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By Erica Horn and Maddie Schueler
The Supreme Court of Kentucky recently held the fee imposed by the Campbell County Fiscal Court to fund 911 emergency telephone service is constitutional and a valid exercise of the County’s statutory authority. Historically, emergency 911 service in Campbell County, like much of Kentucky, was funded by a monthly subscriber fee on landline telephones. Due to the recent decrease in landline phones, the landline fee has become an inadequate source of revenue. On August 7, 2013, the Fiscal Court adopted Ordinance O-04-13, which replaced the landline fee with an annual service fee of $45 on each occupied individual residential and commercial unit in Campbell County. The 911 fee is placed on the property tax bills of property owners in the County.
Shortly after the Fiscal Court adopted the Ordinance, the Greater Cincinnati/Northern Kentucky Apartment Association and other commercial and residential property owners in Campbell County (collectively, the “Association”) filed a declaratory judgment action alleging the Ordinance was unconstitutional and in contravention of the Kentucky statutes. The Circuit Court ruled in favor of the County, and the Association appealed. Due to the statewide importance of the case, the action was transferred from the Court of Appeals directly to the Kentucky Supreme Court.
The relevant statute is KRS § 65.760(3), which provides, in pertinent part, “The funds required by a city, county, or urban-county government to establish and operate 911 emergency telephone service . . . may be obtained through the levy of any special tax, license, or fee not in conflict with the Constitution and statutes of this state.” The County conceded the 911 fee is not a valid tax or license, but claimed the fee is a valid user fee. The Association countered that the 911 fee is an impermissible user fee because the fee is not based upon actual use as required by KRS § 91A.510, which defines a “user fee” as a “fee or charge imposed by a local government on the user of a public service for the use of any particular service not also available from a nongovernmental provider.” (emphasis added). The Association argued that property owners required to pay the 911 fee may never dial 911 and, thus, there is no correlation between the 911 fee and the benefit received, as required by Kentucky law.
Despite the County’s argument that the 911 fee is a valid user fee, the Court found the “fee” authorized by KRS § 65.760(3) need not be a user fee. The Court noted that KRS § 65.760 does not refer to KRS § 91A.510 or qualify the term “fee”. Therefore, the Court set up a “new” test for the “fee” authorized by KRS § 65.760(3), holding the fee “must bear some relationship to the benefit received.” The Court found this test was satisfied with respect to the 911 fee because “911 emergency telephone service derives significantly from residents’ occupation and use of [their] properties.” The Court further stated:
While the scope of benefits received from the 911 emergency telephone service is incapable of precise measure, it is uncontroverted that all citizens benefit from that service. . . . To assess payment upon only those citizens actually telephoning 911 is not, nor has it ever been, the policy of our counties or our Commonwealth.
In a vigorous dissent, Justice Venters, joined by Chief Justice Minton, analogized the majority’s attempt to fit the 911 fee into the current statutory framework to driving a square peg into a round hole. The dissent noted the 911 fee fits within none of the criteria required for a valid governmental fee and bears all the hallmarks of a tax. Fees properly assessed by governmental entities, the dissent reasoned, must be either regulatory or license fees or user fees. Because the 911 fee does not regulate a profession or activity, it does not fall within the first category of fees. Moreover, the 911 fee is not a valid user fee because there is no relationship between the fee charged and the benefit received. In fact, the dissent noted, the County conceded that all citizens benefit from 911 service regardless of whether they own property and pay the fee. Because the 911 fee is not a regulatory fee or a user fee, the dissent found the fee is exactly what it appears to be: a tax. And because the “fee” is a flat tax on property and is not imposed on an ad valorem basis, it violates Section 174 of the Kentucky Constitution.
The Association intends to file a petition for rehearing.
The authors’ firm represents the Association in this action.
 Greater Cincinnati/Northern Kentucky Apartment Ass’n, Inc. et al. v. Campbell County Fiscal Court et al., 2014-SC-000383-TG (Ky. Oct. 29, 2015) (to be published).