Texas Supreme Court holds general-law cities cannot impose a revenue-based licensing fee for construction trash haulers

 

Builder Recovery Services, LLC v. The Town of Westlake, Texas, 21-0173, (Tex, May 20, 2022) 

In this case, the Texas Supreme Court held that general law cities have limited authority to impose license fees for solid waste collections.  

The Town of Westlake is a general-law municipality that imposed a percentage-of-revenue license fee on companies like Builder Recovery Services, LLC (BRS) which hauls trash away from construction sites.  The Town has a percentage agreement with Republic Services, which performs regular residential and commercial trash collection for the Town, but which also included construction site hauls. The Greater Fort Worth Builders Association sent the Town a letter questioning the Town’s legal authority to make Republic the exclusive provider of construction trash-hauling services. BRS and the Town’s staff attempted to agree on terms for a license, but no agreement was reached. BRS began operating in the Town without a license. When the Town cited BRS for operating without a license, it brought suit. The Town amended the fee amount during the suit. The trial court ruled the original fee was invalid and rejected the remainder of the BRS claims.  Both sides appealed. The court of appeals affirmed in part and reversed in part, by affirming the judgment favoring the Town but holding the BRS claim regarding the original fee was moot. BRS appealed.  

General-law cities, like the Town of Westlake, possess only those powers and privileges that the State expressly confers upon them.  A claim that a percentage-of-revenue fee of any size is unlawful is not mooted by an intervening adjustment to the size of the fee.  The court made a distinction between a licensing fee and a franchise fee. The Town’s relationship with Republic is governed by an exclusive franchise agreement as described in section 364.034 of the Health and Safety Code. The Court assumed the Town had the authority to require a license, then focused its analysis on the types of licensing fees allowed. A licensing fee is meant to recoup administrative costs of the licensing system. The Town does not regulate the price of trash hauling in this instance. How much BRS charges its customers to haul their trash “is none of the Town’s concern, and this privately negotiated, fluctuating amount has nothing to do with how much money the Town needs to administer its trash-hauling regulations.”  The Court held it was unlikely that the Legislature’s grant to general-law cities the generic authority to regulate trash hauling was intended to include an implied power for a revenue-based charge of this nature.  While a licensing fee properly tied to administrative costs is allowed, it cannot be revenue-based. Next, the Court held that while the fee and remainder of the regulations appear to be a packaged deal, the ordinance has a severability clause. But what remains was not argued, so the Court remanded the case. 

 Panel consists of Chief Justice Hecht, and Justices Lehrmann, Boyd, Devine, Blacklock, Busny, Bland, Huddle, and Young. Court of Appeals’ judgment reversed; Remanded to Court of Appeals. Opinion by Justice Blacklock can be read here. Docket page with attorney information found here.