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Recurring road improvement assessments may be levied if it can be individually established that assessees receive a special benefit

Press Release No. 64/2014 of 23 July 2014

Order of 25 June 2014
1 BvR 668/10

It is constitutionally permissible to levy recurring road improvement assessments. Who is charged and who not must be determined on the basis of whether the individual in question receives a special benefit. Such was the decision of the First Senate of the Federal Constitutional Court in an order released today. The relevant provision of the Rhineland-Palatinate Municipal Levies Act is compatible with the Basic Law, provided it is interpreted in conformity with the Constitution. The cases were remitted to the Rhineland-Palatinate Higher Administrative Court (Oberverwaltungsgericht) for review of whether the challenged ordinances comply with the constitutional requirements that have now been clarified.

Facts of the Case and Procedural History:

The complainants were charged recurring assessments for traffic facilities under municipal ordinances. Case 1 BvR 668/10 arises from a decision by the City of Saarburg to assess EUR 146.30 for the year 2007; case 1 BvR 2104/10 arises from a decision by the City of Schifferstadt to assess  EUR 27.36 for 2006. For the most part, the actions brought against these assessments before the administrative courts were not successful. The complainants are also indirectly challenging the legal basis for the ordinances under § 10a of the Rhineland-Palatinate Municipal Levies Act (Kommunalabgabengesetz – KAG RP).

Key Considerations of the Senate:

1. The legal basis for the recurring assessments respects the allocation of responsibilities under the Basic Law (Grundgesetz GG). Recurring assessments under § 10a KAG RP are not taxes, but non-tax levies for which the Laender possess the necessary legislative powers (Arts. 30, 70 et seq. GG, road improvement assessment laws).

2. The constitutional complaints are unfounded insofar as they fundamentally challenge the possibility of imposing recurring assessments for traffic facilities under § 10a KAG RP.

a) The general principle of equality under Art. 3 sec. 1 GG requires the legislator to treat equally matters that are essentially equal, and unequally such matters that are essentially unequal. For the laws on taxes and levies, the principle of equality gives rise to the principle of equal imposition of burdens. The legislature has broad discretion in choosing what to impose levies on, and in determining the standards for assessments and rates for levies. However, anyone required to pay a non-tax levy will commonly also be a taxpayer. Consequently, non-tax levies are in need of a particular objective justification that goes beyond the mere purpose of raising revenue. The most notable objective reasons that may justify the amount of a fee or assessment are reimbursement for benefits, encouragement or discouragement of certain behaviours, and social purposes.

A legislature may legitimately conceive levies in a way that keeps them practicable and free from excessive differentiation requirements that give rise to legal uncertainty. However, their economic effect on assessees may not exceed a certain level of inequality. Rather, the benefits achieved must be legally proportionate to the associated inequality of the burden of payment.

Art. 3 sec. 1 GG requires that assessments must be determined on the basis of the potential benefit the assessees may derive from their use. If road improvement assessments are based on the ownership of land, then under the principle of equal treatment under the law, only those properties may be assessed whose owners receive a special benefit from their ability to use the improved roads, in a way that the general group of road users cannot. If the assessment is based on ownership of land, the special benefit must be defined on the basis of land.

b) Levying recurring assessments under § 10a KAG RP does not violate the principle of equal imposition of burdens, provided it is interpreted in conformity with the Constitution.

aa) In the view of the Land legislature, the special benefit associated with a non-recurring assessment lies in the de facto and de jure possibility of having vehicular or pedestrian access “to the constructed or improved traffic facility,” while for the case of a recurring assessment, it is sufficient if there is a possibility of vehicular or pedestrian access to “one of the traffic facilities” – i.e. not merely to a single specific traffic facility that has just been constructed or improved.

Thus the Land legislature remains within its margin of discretion defined by the principle of equality. The improvement assessment compensates not for the mere possibility of using a road – a possibility that is also available to the general public – but for the provision of thoroughfare access that benefits a property by connecting it to the traffic network within and between municipalities. The road improvement ensures that the property remains accessible, and thus that it can still be used in a qualified manner, because, by itself, the street or road on which a given property is located is usually not sufficient to provide access to a thoroughfare. Rather, the connection to the remaining road network is generally established only by way of multiple traffic facilities.

bb) A billing unit for road improvement assessments may be established if the respective traffic facilities provide a specific and individual benefit to the assessed property.

§ 10a KAG RP allows the enactor of an ordinance to establish cohesive public facilities that do not necessarily cover the entire territory of the municipality, and that instead apply only to specifically defined parts of that territory. The legislature considered it the usual case that ordinances regard all traffic facilities in a municipality as a single cohesive public facility. This determination must be viewed in light of the fact that there are an especially large number of rather small municipalities in Rhineland-Palatinate.

cc) An ordinance is justified in establishing just one billing unit for the entire territory of a municipality if the traffic facilities provide a special benefit to all the assessed property. If there is no such benefit – as may regularly be the case in large cities or municipalities that do not have a continuous territory – assessing all properties would result in equal treatment of matters that are essentially unequal.

(1) The wording of § 10a KAG RP does not oppose such an interpretation in conformity with the Constitution, because it expressly requires the enactors of ordinances to take local circumstances into account. In large cities or in municipalities that do not have a continuous territory, the discretionary power to enact ordinances that establish a single traffic facility covering the entire territory of the municipality is constitutionally reduced to zero, since refraining from levying such a blanket assessment is the only way to take proper account of the principle of an associated special benefit while at the same time bearing in mind the enactor’s discretionary power to categorise and simplify.

(2) An assessment may be considered only for those properties that at least potentially stand to benefit from the traffic facility – in other words, for which the advantage of possibly using the improved roads provides a local advantage that enhances the utility value of the property. By the standard of the principle of equality, only in this case does it seem justified to assess the owner or owners of that particular property for the use of the improved road.

Whether the assessed properties receive a specific benefit from the improvement and maintenance of a traffic facility depends not on the political unit to which an area belongs, but primarily on the actual local conditions, such as size, the existence of a cohesive built-up territory, the topography and location of rail installations, rivers and major highways, or typical road usage. In large cities, it may regularly be necessary to divide traffic facilities into multiple territorial segments, and it may not be possible to assume the existence of a cohesive public facility, albeit without prejudice to the discretionary powers to enact ordinances that apply otherwise; on the other hand, in small municipalities – particularly those that comprise only one small, continuously built-up area – the cohesive public facility may often be identical with the municipal territory.

However, the principle of equality does not prescribe a “functional cohesion” of traffic facilities, such as was formerly required by Land legislatures and the administrative courts, for the formation of a billing unit for traffic facilities. From the constitutional viewpoint, the only criterion of interest is whether an individual relationship can be established between the special benefit and the obligation to pay an assessment.

3. The challenged decisions did not take full account of the constitutional requirements that proceed from the principle of equal assessment. In particular, in applying § 10a KAG RP, the Higher Administrative Court did not examine whether the assessed properties enjoy an individual and specific benefit from being connected to the assessment unit concerned. Consequently the decisions of the Rhineland-Palatinate Higher Administrative Court are reversed, and the cases are remitted to that court.