Pewaukee Tax Struck Down by Appeals Court
The Village of Pewaukee’s transportation utility fee (TUF) was struck down by the Wisconsin Court of Appeals, which found it to be an illegal tax, on February 7. The legal issue was whether the TUF was actually a fee that municipalities are allowed to charge for specific services they provide, or a tax, which is intended to generate revenue for the municipality.
According to the Appeals Court decision, “The Village enacted an ordinance to create a transportation utility in February 2021. According to the ordinance, the purpose and intent behind creating this utility was to provide a sustainable source of funds for the maintenance, construction and reconstruction of transportation infrastructure under the jurisdiction of the Village.”
The base user fee is charged to every developed property, and an additional usage fee is charged to businesses to generate the desired revenue for the transportation budget. According to the Village’s website, the fee is charged via municipal utility bills, which also include charges for water, sewer and fire protection services. The current base fee (as of first quarter 2023) is $10.21 per month per developed property. The additional usage fee is .57 per average daily trip per year.
The Wisconsin Manufacturers & Commerce (WMC), which represents businesses and is based in Madison, brought a lawsuit against the Village of Pewaukee in April 2022, stating that the TUF was an illegal excise tax and the Village did not have the authority to create such a tax. On March 9, 2023, the circuit court granted summary judgment in favor of the Village. The WMC appealed, resulting in today’s decision.
On June 29, 2023, shortly after the WMC appealed, the Wisconsin Supreme Court ruled in a similar case, Town of Buchanan, 408 Wis. 2d 287, that the Town of Buchanan’s transportation user fee was an illegal tax, which set the precedent for today’s ruling against the Village of Pewaukee.
Focus Waukesha requested comment from Village of Pewaukee President Jeff Knutson and has not yet received his reaction or a response regarding whether the Village intends to appeal to the Wisconsin Supreme Court. We will update this story if/when we receive a response.
The League of Wisconsin Municipalities (League), which provides guidance and best practices to municipalities on good governance, supported the Village’s case and has provided a legal opinion that can be found on its websitestating that, “municipalities have the authority to create transportation utilities,” explaining that “a municipality may rely on its broad statutory authority and/or constitutional home rule powers to create a transportation utility and charge property owners transportation utility fees.”
Focus Waukesha has requested comment from the League and clarification regarding whether they will rescind this advice to municipalities after both the Wisconsin Supreme Court and Court of Appeals have now ruled against their position. If we receive a response from them, we will update this article. The League’s site lists several other municipalities in the state that have created TUFs and are likely facing the same legal issues as the Village of Pewaukee.
Although the TUF is not a large fee, residents and businesses will likely appreciate having it removed from their water bills in the near future. Whether they will receive a refund for fees paid since the TUF was enacted or if the Village will create a new funding mechanism to replace this revenue stream remains to be seen.