County Sanitation District No. 2 of Los Angeles County v. Lorber Industries of California, Inc.

This action was filed under Chapter XI of the Bankruptcy Act 1 by Lorber Industries, Inc. In the arrangement proceedings before the bankruptcy court, the local sewer district filed a claim for sewer use fees it had assessed to the debtor. It was claimed the user fees constituted taxes and were therefore entitled to priority status. We hold that such fees do not constitute taxes, and that the bankruptcy court correctly classified the sewer district as a general unsecured creditor.

I

FACTS

A. The District

County Sanitation District No. 2 of Los Angeles County (the “District”) was formed *1064 under the authority of California Health and Safety Code §§ 4700-4858 (West 1970 & Supp. 1981). Its primary functions are to construct, operate, and maintain trunk sewer lines and treatment facilities that collect, treat, and dispose of domestic and industrial ■wastewater. The District is empowered to condemn or purchase property, and it may finance acquisition and construction by issuing bonds. Section 4746. Current expenses of maintenance and operation may be financed by issuance of negotiable promissory notes. Section 4746.1. It is also granted the power to levy and collect real property…