G en. 127] 127

We defe r to the City

Attorney ’s construc tion of local law. 1 M UNI CI PALI TI ES
F EES

– W HE T HE R C ONN E CT I ON F EE S M AY B E U SE D F OR O PE RA T I NG C OST S OF M UNI CI PAL W AT E R A ND S E WERA GE T REATMENT F ACI LI TI ES

Sept ember 25, 2007

The H onor abl e C ar r ol lA

. Jones Mayor, C i t

y of B r uns w i ck
O n behal f of t he C i t y of B r uns w i ck ( “C i t y ”) , y ou r eques t ed our opi ni on about t he per m i s s i bl e us e of r evenue s fr om fee s char ged for con necti on t o the m un i ci pal w at er and sew erage sy stem s. S p e c if ica lly , y o u a sk e d w h e th e r th e se re v e n u e s m a y b e d e v o ted o n ly t o capi t al i nfr as t r uctur e cos t s orw het hert heym ayal s o be us ed for op erat i ng cost s of t he C i t y ’s w at er and sew erage t reat m ent faci l i t i es. C ons i s t entw i t h ourpol i cygover ni ng opi ni on reques t s fr om l ocal gover nm ent s , y ou i ncl uded w i t h y our r eques t an opi ni on fr om t he C i t yAt t o r n e y
. I n t h a t o p i n i o n , h e s t a t e d t h a t t h e Ci t yCha r t er aut hor i zes t he C i t yt o col l ectchar ges in ac cor dance w i t h St at e l aw and t hat nei t her t he C i t yC har t ernor t he C i t yor di nance s t hemsel ves l i m i t ed t he C i t y ’ s us e of c onnect i on fee s
. H e ide nt i fi ed t he 1 appl i c a b l e St a t e l a w go v e r n i n g t h e o p e r a t i o n o f Ci t y ’ s wat e r and se w e r sy st em s as Tit l e 9, S ub t i t l e 7 o f t he E nv i ronm ent A rt icle ( “EN ”) , A nnot at ed C ode of M ar y l and. H ow ever , he al s o poi nt ed out t hatt he Sew er age Fac i l i t i es B ond A ct , E N §9- 801 et s eq
. , m i ghtbe i nt erpr et ed t o al l ow us e of co n n ect i on fee r evenue s t o cover “e x p en ses of rep air an d m ainten an ce o f sew era g e ( n o t w ater) sy stem s i f s uch fe es fal l w i t hi n t he def i ni t i on of ‘ r evenue fr om t he s ew er age f

ac i l i t y ’ , ” had the C i t yi s s ued bonds undert hi s s t atut e. W hi l e t he C i t yA t t or neyconcl uded t hatr evenue fr om connec t i on fee s i s t o be used for debts er vi ce, he s t at ed t hatt he ans w ert o y our i nqui r yi s not cl earcutand s ugges t ed t hatt he C i t ys eek a dvi ce f r om th is O f f ice . S u b se q u e n tly , w e w e r e a d v ise d b yth e C ity A dm i ni s t r at or t hatt he onl y o u ts t andi ng debtt hatt he C i t yhas for w at ero r sew eri nfr as t r uctur e w as not i s s ued underei t herof t he s t atut es i dent i fi ed i n t he C i t yA t t or ney ’ s opi ni on, but r at hert hr ough S t at e fi nan ci ng program s.1 2 8 [92 O p . A tt’ y For t he r eas ons expl ai ned bel ow , undert he C i t y ’s cur r ent fin an cin g a g ree m en ts, rev en u es f rom sew er c o n n ec ti o n fe es a re d e d ica ted to d e b t se rv ice . In a d d iti o n , w e a g r e e w ith th e C ity A t t or neyt hatr evenue s fr om anyconnec t i on char ges t hatm i ght be i m pos ed underE N §9- 722( a) w oul d be dedi cat ed t o d eb t s er vi ce. E v en if co n n e c tio n f

ee s w ere to b e im p o sed u n d er o ther statutory aut hor i t y , i t i s unl i kel yt hat t he r es ul t i ng r evenue s coul d be us ed for r out i ne oper at i ng cos t s of t he C i t y ’ s w at erand s ew er age tr eat m ent faci l i t i es.

I Backg r ound
W hen a c us t om eri ni t i al l yhooks up t o a publ i c w at eror s e w e r a g e s ys t e m , t h e c u s t o m e r i s u s u a l l y r e q u i r e d t o p a y a connec t i on fee

. G ener al l y , a conne ct i on fee i s a o ne- t i m e cha r ge, a lth o u g h p a y m e n t is so m e tim e s d e f e rr e d o v e r t im e
. See, e. g. , W ard D ev. C o. , I

nc. v. I ngr ao , 6 3 M d

. A p p. 645, 651, 493 A

. 2d 421 (1 9 8 5 ).
V a r i o u s me t h o d s a r e u s e d t o c o mpu t e c o n n e c t i o n f e e s
. For exampl e, i t m i ght r efl ectonl yt he ac t ual cos t , orm or e l i kel y , t he a v e ra g e c o st, to c o m p lete a p h y sic a l c o n n e c tio n b e tw e e n th e m a in a n d p ro p e rt ie s s e rv e d

. S e e , e .g ., A m
. W a te r W o rk s A s s ’n , P r i nci pl es o f W a t erR at es , F ees , and C har ges p. 18 1 (5 ed. 20 00 ). B ut a th connec t i on fee m aynotnece s s ar i l ybe l i m i ted to the cos t of t he m a k in g th e c o n n e c tio n
. See, e. g. , Megl i no v. T ow ns hi p C om m
. of t he Tow ns hi

p of E agl es w ood , 103 N

. J

. 144, 155 n. 3, 510 A

. 2d 1134 ( 1986)

. T he cha r ge mi ghtbe s ets o t hatt he new cus t om er r ei m bur s es t he muni ci pal i t yfora por t i on of t he cos t of ca pi t al r equi r ed t o pr ovi de t he s er vi ce ort he cos t t o r epl ace t he ca paci t yt he n e w c u s to m e r c o n s u m e s . R o g e r J . D o la n , et al ., M a n a gi ng t he W a ter a n d W a ste w a ter Util ity p . 8 -5 (2 0 0 3 ); see al so 12 M cQ ui l l i n, The Law of

Muni ci palC or por at i ons § 3 5

. 5 5 (3 ed

. rev . 2 0 0 6 ). rd R evenue col l ect ed t hr ough connec t i on char ges i s us ual l ydedi cat ed to c a p ita l e x p e n s e s . D o la n , supra , a t 9 -9 , 9 -1 0

.G en. 127] 129

Th is t e rm

is d e fi ne d a s f

oll ow s: 2

“ Munic ipal a

uth ority” me ans : ( 1 ) T h e m ayo r

an d c o un c i l o f

a mun i c i p a l i ty; (2) Thetown commissioners of a municipa lity ; or ( 3 ) Any o th e r

g o v e r n i n gb o dy o f

a mun i c ip a l i ty. EN §9-701(b). Throughout the rema inder of this opinion, we use the term “municipality” or City

for br evity

. The s ubtitle also authorizes the construction and ope ration of 3 draina g e sy stems and re fuse disposal sy stems. SeeEN §9-701( c) (def inition of “sy stem”). W e turn n ex t t o the s ta tu to ryp rov isi o n s g o v ern ing the C ity ’s w at erand s ew er age s y s t ems, i ncl udi ng t he per m issi bl e us e of co nnect i on fee s , and t he s t atut or ypr ovi s i ons gover ni ng t he C i t y ’s e x istin g d e b t.

II

M u n i c i p a l W a t e r a n d S e w e r a g e S y s t e ms E N T i t l e 9, Subt i t l e 7, Par t I I pr ovi des enabl i ng aut hor i t yunder w hi ch a “ m uni ci pal aut hor i t y , ” s uch as t he C i t y , m aycons t r uctand 2 o p e r a t e , a mo n g o t h e r t h i n g s , a wa t e r s u p p l ya n d s e we r a g e s y s t e m. 3 A m on g t he pow ers grant ed t o a m un i ci pali t y un der t his subti t l e is a u t h o r i t yt o c o n s t r u c t , e x t e n d , o r a l t e r a wat e r o r s e wer a g e s y s t em a n d th e a u th o ri ty to m a in ta in a n d o p e ra te a s y s te m . E N § 9 -7 0 5 . A m uni ci pal i t yt hatcons t r uct s ores t abl i s hes a w at erors ew er age s y s t e m i s t o “ [ c ] o n s t r u c t a n d p r o v i d e a t i t s o wn e x p e n s e
. . . a wat er se rv ice p ip e o r se w e r c o n n e c tio n th a t ex ten d s f ro m th e w a ter m a in or s ew er to t he pr oper t yl i ne of e ach l ott hatabut s on a s t r eetor r i g h t

- o f

- wayi n whi c h t h e wat e r ma i n o r s e weri s l a i d

. ” EN § 9 -70 8 (a)(1).
S u b je c t to th e a p p ro v a l o f th e v o te rs in a re f

e re n d u m , a m u n ici p ali tym ay issue b o n d s to fin an ce all o r pa rto f a sy stem ’s des i gn, co n str u cti on, ext ens i on, al t er at i on, pur chas e or1 3 0 [92 O p . A tt’ y

Suc h b on ds aretax-e xemp t, ca n have a te rm of maturity of up to 4 50 year s, and ar e not subject to any limiton the total amount of municipal debt. The bonds ar e a l ien on all prope rty within the municipality . EN §9-711(b)

. For purposes of such a ssessments, the municipality may classify 5 p r o p e rty b a s e d o n u s e ; th e annu a l r ate s ma y b e a lt e r e d ye ar to ye ar , but rate s must be uniform within each c lassification. EN §9- 713(b)( 3). This part applies, not only to municipa lities, but also to counties 6 and certain special di stricts that operate water and sewe rag e sy stems. See EN §§9-720 a

nd 9-721. The a

uthority under this par

t suppl ements any other a uthority availablefor f

inancingwater

and sew erag e sy stems. EN §9-721(a). condemnat i o n
. E N §9- 711( a) and ( c)

. T o coveral l or par t of t he 4 debts er vi ce, t he muni ci pal i t ym ay im p os e an a nnual fr ont

- foot a s s e s s m e n t “ a g a i n s t a n y p r o p e r t y t h a t a b u t s o n a n y s t r e e t , r o a d , a l l y, o r r i g h t

- o f

- wayi n whi c h a wat e r p i p e [ o r ] s ew er
. . . i s l a i d

. ” EN § 9 -7 1 3 (a ). T h e m u n icip a litym a ya lso im p o se se rv ice c h a rg e s to

5 coverbot h debts er vi ce a nd “t he cost o f m ai nt enanc e, r epai r , and operat i on” of a w at eror s ew er age s y s t em, “i ncl udi ng over head e x p e nses. ” E N §9 -714. To t he ex t ent that anyfront -foot b e n e f it asses sm ents or ser vice charges d o no t pay t he p ri ncipal and i nter est o n th e b o n d s, th e m u n icip a lity is t o lev y a p ro p e rtytax to sa tisf yits d e b t s e rv ic e o b lig a tio n . E N § 9 -7 1 2

. E N T i t l e 9, S ub t i t l e 7, P artII I gr ants add i t i on al authori t yto m uni ci pal i t i es conce r ni ng w at erand s ew er age s er vi ces , i ncl uding 6 ex p li citau tho ri ty to im p o se co n n ec ti o n ch arg es. E N § 9 -72 2 (a)(1). T h a t sta tu te a u th o riz e s a m u n icip a lity to “ [ e ]sta b lish a re a so n a b le char ge t hati s notl es s t han t he ac t ual cos t

. . . fo r c o n n ect i on w i t h a w at eror s ew er age s y s t em. ” I d. T he s t at u te a lso aut hor i zes t he i m pos i t i on of annua l as s es s m ent s on al l pr oper t y , i m pr oved or u n im p ro v e d , ab u tti n g a n ystre e t, ro a d , lan e , ally , o r rig h t-o f -w a yin w hi ch t her e i s a w at erm ai n ors ew er
. E N §9- 722( a) ( 2)

. R evenue s re su lti n g f

ro m a ss e ss m e n t s a n d c o n n e c tio n c h a rg e s u n d e r th is s tatu te ar e fo r “ t h e p a y me n t o f p r i n c i p a l a n d i n t e r e s t o n i n d e b t e d n e s s t hat is i n cu rred to f

inan ce an y w ater o r se w era g e sy stem

. ” E N § 9 -72 2 (a). W hi l e t hes e r evenue s ar e l i m i t ed t o d ebts er vi ce, unl i ke cha r ges underPar t I I , t heyar e nots ol el yforbonds i s s ued underE N §9- 711.
E N T itl e 9 , S u b tit le 7 , P a rt III a lso a u th o riz e s a m u n icip a lityto i m pos e s er vi ce c har ges
. S u bj ectt o l ocal char t erpr ovi s i ons andG en. 127] 131

The Ci ty ’s l oans through the M ary land W ater

Quality Revolving 7 L oan F und wer e close d on September 26, 1996, A pri l 8 , 2 0 04, and J anuar y 27, 2005. We understand that the City has also applied f

or a loa n from the Ma

ryland DrinkingWater RevolvingL oan F und. s t atut or yr equi r ement s , t he m uni ci pal i t ym ays etr eas onabl e r at es for w at er s e r v i c e a n d r e a s o n a b l e c h a r g e s f o rs e weru p k e e p a n d s ew er s er vi ce, char geabl e agai ns t pr oper t i es s er ved bya w at erl i ne ors ew er p ip e th a t th e m u n ic ip a lity o w n s o r s u p e rv is e s
. See E N §9- 723 t hr ough §9- 727. T he r es ul t i ng r evenue m ay be us ed fordebts er vi ce, as w el l as t he mai nt enanc e, r epai r , and oper at i on of a w at eror sew era g e sy stem

. E N § 9 -72 3 (a).

III
S t a t e F i n a n c i n g P r o g r a ms W e under s t and t hatt he C i t yhas s ecur ed fundi ng fori t s w at er and s ew erfac i l i t i es t hr ough St at e fi nanci ng pr ogr ams. T he fi nanci ng agr eement s r el at ed t o t hos e l oans can al s o aff ectt he us e of con necti on charges. WQF A P r o g r a ms T he D epar t m entof t he Envi r onm entW at erQ ual i t yFi nanci ng A dm i ni s t r at i on ( “W Q FA ”) oper at es t w o loan pr ogr ams t hr ough w hich i t off

ers be lo w m arket -r at e l oan s t o q uali fi ed b orr ow ers , incl udi ng m uni ci pal i t i es : t he M ar y l and W at erQ ual i t yR evol vi ng L oan Fund, E N §9- 1605, and t he M ar y l and D r i nki ng W at er Re v o l v i n g Lo a n F u n d , EN § 9

- 1 6 0 5

. 1

. Both o f t h e s e p r o g r a ms requi re that, as a con dit i on of a l oan , t he local go vernm ent es t abli sh a d e d i c a t e d r e v e n u e s o ur ce fo r t h e l o a n r e p a y me n t

. EN §§9- 1605( d) ( 1) ( i i i ) and 9- 1605. 1( d) ( 1) ( i )

. T he W Q FA r equi r es t hat t he bonds evi denci ng a l ocal gover nm ent ’ s l oan pr ovi de a “doubl ebar r el ” s ecur i t y– t hati s , i n addi t i on t o t he pl edged r evenue s , t he b o n d s a re b a c k e d b yth e lo c a l g o v e rn m e n t’ s f u ll f a ith a n d c re d it. See als o E N §9- 1606( d) ( aut hor i zi ng a bor r ow ert o pl edge a nyr evenue s th a t th e b o rr o w e r w o u ld b e e n title d to re c e iv e f ro m th e S ta te ).
W e under s t and t hatt he C i t ycur r ent l yhas t hr ee out s t andi ng l oans fr om t he M ar y l and W at erQ ual i t y R ev o lvi ng L oan Fund t hroug h the W Q F A

. In fi nan ci ng agreem ents con cerni ng t ho se 7 l oans , t he C i t yhas pl edged s ew erus erchar ges , “i ncl udi ng anyand1 3 2 [92 O p . A tt’ y

One loan agree ment involving the 2 Avenueand B Street 8 n d Stream Restoration also includ es wa t er user cha rg es as pa

rt of the dedicated re venue ple dg e. The pledg e of revenue s otherwise distributed by the State to the 9 political subdivisi on fac il i t ates collections. SeeHCD §4-229(b) (2) (direc tingComptroller and State Tre asure r to pay pledg ed moneys to CDA or trusteedesignated by

CDA). all fe es f o r use o f th e p u b li c se w er sy stem o r c o n n e c tio n to it , ” for rep ay m en t of

the lo an s (em p h asis su p p li ed ). 8
I nf r as t r uct ur e Progr am U n d e r th e In f

ra s tr u c tu re P ro g ra m , s ee A nnot at ed C ode of M ary land , H o u sing an d C o m m u n ity D ev elop m en t A rt icl e (“ H C D ”), §§4- 220 and 4- 228 t hr ough 4- 233, a muni ci pal i t ym ayent er i nt o an agreement w i t h t he C om m uni t yD evel opm entA dm i ni s t r at i on (“ C D A ” ), a u n it w ith in th e D e p a rtm e n t o f H o u sin g a n d C o m m u n ity D evel opm ent , t o fi nance i nfr as t r uctur e proj ect s , i ncl udi ng w at erand sew era g e sy stem s
. See H C D §§1- 101( i ) ( defi ni t i on of “pol i t i cal s ubdi vi s i on”) and 4- 220 ( qual i fy i ng i nfr as t r uctur e pr oj ect s )

. U nder t hi s pr ogr am, t he muni ci pal i t ypl edges “anym oney , i ncl udi ng a s h a r e o f i n c o me t a x , t h a t t h e [ mun i c i p a l i t y ] i s e n t i t l e d t o r e c ei ve f ro m th e S ta te .” H C D § 4 -2 2 9 (b )( 1 ).
T he C i t yhas t w o out s t andi ng l oans t hr ough t hi s pr ogr am. T he agr eement fort he C i t y ’ s m os t r ece nt l oan pl edges as s ecur i t ym oney t hatt he C it y is e nt i t l ed t o r ece i ve fr om t he St at e, i ncl udi ng S tat e-sh are d rev en u es, S tat e-c o ll ec ted lo ca l t ax es, t h e C ity ’s sh are o f S tate tax e s, in c lu d in g th e S tate in c o m e tax , g e n e ra l p u rp o se g ra n ts or paym ent s , St at e hi ghw ay us er r evenue s , and any futur e pr ogr am r evenue s r epl aci ng t hos e pr ogr ams i n pl ace att he t i m e of t he l oan. 9 H ow ever , t he pr i m ar y s ecur i t y under t he r epaym ent agr eement i s t he C ity’s f u ll f a ith a n d c re d it.G en. 127] 133

Othe r f ina nc ingarrang e me nts that th e City might e nte r i nto 10 could include pledg e re quirements with detailed f low of funds provisions sp e c if ic a lly e arm arkingc onne c tio n c ha rg e s. IV
A n a ly sis
Y ou have a s ked w h ethe r r evenue s fr om connec t i on fee s m ay b e u s e d to d e f

ra yth e o p e ra tin g c o s ts o f a s y s te m
. A s n o ted a b o v e , th e C ity h a s o u tsta n d in g f in a n c in g a g re e m e n ts w i t h t he W Q FA and t he C D A Inf rast r uctur e Pr ogr am. R evenue s r es ul t i ng fr om con n ec ti on fee s m us t be us ed cons i s t ent l yw i t h any covena nt m ade as par t of t hes e t r ans act i ons or anyot herfi nanci ng ar r angement

. For exampl e, t he W Q FA l oans funded thr oug h t he M ar y l and W at erQ ual i t y R evol vi ng L oan F und s peci fi cal l yr equi r ed t hatt he C i t ypl edge s ew erconnec t i on fee s for r epaym entof t he l oan s. 10
W i t h r es pectt o T i t l e 9, Subt i t l e 7 of t he E nvi r onm entA r t i cl e, th e so u rc e o f f

u n d in g id e n tifie d b y th e C ity A tto rn e y , o u r a n a ly sis s t ar t s w i t h t he pl ai n l anguage of t he statute – t he “be s t s our ce of l egi s l at i ve i nt ent

. ” R os s v. St at e Bd. of E l ect i ons , 387 M d. 649, 661, 876 A

. 2d 692 ( 2005)

. A s not ed above , E N §§9 -71 4 an d 9- 723 s peci fi cal l y aut hor i ze t he use o f servi ce cha rges t o fund, among o t her cos t s , t he cos t s of oper at i ng a w at er or s ew er age s y s t em. In cont r as t , E N §9- 722 aut hor i zes i m pos i t i on of a connec t ion ch arge “[t ] o pr ovi de funds forpaym ent o f pri nci pal and i nt er es t on i ndebt ednes s t hati s i ncur r ed t o fi nance any w ater o r s ew er age s y s t em .
. . . ” EN §9- 722( a)

. T he stat u te r equi r es t hata conne ct i on char ge be “ r eas onabl e” a nd “no t less t han t he ac t ual cos t

. . . for connec t i on. ” EN §9- 722( a) ( 1)

. T hus , w hi l e a c onnect i on char ge m ayexce ed t he ac t ual cos t of m aki ng t he conne ct i on, not hi ng i n t he st at ute r el at es the charge t o op erat i ng exp enses or aut ho ri zes t he u se o f re v e n u e s f

o r o p e ra tin g e x p e n se s. R a th e r , th e sta tu te e x p licitly as s i gns t hos e r evenue s t o t he paym entof debts er vi ce. T he s t atut or ypr ovi s i on r equi r i ng t hat connect i on char ge r evenue s be dedi cat ed t o capi t al expens es i s cons i s t entw i t h t he u n d erly ing p u rpo se o f su ch ch arg es, t h at i s, req u ir ing n ew cu stom ers to c o n tr ib u te a s h a re o f

th e c a p ita l c o s ts o f

th e s y s te m
. S e e , e .g ., 12 M c Q u illin , T

he L aw of M

un i ci pa lC orpo rat i on s §§35. 43 and 35. 55 (3 e d . re v . 2 0 0 0 ) ( w a te r c o n n e c tio n f e e s ) ; 1 1 M c Q u illin , supra , rd1 3 4 [92 O p . A tt’ y

Other State statutes a ddressingthe use of c onnection cha rg es 11 g enerally limitthe use of revenue s to c apital costs. For example, the law g overningcounty sanitary commissions allows reasonableconnec tion charg es as well as benef

it a ssessments to pa

y debt service

. EN §9 -656. S u b j ec tt o ani n d i v i d

u al co unty

ex ce p t i o n , ex ce s s co nn ec t i o nch ar ge reve nues ar e only to be used for “repairs, replace ment, and extraordinar y e xp e n s e s
. ” EN§ 9

- 6 6 1 ( g ) ( 1 ); s ee also EN §9-922 (water and sew er authority may

charg e re as on ab letappingfee ). The Washington Suburban Sanitary Commi ssion is gene rally require d to divide reve nue from connec tion fees e x cee ding theactua l connec tion costs between debt servi c e an d

a c o nti n g e n c y

f un d f o r “ r ep a ir , r ep la c e me nt, o r any e xtra ordin ary

e xpe ns e in t

hema int e na

nc e and op e ra tio n”of its sy ste ms. Anno tate d Co deof

Mary land , Article29 , § 6- 10 1; see W ashington Suburban Sanitary Comm’n v. C.I. Mitchell and Best Co. , 303 Md. 544, 56 5- 66 , 4 95 A. 2d

30 (1 98 5) (Art ic le 2 9 us uall y re late s sp e c if

ic reve nue-raisingmeasure s to identified costs).
To be s ur e , th e r e ar e s tatute s th at gr ant b r o a d e r a uth o rit y
. F or e xamp le , th e Wor c e ste r C ounty Sanit ary Commis sio n is autho ri zed to u se excess connec tion char ge re venues f or “a ny ... purpose r elatingto the operation of the servic e area.”EN §9-661( g )(2). An d , as noted by the City Attorney , the Sewerag e F acilities Bond A ct allows use of any sewe rag e fac ility reve nues to c over operating costs – authority that might beint e rp re te d a s e xten din gto c onne c tio n c ha rg e s f or sewe rag e sy ste ms. EN §9-812.
In h is a na ly sis , th e City Attor

ne y a lso c ite d a

n o pin ion of thePub lic ServiceCommi ssion concer ning a private w ater

comp any , which su g g e ste d a

na rrow e r v ie w o f t

hea pp ro priate us e of

c onne c tio n c ha

rg e s. SeeLXXI

Report of the Public ServiceCo mmissi on of Mar yland 125 (1980). How ever , that opinion is consist ent with the notion that c onne c tio n f

e e s sh ou ld b e de dic ate d to c a pit a l c os ts. Of

c ours e , th e Pub lic ServiceCommi ssion lacks jurisdiction over rates cha rg ed by mun i ci pal water and sewera g e uti lities except under limited circ umstances involving se rv ic e be yon d mu

nic ipal l im it s. Anno tate d Co deof Mary land , Pu bli c Utility Companies Article, §§4- 304 and 4-305. §§ 31

. 30 and 31

. 30

. 15 (s ew er con necti on s)

. R ou t i ne o perat i ng cost s, h o w e v e r, a re n o t a c a p ita l e x p e n s e
. U ni t ed St at es v. Mi chi

gan , 483 F

. S u p p
. 2 d 5 6 1 , 5 6 3 (E .D . M ic h . 2 0 0 7 ), ci t i ngW at erE nvi r onm ent F e d e ra tio n , F i n a n c i n ga n d Ch a r g e s f o rWa s t e wat e r S

y s t e ms 2 8 -9 ( 2004)

. I t i s di ffi cul t t o s ee how r out i ne oper at i ng cos t s coul d be f u n d e d o u t o f c o n n e c tio n c h a rg e re v e n u e s in a m a n n e r th a t w o u ld ens ur e a r eas onabl e al l ocat i on of cos t s bet w een e xi s t i ng an d new cust om ers
. 11G en. 127] 135

A mun ic ipality

c ou ld i ssu e g e neral obli g atio n b on ds or , if 12 authorized by

its charter, r evenuebonds to financewater and sew er infrastruc ture pursua

nt to the Annotated Code of Mar yland, Article23A, §31 et seq

. A municipality , acting alone or in c ombination with another po lit ic a l su

bd ivi sio n c ou ld e sta

bli sha pu bli c a uth ority to be r e sp on sib le for wa ter or se wer ag e ser

vices. SeeEN §9-901 et seq

. A mun ic ipality could obtain wate r or se wer ag e ser vices througha county

sanitary co m m ission. SeeEN §9-601 et seq

. A f r an c h is e mi ght b e gr anted to a private e ntity

to provide water or se wer ag e ser vices withi nthe municipality

. Article 23A , §§2(b)( 13) and 2A (b). A municipa lity might al s o h av e auth o ri ty

un d er a pub l i c lo ca l l aw t o p ro v i d e w at er o r s ew er age service , provided th e authority is not inconsist ent with Part I Iof Title 9, Sub tit le 7 o f t

heEnvironme nt Arti cle. E N § 9- 70 4( a ); see, e .g. , Ga rre tt County Sanitary Dist. v. Mayor and Town Council of Oakland, 249 Md. 400, 405, 240 A.2d 228 (1968)

. A municipality could also establish a specia l tax ing district to fund w ater or sewe r infra structure . Article 23A , §44A. W e have focus ed ourr es pons e on t he C i t y ’ s exi s t i ng fi nanci ng agr ee me n t s a n d EN Ti t l e 9 , Su b t i t l e 7 , t h e s t a t u t o r yp r o v i s i ons r e f e r e n c e d b yt h e Ci t yAt t o r n e y
. Th e r e a r e o t h e r p r o v i s i o n s u n der w hi ch t he C i t ym i ght oper at e a w at erors ew er age s y s t em, fi nance w at er and sew erage i nfrast ructure, and i m po se c on nect i on charges. 12 For exampl e, A r t i cl e 23A , §2( b) ( 3 3 ) a ut hor i zes a muni ci pal g o v e rn in g b o d yto e s ta b lis h “ re a s o n a b le f e e s a n d c h a rg e s
... [a ]sso ciated w ith the e x erc ise o f a n yg o v ern m en tal o r pro p rietary funct i o n aut hor i zed byl aw t o be exe r ci s ed bya muni ci pal corpor at i on. ” W i t hout cat al ogi ng eac h of t hes e pos s i bl e s our ces of aut hor i t y , i t i s unl i kel yt hat co n n ect i on fee s i m pos ed underanyof t ho se provi si on s could be u se d f o r op erat i ng exp enses. U nles s a par t i cul ars t atut e aut hor i zed t he use of connec t i on fee s foroper at i ng expens es , a “c onnect i on” cha r ge w oul d l i kel ybe cons idere d a fe e t hatm us t be r eas onabl yr el at ed t o the co st of conne ct i on ort he c a p ita l c o s ts o f

th e s y s te m to w h ic h th e u s e r is c o n n e c te d

. See P art I above.

V
C oncl usi on U nder t he C i t y ’ s cur r ent fi nanci ng agr eement s , r evenue s fr om s ew erconnec t i on fee s ar e dedi cat ed t o debts er vi ce a nd t hus ar e not avai l abl e foroper at i ng expense s
. R evenue s fr om anyconnec t i on char ges t hatm i ght be i m pos ed un d er E N §9- 722( a) w oul d be1 3 6 [92 O p . A tt’ y dedi cat ed t o debts er vi ce. E ven i f conne ct i on fees w er e t o be i m pos ed underot hers t atu toryaut hor i t y , i t i s unl i kel yt hatt he r es ul t i ng r evenue s coul d be use d fo r r out i ne oper at i ng cos t s of t he C i t y ’s w at er and sew erage t reat m ent faci l i t i es.

D ougl as F. G ans l er A t t or ney G ener al
W i l l i am R

. V ar ga A ss i s t ant A tt o rn eyG eneral
R o b e rt N . M c D o n a ld C h ie f C o u n s e l, O pi ni ons and A dvi ce