HB 164: Denying Cities a Fee-Based Slush Fund

This Bill passed the House 61-11 and the Senate 20-0.

Libertas Institute supports this bill.

Raising taxes is a complicated process, and a politically unpopular one in many Utah cities. So when government employees and elected officials want more money without the hassle, they sometimes will raise fees rather than raise taxes—and then use the extra revenue from the fee increase for something other than the services the fee was meant for.

Courts have held that this cannot be done, yet it continues—and cities are fighting a new bill designed to statutorily prohibit them from paying fast and loose with fees.

Representative Jefferson Moss has sponsored House Bill 164, which would specify that cities can no longer use their enterprise fund for “a good, service, project, venture, or other purpose that is not directly related to the goods or services provided by the enterprise for which the enterprise fund was created.”

In other words, a city that owns an electrical company would no longer be able to raise rates, and use the extra money for core government services that don’t pertain to the delivery of electricity.

As you might imagine, cities are fighting this bill—and hard. Your taxpayer dollars are at work funding lobbyists who are trying to retain the power to maintain a slush fund of fees.

The problem? It’s already against the law.

So says the courts. Two decades ago, the Utah Supreme Court noted that a fee is as follows:

A fee raises revenue either to compensate the government for the provision of a specific service or benefit to the one paying the fee or to defray the government’s costs of regulating and policing a business or activity engaged in by the one paying the fee.

In other words, fees have to be for the specific good or service provided for—and nothing else. The Court also said that for a fee to be valid, the fee must “bear a reasonable relationship to the services provided, the benefits received, or a need created by those who must actually pay the fee.”

That isn’t the case when cities can use enterprise funds for non-enterprise-related things. So despite acting contrary to case law, cities are fighting a legislative effort designed to put into statute what the Utah Supreme Court has basically already said.