The court concluded that a fire district could

raise revenue only through taxes, bond elections, and fee

4
schedules. It further found that the items for which a fire

district could create fee schedules under A.R.S. § 48-805(B)(14)

were “much more limited items . . . which appear to be for a

specific service.” It held that fees could be charged for

actual services rendered, but those charges must reasonably

relate to their purpose, and the District’s assessment did not

satisfy this criterion.

¶9 The District appealed, and the court of appeals

reversed and remanded. Nw. Fire Dist. v. U.S. Home of Ariz.

Constr. Co., 213 Ariz. 489, 495, ¶ 23, 143 P.3d 1030, 1036 (App.

2006). Relying on cases and statutes from other jurisdictions,

the court determined that a facilities benefit assessment is “a

special assessment against real property for public

improvements.” Id. at 491, ¶ 8, 143 P.3d at 1032 (quoting

Barratt Am., Inc. v. City of San Diego, 12 Cal. Rptr. 3d 132,

137 (Cal. Ct. App. 2004)). Under this definition, the court

reasoned, the District’s fee qualified as a facilities benefit

assessment because the District intended to use the money

collected to develop facilities to provide services to the

construction areas. Id. at 491-92, ¶ 8, 143 P.3d at 1032-33.

¶10 In rejecting the superior court’s holding that the fee

could be assessed only for services rendered, the court of

appeals determined that this assessment does provide a service -

the guarantee of adequate facilities to respond to an emergency.

5
Id. at 492, ¶ 10, 143 P.3d at 1033. Further, the court found,

the lack of limiting language in A.R.S. § 48-805(B)(14)

demonstrates the legislature’s intent to create a broad power to

assess. Id. at ¶ 11. The court concluded that if the District

was not entitled to impose these assessments on property owners

that benefited from the District’s facilities, the phrase

“facilities benefit assessment” would be rendered meaningless.

Id. at 493, ¶ 14, 143 P.3d at 1034.

¶11 U.S. Home petitioned for review, arguing that the fee

imposed is not a valid facilities benefit assessment. The

District responded by arguing that the fee charged is

statutorily permitted and that the court of appeals opinion did

not give it unregulated power to raise revenue.

¶12 We granted review because this case raises an

important issue for the more than 130 fire districts in the

state and their residents. We have jurisdiction under Article

6, Section 5(3), of the Arizona Constitution and A.R.S. § 12-

120.24 (2003). Whether a particular exercise of power by the

District falls within its statutory authority is a question of

law, which we review de novo. See Hohokam Irrigation & Drainage

Dist. v. Ariz. Pub. Serv. Co., 204 Ariz. 394, 397, ¶ 5, 64 P.3d

836, 839 (2003).

II

¶13 Fire districts are constitutional and statutory

6
entities, much like municipal corporations. See Ariz. Const.

art. 13, § 7; A.R.S. §§ 48-802 to -834 (2000); Cal. Portland

Cement Co. v. Picture Rocks Fire Dist., 143 Ariz. 170, 174, 692

P.2d 1019, 1023 (App. 1984). As such, a fire district can

exercise only those limited powers granted to it by the

legislature. Cf. Hohokam Irrigation & Drainage Dist., 204 Ariz.

at 397, ¶ 6, 64 P.3d at 839; Local 266, Int’l Bhd. of Elec.

Workers v. Salt River Project Agric. Improvement & Power Dist.,

78 Ariz. 30, 38, 275 P.2d 393, 398 (1954). The revenue-raising

power of fire districts – the power at issue here – has been

limited by the legislature to issuing and selling bonds, A.R.S.

§ 48-806 (Supp. 2006); collecting property taxes, id. § 48-

807(F) (Supp. 2006); and charging fees in accordance with

permitted fee schedules, id. § 48-805(B)(14). It is this last

statutory power on which the District relied in adopting its

“facilities benefit assessment.”

¶14 The legislature has not defined “facilities benefit

assessment.” U.S. Home argues that the superior court correctly

interpreted this provision narrowly by finding that this

assessment could issue only for specific services rendered. The

court of appeals, however, afforded this phrase a broader

interpretation by stating that it permitted “a special

assessment against real property for public improvements.” Nw.

Fire Dist., 213 Ariz. at 491, ¶ 8, 143 P.3d at 1032 (quoting

7
Barratt Am., Inc., 12 Cal. Rptr. 3d at 137).

¶15 We need not decide today between these differing

interpretations. Even assuming the court of appeals correctly

determined that the legislature intended “facilities benefit

assessment” to grant fire districts the power to impose “special

assessments,” we conclude that the District’s fee is not a

special assessment.

A

¶16 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 received a

benefit.” Barry v. Sch. Dist. No. 210, 105 Ariz. 139, 140, 460

P.2d 634, 635 (1969) (quoting State v. Carney, 139 N.E.2d 339,

340 (Ohio 1956)); Weller v. City of Phoenix, 39 Ariz. 148, 151,

4 P.2d 665, 667 (1931) (defining assessments as “special and

local impositions on property, made for a public purpose, but

fixed in amount with reference to the special benefit which such

property derives from the expenditure” (emphasis omitted)). A

special assessment therefore may not be levied against

particular property if the property will not receive a specific

benefit from the improvement funded by the assessment. See

Mosher v. City of Phoenix, 39 Ariz. 470, 480, 7 P.2d 622, 626

(1932), overruled on other grounds by In re Forsstrom, 44 Ariz.

472, 493-94, 38 P.2d 878, 887 (1934). “The rationale of special

8
assessment is that the assessed property has received a special

benefit over and above that received by the general public.”

J.W. Jones Cos. v. City of San Diego, 203 Cal. Rptr. 580, 584

(Ct. App. 1984) (quoting Solvang Mun. Improvement Dist. V. Bd.

Of Supervisors, 169 Cal. Rptr. 391, 395 (Cal. Ct. App. 1980)).

¶17 Because property may be assessed its proportion of

specified costs only if it receives a special benefit from the

improvement that is different than the benefit received by other

properties, any evaluation of a special assessment must begin by

reviewing the improvements funded by the assessment and their

estimated costs. Cf. A.R.S. § 48-577 (2000) (stating that a

municipal special assessment requires preliminary plans for

improvements and cost estimates and also requires that no lot be

assessed more than “its proportion of the estimate”). Without a

specific plan and cost estimate, there can be no way of knowing

the property owner’s share of the improvement costs or whether a

particular property will be benefited at all, let alone whether

it will receive a benefit different than all other properties in

the district.

¶18 The District’s Resolution did not set forth or refer

to any specific plan for the construction of new facilities.

The District thus cannot demonstrate the cost of such facilities

or the associated benefit to each assessed property.

¶19 Furthermore, the District has not shown that the funds

9
collected under this assessment will be spent on facilities that

uniquely benefit the assessed property. The funds collected

were not segregated; instead they were placed into the

District’s general fund. The District’s proposed budget for

2005-06 showed these funds being spent without any indication

that they were earmarked for facilities that specially benefited

the assessed properties. Moreover, even assuming that the

District will eventually use the money for facilities, there is

no way to conclude on the current record that the assessed

property will benefit in a way that other property within the

District does not. The District’s general plans to use the

funds for facilities to benefit the new construction are not

enough. For example, the District could fulfill this aspiration

by simply expanding a current fire station or acquiring the

adjacent lot for new facilities. In that situation, there would

be no special benefit to new construction that would not also be

shared by the prior District residents served by that station.

See Mosher, 39 Ariz. at 480, 7 P.2d at 626.

B

¶20 Nonetheless, the District asserts that its facilities

benefit assessment did not exceed the power granted by A.R.S. §

48-805(B)(14) because the fee assessed to U.S. Home and others

was meant to ensure adequate facilities for new construction.

The District further argues that its failure to formulate a plan

10
for the construction or improvement of facilities to benefit the

new construction should not be determinative because its

decision is a legislative decision, not one for the judiciary.

¶21 The District’s interpretation of “facilities benefit

assessment,” however, would effectively permit it to circumvent

statutory protections for fire district property owners. Such

an interpretation would render the statutory protections largely

illusory. See Jennings v. Woods, 194 Ariz. 314, 320, ¶ 21, 982

P.2d 274, 280 (1999) (interpreting statutory provisions so as

not to render a provision meaningless).

¶22 For instance, under the District’s theory, a fire

district could request a lower property tax authorization or

issue fewer bonds to appease qualified electors, and then levy a

facilities benefit assessment against certain district property

owners, such as U.S. Home, to cover the district’s facilities

costs. Such an assessment could exceed the three and one-

quarter percent property tax cap of A.R.S. § 48-807(F) or the

six percent bond cap of A.R.S. § 48-806(D) and thereby evade

these statutory limitations. The assessment would also evade

electoral approval and the statutory requirement that proceeds

from the sale of bonds be placed in a separate fund and used

only for a specific purpose. Id. § 48-806(D), (G). Without a

specific plan to improve or build facilities, the assessed

property owners have not only lost these statutory protections,

11
but they also have no assurance that the assessment was

necessary or that they will benefit from the facilities they

have funded.2 An interpretation of “facilities benefit

assessment” that allows this result cannot have been what the

legislature intended in passing A.R.S. § 48-805(B)(14).

¶23 Unlike the court of appeals, we are not persuaded that

the political accountability of the District’s board offers

appropriate protection for District property owners. See Nw.

Fire Dist., 213 Ariz. at 492, ¶ 12, 143 P.3d at 1033. The

assessment here was not levied against qualified electors of the

District. See A.R.S. § 48-802(C) (Supp. 2004) (stating that

only qualified electors who are district residents may vote in a

district election). It was the builder, not a qualified

elector, who was charged the assessment upon application for a

building permit. Therefore, the public accountability check on

this assessment was lacking.

III

¶24 Finally, the District argues that our opinion in Home

Builders Association of Central Arizona v. City of Scottsdale,

187 Ariz. 479, 930 P.2d 993 (1997), controls the outcome of this

case. We find that opinion distinguishable on several grounds.

2
Remedying a shortfall in tax revenue through a facilities
benefit assessment, as the District did here, raises the same
concerns.

12
First, the fee under consideration in Home Builders was a

development fee. Id. at 480, 930 P.2d at 994. Fire districts,

unlike municipalities, do not have the power to impose

development fees.3 See, e.g., A.R.S. § 9-463.05 (Supp. 2006);

cf. Hohokam Irrigation & Drainage Dist., 204 Ariz. at 397, ¶ 6,

64 P.3d at 839 (stating that irrigation districts’ powers are

limited to those enumerated in the constitution or statutes).

¶25 Second, the ability to impose a development fee is

broader than the ability to impose a special assessment. Home

Builders, 187 Ariz. at 483, 930 P.2d at 997. Specific plans are

not required to impose a development fee, unlike a special

assessment. Id. Because we assume for purposes of this opinion

that a facilities benefit assessment is a special assessment,

the District’s assessment cannot be afforded the same

flexibility as the development fee in Home Builders.

¶26 Third, the city’s plan in Home Builders was much more

specific than that put forth by the District. The city

specifically delineated its program for meeting its future water

needs, including how the water would be obtained and estimating

3
Development fees are designed to “offset costs to [a]
municipality associated with providing necessary public services
to a development.” A.R.S. § 9-463.05(A) (Supp. 2006). They are
“designed to assist in raising the capital necessary to meet
needs that surely will arise in the foreseeable future but whose
precise details may not at the outset be quite clear.” Home
Builders, 187 Ariz. at 483, 930 P.2d at 997.

13
the total costs associated with bringing these resources to the

city. Id. at 480-81, 930 P.2d at 994-95. The city then

determined the cost of bringing each acre-foot of water to the

city and the average amount of water certain types of

development require. Id. at 485, 930 P.2d at 999. The

development fee was then calculated based on the estimated cost

for providing water to the type of development being charged.

Id.

¶27 Here, the District has not created a plan for any

particular facilities to benefit those assessed, nor has it

determined what facilities are necessary for the new

construction. Therefore, the District cannot accurately

determine how much to assess the property owners because it has

no estimated cost for the necessary facilities. Although plans

supporting special assessments are required to be more specific

than those for development fees, id. at 483, 930 P.2d at 997,

the District’s plan is far less developed than that in Home

Builders. Thus, the District’s reliance on Home Builders is

unavailing.

IV

¶28 For the foregoing reasons, we hold that the

“facilities benefit assessment” promulgated by the District was

not authorized by A.R.S. § 48-805(B)(14), and is therefore

14
invalid.4 Accordingly, we affirm the trial court’s grant of

summary judgment in favor of U.S. Home and vacate the opinion of

the court of appeals.

_______________________________________
Michael D. Ryan, Justice

CONCURRING:

_______________________________________
Ruth V. McGregor, Chief Justice

_______________________________________
Rebecca White Berch, Vice Chief Justice

_______________________________________
Andrew D. Hurwitz, Justice

_______________________________________
W. Scott Bales, Justice

4
Because we conclude that the District’s assessment exceeded
its authority under A.R.S. § 48-805(B)(14), we need not address
the other issues raised by the parties.

15