Magnolia, Texas, is one of a growing number of cities and towns across America that have enacted discriminatory fees against churches and other nonprofits because, in the government’s view, they don’t “pay their fair share.”
Last year, Mayor Todd Kana and the Magnolia City Council voted to revise the city’s fee schedule for water services, creating an expensive “institutional” fee that only applies to churches, schools and other nonprofit organizations. Magnolia City Administrator Paul Mendes defended the new fee stating, “Implementing an institutional rate would allow the city to collect funds from these entities in place of taxes or other fees.”
In other words, the city created a new water “tax” in lieu of the sales tax, property tax, or other taxes that typically are not levied against churches and non-profits.
While it may seem like a clever government scheme to collect more money, it’s illegal. And in the case of Magnolia’s illegal scheme, First Liberty Institute filed a lawsuit against the city on behalf of three churches that are victims of the excessive fee policy.
Magnolia is just one of many local governments that, desperate for new sources of revenue, believe they have found an easy target: churches.
Although churches and non-profit ministries are often exempt from local property taxes – a significant source of income for most localities—they provide innumerable social and economic benefits to the communities they serve. Churches not only provide spiritual guidance for their congregations, they frequently offer aid to the poor and the homeless, child care centers for working parents, educational opportunities for children and adults, and other beneficial programs. While the societal benefits of such activities should be self-evident, there are also, less-visible economic benefits. Recent studies reveal that the average church in an urban environment generates over $1.7 million annually in economic impact. And nationally, religion generates a greater economic benefit to the nation than the top ten technology companies combined. That’s more than the combined contributions of Google, Amazon, Apple, Microsoft, and whomever makes Fortnite. In recognition of these benefits, every state exempts some or all of the properties owned by churches and charitable non-profits from property taxes.
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But with increasing frequency, municipalities have been taking the benefits churches provide for granted. After all, good deeds aren’t taxable. An alarming nationwide trend shows the creative lengths to which municipalities will go to extract what they deem to be a church’s “fair share.”
Far from “fair,” Magnolia’s water fee scheme singles these entities out to deny them the benefits Texas law provides. Magnolia’s scheme is akin to a grocery store charging you more for your groceries because they don’t charge you for parking.
The water and wastewater fees for nonprofits in Magnolia is now significantly higher than that of commercial businesses. Some churches in Magnolia have received water bills up to 178% higher than what non-churches are billed for similar usage. All for the same water.
The Magnolia city council’s actions are not only wrong, they are illegal. Government cannot single out entities for different treatment without a legal basis for doing so. The city council’s only stated purpose, to deny churches and schools a benefit granted by the state, is not a legal basis. Indeed, there is no legitimate basis for charging a higher fee to churches and nonprofits in Magnolia.
Magnolia’s water fee scheme is more evidence of the government’s unquenchable thirst for taxpayer money. Nothing is sacred in the quest for more revenue.
Mike Berry is Chief of Staff at First Liberty Institute. To contact Mr. Berry, please visit www.firstliberty.org.
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