Title: Eagle Harbor v. Isle of Wight County

State: virginia

Issuer: Virginia Supreme Court

Document:

PRESENT:  All the Justices 
 
EAGLE HARBOR, L.L.C., ET AL. 
OPINION BY 
v. 
Record No. 051543 
 
 
 
  JUSTICE G. STEVEN AGEE 
April 21, 2006 
ISLE OF WIGHT COUNTY 
 
FROM THE CIRCUIT COURT OF ISLE OF WIGHT COUNTY 
E. Everett Bagnell, Judge 
 
Eagle Harbor, L.L.C. and Founders Pointe, L.L.C. ("the 
Developers")1 appeal from the judgment of the Circuit Court of 
Isle of Wight County which sustained the demurrer of the County 
of Isle of Wight ("the County") to a bill for declaratory and 
other relief filed by the Developers, as well as an amended 
bill, and dismissed the case with prejudice.  For the reasons 
set forth below, we will affirm the judgment of the trial court. 
I. 
BACKGROUND AND PROCEEDINGS BELOW 
The Developers own several hundred acres of land in the 
County, part of which is zoned "for development of a mixed-use 
community" including residential units, and the remainder is 
"zoned for single-family residential . . . units."  Combined, 
the Developers have approximately 1,850 residential unit sites, 
                     
1 Eagle Harbor owns approximately 567 acres, zoned for up to 
1,510 residential units, located on Route 17 in Isle of Wight 
County. Founders Pointe owns approximately 325 acres in the 
County, which are zoned for up to 340 single-family residential 
units.  The Founders Pointe development was commenced by the 
principals of Eagle Harbor after Eagle Harbor initially 
contested the sewer and water connection fees at issue in this 
case.  Eagle Harbor and Founders Pointe will be referenced 
together as "the Developers" throughout this opinion. 
 
 
2
all of which are located in the County's Northern Development 
Service District ("NDSD").  The County has three separate 
utility service districts: the NDSD, the Windsor Service 
District ("WSD"), and the Southern Development Service District 
("SDSD"). 
In 1996, the County's Board of Supervisors ("the Board") 
enacted ordinances ("the 1996 Ordinances") setting water and 
sewer connection fees for each residential unit of $3,000 to 
connect to the County's water system and $3,000 to connect to 
the County's sewer system.  The 1996 Ordinances also provided 
that "when application for service is made for single family 
houses in a system totally installed by the developer and 
conveyed to the County at no cost, the connection fees [would] 
be reduced by sixty percent (60%)" ("the developer credit").  In 
2000, the Board repealed the developer credit. 
In 1997, the County issued 25-year General Obligation Water 
and Sewer Bonds in the amount of $14,250,000 in order to finance 
improvements to its water and sewer system.  Specifically, 45% 
of the bond proceeds financed improvements to the County's water 
system in the NDSD and the remainder went to improvements to the 
County's sewer system in the other two service districts.  There 
were no sewer improvements in the NDSD and no water improvements 
undertaken in the WSD or the SDSD from the proceeds of the bond 
issue. 
 
 
3
In April 2001 the Board commissioned an "internal study of 
existing water and sewer rates" and utility connection fees.  
The results of the study ("the County Report") noted that under 
the 1996 Ordinances, including the repeal of the developer 
credit, payments on "[t]he average yearly sewer debt of $554,246 
would require an average of 185 new sewer connections per year," 
and "[t]he average yearly water debt of $461,063 would require 
an average of 154 new water connections per year."  The County 
Report also found that only "100 new water connections and 90 
new sewer connections are projected next fiscal year," and 
concluded that "[b]ased on [the] assumption . . . that there 
would be the same number of connections per year in the next 25 
years, the existing water and sewer connection fees would need 
to be increased to $4,610 and $6,158 respectively to totally 
support the existing debt."  In September 2001, the Board passed 
new ordinances increasing the residential water and sewer 
connection fees to $4,000 each.  ("the 2001 Ordinances").  These 
fees applied to any new residential connection to either system 
anywhere in the County. 
By letter to the County dated August 14, 2003, Eagle Harbor 
contested the legality of the 2001 Ordinances.  Specifically, 
Eagle Harbor contended that the connection fees were not "fair 
and reasonable" as required by statute because there was "no 
reasonable correlation" between the benefits derived from the 
 
 
4
water and sewer improvement projects funded by the bond proceeds 
and the fees charged. The letter noted that any new customer 
connecting to the County systems during the life of the bond 
issue would be required to pay the fees regardless of whether 
that customer derived benefit from the improvement projects 
financed by the bond proceeds.  Further, Eagle Harbor pointed 
out that though "the useful life of the improvements . . . 
materially exceeds the term of the [b]onds, customers benefiting 
from those [p]rojects after the [b]onds have been retired bear 
none of the capital costs associated with them."  Eagle Harbor 
suggested alternative methods of computing the fees that would 
require connecting customers to pay fees based on the benefit 
received from the bond issue projects in their utility service 
district.  Eagle Harbor contended that it should pay only a 
nominal sewer connection fee as it had "paid all the costs of 
extending sewer" to its property. 
By letter of November 20, 2003, Eagle Harbor made a demand 
pursuant to Code § 15.2-1248, that the County pay $3,848,500, 
"representing the sum by which land sales within Eagle Harbor, 
LLC have been impacted by the challenged fees."2  Founders Pointe 
made a separate demand on September 10, 2004, for $569,500 in 
                     
2 In later demand letters to the County, Eagle Harbor 
increased its demand as more of its residential units for which 
it had paid the increased utility fees were sold.  By letter of 
 
 
5
damages for the "imposition of improper and excessive water and 
sewer connection fees" upon the same basis previously set forth 
by Eagle Harbor. 
Receiving no response from the County, the Developers filed 
a bill of complaint for declaratory and other relief on 
September 17, 2004, seeking a determination that the connection 
fees under the 2001 Ordinances were "unreasonable and contrary 
to law."  They also sought compensation for the difference 
between the connection fees they paid under the 2001 Ordinances 
and the level of fees the Developers contended were reasonable 
and lawful.  The Developers did not allege in this pleading, or 
in the later filed amended bill for declaratory and other 
relief, that the 2001 Ordinances were actually an improper 
revenue raising device amounting to an illegal tax, impact fee, 
or special assessment so as to be void. 
In the alternative, the Developers asked the trial court to 
enter "an injunction requiring the County to refund all water 
and sewer connection fees illegally charged since September 20, 
2001."  The Developers appended to their bill of complaint a 
copy of the County Report and a study conducted by their own 
expert, Robert C. Dolecki, P.E., evaluating the County's 
methodology in setting connection fees ("the Dolecki Report"). 
                                                                  
September 13, 2004, Eagle Harbor alleged its accrued damages had 
increased to $6,284,600. 
 
 
6
The County filed a demurrer and a hearing was held by the 
trial court.  By letter opinion dated March 22, 2005, the trial 
court found that a "presumption of legislative validity" and 
therefore, a "presumption of reasonableness" attached to the 
2001 Ordinances.   The trial court noted that the standard of 
review for such an ordinance was whether it was "fairly 
debatable."  The trial court then opined that under the standard 
of review "only irrational, arbitrary or capricious action falls 
outside the 'fairly debatable' standard."  The trial court then 
concluded that the Developers did not "state[] facts, which if 
considered true, would establish unreasonableness."  
Consequently, the trial court ruled the 2001 Ordinances met the 
"fairly debatable" standard and were thus valid. 
As to the Developers' claim under Code § 15.2-2119, the 
trial court opined that this statute authorizes localities to 
collect fees from property owners connecting to County utility 
systems, and the Developers' contention that the 2001 Ordinances 
were "contrary to law" was without merit.  The trial court's 
opinion did not specifically address the requirement under Code 
§ 15.2-2119 that sewer and water connection fees must be "fair 
and reasonable."  The trial court concluded that it would 
sustain the County's demurrer and dismiss the Developers' bill 
of complaint. 
 
 
7
On April 1, 2005, the Developers moved the trial court for 
leave to file an amended bill of complaint for declaratory 
judgment and attached their proposed amended bill to the motion.  
The facts alleged in the amended bill were essentially the same 
as in the prior pleading.  The Developers alleged they were 
required as a condition of zoning to connect to County 
utilities, and they consequently paid over $1,700,000 to extend 
public water and sewer lines to their developments, which lines 
have been or will be turned over to the County without charge. 
The 2001 Ordinances, along with the repeal of the developer 
credit, increased the Developers' connection fees per lot from 
$2,400 to $8,000, and "the imposition of excessive connection 
fees . . . diminished the value of the [Developers' 
properties]".  While the bond issue financed the NDSD Water 
Project, the Windsor Sewer Project, the Windsor Boulevard 
Extension, and the SDSD Sewer Project, approximately 90% of the 
proceeds were used to extend service to specific areas where 
County water or sewer service did not previously reach. 
The Developers admitted they derived a limited benefit from 
the NDSD Water Project but contended they received no benefit in 
return for the sewer connection fee charged by the County.  The 
Developers further alleged that under the 2001 Ordinances, the 
County did not assess capital costs of the bond issue against 
those customers benefiting from such projects in proportion to 
 
 
8
benefits derived, nor did it treat the improvements as 
enhancements to the system generally and recover the capital 
costs of the bond issue through regular monthly charges for 
water and sewer service. 
By Order of April 25, 2005, the trial court granted the 
motion for leave to amend but found that the additional facts 
alleged in the amended bill had been previously argued by the 
parties and considered by the court.3  The trial court sustained 
the demurrer to the bill of complaint and the amended bill of 
complaint and dismissed the Developers' suit with prejudice.  We 
granted the Developers this appeal. 
II. STANDARD OF REVIEW 
"A demurrer tests the legal sufficiency of facts alleged in 
pleadings, not the strength of proof."  Glazebrook v. Board of 
Supervisors of Spotsylvania County, 266 Va. 550, 554, 587 S.E.2d 
589, 591 (2003) (citations omitted).  To survive a challenge by 
demurrer, a pleading must be made with "sufficient definiteness 
to enable the court to find the existence of a legal basis for 
its judgment." Moore v. Jefferson Hospital, Inc., 208 Va. 438, 
                     
3 We agree with the trial court that the amended bill of 
complaint alleges no "additional facts" which were not 
"previously argued by the parties [and] considered by the [trial 
court]."  As the initial and amended bills of complaint were 
essentially the same and disposition was made by the same order 
of April 25, 2005, we will hereafter refer to the Developers' 
pleading as both the bill of complaint and the amended bill of 
complaint. 
 
 
9
440, 158 S.E.2d 124, 126 (1967) (internal quotation marks and 
citations omitted). 
In reviewing a trial court's order sustaining a demurrer, 
"we are required to address the same issue that the trial court 
addressed, namely whether the amended [bill of complaint] 
alleged sufficient facts to constitute a foundation in law for 
the judgment sought."  Hubbard v. Dresser, Inc., 271 Va. 117, 
119, 624 S.E.2d 1, 2 (2006).  We undertake this review de novo, 
accepting "as true all facts properly pleaded in the bill of 
complaint and all reasonable and fair inferences that may be 
drawn from those facts."  Glazebrook, 266 Va. at 554, 587 S.E.2d 
at 591 (citations omitted). 
III. ANALYSIS 
The Developers argue in three assignments of error that the 
trial court erred in sustaining the County's demurrer. They 
initially argue the trial court erred "by holding that the 
validity of the fee structure [was] 'fairly debatable' as a 
matter of law," and instead should have applied the "reasonable 
correlation" test discussed in McMahon v. City of Virginia 
Beach, 221 Va. 102, 267 S.E.2d 130 (1980).  They also contend 
that it was error to find the 2001 Ordinances "fairly debatable" 
and thus "reasonable" as a matter of law in spite of the 
Developers' factual allegations to the contrary.  As such, the 
Developers argue the trial court was required to take evidence 
 
 
10
on the issue and could not sustain the County's demurrer on the 
record before it.  Finally, the Developers contend that the 
trial court erred in its consideration of their argument under 
Code § 15.2-2119 because it disregarded the statutory 
requirement that connection fees be "fair and reasonable." 
The County defends the standard applied in the trial court, 
arguing that "[i]t is the Board, not [the Developers], that 
determines an appropriate methodology for calculating connection 
fees."  Additionally, the County contends that the fees set by 
the 2001 Ordinances were "fair and reasonable" as required by 
Code § 15.2-2119 because the fees "were determined by the County 
on an objective basis," and the "anticipated revenue from those 
fees is not sufficient to cover the County's utility debt 
service."  The County also argues there was sufficient evidence 
placed before the trial court by the Developers to permit a 
ruling as a matter of law on whether the 2001 Ordinances met the 
"fairly debatable" standard and therefore sustaining the 
demurrer was appropriate. 
A. REASONABLE CORRELATION TEST 
The Developers' first assignment of error invites this 
Court to hold that utility connection fees must meet an 
independent test of validity in that such fees must bear a 
reasonable correlation to the benefits derived by the property 
 
 
11
owner.  The Developers contend we established such a test for 
utility connection fees in McMahon.  We disagree. 
In McMahon, we determined that a locality may "require 
landowners who possess adequate supplies of potable water 
provided by their privately owned wells to connect with the 
municipal water supply" for a fee.  221 Va. at 103, 267 S.E.2d 
at 131.  We also affirmed the finding of the trial court "that 
because the charges imposed by the ordinance would not exceed 
the actual cost to the City of installing the waterlines in the 
streets in front of the landowners' residences, a reasonable 
correlation arose between the benefit conferred and the cost 
exacted."  Id. at 107, 267 Va. at 134. 
However, the issue in McMahon, and the other cases cited by 
the Developers, Tidewater Association of Homebuilders, Inc. v. 
City of Virginia Beach, 241 Va. 114, 400 S.E.2d 523 (1991), and 
Mountain View Limited Partnership v. City of Clifton Forge, 256 
Va. 304, 504 S.E.2d 371 (1998), was whether the ordinance in 
question was illegal because it was "an impermissible revenue-
producing device" in the form of an invalid special assessment 
or the like.  The Developers have neither alleged nor argued 
that the 2001 Ordinances are of that nature. 
Our decision in McMahon does not set out a separate 
"reasonable correlation" test for utility connection fees.  
Rather, the examination of a municipal fee alleged to be an 
 
 
12
"impermissible revenue-producing device" focuses on whether "a 
reasonable correlation arose between the benefit conferred and 
the cost exacted" to clarify if the levy in question "are fees 
rather than special assessments."  221 Va. at 107-08, 267 S.E.2d 
at 133-34.  The landowners in McMahon argued that the ordinance 
requiring the mandatory water connection was not "a valid health 
measure" but rather "an impermissible revenue-producing device."  
Id. at 107, 267 S.E.2d at 133.  We determined that the ordinance 
was a public health measure and as such, was a "valid exercise 
of the City's police power."  Id. at 107, 267 S.E.2d at 134.  
Our observation that there existed "a reasonable correlation 
. . . between the benefit conferred and the cost exacted" served 
only to "negate[] the landowners' contention that the ordinance 
was adopted solely as a revenue measure."  Id. at 107-08, 267 
S.E.2d at 134. 
Our subsequent decisions applying McMahon's reasonable 
correlation observation were in similar circumstances.4  In 
                     
4 The Developers urge that our decision in Estes Funeral 
Home v. Adkins, 266 Va. 297, 586 S.E.2d 162 (2003), supports 
their position that utility connection fees imposed by a 
locality are unlawful if there is "no correlation between the 
rates charged . . . and the cost . . . of providing [the 
service]."  However, the claim in Estes Funeral Home was based 
on a constitutional argument that the Equal Protection clause 
prohibited assessing disparate trash collection fees among 
members of the same customer class.  Id. at 302-03, 586 S.E.2d 
at 165.  We agreed that a locality could not charge different 
fees to similarly situated customers.  Id. at 306, 586 S.E.2d at 
167.  No such claim is made in the case at bar, which involves 
 
 
13
Tidewater Association of Homebuilders, a group of homebuilders 
challenged a city ordinance imposing a Water Resource Recovery 
Fee to recover the capital costs of building a water pipeline.  
241 Va. at 117, 400 S.E.2d at 525.  The homebuilders alleged 
"the City had no legal authority to levy and collect the fee, 
that the fee was an unauthorized tax, and that the timing and 
amount of the fee were arbitrary and capricious exercises of the 
City's authority."  Id.  Specifically, the homebuilders 
contended that the City acted without authority because the fee 
was an "impact fee" as defined by former Code § 15.1-498.2,5 and 
thus should have been established by statute in order to be 
valid.  Id. at 119-20, 400 S.E.2d at 526.  Further, they alleged 
that the fee was an impermissible tax because there is "no 
particularized benefit to those who pay the fee."  Id. at 120, 
400 S.E.2d at 527. 
Holding that "the ability to finance the cost of providing 
[a water system] is inherent in the authority to provide it," 
this Court determined that the fee was a form of proprietary fee 
for a particular service.  Id. at 119-20, 400 S.E.2d at 526-27.  
"[W]ithout the [pipeline], new developments or connections to 
                                                                  
the mirror opposite of the circumstances reviewed in Estes 
Funeral Home, because the County here is charging uniform fees 
among members of the same customer class.  Estes Funeral Home 
therefore has no application in the case at bar. 
5 This statute is now codified as Code § 15.2-2319. 
 
 
 
14
the existing water system would not have been possible."  Id. at 
121, 400 S.E.2d at 527.  We held that "those who are paying the 
fee for the new connections . . . are receiving an immediate 
benefit – access to the present City water system which would be 
unavailable without the project."  Id.  Citing McMahon, we noted 
that because "there was a reasonable correlation between the 
benefits of the service provided and burdens of the fee paid, 
. . . the fee was valid and not solely a revenue measure or 
special assessment."  Id. 
In Mountain View, apartment complex owners contested the 
validity of an ordinance nearly doubling refuse collection and 
disposal fees.  256 Va. at 307, 504 S.E.2d at 373.  
Specifically, the owners contended that under Tidewater and 
McMahon, "the fee imposed by the Ordinance was an impermissible 
tax, because the fee exceeded the actual cost of providing the 
service and there was no reasonable correlation between the 
benefit conferred and the burden imposed."  Id. at 310, 504 
S.E.2d at 374-75.  At trial, the City of Clifton Forge presented 
evidence that the landfill used at the time the higher fees were 
enacted was set to close and that anticipated expenditures 
associated with that closing merited the fee increase.  Id. at 
308-09, 504 S.E.2d at 374. 
In explaining our prior holdings in McMahon and Tidewater 
we observed that: "[W]e merely concluded that since the costs of 
 
 
15
the planned services exceeded the fees imposed for those 
services, there was no merit to the contention that either of 
the ordinances constituted an impermissible tax."  Id. at 311, 
504 S.E.2d at 375.  Based upon this precedent, we determined the 
challenged ordinance in Mountain View  
is not an invalid revenue-generating device solely 
because the fee set by the ordinance generates a 
surplus. The relevant inquiry, as set forth in McMahon 
and reaffirmed in Tidewater, is whether there is a 
reasonable correlation between the benefit conferred 
and the cost exacted by the ordinance. 
 
Id. at 312, 504 S.E.2d at 376.  
 
Our decision in McMahon and its progeny establish that the 
judicial inquiry as to a reasonable correlation relating to a 
municipal fee is directed to whether that fee is a bona fide 
fee-for-service or an "invalid revenue-generating device."  
Mountain View, 256 Va. at 312, 504 S.E.2d at 376.  The 
reasonable correlation test is not an independent determination 
of reasonableness in the context of the "fairly debatable" 
standard applied to the legislative enactment of a local 
governing body.  Instead, it is determinative of whether a fee 
enacted by a locality is a permissible exercise of its police 
power as opposed to an impermissible revenue-producing device in 
the form of a special assessment, impact fee or the like. 
In the case at bar, the Developers neither pled nor argued 
that the 2001 Ordinances enacted fees that constituted an 
 
 
16
impermissible tax as a special assessment, impact fee, or the 
like.  Neither do the Developers challenge the County's 
authority to enact and levy the connection fees as a valid 
exercise of the County's police powers.  Instead, they contend 
only that the fees are "unreasonable and contrary to law" as not 
reasonably related to the benefit conferred on the Developers.  
Therefore the "reasonable correlation" test has no application 
to the 2001 Ordinances, and the trial court did not err by 
refusing to apply such a review. 
B. CODE § 15.2-2119 
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); County of York v. King's Villa, Inc., 226 Va. 
447, 450, 309 S.E.2d 332, 333 (1983); Armstrong v. County of 
Henrico, 212 Va. 66, 77, 182 S.E.2d 35, 43 (1971).  Thus, as 
with any other legislative function, the action of the Board in 
setting the connection fees is accorded a presumption of 
validity.  Board of Supervisors v. Robertson, 266 Va. 525, 532, 
587 S.E.2d 570, 575 (2003). 
The trial court recited the "reasonableness" standard which 
governs the challenge to an ordinance a local governing body 
enacts in its legislative capacity: 
 
 
17
The presumption of legislative validity that 
attached to the Board's [legislation] is a presumption 
of reasonableness. Legislative action is reasonable if 
the matter in issue is fairly debatable. 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 
. . . . 
We have enunciated the following principles for 
determining whether the presumption of reasonableness 
in a given case should prevail or has been 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. 
 
Id. at 532-33, 587 S.E.2d at 575 (citations and internal 
quotation marks omitted).6 
Code § 15.2-2119 requires that "[w]ater and sewer 
connection fees established by any locality shall be fair and 
reasonable."  The General Assembly has used this language 
throughout the Code to describe the obligation of authorities  
                     
6 The trial court cited Marsh v. City of Richmond, 234 Va. 
4, 10, 360 S.E.2d 163, 166-67 (1987) and City of Richmond v. 
Randall, 215 Va. 506, 511, 211 S.E.2d 56, 60 (1975), for the 
proposition that "only irrational, arbitrary or capricious 
action falls outside the 'fairly debatable' standard."  However, 
in Marsh we did not mention the "fairly debatable" standard, and 
our decision in Randall echoes the reasoning of Robertson, 
requiring a weighing of the evidence to determine reasonableness 
and thus whether the contested issue is "fairly debatable."  
Randall, 215 Va. at 511-12, 211 S.E.2d at 60.  Thus, the trial 
court erred in defining "fairly debatable" by focusing on the 
"irrational, arbitrary or capricious" standard. 
 
 
18
and localities charging connection fees and service fees for 
water, sewer, and wireless communications to charge only fair 
and reasonable fees.  Code §§ 15.2-2143, -5114(10), -5136(D),   
-5137(E), -5431.11(9), -5431.25(D); Code §§ 21-118.4(e), -118.5.  
The legislature, however, declined in each instance to define 
"fair and reasonable." 
The Developers argue that because Code § 15.2-2119 was 
amended in 1997, adding the "fair and reasonable" language to 
the statute, the General Assembly created a new standard of 
review.  They contend a court must independently determine 
whether a local governing body's fee enactment is "fair and 
reasonable," not simply whether the issue of a "fair and 
reasonable" connection fee is "fairly debatable."  We disagree 
with the Developers. 
 
Prior to its amendment, Code § 15.2-21197 did not separately 
address the right of a locality to assess connection fees.  The 
1997 amendments, however, added the pertinent language to the 
statute that: "Water and sewer connection fees established by 
any locality shall be fair and reasonable." (Emphasis added).8  
These amendments did not address or change the applicable 
                     
7 Code § 15.1-321 became Code § 15.2-2119 in December of 
1997 pursuant to a separate enactment during the same session of 
General assembly repealing and recodifying former Title 15.1 as 
Title 15.2.  See 1997 Acts ch. 587. 
8 See 1997 Acts ch. 12 (amending former Code § 15.1-321, now 
codified as § 15.2-2119). 
 
 
19
standard of judicial review used when examining the exercise of 
the legislative function by a local governing body in adopting a 
connection fee.  Upon evidence that the connection fee is not 
"fair and reasonable," and corresponding evidence that the 
adopted fee does meet that standard, the courts' function upon 
judicial review is to determine if the evidence that the fee is 
"fair and reasonable" makes the issue "fairly debatable."  
Application of that standard in this case indicates the trial 
court did not err in granting the demurrer as to the Code 
§ 15.2-2119 claim. 
A public body's statutory obligation to charge "fair and 
reasonable" fees is a delegation of authority by the General 
Assembly which includes a certain amount of discretion.  See 
Central Tel. Co. of Va. v. Corporation Comm'n, 219 Va. 863, 874, 
252 S.E.2d 575, 581 (1979) (In performance of its statutory 
mandate to fix "just and reasonable" rates for a public utility, 
the State Corporation Commission "exercises a legislative 
function . . . which involves a reasonable amount of 
discretion.").  When the General Assembly permits a governmental 
entity to act with discretion, without further statutory 
guidance, we presume that such action is valid and reasonable 
unless the party disputing the action presents unchallenged 
evidence of unreasonableness.  See Robertson, 266 Va. at 532-33, 
587 S.E.2d at 575.  Even though the trial court's opinion does 
 
 
20
not elaborate on the facts weighed on demurrer, the record 
reflects the trial court considered not only the factual 
allegations in the Developers' pleadings, but also the facts 
represented by the documents incorporated into the pleadings: 
the Dolecki Report and the County Report.  See City of 
Chesapeake v. Cunningham, 268 Va. 624, 633, 604 S.E.2d 420, 426 
(2004) ("Where no evidence is taken . . . the trial court, and 
the appellate court upon review, must rely solely upon the 
pleadings (which include[] the voluminous attachments in this 
case) in resolving the issue presented."). 
The Developers' pleading, including the Dolecki Report, 
alleged facts, which if true, arguably constitute "probative 
evidence" that the fees set by the 2001 Ordinances were not fair 
and reasonable.  For purposes of a demurrer, the Developers 
showed they extended sewer lines to their properties at their 
own considerable expense, but then paid the County $7,400,000 in 
sewer connection fees without receiving any benefit.  They also 
alleged that if the cost of the sewer improvements were divided 
by the number of property owners connecting to the bond-financed 
system and receiving benefit therefrom, the actual cost per 
connection should be $15,000, not $4,000.  While the contrast is 
not as stark regarding water connection fees, the Developers 
make similar allegations which we must accept as true for 
purposes of a demurrer.  See Arlington Yellow Cab Co. v. 
 
 
21
Transportation, Inc., 207 Va. 313, 318-19, 149 S.E.2d 877, 881 
(1966). 
Taking the facts alleged but not the conclusions of law 
presented as true for purposes of the demurrer, the Developers 
set out facts representing the unreasonableness of the 
connection fees.  Unless there were contrasting facts presented 
of reasonableness, these allegations would be sufficient to 
survive a demurrer because the issue could not be "fairly 
debatable."  However, by incorporating the County Report in 
their pleading, the Developers also presented facts showing the 
reasonableness of the fees to the trial court. 
The County Report summarized the Board's policy decisions 
with regard to financing the County's water and sewer systems: 
• Operating expenses should be covered by user fees. 
• Capital expenses should be covered by connection fees. 
 
. . . . 
 
• No general fund monies should be used to supplement 
the Public Utilities budget. 
 
. . . . 
 
[T]he goal of the utility system is to become self 
sustaining.  In order to achieve that goal, the water 
and sewer connection fees need to be increased to 
cover the existing debt . . . . 
 
The County Report concluded that in order to meet the policy 
goal of having a self-sufficient utility system, the water and 
sewer fees would need to be increased to $4,610 and $6,158, 
 
 
22
respectively.  Instead of increasing the connection fees to the 
amount needed to fully support the bond indebtedness, the County 
raised its connection fees to $4,000 per connection in the 2001 
Ordinances. 
The Developers' pleading, through the County Report, thus 
placed before the trial court facts showing that the connection 
fees established by the 2001 Ordinances were a uniform amount to 
all new customers countywide, were less than the actual system 
costs and were solely dedicated to retiring the utility bond 
issue.  The County Report thus presented facts showing that the 
2001 Ordinances were fair and reasonable in rebuttal to the 
allegations of unreasonableness in the pleadings and the Dolecki 
Report. 
The trial court thus had before it facts reflecting that 
the fees were not "fair and reasonable" and offsetting facts 
showing that the fees were reasonable as its letter opinion 
notes: "the facts stated by Eagle Harbor . . . would appear to 
support the very debatability of the County's enactment of the 
fees."  As such, there was "evidence of reasonableness . . . 
sufficient to make the question fairly debatable," thus "the 
legislative action must be sustained."  Robertson, 266 Va. at 
533, 587 S.E.2d at 575 (internal quotation marks omitted).  
Accordingly, the trial court did not err in sustaining the 
 
 
23
demurrer regarding the Developers' argument under Code § 15.2-
2119. 
C.  TRIAL COURT'S FAILURE TO HEAR EVIDENCE 
 
The Developers also assign error by contending the trial 
court had an insufficient evidentiary basis upon which it could 
sustain the County's demurrer and the trial court therefore 
could not rule as a matter of law without taking evidence on the 
issue of reasonableness.  The Developers aver that Concerned 
Taxpayers v. County of Brunswick, 249 Va. 320, 327, 455 S.E.2d 
712, 716 (1995), establishes a rule requiring an evidentiary 
proceeding beyond the pleadings and argue "the trial court must 
hear and compare the evidence in order to determine whether a 
legislative action's validity is 'fairly debatable.' " 
 
In many cases, the Developers' argument would be accurate 
as a practical matter because the facts alleged could not be 
deemed sufficient to rule as a matter of law at the demurrer 
stage since there is no venue for a defendant's factual 
presentation.  In evaluating a plaintiff's pleading upon 
demurrer, the only factual allegations before the court would be 
those alleged by that pleading.  If those factual allegations, 
deemed true, established the plaintiff's prima facie case and 
required a rebuttal for determining the merits, the trial court 
could not act without the taking of evidence. 
 
 
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However, in the case at bar, the Developers not only made 
allegations of fact in their pleading, but enlarged the scope of 
facts before the trial court by incorporation of the Dolecki 
Report and the County Report.  As noted earlier, the trial court 
was entitled to consider these documents in its determination of 
the demurrer.  See City of Chesapeake, 268 Va. at 633, 604 
S.E.2d at 426. 
 
By virtue of the extended nature of the Developers' 
pleading with the incorporated reports, the trial court was in a 
unique position in the consideration of the demurrer to have 
evidence of the purported unreasonable nature beyond the bare 
allegations in the pleadings as part of the record for decision.  
As discussed above, the trial court had facts showing the 
unreasonable nature of the 2001 Ordinances in the Dolecki Report 
which was met with facts reflecting reasonableness in the County 
Report.  The Developers chose to put these facts before the 
trial court through the structure of their filing and cannot now 
complain regarding the trial court's consideration of them.  In 
effect, the Developers presented both sides of the evidentiary 
issue through their filing which was adequate for the trial 
court to determine the 2001 Ordinances were "fairly debatable" 
and resolve the issue on demurrer.  Unlike the parties in 
Concerned Taxpayers, the Developers here put an adequate 
 
 
25
evidentiary record before the trial court which, therefore, did 
not err in ruling without an evidentiary hearing. 
IV.  CONCLUSION 
For the foregoing reasons, we will affirm the judgment of 
the trial court sustaining the County's demurrer and dismissing 
the Developers' bill of complaint and amended bill of complaint 
with prejudice. 
Affirmed.