GSP Mgmt. Co. v. Duncansville Municipal Authority

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
GSP Management Company, :
Appellant :
:
v. : No. 40 C.D. 2015
: Argued: September 17, 2015
Duncansville Municipal Authority :
BEFORE: HONORABLE DAN PELLEGRINI, President Judge
HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE P. KEVIN BROBSON, Judge
OPINION BY JUDGE BROBSON FILED: October 19, 2015
By order of December 28, 2014, the Court of Common Pleas of Blair
County (trial court) rejected the challenge of Appellant GSP Management
Company (GSP) under Section 5607(d)(9) of the Municipality Authorities Act
(Act), 53 Pa. C.S. § 5607(d)(9), to the sewage rate scheme of the Duncansville
Municipal Authority (Authority). This section authorizes municipal authorities to
establish “reasonable and uniform rates” for the services that they provide.
Section 5607(d)(9) of the Act. The section also expressly authorizes suits against a
municipality to challenge the reasonableness and uniformity of established rates.
In its suit, GSP, by way of a declaratory judgment action, challenged the
Authority’s rate scheme both on its face (Count I) and as applied to GSP (Count
II). (Reproduced Record (R.R.) 32a.) For the reasons set forth below, we affirm
the trial court’s rejection of the facial challenge, but we reverse the trial court’s
rejection of GSP’s as applied challenge and remand the matter to the trial court for
further proceedings.
The trial court resolved the parties’ dispute in reliance on a Joint
Stipulation of Facts (Stipulation). (R.R. 47a-53a.) According to the Stipulation,
GSP operates a mobile home park in Allegheny Township, Blair County, known as
Lehigh Terrace Mobile Home Park (Lehigh Terrace). The Authority does not
provide water and sewer service directly to residents in Lehigh Terrace; rather,
Lehigh Terrace maintains its own internal water distribution and sewage collection
and conveyance systems. The Authority meters the water that it provides to
Lehigh Terrace, but it does not meter the wastewater discharged from the mobile
home park into the Authority’s sewer system.
In June 2009, the Authority informed GSP of its adoption of a new
“Sewer Rate Structure Based on Water Meter Readings – High End Users” (New
Rate Structure). The New Rate Structure provides for the calculation of a sewer
bill based on tiered sewer rates, where the rate increases on a sliding scale
corresponding to the amount of metered water supplied to the customer. As the
customer’s metered water increases through particular bands, so too does the
assessed sewer rate and, consequently, the customer’s sewer bill. The Authority’s
New Rate Structure does not expressly provide for an allowance where a customer
encounters extreme deviations in the amount of its sewer bills based on water leaks
between the point where the water is metered and where water is accessed by the
customer or, in the case of Lehigh Terrace, the resident. There is no dispute that
metered water orphaned by a leak in the internal Lehigh Terrace system is
consequently not used by Lehigh Terrace residents and thus is never discharged
into the Authority’s sewer system. Since implementation of the New Rate
Structure, the Authority has historically billed Lehigh Terrace for approximately
40,000 gallons of water a month and, consequently, approximately 40,000 gallons
2
of sewage a month. Lehigh Terrace’s highest metered water flow during a month
in which it did not experience any leaks in its internal water distribution system
was approximately 60,000 gallons.
Lehigh Terrace experienced significant leaks in its internal water
distribution system on several occasions during 2009 and 2011. In June and
July 2009, as a result of the leaks, metered water flow into Lehigh Terrace
increased to 130,000 gallons and 220,000 gallons, respectively. In March 2011,
again due to leaks, the metered flow into Lehigh Terrace was 110,000 gallons.
Lehigh Terrace experienced leaks again in August, September, October, and
November of 2011, with corresponding metered flow into the property of 120,000;
330,000; 580,000; and 210,000 gallons, respectively. During each of these
months, despite the increase in metered water flowing into Lehigh Terrace, there
was no corresponding increase in outflow of sewage from Lehigh Terrace into the
Authority’s sewage system. In other words, water consumption by Lehigh Terrace
residents stayed relatively stable, as did their discharged waste water; the excess
metered water was attributable to the leaks, lost somewhere in the conveyance of
the water from the meter point to the residents due to leaks in the Lehigh Terrace
distribution system. Once Lehigh Terrace repaired the leaks, metered flow
returned to its historic average (approximately 40,000 gallons a month).
The Authority has an unwritten policy of making allowances for those
that have experienced uniquely high water and sewer bills, but only where a
malfunction in the customer’s water meter is established. In such cases, the bills
will be adjusted. Where, however, the high water and sewer bills are the result of
leaks after the point of the meter and within the customer’s property, the Authority
will permit an installment payment plan, but it will not adjust the sewage bill.
3
Under the Rate Structure, and using Lehigh Terrace’s average
monthly water consumption with no leaks of 40,000 gallons, Lehigh Terrace’s
monthly sewer bill would be $753.00. The monthly sewer bill based on 60,000
gallons of metered water, Lehigh Terrace’s highest during a no leak month, would
be $1,253.00. During the months where Lehigh Terrace’s metered water spiked
due to leaks in its internal distribution system, the Authority billed Lehigh Terrace
the following amounts for sewer service:
June 2009 $3,003.00
July 2009 $5,253.00
March 2011 $2,503.00
August 2011 $2,753.00
September 2011 $8,003.00
October 2011 $14,253.00
November 2011 $5,003.00
In the Stipulation, the Authority agrees with GSP that for these months, the sewer
bills for Lehigh Terrace “were not reasonably proportional to the value of the
sewer service rendered by the Authority.” (R.R. 52a.)
GSP has paid its water bills from the Authority in full. They are not at
issue in this case. GSP has also paid its sewer bills from the Authority in full for
every month other than the seven months at issue here. For those months, GSP has
remitted to the Authority $11,781.00 to be applied toward its sewer bills for those
months. Ultimately, GSP’s declaratory judgment action, challenging the New Rate
System on its face and as applied, is about obtaining relief from the sewer bills
assessed by the Authority for the seven months where it is undisputed that due to
leaks in Lehigh Terrace’s internal water conveyance system, substantially more
4
metered water flowed into Lehigh Terrace than waste water discharged from
Lehigh Terrace into the Authority’s sewer system.
Following the filing of the declaratory judgment action, the Authority
filed a lien against GSP’s principal for the amount of the unpaid sewer bills. The
parties filed a joint motion to consolidate the Authority’s lien with GSP’s
declaratory judgment action. In that joint motion, the Authority and GSP
represented to the Court that “GSP’s argument in support of its declaratory
judgment action is the same as its defense against the Authority’s . . . lien—that the
Authority’s sewer rate structure is not reasonable and, therefore, violates
Section [560]7(d)(9) of the [Act].” (R.R. 25a.) It appears that, through their joint
motion to consolidate, the parties dispensed with the formalities of a writ of scire
facias by the Authority, seeking collection of the lien amount, and an affidavit of
defense from GSP, opposing collection in whole or in part.1 The trial court granted
1
Scire facias is a “judicial writ, founded upon some matter of record, such as a judgment
or recognizance and requiring the person against whom it is brought to show cause why the party
bringing it should not have advantage of such record.” The Latin term is used to designate both
the writ and the whole proceeding. Black’s Law Dictionary 1346 (6th ed. 1990). “The object of
the writ of scire facias is ordinarily to ascertain the sum due on a lien of record and to give the
defendant an opportunity to show cause why the plaintiff should not have execution.” Western
Clinton Cty. Mun. Auth. v. Estate of Rosamilia, 826 A.2d 52, 56 (Pa. Cmwlth. 2003) (Estate of
Rosamilia). In Estate of Rosamilia, we outlined the ordinary process, as provided in what is
commonly referred to as the Pennsylvania Municipal Claims and Tax Liens Act (MCTLA), Act
of May 16, 1923, P.L. 207, as amended, 53 P.S. §§ 7101-7505:
In Pennsylvania, municipal claim procedure in general and
scire facias procedure in particular, is purely statutory. Once the
municipality files a claim for services, the claim becomes a lien on
the property. If the owner does not dispute the claim and
assessment, the owner simply pays and removes the lien. To
contest the claim or amount of assessment and to force the issue to
an original hearing, the owner may file and serve a notice upon the
(Footnote continued on next page…)
5
the motion and consolidated the lien action with GSP’s declaratory judgment
action.
Based upon the stipulation of facts, briefs, and oral argument of the
parties, the trial court concluded that (1) the Authority’s New Rate Structure is
facially valid, and (2) GSP failed to demonstrate that the imposition of the New
Rate Structure on GSP during the seven months it experienced water leaks in its
water system constituted an abuse of discretion or an arbitrary establishment of the
rate system. Accordingly, the trial court refused to adjust GSP’s sewer bills during
the seven months in question. (R.R. 124a.) GSP challenges the trial court’s legal
conclusions on appeal.
As noted above, Section 5607(d)(9) of the Act provides authorities
with the power
[t]o fix, alter, charge and collect rates and other charges
in the area serviced by its facilities at reasonable and
uniform rates to be determined exclusively by it for the
purpose of providing for the payment of expenses of the
(continued…)
claimant municipality to issue a writ of scire facias. In the
proceeding commenced by the writ of scire facias, the owner then
files an “affidavit of defense.” In that affidavit the owner may
raise all defenses he or she has to the municipal claim.
Alternatively, the municipality may pursue a writ of scire
facias without waiting for prompting by the owner, which is what
occurred in the present case. In response to the writ, the owner
may file an affidavit of defense raising all defenses.
. . . [T]he existence of a local administrative procedure for
contesting sewer bills does not alter the statewide statutory scheme
for municipal claims and writs of scire facias.
Estate of Rosamilia, 826 A.2d at 56 (citations omitted).
6
authority . . . and operation of its facilities . . . . Any
person questioning the reasonableness or uniformity of a
rate fixed by an authority . . . may bring suit against the
authority.
In Allegheny Ludlum Corporation v. Municipal Authority of Westmoreland County,
659 A.2d 20 (Pa. Cmwlth. 2006), we held that
[i]n deciding whether a rate is reasonable, the trial court’s
scope of review is limited to determining whether there
has been a manifest and flagrant abuse of discretion or an
arbitrary establishment of the rate system . . . . The party
challenging the validity of the rate has the burden of
proving that it is unreasonable . . . . Whether a rate is
unreasonable is dependent upon whether it is reasonably
proportional to the value of the service rendered . . . .
Judicial discretion may not be substituted for
administrative discretion.
Allegheny Ludlum, 659 A.2d at 26 (citations omitted). The challenger bears the
burden of proving that the water and/or sewer rate system is unreasonable.
Ridgway Twp. Mun. Auth. v. Exotic Metals, Inc., 491 A.2d 311, 313 (Pa. Cmwlth.
1984). In addressing rate claims under the Act, courts must consider the value of
the challenged service as well as its use. Id. This Court has held, however, that
there is value in simply being connected to a sewer system. Washington Realty
Co. v. Municipality of Bethel Park, 937 A.2d 1146, 1150 (Pa. Cmwlth. 2007),
appeal denied, 960 A.2d 457 (Pa. 2008). In Scott Township Sewer and Water
Authority v. Ease Simulation, Inc., 2 A.3d 1288 (Pa. Cmwlth. 2010), the Court held
that the fact that the user paid more for service than a neighbor did not make the
rate per se unreasonable. Scott Twp., 2 A.3d at 1291. In Ack v. Carroll Township
Authority, 661 A.2d 514 (Pa. Cmwlth. 1995), appeal denied, 673 A.2d 336
(Pa. 1996), we commented that “rates need not be proportioned with exactness to
[the] use made or the cost to the individual customer, so long as it is reasonably
related to the cost of maintaining the service for all customers, and the customers
7
challenging the rates receive ‘some’ benefit from the system.” Ack, 661 A.2d at
518. The charge should be reasonably proportional to the value of the service,
rather than to the use made of the system. In re Petition of City of Philadelphia,
16 A.2d 32, 35 (Pa. 1940).
With regard to GSP’s facial challenge to the New Rate Structure,
appellate courts have concluded that basing sewer rates upon the amount of
metered water flowing into a property is a valid means of establishing rates for
sewer system services. In re City of Philadelphia, 21 A.2d 876, 878 (Pa. 1941);
Borough of North East v. A Piece of Land Fronting on West Side of South Lake
Street, 159 A.2d 528, 530-31 (Pa. Super. 1960) (en banc). Consistent with this
precedent, we conclude similarly that the Authority’s New Rate Structure is not
invalid on its face and affirm the trial court’s decision in this regard.
We now turn our attention to GSP’s as applied challenge. GSP
contends that the New Rate Structure, as applied to the circumstances established
in the parties’ Stipulation, is unreasonable. Whether and, if so, under what
circumstances, a person can bring a reasonableness challenge under
Section 5607(d)(9) of the Act on an as applied basis appears to be an issue of first
impression for this Court. There is, however, informative precedent from the
Pennsylvania Superior Court on the subject, which predates this Court’s creation
and assumption of appellate jurisdiction over these types of local government
matters.
In Municipal Authority of the Town of Bloomsburg v. Bloomsburg
Cooperative Canners, Inc., 199 A.2d 502 (Pa. Super. 1964) (en banc)
(Bloomsburg), a local cannery challenged the reasonableness and uniformity of
how the municipal authority fixed the sewer rental fee that it would charge the
8
cannery with respect to its industrial operations. Apparently, although not clear
from the Superior Court’s opinion, rather than establish a general rate structure
applicable to all users, the municipal authority established separate rental rates for
each industrial user. In this regard, the local cannery’s challenge in Bloomsburg
had attributes of both a facial and as applied challenge to the municipal authority’s
rate decision. One of the challenged components of the rental rate assessed against
the cannery involved a basic charge, calculated as a percentage, initially 85% and
increased to 95% in 1960, applied to all metered water entering the plan. Another
challenged component was a surcharge of 100%, decreased in 1960 to 65%, of the
basic charge on account of certain industrial material that the authority’s plant had
difficulty disposing of. The common pleas court granted the cannery relief with
respect to its challenge to the base rate and reduced the base rate percentage from
85%, and later 95%, of metered water to 65% of metered water. The municipal
authority appealed.
In evaluating the merits of the municipal authority’s appeal, the
Superior Court first noted that in 1960, the municipal authority increased the basic
rate percentage from 85% to 95% but decreased the surcharge from 100% to 65%.
It then observed:
In the absence of a showing of special circumstances,
such as the fact that a substantial part of the metered
water entering the plant did not reach the sewage system
or that a substantial amount of unmetered water was
entering the system, a percentage of the metered water
consumption as determined by the authority is a proper
basis for sewer rates.
Bloomsburg, 199 A.2d at 504 (emphasis added). Applying this principle to the
evidence in the case, the Superior Court held that the trial court did not abuse its
discretion in reducing the basic charge rate to 65% of metered water:
9
At the time of the increase of the base rate the
authority had in its possession cannery figures showing
that more than 27% of water consumption did not reach
the sewer line. On this evidence, a holding that a basic
charge premised on 95% of water consumption is
unjustified is a proper exercise of the discretion of the
court below. If believed, the testimony would warrant a
reduction to at least 73% of metered water consumption,
and, in view of the evidence that charges to other
industrial patrons were based upon less than 50% of
metered water consumption, we find no abuse of
discretion in its conclusion that the basis on which the
cannery was charged was discriminatory. We, therefore,
cannot say that the court was unwarranted in determining
that 65% of water consumption was a proper figure upon
which to calculate the basic charge. While there was
evidence that the cannery used some unmetered
well water, some of which then entered the sewage
system, there was also evidence that other industrial users
did likewise. There is no indication that the court did not
take this into consideration in concluding that under the
circumstances the proper figure should not be higher than
65%.
Id.
To summarize, in Bloomsburg, the Superior Court held that the
common pleas court was justified in holding unreasonable a basic charge premised
on 95% of water consumption when the municipal authority knew that up to 27%
of all metered water entering the cannery never reached the authority’s sewer lines.
This alone would have warranted a reduction to at least 73% (100% of metered
water less the 27% orphaned water that never reached the authority’s sewer lines).
But there was another reason to reduce the percentage even further—i.e., the 95%
figure was discriminatory based on evidence that showed that the sewer charges of
other industrial users were based on less than 50% of metered water. Based on this
10
additional reason, a further reduction to 65% of metered water consumption was
justified.2
In Borough of North East, the Superior Court addressed a
manufacturing company’s challenge to a borough’s sewer rates based on non-use.
The company purchased water from the borough for the purpose of its industrial
manufacturing operation. The borough, however, only authorized the company to
discharge into the municipality’s sewer system 5% of the water purchased.
Nonetheless, the borough fixed its sewer rental charge for all users at 20% of its
water charge. The company refused to pay, contending that a rate based on 20% of
the amount of water purchased to treat only 5% of the water it purchased was
unreasonable. The municipality commenced collection actions through
enforcement of a municipal lien for the unpaid amount. Siding with the company,
the common pleas court entered a judgment in favor of the municipality, but for
substantially less than the amounts billed. The municipality appealed.
The Superior Court affirmed, rejecting the municipality’s position that
use of the system is an irrelevant factor when evaluating the reasonableness of a
sewer rate:
If the borough’s contentions were correct—that
regardless of the amount of the proven use of the
borough system a consumer must pay 20 per cent of its
total water bill as sewer rental—the charge would be in
the nature of a tax rather than a payment for the service
rendered. Sewer rentals are not taxes.
2
The trial court rejected GSP’s reliance on Bloomsburg because the Superior Court based
its decision to reduce the basis charge, in part, on the ground that it was discriminatory and GSP
does not raise such a challenge in this case. At most, however, this distinction makes that aspect
of the reasoning in Bloomsburg inapplicable to our resolution of GSP’s appeal.
11
Id. at 531-32. Further, the Superior Court indicated that the use of a rate based on
water consumption that disregarded the ultimate use (and disposition) of the water
consumed, would be “arbitrary, improper, inequitable and unlawful.” Id.
Moreover, in rejecting a contention by the Borough that the company’s challenge
to its rate ordinance was untimely, the Superior Court observed that the company
was not attacking the sewer rate ordinance “per se” but rather questioned “the
method of application of the ordinance in the calculation of the annual sewer
charge.” Id. at 533. Although the company may not have timely challenged the
ordinance, its challenges to its annual sewer bills were timely. Id.
We find the Superior Court’s decisions in North East and Bloomsburg
persuasive to the extent that they stand for the proposition that where a municipal
authority adopts a sewer rate structure that is tied to the amount of metered water
flowing into a property, a sewer customer may challenge the amount of its sewer
bills by establishing that a substantial part of the metered water entering the
property did not reach the sewage system. The Authority’s view is that under such
a rating structure, the customer bears all risk that a portion of the metered water
will not flow through to the municipal sewer system. Even though the orphaned
water would have no impact on and present no burden to the capacity of the
municipal sewer system, the Authority contends that the customer must
nevertheless pay for sewer services based upon the amount of metered water. We
disagree and, consistent with the reasoning of the Superior Court in North East and
Bloomsburg, hold that where there is an extraordinary water loss between the point
of metering and the point of discharge into the municipal sewer system that is
substantial in quantity and unplanned or unanticipated, relief from the sewer
charges during those periods of extraordinary water loss would be warranted to
12
ensure that the amount billed and collected is not unreasonable in relation to the
service rendered, crossing the line between a permitted fee and an unauthorized
tax.
Based on the parties’ Stipulation, it is undisputed that during the seven
months at issue, Lehigh Terrace experienced a loss of water between the metering
point and the point of discharge into the Authority’s sewer system. The loss was
extraordinary, because the parties attribute the loss to leaks in Lehigh Terrace’s
internal water distribution system during those months and not some other ordinary
explanation for a spike in metered water usage—e.g., filling a swimming pool or
watering a large lawn.3 The loss of water due to the leaks was substantial in
amount. The Stipulation provides that, on average, Lehigh Terrace consumed
approximately 40,000 gallons of metered water per month—60,000 gallons at its
highest. During the months where Lehigh Terrace experienced leaks in its internal
system, metered flow into Lehigh Terrace ranged from a low of 110,000 gallons to
a high of 580,000 gallons. Taking Lehigh Terrace’s highest month of normal
water usage (60,000 gallons) as the point of comparison, during the months at issue
metered flow into Lehigh Terrace doubled at its lowest point (March 2011) and
increased nearly ten-fold at its highest point (October 2011). There is nothing in
the Stipulation to support any finding that the leaks were planned or anticipated.
Moreover, the parties agree that the significant, unplanned, and unanticipated
increase in metered water flowing into Lehigh Terrace imposed no increased
burden on the Authority’s sewer system. Under these circumstances, relief from
3
We note here, again, that GSP has paid in full the water bills from the Authority during
these seven months and that the only issue before is us the amount to be paid on the sewer bills.
13
the amounts the Authority billed GSP during these months for sewer service is
appropriate.
Given the circumstances of this case, we need not resolve the question
of whether GSP’s “as applied” challenge to the Authority’s New Rate Structure
under Section 5607(d)(9) of the Act by way of a declaratory judgment action was
an appropriate mechanism to decide the parties’ dispute over the amount billed by
the Authority for sewer service. Here, the parties and the trial court consolidated
the Authority’s lien, treating it as a scire facias proceeding. In such a proceeding,
as we observed in Estate of Rosamilia, GSP was entitled to challenge the
reasonableness of the amount billed by the Authority. See also Ridgway Twp.
Mun. Auth., 491 A.2d at 313 (holding trial court did not err in finding minimum
monthly water rate, as applied, was unreasonable when compared to actual use and
reducing amount of bill). The scire facias proceeding affords GSP relief in this
situation.
Accordingly, although the trial court appropriately rejected GSP’s
facial challenge to the Authority’s New Rate Structure, we conclude that the trial
court erred in refusing to adjust GSP’s sewer bills during the seven months in
question. We remand the matter to the trial court to determine the amount that
GSP should pay to the Authority for those seven months.
P. KEVIN BROBSON, Judge
14
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
GSP Management Company, :
Appellant :
:
v. : No. 40 C.D. 2015
:
Duncansville Municipal Authority :
ORDER
AND NOW, this 19th day of October, 2015, the order of the Court of
Common Pleas of Blair County (trial court) is AFFIRMED in part and
REVERSED in part, and the matter is REMANDED to the trial court for further
proceedings consistent with the accompanying opinion.
Jurisdiction relinquished.
P. KEVIN BROBSON, Judge