There must be a better way: the unintended consequences of Missouri's Hancock Amendment.

• Author: Hubbard, Kimberly

Zweig v. Metropolitan St. Louis Sewer District, 412 S.W.3d 223 (Mo. 2013) (en banc).

1. INTRODUCTION

   The Hancock Amendment to the Missouri Constitution (1) became law in November 1980 after fifty-five percent of voters approved it. (2) The amendment is a type of provision known as a "tax and expenditure limitation." (3) The purpose of these provisions was "to restrict the growth of the state budget." (4) Most people thought it meant that they would not have to pay higher taxes, and they were right to an extent. (5) What voters and Mel Hancock, the amendment's namesake, did not contemplate were the numerous ill-effects of this constitutional amendment. (6)

   One of the downsides of the amendment was brought to the forefront in the recent case of Zweig v. Metropolitan St. Louis Sewer District, decided by the Supreme Court of Missouri in November of 2013. (7) The Metropolitan St. Louis Sewer District ("MSD") was using some of its sewer revenues to subsidize its stormwater operations, a practice that it described as "not sustainable." (8) It proposed a "stormwater user charge" to raise sufficient revenues to maintain its core functions. (9) The Supreme Court of Missouri struck down the user charge, correctly reasoning that the Hancock Amendment prohibited MSD from imposing the charge because it was more characteristic of a tax. (10) Thus, under the Hancock Amendment, the stormwater user charge could not be levied without voter approval, which MSD did not get prior to instituting the charge. (11)

   A result of the Hancock Amendment, perhaps unforeseeable at the time of its inception, is that government functions, such as the stormwater system, the sewage system, and the education system, are at the mercy of voters when it comes to increasing their funding. Voters do not often vote to raise taxes, as was evidenced by previous proposals to raise taxes on cigarettes. (12) Voters defeated those proposals three different times, most recently in 2012. (13) The ballot measures were unsuccessful even though the tax increase was only four cents, (14) and despite the supporters' coalition, Missourians for Health and Education, outspending the opponents by more than two-to-one in advertising. (15)

   Although properly decided, Zweig highlights several of the many concerns raised by the Hancock Amendment, among which are lack of quality and quantity of services due to lack of funding, extensive and expensive litigation brought under the amendment, and legislative workarounds that take decisions out of the hands of voters anyway. (16) This Note first discusses the Zweig case in detail and shows how the court's holding stands strongly on reasonable grounds under the Missouri Constitution. In Part III, this Note discusses the legal background surrounding the Zweig case, including the history of the Hancock Amendment and several cases that Zweig purports to overrule. Finally, this Note ends with a discussion of the possibly unforeseen consequences that have resulted from the Hancock Amendment and proposes that these consequences merit giving the amendment a second look. This Note does not suggest that the amendment be done away with entirely, as it has its merits; however, lawmakers and legal scholars in Missouri must begin an in-depth discussion of the amendment in order to decide the best course of action for the great state of Missouri and its future budget.

2. FACTS AND HOLDING

   MSD was created in 1954 when voters in the City of St. Louis and parts of St. Louis County ratified MSD's charter pursuant to the Missouri Constitution. (17) Shortly after it was created, MSD owned and controlled all the public sewer and stormwater facilities throughout the metropolitan sewer district. (18) The district expanded in 1977 and, beginning in 1989, MSD was responsible for regulating all the facilities in the district, including those in the newly annexed area, and planned to "assume ownership of and control over designated facilities as funds became available." (19)

   MSD operates and maintains a stormwater drainage system and also maintains sewer operations, which are completely separate from the stormwater drainage system. (20) A landowner does not have to be physically connected to MSD's stormwater drainage system in order to "use" the drainage system by having stormwater flow through MSD's system. (21) This is quite different from the sewer operations that MSD conducts, as a physical connection between the land and the sewer system is required in order for that landowner to use MSD's sewer system. (22) Due to this lack of a physical connection between a landowner's land and the stormwater drainage system, it is impossible for MSD to tell how much stormwater any single property discharges into the system or where water flowing through the system came from originally. (23)

   Other stormwater services that MSD provides include some "stormwater oversight functions such as planning, permitting, and public education." (24) These oversight functions are not related to MSD's operation of the stormwater drainage system. (25) According to MSD's charter, MSD has the power to:

   (a) levy property taxes, provided the total levy for maintenance and operation does not exceed $0.10 per $100 assessed valuation; (b) levy special assessments for the construction, improvement, or extension of specific sewer or drainage facilities; and (c) establish a schedule of rates, rentals, and other charges, to be collected from all the real property served by the sewer facilities of the District. (26) Before the implementation of the charge contested in this case, MSD funded its stormwater operations using several different taxes. (27) MSD levied taxes on real property within the district of $0.02 per $100 assessed valuation, collected an additional $0.05 per $100 assessed valuation for property within the district's original boundaries, and levied a surcharge for stormwater operations on each of its sewer customers of $0.24 per month. (28) These taxes resulted in receipts for MSD totaling $13.5 million for 2007. (29)

   Unfortunately, MSD spent $33 million on its stormwater operations in 2007, which meant it had to use $19 million from its sewer revenues to subsidize the stormwater operations. (30) According to MSD, this subsidy was "not sustainable and, even if it was, a $33 million budget was not adequate to fund the range of stormwater drainage and oversight services MSD [believed were] required." (31)

   These budget issues caused MSD to propose the stormwater usage charge at issue in this case. (32) The proposed stormwater usage charge was meant to replace the existing property taxes and was based on the square footage of impervious area on each owner's property. (33) MSD determined that it would need to charge landowners $2.29 per 100 square feet of impervious area per year in order to raise adequate revenue to maintain the availability of its stormwater services. (34) Ultimately, the $2.29 annual rate was divided by twelve so that it could be charged monthly. (35) MSD estimated that once the proposed stormwater usage charge was fully implemented it would generate annual revenues of $57 million. (36)

   In December 2007, following public hearings, other proceedings, and a recommendation by MSD's rate commission that MSD implement the proposed stormwater usage charge, MSD adopted ordinances that would eliminate any existing stormwater taxes and replace them with a stormwater user charge in March 2008. (37) MSD planned to implement the new scheme gradually, starting with a charge of $1.44 for each 100 square feet of impervious area annually in 2008, and increasing the fee annually so that landowners would pay the full rate of $2.29 per 100 square feet of impervious land by 2014. (38)

   MSD's implementation of the charge was successful until William Zweig and several other ratepayers ("Ratepayers") sued MSD in a class action. (39) The Ratepayers asserted that MSD's implementation of its stormwater user charge without prior voter approval violated Article X, Section 22(a) of the Missouri Constitution and sought declaratory, injunctive, and monetary remedies. (40)

   The trial court agreed with the Ratepayers and enjoined MSD from future collection of the charge. (41) The court further ordered that MSD pay the Ratepayers' attorneys' fees and other expenses. (42) However, the Ratepayers were unsuccessful in obtaining monetary remedies for the unconstitutional stormwater user charges that they had already paid in 2008 and 2009. (43) The trial court did not order MSD to pay damages or to refund any charges already collected. (44)

   The case that is the subject of this Note is the result of MSD's appeal of the trial court's decision regarding the Ratepayers' constitutional claim and the award of the Ratepayers' attorneys' fees and expenses. (45) Another issue in this case comes from the Ratepayers' cross-appeal of the trial court's decision not to award the Ratepayers monetary judgment for any amounts already collected by MSD. (46) The Supreme Court of Missouri granted transfer of the case in October 2012. (47)

   MSD conceded that it had "no way to measure each landowner's discharge into its drainage system during a storm," and thus the stormwater user charge was "not charged in exchange for an individual land owner's 'use' of MSD's drainage system ... or that landowner's 'use' of MSD's oversight functions." (48) MSD instead argued that its stormwater user charge was constitutional because it was a "user fee paid for MSD's service of ensuring the 'continuous and ongoing' availability of its stormwater drainage system (and oversight functions), rain or shine." (49) MSD supported its argument that the stormwater user charge should be classified as a user fee by contending that the fee was "based on each landowner's individual contribution to the overall need for MSD's stormwater services." (50)

   The Supreme Court of Missouri affirmed the trial court's decision that the stormwater user...