             IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Alan Ziegler, Nicolas Bene,                     :
Lissette Chevalier, Jose Munoz,                 :
and Efrain Caban, Individually and              :
on Behalf of all Similarly Situated             :
Persons                                         :
                                                :
                       v.                       : No. 169 C.D. 2018
                                                : Argued: December 13, 2018
The City of Reading, and Reading                :
Area Water Authority                            :
                                                :
Appeal of: The City of Reading                  :


BEFORE:         HONORABLE MARY HANNAH LEAVITT, President Judge
                HONORABLE PATRICIA A. McCULLOUGH, Judge
                HONORABLE MICHAEL H. WOJCIK, Judge


OPINION BY JUDGE WOJCIK                             FILED: August 14, 2019


                This case returns to us following our remand to the Court of Common
Pleas of Berks County (trial court) in City of Reading v. Ziegler, 142 A.3d 119
(Pa. Cmwlth. 2016). In this appeal, the City of Reading (City) challenges the order
of the trial court entering declaratory judgment in favor of Appellees (Residents)1
that the City’s residential curbside recycling fee is inconsistent with the Municipal
Waste Planning, Recycling, and Waste Reduction Act (Act 101).2 The City argues
that the trial court erred or abused its discretion by improperly shifting the burden to
the City to defend its recycling fee; capriciously disregarding competent evidence

       1
         The Residents are Alan Ziegler, Nicholas Bene, Lissette Chevalier, Jose Munoz, and
Efrain Caban, individually and on behalf of all similarly situated persons.

       2
           Act of July 28, 1988, P.L. 556, as amended, 53 P.S. §§4000.101-4000.1904.
that the City complied with Act 101; considering evidence of avoided costs of
tipping fees; finding that any surplus of fees is inconsistent with Act 101; and
allowing the Residents to alter their claim. For the reasons that follow, we vacate
and remand for further calculations.

                                       I. Background
                The City is a third class city located in Berks County with a population
of over 10,000 residents, operating under a home rule charter.3, 4 The Reading Area
Water Authority (RAWA) is a municipal authority created under the Municipality
Authorities Act.5 The City delegated the responsibility for solid waste planning and
plan implementation under Section 303(d) of Act 101, 53 P.S. §4000.303(d), to
RAWA. The Residents either reside or maintain a place of business in the City and
have paid recycling fees to the City or RAWA.
                Under Act 101, cities of the third class operating under a home rule
charter with populations over 10,000 are required to implement a recycling program.
Section 1501(a) of Act 101, 53 P.S. §4000.1501(a). Pursuant thereto, the City
enacted ordinances establishing its recycling program. In March 2014, the City
revised its recycling program by enacting Ordinances 20-2014 and 21-2014, which
are the subject of this appeal.


       3
          See 123 The Pennsylvania Manual 6-5, 6-7, 6-46, 6-57 (2017); Emert v. Larami
Corporation, 200 A.2d 901, 902 n.1 (Pa. 1964) (“Courts will take judicial notice of geographical
facts such as the county in which a town or city is located.”) (citations omitted).

       4
         The City is designated as financially distressed under the Municipalities Financial
Recovery Act, commonly referred to as Act 47, Act of July 10, 1987, P.L. 246, as amended,
53 P.S. §§11701.101-11701-712.

       5
           53 Pa. C.S. §§5601-5623.


                                               2
                Ordinance 20-2014 amended Chapter 496, Part 2 of the City’s Code of
Ordinances (Code), which pertains to the storage and collection of solid waste.
Reproduced Record (R.R.) at 1031a-34a. Specifically, it eliminated a separate
recycling fee and instituted a “Curbside Waste Collection Fee” (Curbside Fee) to
cover the combined costs of collecting municipal waste,6 recyclable materials,7 and
organic waste.8
                Ordinance 21-2014 amended Chapter 212 of the City’s Code governing
fees by setting the Curbside Fee at $303.10 per property per year. R.R. at 1036a-
37a. Imbedded in the Curbside Fee is a service fee for recyclables of $91.83
(Recycling Fee). The Recycling Fee applies to owners of residential properties with
four or fewer units. Although owners are permitted to opt out of the City’s curbside




       6
           The Code defines “municipal waste” as

                Any garbage, refuse, industrial lunchroom or office waste and other
                material including solid, liquid, semisolid, or contained gaseous
                material resulting from operation of residential, municipal,
                commercial or institutional establishments or from community
                activities and which are not classified as residual waste or hazardous
                waste as herein defined. The term does not include source-separated
                recyclable materials or organic waste.

Section 496-201 of the Code.

       7
         The Code defines “recyclable materials” as “[t]hose recyclable materials specified by the
City for separate collection in accordance with this Part. Such materials may include, but not be
limited to, aluminum cans, ferrous and bimetal cans, glass containers, plastic bottles and
containers, mixed paper, white goods, major appliances, televisions, tires and large auto parts.”
Section 496-201 of the Code.

       8
         The Code defines “organic waste” as “[l]eaves, garden residues, grass clippings,
shrubbery and tree trimmings and similar materials.” Section 496-201 of the Code.


                                                  3
municipal waste service by securing the services of a private hauler, they are not
permitted to opt out of the City’s curbside recycling service. R.R. at 1032a-33a.
               In June 2014, the Residents filed a class action complaint against the
City and RAWA (collectively, the City), challenging the Recycling Fee. In Count
I, the Residents sought a declaratory judgment that the Recycling Fee is “in violation
of the laws of the Commonwealth,” namely, Act 101 and the Solid Waste
Management Act (SWMA).9 R.R. at 17a. In Count II, the Residents sought a
preliminary injunction enjoining the City from billing for current or future Recycling
Fees and from pursuing the collection of any Recycling Fees currently outstanding.
Id. In Count III, the Residents sought compensatory and punitive damages as well
as reasonable attorney fees. Id. By joint request and agreement of the parties, the
trial court considered only Count I and deferred disposition of the other two counts.
               On December 5, 2014, the trial court ruled that the Recycling Fee was
permissible and entered an order granting judgment in favor of the City. The trial
court later amended its order to facilitate interlocutory appeal to this Court.
               On appeal, an en banc panel of this Court vacated the order and
remanded the matter to the trial court for further analysis consistent with our recent
decision in Waste Management of Pennsylvania v. Department of Environmental
Protection, 107 A.3d 273 (Pa. Cmwlth. 2015). In particular, we directed the trial
court to consider whether the City’s Recycling Fee will have a negative impact on
the recycling program’s financial self-sufficiency, as that term is used in Act 101, or
a deleterious effect on the efficiencies of the City’s recycling program. The remand
also contemplated input on these questions from the Department of Environmental
Protection (DEP).


      9
          Act of July 7, 1980, P.L. 380, as amended, 35 P.S. §§6018.101-6018.1003.
                                               4
             On remand, the trial court interpreted this Court’s opinion “to mean that
if the [R]ecycling [F]ee is permitted without limits, it will relieve the City of an
incentive to increase the program’s efficiency and pursue other appropriate sources
of funding.” Trial Court Op., 1/2/18, Finding of Fact (F.F.) No. 3. “[W]hether
recycling fees violate state law depends upon the particular implementation and
amount of such fees because ‘the ultimate financial self-sufficiency of the
[recycling] program’ and making sure the program is ‘as efficient as it could be’ are
. . . ‘obvious purposes of Act 101.’” Trial Court Op., at 8 (quoting Ziegler, 142
A.3d at 130). “If a recycling fee works against those purposes, it is inconsistent with
Act 101 and thus preempted.” Id. The trial court then held additional evidentiary
hearings and considered briefs and arguments of the parties.
             Based on the evidence and arguments presented, the trial court found
that Section 496-208 of the Code, as amended by Ordinance 20-2014, provides for
the Curbside Fee to be set as follows:

             The Director of Public Works shall submit an annual
             report by October 1 to City Council detailing projected
             expenses and revenues for the upcoming year and
             recommend a service fee to cover all costs associated with
             the collection and removal of all curbside waste. The
             report shall specifically detail the amount of the curbside
             waste fee that is imposed to cover the costs associated with
             the collection of municipal waste, which shall be used to
             determine the amount of the fee imposed upon owners of
             [the properties that permissibly opt for private collection
             of municipal waste].

F.F. No. 8 (emphasis added).       Section 212-136 of the Code, as amended by
Ordinance 21-2014, sets the specific fees each year and currently describes the fee




                                          5
variants more clearly as “[c]ombined billing rate for municipal trash and recycling
service” and “[b]illing rate for recycling service only.” F.F. No. 9.10
              The trial court found that DEP does not review municipal recycling
programs to assess self-sufficiency or efficiency, and has no opinion as to the City
recycling program’s efficiency level. The Berks County Solid Waste Authority
likewise does not play a role in reviewing or assessing the City’s recycling program
and has no opinion about the City program’s efficiency. The City has never formally
asked DEP or the Berks County Solid Waste Authority for advice or assistance in
operating or assessing its recycling program. The City has not conducted its own
comprehensive studies or analyses of recycling program options or efficiency. To
the contrary, over the course of Court proceedings on remand, the City repeatedly
discovered additional and sometimes inconsistent and unclear information about its
own program costs. F.F. Nos. 10-13.
              DEP’s contribution to municipal efforts toward recycling program self-
sufficiency consists of a single technical report, Building Financially Sustainable
Recycling Programs, dated April 2005, and other technical studies such as one dated
January 2015, concerning the feasibility of the City’s baler for processing recycled
paper. F.F. No. 14. DEP also issued the “DEP Act 175 Recycling Program Plan,
July 2004 Working Draft.” F.F. No. 15. This document provides commentary
explaining several perspectives on the concept of program self-sufficiency:

              [A] local program can be understood as self[-]sufficient if
              its economic, social, and environmental benefits exceed its
              costs, whether or not all of these costs and benefits are

       10
          In February 2018, the City enacted Ordinance 6-2018 amending Chapter 496, Part 2 of
the Code clarifying that the Curbside Fee only covers the costs of its recycling program “that
exceeds the amount available through Act 101 grants, the marketing and sale of recyclable
materials, and any other Act 101-approved revenue source.” See Appellant’s Brief, Appendix F.
                                              6
            reflected in the municipality’s budget. At the local level,
            considerable benefits are experienced, even if they are not
            all reflected as direct recycling benefits on the
            municipality’s balance sheet. Finally, and more narrowly,
            a local program can be understood as self-sufficient if its
            economic benefits to the municipality’s budget are equal
            to or exceed its costs to the municipality’s budget.
F.F. No. 15. This document emphasizes assessing self-sufficiency by taking into
consideration costs and benefits that may not appear on balance sheets, including
“the avoided costs of disposal and tax revenue,” and further notes that a program’s
income includes “proceeds from the sale of recyclable materials, fees and avoided
disposal costs, where they can be realized.” F.F. No. 16.
            The City operated its recycling program “in house” from 2014 through
February 2017. The City’s funding for the recycling program mainly came from the
Recycling Fee, periodic grants under Act 101 and the marketing and sale of
recyclable materials. In 2014 and 2015, the Recycling Fee was $91.83 per property;
in 2016, it was $95.04. The City recouped approximately $2.3 million of its
recycling costs through the annual assessment. The marketing and sale of recyclable
materials accounted for approximately $100,000 per year. Grant money varied by
year and was not available every year. See F.F. No. 17, 18, 22.
            According to the City’s ledgers, the City’s recycling program generated
a surplus for the years 2014-2016:


    Year       Costs         Grants           Sales    User Fees          Surplus
    2016   $2,140,859.00     $7,815.00    $76,997.00   $2,529,117.00 $473,070.00
    2015   $2,295,019.00   $127,515.00    $91,342.00   $2,324,947.00 $248,785.00
    2014   $2,323,304.00    $98,682.00   $110,221.00   $2,388,891.00 $274,490.00




                                          7
See F.F. No. 18. The trial court found that in each year from 2014 through 2016, the
user fees collected, standing alone, without including grants or sales of recyclables,
exceeded the total costs of the City’s recycling program.
               However, in prior years, the recycling program ran a deficit.
Specifically, in 2013, the program ran a deficit of $57,854; a deficit of $958,914 in
2012; and a deficit of $468,253 in 2011. In 2010, the program operated at a surplus
of $104,127. The trial court noted that it was not clear what efforts, if any, the City
made to operate the program as efficiently as possible during the deficit years. F.F.
Nos. 20, 21.
               As of March 2017, the City began outsourcing its recycling program
(along with collection of waste, which was already outsourced) under a three-year
fixed rate contract with BFI Waste Services of Pennsylvania (BFI). As a result, the
City no longer markets and sells the collected recyclable materials; rather, BFI is
now responsible for disposing of all waste and recyclables collected and may itself
sell the recyclable materials. F.F. Nos. 19-24.
               Under the contract, the City pays BFI $3,499,359.36 per year, which
consists of $2,642,745.60 for curbside trash collection at an estimated 20,640 units
and $856,613.76 for curbside recycling collection at an estimated 26,636 units.
There is also a $41,700 education component. When the outsourcing contract with
BFI went into effect in March 2017, the City reduced its Recycling Fee to $74.04.
F.F. Nos. 25-26.
               The City did not factor prior surpluses into the new rate, but instead
applied those surpluses against deficits in prior years. The City anticipated a surplus
in 2017, which it intended to use for some estimated transitional costs. The City
retained some responsibilities and costs of the recycling program despite the contract


                                           8
with BFI, including purchasing and providing collection containers, administering
fee collection and customer service, and conducting leaf and yard waste collection.
The City anticipates an upcoming cost of $1.2 million to provide new collection bins
to approximately 26,636 units (a cost of approximately $45 per bin). Tipping fees
and apportioned employee salaries for the City’s handling of leaf and yard waste
costs the City approximately $326,000 per year. F.F. Nos. 27-30.
             The trial court determined that the City did not meet its obligation to
consider ways to increase the efficiency and self-sufficiency of its recycling program
without reliance on a fee. The City did not conduct comprehensive studies of its
recycling program options. For years, the City collected fees that were greater than
the total program costs, and it did not properly account for those surpluses in setting
fees for future years. The fees were sufficient to cover all costs of its recycling
program, which is inconsistent with Act 101. The City did not timely explore
outsourcing to a private contractor, which ultimately proved to be a significantly
cheaper alternative to its in-house recycling program. Before entering the private
contract with BFI, the recycling program was less efficient and less self-sufficient
than it could have been. The trial court concluded that the fees the City imposed
enabled it to operate its recycling program without properly pursuing Act 101’s
purposes of efficiency and self-sufficiency.
             Upon concluding that the City’s recycling fees were inconsistent with
Act 101 as evidenced both by the amount of the fees exceeding the costs of recycling
even before adding in revenue from sales of recyclables and Act 101 grants, and by
the language of Ordinance 20-2014 itself permitting fees to “cover all costs
associated with the collection and removal of all curbside waste,” the trial court did
not entertain any specific calculation of realizable avoided costs or the precise


                                          9
appropriate fee amount generally. The trial court noted that the exact extent to which
avoided costs should have lowered the fees is an issue for future proceedings on
damages. The trial court also declined to consider monetary damages at this juncture
because the parties agreed to have the court rule solely on Count I -- the declaratory
judgment count -- before proceeding with other aspects of the case. Accordingly,
the trial court entered declaratory judgment in favor of the Residents. This appeal
now follows.11


                                           II. Issues
               The City raises five issues for our review. First, the City contends that
the trial court erred by misapplying a burden shifting analysis and placing the burden
on the City to prove that its Recycling Fee as authorized by Ordinances 20-2014 and
21-2014 complied with Act 101. Prior decisional law clearly holds that the burden
of proof always lies with the party challenging the reasonableness of a fee and never
shifts to the municipality. Second, the City argues that the trial court disregarded
credible evidence proving the City’s compliance with Act 101. Third, the City
claims that the trial court erred by considering evidence of avoided costs of tipping
fees as a factor in determining that the City’s Recycling Fee is inconsistent with Act
101. Fourth, the trial court abused its discretion and committed an error of law in
finding that any surplus of fees in proportion to the costs of the recycling program is
inconsistent with Act 101. Finally, the City maintains that the trial court erred by
allowing the Residents to alter their claim thereby exceeding the scope of both the


       11
           Our review in a declaratory judgment action is limited to determining whether the trial
court’s findings are supported by substantial evidence, whether an error of law was committed or
whether the trial court abused its discretion. Pennsylvania Independent Waste Haulers Association
v. Township of Lower Merion, 872 A.2d 224, 227 n.13 (Pa. Cmwlth. 2005).
                                               10
declaratory judgment claim and the trial court’s August 1, 2014 order limiting these
proceedings to the disposition of Count I of the Complaint only.

                                  III. Discussion
                                A. Burden of Proof
             First, the City argues that the trial court improperly used a shifting
burden of proof requiring the Residents to show only that the City had a surplus of
fees for certain years before shifting the burden to the City to show that the City’s
Recycling Fee is consistent with Act 101. This is contrary to case law requiring the
party challenging an ordinance to show the ordinance’s invalidity. The Residents
failed to prove facts supporting their claim. The Residents produced no expert
testimony that the amount charged had a negative impact on the efficiencies of the
recycling program. In fact, the trial court never found that the Residents met their
burden of proof or that the evidence proved that the City’s Recycling Fee had a
negative impact on the financial self-sufficiency of the City’s recycling program.
             “[O]rdinances are presumed to be valid and those who challenge their
validity carry a heavy burden to establish their invalidity.” Fisher v. Viola, 789 A.2d
782, 785 (Pa. Cmwlth. 2001); accord Chrin Brothers, Inc. v. Williams Township
Zoning Hearing Board, 815 A.2d 1179, 1184 (Pa. Cmwlth. 2003). A rebuttable
presumption is not absolute or unassailable. Commonwealth v. McNeil, 439 A.2d
664, 667 (Pa. 1981); Kiskadden v. Department of Environmental Protection, 149
A.3d 380, 402 (Pa. Cmwlth. 2016), appeal denied, 168 A.3d 1281 (Pa. 2017). It is
merely an assumption until it is disproved. Kiskadden, 149 A.3d at 402.
             For instance, in a tax assessment appeal, the validity of the tax
assessment is presumed. Beaver Gasoline Co. v. Zoning Hearing Board of Borough
of Osborne, 285 A.2d 501, 504 (Pa. 1971). However, where the taxpayer presents

                                          11
evidence drawing the validity of that tax assessment into question, the taxing
authority may no longer rely upon the presumption, but is required to present
evidence in support of the assessment to sustain its validity. Id. Similarly, in
criminal cases, the Commonwealth is entitled to a presumption of the sanity of the
criminal defendant. Id. But, once the defendant introduces evidence drawing his
sanity into question, the Commonwealth may no longer rely upon that presumption,
but is required to prove sanity, as it must every other element of the case, by
affirmative evidence. Id. Likewise, where a zoning ordinance is challenged, a
municipality is entitled to a presumption of its validity. Id. But, once a permit
applicant presents evidence that there was a total ban on the proposed use, the
municipality must present evidence to establish the validity of the total ban in terms
of public interest. Id.
             Similarly, where the reasonableness of a fee is challenged, the party
challenging the fee bears the burden of proving it is unreasonable.          M & D
Properties, Inc. v. Borough of Port Vue, 893 A.2d 858, 862 (Pa. Cmwlth.), appeal
denied, 906 A.2d 1197 (Pa. 2006). However, “[t]he burden does not shift to a
municipality to prove that a challenged fee is reasonable; it always remains the
burden of the challenger to show that the fees are unreasonable.” Id.
             The trial court applied the burden analysis applicable to ordinances
here. The City was entitled to a presumption that its ordinances, which authorized
the assessment and collection of a Recycling Fee, were valid. The trial court placed
the burden on the Residents to show that the City’s ordinances were inconsistent
with Act 101’s purposes and provisions. More particularly, pursuant to this Court’s
remand directive, the Residents bore the burden of proving that the City’s ordinances
had a negative impact on the recycling program’s financial self-sufficiency, as that


                                         12
term is used in Act 101, or a deleterious effect on the efficiencies of the City’s
recycling program. Ziegler, 142 A.3d at 139.
             To that end, the Residents showed that Ordinance 20-2014 permitted a
Recycling Fee that covered “all costs” of recycling and, as applied, the fee alone
covered the cost of the program and generated surpluses for multiple years. In so
doing, the Residents showed that the program was not as efficient as it could be
thereby drawing the validity of the ordinances authorizing the fee into question. As
this Court has explained, where a fee covers all costs associated with the recycling
program, it does not encourage waste reduction and marketing of recyclables, nor
does it use planning, grants or other incentives to attain increased efficiency contrary
to Act 101’s purposes. Ziegler, 142 A.3d at 129.
             Based on the Residents’ evidence, the trial court found that the fee
charged and collected was high enough to cover all of the program costs and enabled
the City to ignore the statutorily favored funding from grants and sales of recyclables
in contravention of Act 101. Once the Residents presented evidence tending to show
that the ordinances had a negative effect on the efficiency and self-sufficiency of the
recycling program, it was up to the City to rebut this evidence. In other words, the
City could no longer rely on the presumption of the ordinances’ validity, and it was
required to rebut the Residents’ evidence in order to prevail. Upon review, the trial
court correctly assigned the burden of proof.

                             B. Disregard of Evidence
             Next, the City contends that the trial court abused its discretion by
failing to consider evidence and arguments relating to the City’s Recycling Fee and
program costs. The City discovered evidence that it had significant leaf and yard
waste collection costs that should have been accounted for in the recycling fund, but

                                          13
were assessed to the City’s general fund. The trial court accepted the City’s evidence
that the leaf and yard waste collection program costs $326,000 per year, but the court
did not include these costs when calculating that the City had a surplus in the
recycling program. Yard waste falls within the definition of recycling. There is no
explanation why the trial court ignored this evidence.
             In addition, the City contends that the trial court erred by disregarding
the City’s argument that grants under Section 904 of Act 101, 53 P.S. §4000.904,
should not be counted in the City’s surplus. Section 904 grants are not limited in
use to recycling programs and may be used for any municipal purpose. To the extent
that the trial court considered Section 904 grants as a revenue source, any surplus
should be reduced by the amount of Section 904 grant money received.
             Further, the City asserts that the trial court failed to include in its
calculations those years in which the City lost money in the recycling program. The
trial court cannot consider surpluses only and must consider deficits too. The trial
court also did not consider future program costs (e.g., replacement recycling bins
costing $1.2 million). The City claims that when all of the revenue and costs from
the six years of the recycling program that appear in the record are considered, the
City actually operated its program at a net deficit.
             As fact-finder, the trial court maintains exclusive province over matters
involving the credibility of witnesses and the weight afforded to the evidence. In re
Penn-Delco School District, 903 A.2d 600, 608 (Pa. Cmwlth. 2006), appeal denied,
921 A.2d 499 (Pa. 2007). The trial court is free to believe all, part, or none of the
evidence presented, and is likewise free to make all credibility determinations and
resolve conflicts in the evidence. Boro Construction, Inc. v. Ridley School District,
992 A.2d 208, 218 n.16 (Pa. Cmwlth. 2010). As a result, this Court is prohibited


                                          14
from making contrary credibility determinations or reweighing the evidence in order
to reach an opposite result. Penn-Delco, 903 A.2d at 608.
             In fact, we are bound by the findings of the trial court which have
adequate support in the record so long as the findings do not evidence capricious
disregard of competent and credible evidence. Leon E. Wintermyer, Inc. v. Workers’
Compensation Appeal Board (Marlowe), 812 A.2d 478, 487 (Pa. 2002). “Review
for capricious disregard of material, competent evidence is an appropriate
component of appellate consideration in every case in which such question is
properly brought before the court.” Id. Capricious disregard occurs only when the
fact-finder deliberately ignores relevant, competent evidence. Id.


                              1. Leaf and Yard Waste
             After the August 2017 hearing, the City discovered it had significant
leaf and yard waste collection costs that should have been accounted for in the
recycling fund, but were assessed to the City’s general fund. The Residents filed a
motion in limine to preclude this evidence. The trial court did not rule on the motion,
but did consider the City’s evidence regarding yard waste and leaf collection.
             In fact, the trial court found that this service costs the City
approximately $326,000 per year. Despite this finding, the trial court did not factor
this evidence into its surplus analysis. The trial court found that the City accounted
for this expense in the City’s general fund, not in the City’s recycling program fund.
By including this expense in the general fund, it was paid for by property taxes, not
by user fees, Act 101 grants or the sale of recyclable materials. R.R. at 1575a.
             However, “leaf waste” clearly falls within the definition of recycling.
Section 103 of Act 101, 53 P.S. §4000.103.          Costs related to leaf waste are


                                          15
attributable to the recycling program, regardless that the City accounted for this
expense in its general fund. By excluding evidence directly related to the actual
costs of the recycling program, the trial court did not present a complete or accurate
picture of what it actually costs the City to operate its recycling program. Thus, we
conclude that the trial court erred by excluding these expenses in its calculations and
efficiency analysis.


                          2. Section 904 Performance Grants
              As for the Section 904 performance grants, the trial court found that
from years 2014 through 2016, the user fees collected – standing alone, without the
inclusion of grants or sales of recyclables – exceeded the total costs of the recycling
program. The trial court reached this determination regarding the fees irrespective
of the performance grants.
              Notwithstanding, as the City points out, Section 904 grants, unlike
those under Section 902 of Act 101,12 are not limited in use to recycling programs

       12
         Conversely, Section 902 grants are limited for the development and implementation of
municipal recycling programs. Specifically, Section 902 authorizes DEP to:

              [A]ward grants for development and implementation of municipal
              recycling programs, upon application from any municipality which
              meets the requirements of this section. The grant provided by this
              section may be used to identify markets, develop a public education
              campaign, purchase collection and storage equipment and do other
              things necessary to establish a municipal recycling program. The
              grant may be used to purchase collection equipment, only to the
              extent needed for collection of recyclable materials, and mechanical
              processing equipment, only to the extent that such equipment is not
              available to the program in the private sector. The application shall
              be made on a form prepared and furnished by [DEP]. The
              application shall explain the structure and operation of the program
              and shall contain such other information as [DEP] deems necessary


                                              16
and may be used for any municipal purpose. 53 P.S. §4000.904(d)(6) (“the grant
funds awarded under this section may be expended by the municipality on any
expense as determined in the discretion of the municipality”) (emphasis added).
There is no requirement for the City to apply Section 904 grants to its recycling
program. Because the City chose to apply its Section 904 grants to its recycling
program, the trial court properly factored this money into its analysis.13 Thus, we
discern no error in this regard. We note that the City’s use of this unrestricted grant
money towards its recycling program is evidence that the City is using any means
available to attain “financial self-sufficiency, as that term is used in Act 101.”
Zeigler, 142 A.3d at 139.

                                       3. Past Deficits
              As for the deficit years, the trial court found that the program ran a
deficit in the years 2011-2013. The trial court found that it was “not clear what


              to carry out the provisions and purposes of this act. The grant under
              this section to a municipality required by section 15011 to
              implement a recycling program shall be 90% of the approved cost
              of establishing a municipal recycling program. The grant under this
              section to a municipality not required by section 1501 to implement
              a recycling program shall be 90% of the approved cost of
              establishing a municipal recycling program. In addition to the grant
              under this section, a financially distressed municipality, as defined
              in section 203(f) of the act of July 10, 1987[, P.L. 246, as amended,
              53 P.S. §11701.203(f)], known as the Financially Distressed
              Municipalities Act, that is required by section 1501 to implement a
              recycling program shall be eligible for an additional grant equal to
              10% of the approved cost of establishing a municipal recycling
              program.

Section 902 of Act 101, 43 P.S. §4000.902(a).
        13
           Where a municipality chooses to use such funds for non-recycling purposes, Section 904
grants should not be factored into the analysis as a revenue source.
                                               17
efforts, if any, the City made to operate the program as efficiently as possible during
the deficit years.” Trial Court Op. at 6. The trial court did not apply deficits in its
calculations. Again, the purpose of the remand order was to determine the efficiency
of the recycling program. The uncontroverted evidence demonstrates that the City
ran a deficit in some years. Those deficits had to be recouped in future years. We
conclude that the trial court erred by not considering deficits in its calculations.


                                 4. Anticipated Costs
             The City also presented evidence that the current fee contemplates
anticipated costs. Specifically, the City presented testimony that it expects to incur
a $1.2 million expense in replacing recycling bins for all 26,636 customer
households. If the City were to apply all $1.2 million to any single year, it would
require the City to add approximately $46 to each customer’s recycling bill. R.R. at
1277a. The City’s managing director testified that the City is considering amortizing
that cost over a three-or five-year period. R.R. at 1274. Despite finding that the City
anticipates an upcoming cost of $1.2 million to provide new collection bins, F.F. No.
29, the trial court did not consider this sum in its analysis or offer any explanation
as to why anticipated costs could not be used to offset the amount of revenue
generated. In this regard, the trial court erred.
             The purpose of the Ziegler test is to determine the efficiency of the
recycling program. The trial court found that the user fees covered all costs of
recycling and generated surpluses and, thus, were contrary to Act 101. However,
the trial court’s calculations disregarded key data regarding actual costs of the
program. By not considering the City’s leaf and yard waste collection costs, prior
years’ deficits or anticipated program costs, the trial court did not capture an accurate


                                           18
and complete picture of the program’s efficiency. Consequently, we are unable to
determine whether the Recycling Fee is consistent with or contrary to Act 101. Thus,
it is necessary to vacate and remand for proper consideration of this evidence and
further calculations that include the disregarded data.

                             C. Avoided Costs of Tipping Fees
                 Next, the City contends that the trial court erroneously considered
tipping fees14 that the City avoids paying when determining whether the City’s
Recycling Fees were consistent with Act 101. The City maintains that the Recycling
Fees would have increased had the City not avoided the tipping fees. Moreover, the
City argues that consideration of avoided costs of tipping fees has no place in the
discussion of whether the City’s assessment and collection of its Recycling Fee had
a negative impact on its recycling program.
                 Section 1712(a) of Act 101, 53 P.S. §4000.1712(a), provides
“[p]rogram costs are excessive when reasonable and necessary costs of operating the
program exceed income from the sale or use of collected material, grant money
received from the department pursuant to section 902 and avoided costs of municipal
waste processing or disposal.” Section 1712(a) merely serves as an affirmative
defense     to     certain   types    of    enforcement       actions    brought      by    DEP.
53 P.S. §4000.1712(a). However, there is scant reference to avoided costs elsewhere
in Act 101.

       14
           A tipping fee is the charge levied upon a given quantity of waste received at a waste
processing facility. “The ‘tipping fee’ includes state-mandated fees set forth in Act 101 and other
solid waste laws. The ‘tipping fee’ may vary depending on the hauler, the time of year, market
conditions, the volume of waste a particular hauler regularly delivers to the facility, the payment
history of the hauler and whether or not the hauler pre-pays the ‘tipping fee.’” Pennsylvania Waste
Industries Association v. Monroe County Municipal Waste Management Authority, 80 A.3d 546,
549 (Pa. Cmwlth. 2013).
                                               19
               Notwithstanding, this section appears to reflect the General Assembly’s
intention that avoided costs are a factor in determining the efficiency and self-
sufficiency of a recycling program.             According to DEP, “a program can be
understood as self[-]sufficient if its economic, social, and environmental benefits
exceed its costs, whether or not all of these costs and benefits are reflected in the
municipality’s budget.” F.F. 15. Recycling and diverting waste from overburdened
landfills certainly serves an economic, social and environmental benefit. See Section
102 of Act 101, 53 P.S. §4000.102. However, avoided tipping costs are not a
revenue source or a cost. Rather, they are merely costs that the City did not incur.
In other words, they are not realized. As such, avoided costs would have no effect
on whether the City’s assessment and collection of its Recycling Fee had a negative
impact on its recycling program.
               Upon review, the trial court “did not entertain any specific calculation
of realizable avoided costs or the precise appropriate fee amount generally.” Trial
Court Op. at 12 (emphasis added). Thus, we discern no error in this regard.15

                                      D. Surplus of Fees
               Next, the City argues that a surplus that is reasonably commensurate
with the costs of the recycling program is consistent with Act 101. The law states
that any fee is valid if the revenue generated by the fees is reasonably commensurate
with the costs incurred. The trial court summarily concluded that any surplus is




       15
         Insofar as the trial court indicated that “[t]he exact extent to which real avoided costs
should have lowered the fees is an issue for proceedings on damages,” for purposes of judicial
economy, we note that avoided costs would not result in lower fees. Trial Court Op. at 12.
However, because the trial court did not reach the damages stage of the proceedings or determine
what extent, if any, avoided costs would have on the Recycling Fee, we find no error in this regard.
                                                20
inconsistent with Act 101, without regard to whether the fees were disproportionate
to the costs.

                Recently, this Court held:

                A municipality cannot impose a tax upon a business under
                the guise of exercising its police power, and, therefore, a
                license fee will be struck down if its amount is “grossly
                disproportionate to the sum required to pay the cost of the
                due regulation of the business.” Flynn v. Horst, 51 A.2d
                54, 60 (Pa. 1947). “The party challenging a license fee has
                the burden of proving that the fee is unreasonable.”
                Thompson v. City of Altoona Code Appeals Bd., 934 A.2d
                130, 133 (Pa. Cmwlth. 2007). “All doubt must be resolved
                in favor of the reasonableness of the fee, since the
                municipality must be given reasonable latitude in
                anticipating the expense of enforcing the ordinance.” Id.

Costa v. Allentown, 153 A.3d 1159, 1165 (Pa. Cmwlth. 2017). A demonstration of
surpluses alone would not defeat the reasonableness of the fee. See id. This Court
has held that “fees charged by a municipality for services rendered are proper if they
are reasonably proportional to the costs of the regulation or the services performed.”
M & D Properties, Inc. v. Borough of Port Vue, 893 A.2d 858, 862 (Pa. Cmwlth.
2006) (emphasis added).
                Although these cases are certainly instructive, they do not involve
application of Act 101. Act 101, as interpreted by this Court, requires the courts to
examine the efficiency of the recycling program and whether attendant user fees
impact the efficiency and self-sufficiency of the recycling program.          Ziegler,
142 A.3d at 130; Waste Management, 107 A.3d at 287.
                Here, the trial court found that the Residents demonstrated that the
ordinances permitted a Recycling Fee that covers all costs of the recycling program


                                             21
and, as applied, the Recycling Fee covered all costs of recycling and generated
surpluses that were not considered by the City in setting the fee.
             As discussed above, the trial court erred in its calculation of a surplus.
Until a new calculation is made, it is unclear whether the fee generated a surplus
over multiple years. Moreover, while a surplus may be indicative of inefficiency
under Act 101, such may be offset by other factors, including evidence regarding
amortization of anticipated costs.

                      E. Alteration of the Residents’ Claims
             Finally, the City argues that the trial court erred by allowing the
Residents to argue that the fee was excessive, a claim not raised in their complaint.
In Count I of the complaint, the Residents merely claimed that the City’s fee was
inconsistent with Act 101, not excessive. The trial court should have precluded the
Residents from proceeding on its new excessive fee argument without amending its
complaint to include this new claim. By allowing this new claim to move forward,
the trial court deprived the City the opportunity to present preliminary objections or
conduct full discovery.
             On remand, this Court directed the trial court to consider whether the
curbside recycling fee will have a negative impact on the recycling program’s
financial self-sufficiency, as that term is used in Act 101, or a deleterious effect on
the efficiencies of the City’s recycling program. Ziegler, 142 A.3d at 139. As the
trial court found, “[c]onsideration of the amount of the fee and related financial
details was thus necessary to comply with the remand and give a final answer to the
question of whether the City’s fee is permissible.”           Trial Court Op. at 2.
Consideration of whether the fee was inconsistent with Act 101 requires an
examination of whether the fee was excessive or unreasonable in relation to actual

                                          22
costs of the program. We note that a fee is unreasonable if it is used by a
municipality purely to generate revenue with little regard to the recycling program’s
efficiency or the goals of Act 101.


                                        IV. Conclusion
               For these reasons, we vacate and remand insofar as the trial court’s
calculations did not include leaf and yard waste collection costs, prior year’s deficits
or anticipated program costs, and we affirm in all other respects.16




                                              MICHAEL H. WOJCIK, Judge




       16
           We also note that funding recycling programs has become a difficult matter. Pursuant
to Ziegler, the goal of Act 101 is to have recycling programs that maximize funding available from
Act 101 grants, sales from recyclables and alternative resources to attain increased efficiency.
Ziegler, 142 A.3d at 129. Act 101 has a laudable but unrealistic goal of self-funding. Id. at 137.
As this Court recognized in Ziegler, self-sufficiency may be beyond the capabilities of
municipalities and recognized that user fees, which are not prohibited by Act 101, are used to fund
recycling programs. Id. Since its enactment, the recycling market has essentially collapsed. The
ability to sell recyclable material has decreased dramatically. See R.R. at 1676a. As a result,
recycling has become much more costly to local governments. Nevertheless, it is the function of
the General Assembly, and not this Court, to reexamine Act 101 and the hardship that it is placing
on municipalities and to develop new ways to encourage and incentivize waste reduction. See,
e.g., Pa. Const. art. II, §1 (“The legislative power of this Commonwealth shall be vested in a
General Assembly[.]”); Tosto v. Pennsylvania Nursing Home Loan Agency, 331 A.2d 198, 202
(Pa. 1975) (“It is the province of the legislature, not the judiciary, . . . to determine the means
necessary to combat public problems, for with means as with ends, the legislature, which is more
responsive to the people and has more adequate facilities for gathering and assembling the requisite
data, is in a better position to evaluate and determine alternative approaches.”) (citation and
internal quotations omitted).
                                                23
          IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Alan Ziegler, Nicolas Bene,              :
Lissette Chevalier, Jose Munoz,          :
and Efrain Caban, Individually and       :
on Behalf of all Similarly Situated      :
Persons                                  :
                                         :
                     v.                  : No. 169 C.D. 2018
                                         :
The City of Reading, and Reading         :
Area Water Authority                     :
                                         :
Appeal of: The City of Reading           :


                                      ORDER


              AND NOW, this 14th day of August, 2019, we VACATE the order of
the Court of Common Pleas of Berks County, dated January 2, 2018, and REMAND
for additional calculations in accordance with the foregoing opinion, and AFFIRM
in all other respects.




                                       __________________________________
                                       MICHAEL H. WOJCIK, Judge
