## Facts

- Eagan adopted a 1978 resolution requiring a “road unit connection charge” as a condition of issuing building permits.
- The stated purpose was to fund major city and county street construction to accommodate traffic from anticipated development.
- The charge was based on an engineering financing plan projecting a funding shortfall for major street construction through 2000.
- For single-family residences, the charge increased from $75 (1978) to $410 (by 1994), generating roughly $400,000 annually.
- Revenues were deposited into a major street fund with other road revenues and were not earmarked to particular projects attributable to the payers’ developments; funds supported major street construction and repairs of existing streets.
- Homebuilding contractors challenged the charge as an unlawful tax and sought refunds for amounts paid within the limitations period.
- The district court upheld the charge as a police-power fee; the court of appeals reversed; the Minnesota Supreme Court granted review.

## Issues

1. Whether a Minnesota statutory city has express or implied authority to impose a road unit connection charge as a condition of issuing building permits to finance major street improvements.
2. Whether the charge is a regulatory fee under the city’s police power or a revenue-raising tax requiring explicit statutory authorization.

## Decision

- The Minnesota Supreme Court affirmed the court of appeals and held the city lacked express or implied authority to impose the road unit connection charge.
- The Court classified the charge as a tax rather than a regulatory fee because it functioned primarily as a revenue measure and was not tied to specific regulatory costs or specific improvements necessitated by the payers’ development.
- The case was remanded for further proceedings consistent with the invalidation of the charge.

## Legal Principles

- A statutory city may levy only those taxes the legislature has explicitly authorized.
- A charge imposed to raise general revenue for public purposes, especially where proceeds are not earmarked to mitigate or regulate the payer’s activity, is a tax rather than a regulatory fee.
- General police powers and land-use regulatory authority do not imply authority to create new municipal revenue measures absent legislative authorization.
- Analogies to connection charges for other utilities do not supply authority where such charges are expressly authorized by statute for those utilities but not for roads.

## Conclusion

The court held that Eagan’s road unit connection charge operated as a general revenue-raising device and therefore was an unauthorized tax; because statutory cities must identify explicit legislative authorization for taxes, the city could not condition building permits on payment of this road charge.


Country Joe, Inc. v. City of Eagan, 560 N.W.2d 681 (Minn. 1997)