Federal Court Strikes Down Town’s Expert Fee Recovery Provisions
The Western District of New York on September 25, 2019 granted a declaratory judgment to a communications tower developer which had sought to strike down portions of a town’s local law providing for the recovery of expert fees incurred by the town in review of a development application.
The case, Up State Tower Co., LLC, et al v. Town of Southport, et al, 6:18-CV-06445 (W.D.N.Y. 2019) was decided by District Court Judge Elizabeth A. Wolford. The plaintiff had applied to construct a communications tower in the town, which application was denied based on the failure of the applicant to provide necessary information prior to the expiration of the Telecommunications Act “shot clock.” Though the court upheld the denials by the town, it did agree with the plaintiff that the plaintiffs were not required to repay the town’s expert fees because the portions of the town’s zoning law providing for such recovery were unlawful. The code provisions at issue in the case were found in Town of Southport Zoning Law §§ 525-50, 525-65, and 525-143(b), which stated:
§ 525-50 Consultant review fees.
The Planning Board may require an applicant for any review, permit or approval to deposit in escrow a reasonable amount established by the Planning Board to pay for the fees and/or costs of any engineer, consultant or attorney designated by the Planning Board to review such application. The fees and/or costs charged by such engineer, consultant or attorney in connection with such review will be charged against the sum deposited in escrow. Any amount remaining shall be returned to the applicant within 45 days of final action on the application.
§ 525-65 Professional assistance.
The Planning Board, subject to the approval of the Town Board, may require an applicant for site plan review to deposit in an escrow account a reasonable amount established by the Planning Board to pay the fees and/or costs of any consultant, engineer, or attorney designated by the Town Board to review the application. The fees and/or costs charged by such consultant, engineer, or attorney in connection with such review will be charged against the sum deposited in escrow. If specific circumstances warrant it, additional funds will be required to be deposited in order to cover reasonable expenses incurred beyond the original estimate. Any amount remaining shall be returned to the applicant within 45 days of final action on the application. Payment to the escrow account, if required, is a prerequisite to a complete application, and no review will be initiated until payment is received. The deposit specified above does not include all approvals or fees required from or by agencies other than the Town, costs associated with extensions to districts to provide necessary services to the proposal nor fees charged by Town departments or boards for permits, approvals, hearings, or other actions, except as noted above.
§ 525-143 Administration; Fees.
(1) Fees shall apply for required or authorized zoning procedures.
(2) The applicant shall be responsible for the review incurred by the Town for professional engineers, planners, architects or attorneys during the subdivision, site plan or permit application review process.
The leading case on the ability of a municipality to charge fees has long been Jewish Reconstructionist Synagogue of N. Shore v. Inc. Vill. of Roslyn Harbor, 40 N.Y.2d 158 (1976). In that case, the Court of Appeals recognized that such fees can be charged but clarified that “the fees charged must be reasonably necessary to the accomplishment of the statutory command.”
In striking down the town’s laws here, the court observed that the town’s laws included a “reasonable” limitation, but noted that it did not limit the fees to those that are “necessary,” and did not contain a codified limit such as an audit procedure or guidance as to what fees can be charged, leaving the fees subject only to the “unfettered discretion” of the planning board. The court noted that the amount actually charged was not the reason for striking the law down, as the court was more troubled by the absence of any guiding standard or limitation on how much the applicant could be charged.
It is likely that many fee provisions throughout the state of New York are unlawful under the reasoning in this case, and municipal attorneys should consider amending their clients’ ordinances to ensure compliance with the Western District’s reasoning to avoid the possibility of not being able to recover significant fees incurred during review of development applications. In doing so, it is important to note that the court pointed out that it was not requiring the use of particular magic words to make a provision lawful, but was requiring codified limitations which ensure that any fees charged bear at least a rough correlation to the reasonable expenses of the government entity demanding the fees.
Municipal attorneys should ensure that their clients’ laws contain provisions which (1) ensure that the fees charged are correlated to the entity’s actual expenses; (2) provide for an auditing procedure by an entity other than the one which charged the fees; (3) limit the fees recoverable to only those which are reasonably necessary to accomplish the municipality’s statutory command; and (4) tie the fees charged to standards or averages for typical review of similar applications in the area.