Case Title: Town of Leesburg v. Giordano

Citation: 

Docket Number: 091455

State: virginia

Court: Virginia Supreme Court

Date: 2010-11-04T00:00:00Z

Document:
PRESENT:  Koontz, Kinser, Lemons, Millette, and Mims, JJ., 
Carrico and Russell, S.JJ. 
 
TOWN OF LEESBURG 
 
 
 
 
 
 
 
 
OPINION BY 
v. 
Record Nos. 091455 
JUSTICE LEROY F. MILLETTE, JR. 
   & 092329 
 
  November 4, 2010 
 
STEVE GIORDANO, JR., ET AL. 
 
FROM THE CIRCUIT COURT OF LOUDOUN COUNTY 
Thomas D. Horne, Judge 
 
In this appeal, we consider whether the circuit court 
erred in ruling that the Town of Leesburg failed to present 
sufficient evidence to meet its burden under the fairly 
debatable standard in a challenge to a town ordinance that 
imposes a 100% surcharge on water and sewer consumption rates 
charged to residents of Loudoun County who reside outside of 
the Town of Leesburg.1 
BACKGROUND 
Seven individuals and three homeowner’s associations (the 
complainants) filed this civil action against the Town of 
Leesburg (the Town), challenging a town ordinance that 
increased the water and sewer rates affecting properties owned 
by the complainants that were located in Loudoun County, but 
outside the Town.  By a series of agreements with Loudoun 
County, the Town was given the exclusive right to provide water 
                                                 
1 We previously considered this case and issued an opinion 
in Town of Leesburg v. Giordano, 276 Va. 318, 667 S.E.2d 552 
and sewer services to properties located in a certain area of 
Loudoun County, but outside the Town.  The water and sewer 
utilities are owned and operated by the Town.  In contrast to 
the circumstances prevailing in many other states, the out-of-
town municipal utility rates, which are at issue in this case, 
are not regulated by the state regulatory authority.  By a 1998 
ordinance, the Town increased the water and sewer consumption 
rates by imposing a 50% surcharge on out-of-town customers.  By 
an ordinance adopted in 2005, effective January of 2006, the 
Town Council again increased the rates by imposing a 100% 
surcharge on water and sewer consumption rates charged to out-
of-town customers.2  The water and sewer services provided to 
in-town and out-of-town customers were the same. 
Prior to enacting the 100% surcharge, the Town hired 
Municipal & Financial Services Group (MFSG) to conduct a study 
regarding the pricing of utility services.  This was done 
pursuant to the Town’s policy to conduct a cost of service 
study for water and sewer rates every five years to assure the 
stability and financial health of the water and sewer utility 
                                                                                                                                                           
(2008).  The issues we considered in that case are not relevant 
to those presented in this appeal. 
2 It is important to note that these surcharges are imposed 
on the consumption rates charged for water and sewer services, 
which is only one charge, among others, imposed upon customers 
for water and sewer services.  Therefore, a 100% surcharge on 
consumption rates does not increase an out-of-town customer’s 
bill for water and sewer services by 100%. 
 
2
fund.  MFSG issued two reports as a result of its study.  In 
its initial October 2005 report, MFSG concluded that the Town’s 
existing user rates for water and sewer did not produce 
sufficient revenue to cover the revenue requirements for fiscal 
year 2006 and beyond.  MFSG recommended that the Town establish 
an “O&M Reserve” and a “Repair, Replacement, and Rehabilitation 
(‘3R’) [R]eserve” for both the water and sewer systems.  These 
reserves would provide funds necessary for “unplanned repairs 
or other significant cash outlays,” and “unexpected major 
repairs and planned replacement or rehabilitation of equipment 
or other major fixed assets.”  To establish these recommended 
reserves and raise sufficient revenue to cover cost, MFSG 
recommended that the Town increase water and sewer rates 
incrementally over the next five years. 
In its November 2005 final report, MFSG recommended that 
the Town adopt a 100% surcharge on water and sewer consumption 
rates charged to out-of-town customers as a means to collect 
sufficient revenue to establish reserves and cover costs.  
However, MFSG stated in its final report:  “It should be noted 
that the surcharge in-Town vs. outside-Town is proposed to 
increase from 50% to 100% based upon policy guidance provided 
by the Town Council.”  In addition to the 100% surcharge on 
out-of-town customers, MFSG recommended that the Town increase 
the water and sewer rates incrementally, similar to its initial 
 
3
recommendation, but in smaller increments, for fiscal years 
2006 through 2010.  In its final report, MFSG concluded that 
the proposed rate increases, including the 100% surcharge, were 
necessary to increase revenue to meet costs and establish the 
two reserve funds.  MFSG’s study was conducted using a “cash 
basis” method to determine the revenue that the Town needed to 
cover the cost of service, meet revenue requirements, and 
establish the recommended reserves.  MFSG also used this method 
to design a rate structure consistent with the Town’s goals and 
objectives. 
The complainants filed a complaint against the Town 
seeking a declaratory judgment that the water rates charged to 
out-of-town customers were “unfair and unreasonable,” in 
violation of Code § 15.2-2143, and that the sewer rates charged 
to out-of-town customers were “impracticable, inequitable, and 
non-uniform,” in violation of Code § 15.2-2119.  The 
complainants also sought injunctive relief directing an 
adjustment of rates for water and sewer service provided to 
out-of-town customers, and a monetary judgment for money paid 
to the Town that was in excess of a reasonable and fair rate 
for water and sewer service. 
At trial, Glenn A. Watkins, an economist specializing in 
public utilities rate-making, testified as the complainants’ 
expert witness.  Watkins stated that his work has focused on 
 
4
regulated utilities rather than unregulated utilities.  
Although Watkins had testified before the State Corporation 
Commission regarding regulated utilities, he had not previously 
testified before a Virginia court in a case involving municipal 
water and sewer rates. 
Watkins testified that the rates charged to out-of-town 
customers were excessive.  In formulating his opinion as to the 
reasonableness of the out-of-town rates, Watkins conducted a 
rate study.  Watkins testified that the purpose of the rate 
study is two-fold:  first, to determine if the rates at issue 
are fair and reasonable; and if not, second, to determine the 
extent to which the rates are excessive.  Watkins further 
testified that a rate study is a three tier process, consisting 
of the following steps:  (1) determining the revenue that is 
needed to operate the utility; (2) allocating the costs among 
the various groups of customers the utility serves, after 
determining if there is any reason to allocate costs 
differently to one group of customers than to another group; 
and (3) establishing the “rate design,” which is the 
development of the actual rates charged.  In performing the 
rate study, Watkins sought to estimate the “maximum rate that 
could be deemed fair and reasonable.” 
Watkins used the “utility” method in conducting his rate 
study.  By using the “utility” method, Watkins considered 
 
5
issues such as “cost of capital, availability fee 
contributions, absence of quality issues, transfers from the 
utility fund to the general fund, system capacity, 
depreciation, owner’s risk, operations and maintenance costs, 
fair return on investment, and a reasonable profit.”  Watkins 
testified that the “utility” method is the “most applicable 
pricing standard for determining out-of-town rates.”  However, 
he also pointed to authority that acknowledges that “revenue 
requirement studies using the cash needs approach are simpler 
than studies using the utility approach.” 
Watkins was questioned concerning the Town’s policy 
decision to impose a 100% surcharge on consumption rates 
charged to out-of-town customers, particularly the relevance of 
the differential in rates charged by other localities.  When 
asked by the complainants’ counsel if there are other ways of 
establishing reasonable rates not based on cost, Watkins 
responded, “Unequivocally no.”  In a competitive world, Watkins 
said, “costs are the standards for prices.”  Because the Town 
is operating as a monopoly, however, Watkins testified that the 
rates must reflect costs to “act as a surrogate for 
competition.”  Watkins also testified that from an operational 
standpoint there is “essentially no difference” in cost to 
serve out-of-town customers versus in-town customers. 
 
6
Based on his preliminary analysis, Watkins testified that 
the water and sewer rates for out-of-town customers that became 
effective on January 1, 2006 were excessive.  Watkins did not 
examine the fairness or unfairness of in-town rates because, in 
his opinion, the fact that there is a differential between in-
town and out-of-town rates is irrelevant.  Watkins testified 
that the rate differential was not of grave concern, but what 
he found excessive was the absolute level of the rate charged 
to out-of-town customers.  According to Watkins, as customers 
of a monopoly service, the most the out-of-town customers 
should pay is the cost base rate. 
After his preliminary analysis, Watkins performed his rate 
study, which utilized audited financial data from fiscal year 
2007.  Watkins’ rate study focused on the water and sewer rates 
that became effective on July 1, 2008.  Watkins opined that 
these rates were not fair and reasonable.  Watkins’ rate study 
concluded that the then existing water rate for out-of-town 
customers was 45.51% excessive, and that the sewer rate for 
out-of-town customers was 28.36% excessive.  Watkins concluded 
that the water and sewer rates for out-of-town customers must 
be reduced by these percentages to be reasonable.  However, 
Watkins conceded that rate making, while an objective process, 
involves a subjective element such that reasonable people may 
differ as to what a reasonable rate is. 
 
7
Myron Olstein, a certified consultant with over 40 years 
of experience in the water and wastewater field, testified as 
an expert witness for the Town.  Olstein testified that he had 
experience with cases involving unregulated, municipally-owned 
utilities throughout the country.  Olstein had also completed 
rate studies for unregulated utilities in Virginia, and 
examined water and sewer rates in various localities in 
Virginia.  Olstein had previously testified as an expert 
witness in cases involving municipal water and sewer rates, and 
as an expert before state regulatory bodies regarding water and 
sewer rates. 
Olstein opined that the water rates for the out-of-town 
customers were “fair and reasonable,” and that the sewer rates 
for the out-of-town customers were “practicable, equitable, and 
uniform.”  In formulating his opinion, Olstein spent at least 
100 hours examining MFSG’s report, reviewing Watkins’ report, 
interviewing a number of persons, and reviewing various 
financial documents from the Town. 
Olstein identified four justifications for his opinions 
and conclusions.  First, Olstein testified that the Town’s 
process of reviewing its water and sewer rates every five 
years, and hiring MFSG to perform a rate study, was sound and 
reasonable.  According to Olstein, five years is the time 
period recommended in the rate manuals, and MFSG has excellent 
 
8
qualifications as a rate consultant.  Olstein testified that 
the purposes of the study were to secure sufficient revenue, 
forecast future demand, and look at the rate-related objectives 
of the local governing body.  Olstein opined that it was 
necessary for the Town to adopt MFSG’s recommendations, 
although he might have recommended a larger reserve.  Olstein 
did not believe that Watkins considered the recommended 
reserves in his calculation. 
Second, Olstein stated that the Town customers are the 
owners of the utility, and as such, bear certain “owner’s 
risks,” which include the risk posed by damage to the water and 
sewer system, a change in regulations affecting the utility, a 
water main break, increases in demand, and an economic 
downturn.  Olstein considered these “owner’s risks” in reaching 
his conclusion that the water and sewer rates charged to out-
of-town customers were fair and reasonable.  Olstein stated 
that incorporating these risks into a rate is ultimately a 
qualitative rather than a quantitative assessment because many 
of the risks involve the probabilities of future events.  
Olstein also said he did not know any Virginia municipality 
that actually quantified such risks.  Additionally, Olstein 
stated that these risks, which are borne by the Town, are 
independent of and in addition to the risk of default the Town 
bears on the bond issued to finance capital improvements to the 
 
9
utility if revenue is insufficient to satisfy principal and 
interest payments.  Olstein opined that given the risks borne 
by the Town as owners of the utility, it is “fair, reasonable, 
and equitable to impose a 100 percent rate differential on the 
out-of-town customers.” 
Third, Olstein disputed Watkins’ testimony that there was 
essentially no cost difference in serving out-of-town versus 
in-town customers.  Olstein performed calculations which 
supported his opinion that the demand for water services for 
the out-of-town customers is more variable than the demand of 
the in-town customers.  Based on these calculations, Olstein 
concluded that it costs more to provide water service to the 
out-of-town customers than the in-town customers. 
Fourth, Olstein testified that it was not uncommon for 
municipal water and sewer utilities to have a rate differential 
for out-of-town customers.  Olstein stated that he could not 
recall a case where he did not look at other localities to 
present a rate comparison.  According to Olstein, rate-setting 
bodies are interested in knowing how their rates compare to the 
rates of their peers, and the differential gives insight into 
how other localities have valued owner’s risks in a qualitative 
way.  Olstein testified that he relied on the range of 
differentials in preparing his report, and that the rate 
 
10
differentials ran as high as 200% in Virginia, and as high as 
300% nationally. 
Regarding the MFSG study, Olstein opined that it was 
reasonable for MFSG to use the “cash needs” method in 
developing its proposed rates.  Olstein stated that the “cash 
needs” method was appropriate because it takes into account the 
payment the Town must make on its outstanding debt used to 
finance the utility.  Olstein further testified that it is 
appropriate to use the “cash needs” method in setting rates for 
municipal utilities because it ensures that the municipality 
has coverage for its debt obligations.  According to Olstein, 
the “utility” method is more appropriate for investor-owned 
utilities, as it provides for a rate of return or profit.  
Further explaining this, Olstein stated: 
One of the things that rates have to do – not the 
only one, but an important one – is to allow the 
utility owner to finance the system.  If you’re in 
the private sector, that means you have to show good 
return on equity.  If you are in the public sector, 
you are going to most likely be using revenue bond 
financing or some variant of that.  And in a revenue 
bond issue, you have to show coverage on a cash 
basis. 
 
Olstein did not conduct an independent rate study, nor was 
he asked to by the Town.  However, Olstein independently 
reviewed MFSG’s rate study and the rates enacted by the Town, 
and based on this review, concluded that the rates were fair, 
reasonable, and equitable. 
 
11
After the parties rested, the circuit court took the 
matter under advisement.  In a letter opinion, the circuit 
court held that the complainants had shown that “the existing 
surcharge for water and sewer for out-of-town residents is 
unfair, unreasonable, and inequitable; and that the surcharge 
for water and sewer service for out-of-town residents [is] 
impracticable, inequitable, non-uniform, and unlawful; and that 
the [complainants] have met their burden of proving the actions 
of the Town[] in enacting the rates unreasonable; and that the 
Town has failed to produce evidence to make the issue fairly 
debatable.”  The court entered a final order in favor of the 
complainants, and in that order, the court enjoined the Town 
from enforcing water and sewer rates for out-of-town customers 
in excess of a 45.51% reduction for water rates, and a 28.36% 
reduction for sewer rates.  The court stayed enforcement of its 
order for ninety days, so that “the Town may consider the rates 
and the Court’s opinion and Order.”  The court did not award 
the complainants monetary damages.  The Town appealed from the 
circuit court’s final order. 
DISCUSSION 
The key issue in this appeal is whether the circuit court 
properly ruled that the Town failed to put forth some evidence 
of reasonableness of the water and sewer rates charged to out-
of-town customers sufficient to make the issue fairly 
 
12
debatable.  We hold that the circuit court erred in ruling that 
the Town failed to meet its burden under the fairly debatable 
standard. 
This Court has held that “setting rates and fees for sewer 
or water services is a nondelegable legislative function.”  
City of South Boston v. Halifax County, 247 Va. 277, 283, 441 
S.E.2d 11, 15 (1994) (quoting County of York v. King’s Villa, 
Inc., 266 Va. 447, 450, 309 S.E.2d 332, 333 (1983)).  Thus, the 
ordinance establishing such rates is afforded a presumption of 
validity.  Eagle Harbor L.L.C. v. Isle of Wight County, 271 Va. 
603, 615, 628 S.E.2d 298, 304 (2006).  This presumption of 
legislative validity is a presumption of reasonableness.  Board 
of Supervisors v. Robertson, 266 Va. 525, 532, 587 S.E.2d 570, 
575 (2003); Board of Supervisors v. McDonald’s Corp., 261 Va. 
583, 590, 544 S.E.2d 334, 338 (2001); Board of Supervisors v. 
Snell Constr. Corp., 214 Va. 655, 659, 202 S.E.2d 889, 893 
(1974).  Legislative action is reasonable if the matter at 
issue is fairly debatable.  Robertson, 266 Va. at 532, 587 
S.E.2d at 575.  An issue is fairly debatable “when the evidence 
offered in support of the opposing views would lead objective 
and reasonable persons to reach different conclusions.”  Board 
of Supervisors v. Williams, 216 Va. 49, 58, 216 S.E.2d 33, 40 
(1975).  Under the fairly debatable standard, “[t]he governing 
body is not required to go forward with evidence sufficient to 
 
13
persuade the fact-finder of reasonableness by a preponderance 
of the evidence.”  Ames v. Town of Painter, 239 Va. 343, 348, 
389 S.E.2d 702, 704 (1990). 
We have stated the following principles for determining 
whether the presumption of reasonableness in a particular case 
should prevail or is overcome: 
Where presumptive reasonableness is challenged by 
probative evidence of unreasonableness, the challenge 
must be met by some evidence of reasonableness.  If 
evidence of reasonableness is sufficient to make the 
question fairly debatable, the [legislative action] 
‘must be sustained’.  If not, the evidence of 
unreasonableness defeats the presumption of 
reasonableness and the [legislative action] cannot be 
sustained. 
 
Robertson, 266 Va. at 533, 587 S.E.2d at 575 (citations 
omitted). 
The General Assembly has expressly granted localities the 
power to provide and operate water and sewer facilities, and 
has placed limitations on the rates that localities’ governing 
bodies may charge for water and sewer services.  Code §§ 15.2-
2119, -2143.  Specifically, Code § 15.2-2143, titled “Water 
supplies and facilities,” provides that localities’ governing 
bodies may only charge “fair and reasonable” fees for water 
services.  Similarly, Code § 15.2-2119, titled “Fees and 
charges for sewer services,” provides that localities’ 
governing bodies may only charge fees “as the governing body 
 
14
deems practicable[,] equitable, [and] uniform” for sewer 
services. 
On appeal, the Town argues that it offered sufficient 
evidence to prove that the issue of reasonableness of the rates 
is fairly debatable.  The Town asserts that the fairly 
debatable standard imposes a low burden on the Town, which it 
met with sufficient probative evidence of the rates’ 
reasonableness.  Specifically, the Town contends that it met 
this low burden by presenting expert testimony from Olstein 
that the water rate for out-of-town customers was fair and 
reasonable, and that the sewer rate for out-of-town customers 
was practicable, equitable, and uniform. 
The Town also asserts that the circuit court improperly 
applied the fairly debatable standard.  According to the Town, 
the circuit court treated this case as a battle of the experts 
by improperly weighing the opinions, reasoning, and 
methodologies utilized by the opposing experts.  In doing so, 
the Town contends that the circuit court failed to give effect 
to the Town’s evidence that supported the reasonableness of the 
rates. 
The complainants respond that the circuit court properly 
applied the fairly debatable standard and correctly ruled that 
the Town failed to present sufficient evidence to meet its 
burden under that standard.  The complainants focus their 
 
15
argument on assailing Olstein’s testimony, asserting that his 
testimony was not sufficient to make the issue of the rates’ 
reasonableness fairly debatable.  Continuing with this 
argument, the complainants note that Olstein did not conduct an 
independent rate study to support his opinion or provide any 
nexus between the rates he deemed reasonable and the costs and 
risks borne by the Town as owner of the utility.  The 
complainants conclude that the circuit court properly ruled 
that Olstein’s testimony was not sufficient to satisfy the 
Town’s burden under the fairly debatable standard. 
In Board of Supervisors v. Stickley, 263 Va. 1, 556 S.E.2d 
748 (2002), this Court addressed a Board of Supervisors’ denial 
of an application by a landowner, Stickley, for a special use 
permit to raise and release game birds on his property.  The 
Board denied Stickley’s application, citing concerns from 
poultry companies about the possibility of wild game birds 
carrying disease into local poultry farms in the area.  Id. at 
5-6, 556 S.E.2d at 751.  In a proceeding in the circuit court 
filed by Stickley to declare the Board’s action unreasonable, 
arbitrary, and capricious, both parties presented expert 
witnesses who testified about the risk of disease posed to the 
local poultry industry by the wild birds.  Id. at 7-8, 556 
S.E.2d at 752.  After summarizing the various expert witnesses’ 
testimony regarding this issue, this Court stated: 
 
16
The question in this case is not who presented 
the greatest number of expert witnesses or even who 
won the battle of the experts.  Rather, the question 
is whether there is any evidence in the record 
sufficiently probative to make a fairly debatable 
issue of the Board’s decision to deny Dr. Stickley a 
special use permit. 
 
Id. at 11, 556 S.E.2d at 754. 
As this Court stated in Stickley, the issue in this case 
is not who won the battle of the experts.  Accordingly, this 
Court need not critically examine and contrast the 
methodologies, processes of reasoning, and calculation methods 
used by the opposing experts in formulating their opinions.  
Rather, the Court need only examine whether any evidence in the 
record is sufficiently probative to make a fairly debatable 
issue of the fairness and reasonableness of the water rate 
charged to out-of-town customers, and the practicability, 
equitableness, and uniformity of the sewer rate charged to out-
of-town customers.  Olstein’s testimony that the water rate 
charged to out-of-town customers is fair and reasonable, and 
that the sewer rate charged to out-of-town customers is 
practicable, equitable, and uniform, supported by his 
justifications for his opinion, is sufficient to make the issue 
fairly debatable.3  Accordingly, we will reverse the judgment of 
                                                 
3 Having reached this conclusion, the Court need not 
consider the Town’s additional assignments of error. 
Additionally, we find no merit in the complainants’ assignments 
of cross-error. 
 
17
the circuit court and enter final judgment in favor of the 
Town. 
Reversed and final judgment. 
SENIOR JUSTICE RUSSELL, with whom JUSTICE MIMS joins, 
dissenting. 
 
As the majority opinion points out, the Town has had, for 
many years, the exclusive right to furnish water and sewer 
services to an area of Loudoun County outside the Town.  The 
Town’s out-of-town customers, however, have no voting rights in 
the Town and are not constituents of the Town Council members 
who set their utility rates.  As to those customers, the Town 
operates an unregulated monopoly.  As the majority opinion also 
points out, many other states have subjected such municipal 
monopolies to regulation by the state’s regulatory authority, 
but our General Assembly has not seen fit to subject them to 
regulation by the State Corporation Commission.  This situation 
operates to the disadvantage of a large number of Virginians in 
addition to the complainants in the present case.  Five amici 
curiae1 state on brief that more than 80 Virginia cities and 
towns, located in more than 50 counties, serve out-of-town 
customers and charge them higher rates than their own 
constituents.  Approximately 140,000 residents of Fairfax 
 
18
County alone are dependent on water supplied by cities and 
towns in which they do not reside and in which they cannot 
vote. 
In this appeal, Leesburg’s out-of-town customers, the 
prevailing parties in the circuit court, assign cross-error to 
the circuit court’s application of the “fairly debatable” 
standard in these circumstances.  We granted them an appeal on 
that assignment of cross-error, but the majority opinion does 
not mention it.  Rather, the majority opinion begins its 
discussion with the holding:  “The key issue in this appeal is 
whether the circuit court properly ruled that the Town failed 
to put forth some evidence of reasonableness . . . sufficient 
to make the issue fairly debatable.”  That holding ignores the 
fundamental question, fairly presented in this appeal, whether 
the “fairly debatable” standard properly applies at all. 
We consistently adhere to the “fairly debatable” standard 
because of the constitutional principle of separation of 
powers.  It is not the proper function of the judicial branch 
of government to second-guess legislative judgments made by the 
duly-elected representatives of the people.  Neither the wisdom 
of legislative enactments nor the motivations of those enacting 
them are subject to judicial review.  The majority opinion 
                                                                                                                                                           
1 Virginia Association of Counties, Virginia Water & Waste 
Authorities Association, County of Fairfax, County of Loudoun, 
 
19
correctly states those principles and cites a number of our 
decisions adhering to them.  Each of those decisions, however, 
deals with the ordinary situation in which a legislative body 
has made a decision operating upon its own constituency and 
affecting the territory it was elected to govern.  The 
rationale underlying the “fairly debatable” standard is that 
the decision affects those who elected the legislators, 
empowering those elected to make decisions for them.  If 
displeased by those decisions, the voters have a ready remedy 
at the next election. 
In the case of legislative acts affecting persons and 
territory outside the jurisdiction in which the legislative 
body has the authority to govern, the rationale supporting the 
“fairly debatable” standard is non-existent.  A town council’s 
decision setting utility rates outside the town should be 
accorded no more deference than the decision of the board of 
directors of a private business operated for profit.2 
Because the Town, as to its out-of-town customers, is 
shielded from the competitive forces affecting private business 
                                                                                                                                                           
and Fairfax County Water Authority. 
2 Members of the Town Council may in fact have had the best 
of intentions, but they had an obvious incentive, in setting 
disparate rates, to please their constituents at the expense of 
those who could not vote.  The existence of such an incentive 
demonstrates the unsoundness of legislative deference in these 
circumstances. 
 
 
20
and operates as an unregulated monopoly, the General Assembly 
has provided some protection for the out-of-town customers.  
That protection consists solely of the requirement of Code 
§ 15.2-2143 that water rates be “fair and reasonable” and the 
requirement of Code § 15.2-2119 that sewer rates be 
“practicable[,] equitable [and] uniform.”  The application of 
those standards is committed to the courts.  In applying them, 
in the absence of any reason for deference to legislative 
decisions, the courts should be guided by the rules applicable 
to any civil litigation between private parties.  The 
complaining parties should bear the initial burden of showing 
that the rates violate the statutory standards.  The burden 
should then shift to the rate-making body to rebut that 
showing.  The fact-finder should then decide the issue by the 
preponderance of the evidence.  
If the “fairly debatable” standard is applied to such 
cases, the out-of-town customers are left to the mercies of an 
unregulated monopoly against which they have no redress either 
at the polls or in the courts.  If litigation such as this is 
subjected to the “fairly debatable” standard, the rate-making 
body, to prevail, needs only to find an expert witness who will 
opine that the rate-maker’s pre-determined decision was “fair 
and reasonable” with respect to water rates, or "practicable[,] 
equitable [and] uniform" with respect to sewer rates.  That 
 
21
will end the case, no matter how persuasive the complainants’ 
evidence may have been.3  That seems to me to lead inevitably to 
an unjust result, defeating the protections the General 
Assembly sought to provide.  Nevertheless, it is precisely what 
will have occurred here as a result of the majority opinion.  
For that reason, I respectfully dissent. 
I would affirm the decision of the circuit court.  That 
court, after carefully reviewing the evidence, found the Town’s 
evidence insufficient to overcome the complainants’ evidence of 
unreasonableness even applying the very low “fairly debatable” 
standard.  A fortiori, the Town’s evidence would have failed to 
meet the more stringent standard of proof by a preponderance of 
the evidence.  See, e.g., Ames v. Town of Painter, 239 Va. 343, 
348, 389 S.E.2d 702, 704 (1990) (distinguishing "preponderance 
of the evidence" and "fairly debatable" standards).  Because a 
pure question of law is presented here, and no further evidence 
                                                 
3 The complainants concede that the Town is entitled to 
collect a surcharge in some amount to cover the Town's "owner's 
risk."  Their expert witness calculated the amount of such an 
added charge, which the circuit court found fair and 
reasonable.  The Town's expert, however, made no such 
calculation but contented himself with merely concluding that 
the Town's previously adopted "policy decision" to impose a 
100% surcharge on out-of-town customers was reasonable.  His 
only justification for that conclusion was that surcharges 
imposed by other jurisdictions are worse.  He said that they 
ran as high as 200% in Virginia and 300% nationally.  Pressed, 
he conceded that 500% might cross the boundary of 
reasonableness.  That is the evidence the majority opinion 
found sufficient to meet the "fairly debatable" standard. 
 
22
or fact-finding is needed, remand is unnecessary and final 
judgment should be entered here.  See Perry v. Commonwealth, 
280 Va. ___, ___ S.E.2d ___ (2010) (this day decided). 
Our people are not noted for their docility in the face of 
monetary exactions imposed upon them by a government in which 
they have no voice.  In the late eighteenth century, a similar 
grievance led to considerable unpleasantness in this country, 
leading to a fundamental change of government.  That grievance 
also arose from the fact that those aggrieved had no redress 
either at the polls or in the courts. 
 
 
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