Seven months after invalidating the facilities usage fee (“jock tax”) for Pittsburgh, the Pennsylvania Supreme Court ruled that another fee is really a tax. In the case Borough of West Chester v. Pennsylvania State System of Higher Education and West Chester University, the university sued over the borough’s (which is a home rule municipality) imposition of a stormwater fee. The court upheld a 2023 ruling by Commonwealth Court.
The majority opinion used a “two-step test” in its ruling “to distinguish a fee for service from other charges levied under a municipality’s taxing authority.” Step one was determining if the municipality carried out a service “in a quasiprivate or public capacity.” If an action is done for public benefit and without a contractual relationship, that is public capacity and the charge is a tax.
If there is a “discretionary service for private emolument, and within the scope of a contractual relationship” then the action is quasiprivate. Under such an action, the charge has to be measured by the service that is rendered. If there is a close relationship, the charge is a fee, if not then it is legally a tax.
What does this all mean? Experts in municipal law and taxation have weighed in (here, here and here). Tax-exempt entities like universities, hospitals and places of worship would be subject to a fee but not a tax. Municipalities that authorized a stormwater fee may need to rethink the arrangement. What if the municipality created a stormwater authority as permitted by Act 68 of 2013? Authorities can levy fees but not taxes.
The Department of Community and Economic Development indicated there are 50 municipal authorities in the state with some connection to stormwater but the tracking and reporting of municipal stormwater fees is lacking. As a sample of stormwater fees in Allegheny County and how much they are expected to raise in 2026, Pittsburgh Water budgeted $29.9 million, Dormont Stormwater Authority $350,000, Mt. Lebanon $2.0 million and Hampton Township $1.0 million.
