## Facts

- The City of Huntington enacted an ordinance imposing a recurring “municipal service fee” on building owners to help fund fire- and flood-protection services.
- The charge was calculated using an annual rate plus an additional amount based on a building’s square footage.
- John and Carole Bacon and other owners of commercial buildings received bills under the ordinance and did not pay.
- The City sued to collect the unpaid charges.
- The owners argued the exaction was a tax in substance, imposed to raise general revenue, and therefore invalid under constitutional and statutory limits on municipal taxation.
- The owners also argued prior federal litigation about a similar charge precluded the City from characterizing the exaction as a permissible fee.

## Issues

1. Whether the municipal service charge was a valid fee for specified services or an impermissible tax subject to constitutional limits on municipal taxation.
2. Whether the ordinance, if treated as a fee, nonetheless violated state constitutional or statutory provisions governing municipal revenue measures.
3. Whether prior federal litigation collaterally estopped the City from defending the charge as a fee in state court.

## Decision

- The Supreme Court of Appeals of West Virginia affirmed summary judgment for the City.
- The court held the charge was a municipal service fee designed to defray costs of fire- and flood-protection services rather than a general revenue tax.
- The court held the fee fell within statutory municipal authority and did not violate state constitutional limits applicable to taxes.
- The court rejected collateral estoppel because the prior federal litigation did not decide the same state-law issues under the same governing legal framework.

## Legal Principles

- Courts classify a government exaction by its substance and function, not its label; a “fee” may be treated as a tax if its primary purpose is raising general revenue.
- A service fee is more likely valid when it is tied to particular services, aims to defray the costs of those services, and bears a reasonable relationship to the method of allocating costs among payors.
- When an exaction is properly characterized as a service fee authorized by statute, constitutional provisions governing ad valorem taxation (including uniformity concepts applicable to taxes) generally do not control in the same way.
- Collateral estoppel applies only when the identical issue was actually litigated and decided in a prior proceeding under the same governing law and with the required party/privy alignment; federal decisions do not automatically resolve state constitutional and statutory questions about municipal authority.

## Conclusion

The court upheld Huntington’s formula-based municipal service charge as a lawful service fee for protective services, not an unconstitutional tax, and held that prior federal litigation did not preclude the City from defending the ordinance under West Virginia law.


City of Huntington v. Bacon, 473 S.E.2d 743 (W. Va. 1996)