IN THE COMMONWEALTH COURT OF PENNSYLVANIA

FMRR Development :

:

v. :

: Birdsboro Municipal Authority :

: Francis X. McLaughlin :

:

v. :

: Bird s boro Water Authority :

: Appeal of: Birdsboro Municipal : Authority and Birdsboro Water : No. 1925 C.D. 2014 Authority : Submitt ed : September 17, 2015

BEFORE: HONORABLE ROBERT SIMPSON, Judge

HONORABLE ANNE E. COVEY , Judge HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge

OPINION NOT REPORTED

MEMORANDUM OPINION BY JUDGE COVEY FILED: October 7, 2015

Bi rdsboro Municipal Authority ( Authority ) appeals from the Berks
County Common Pleas Court’s (trial court) October 7, 2014 order finding in favor of
Francis X. McLaughlin (McLaughlin) and FMRR Development (FM R R)
( collectively , Owners) and against the Authority

. The Authority presents on e issue

for this C ourt’s review: whether a water and sewer rate structure which subjects a
class of customers to a tiered rate with increases based on usage is unreasonable and

disc riminatory . After review, we affirm.

O wner s own real property within the Authority’s service area, and each
property is improved with multi

- unit residential apartment buildings or multi

- family2

dwellings. O n September 24, 2010

, FMR R acquired title to the residential apartment
building commo nly known as the Chestnut Arms A partments (Chestnut Arms)

located at 700 E ast 1st Street in Birdsboro Borough , Berks County, Pennsylvania.

Chestnut Arms consist s of 21 residential apartment units which are connected to the

A uthority ’s water supply and sanitary sewer system. U pon FMRR’s acquisition

, Chestnut Arms was enrolled as the Authority’s customer and at all times had 20
Equivalent Dwelling Units (EDU) assigned to it by the Authority

.

I n September 2008

, McLaughli n acquired title to the residential
apartment building commonly known as the Maple Springs Apartments (Maple
Springs) located at 700 and 800 Union Street in Birdsboro Borough , Berks County,
Pennsylvania. Maple Springs consists of 20 residential apartment units which are

connected to the A uthority ’s water supply and sanitary sewer system. U pon McLaughlin ’s acquisition

, Maple Springs was enrolled as the Authority ’s customer

and at all times had 20 EDUs assigned to it by the A uthority.

Each property had a s ingle water meter installed therein which the
Authority or its predecessor, Birdsboro Borough , maintained

. The Authority’ s July 1,

2008 R ate R esolution (Rate Resolution) establishe d four classifications of users for

both water and sewer services: domestic , c ommercial, industrial and p ublic. There

we re no subcategories in any classification

, and the classifications were not further

defined. The Authority’ s metered rate s chedule provides that rents and charges shall
be based upon and shall be computed in a ccordance with three separate components:
a ready

- to

- serve c harge

, EDU c harges and a consumption c harge. The ready

- to

- s erve charge is a flat charge of $15.68 per consumer unit per quarter . T he EDU charge is a
flat fee per quarter dependent only upon the classification of the user w hich

, in the

instant case

, are domestic e stablishment s and therefore $3

. 50 per unit per quarter.

The c onsumption c harges are tiered charge s that are directly dependent upon water

usage that increase progressively with increased volume/consumption. Specifically,3

the base charge for water consumption by a single EDU up to a quarterly average of
15,000 gallons is $4.992 per 1

, 000 gallons. The base charge for sewer service is
likewise based on water consumption and the charge per consumer u nit is $7.215 per

1

, 000 gallons.

McLaughlin installed i ndividual private water meters at Maple Springs

and

, as a result of comparing usage data from the meters with invoices received from
the Authority

, McLaughlin determined that the consumpti on c harges were
significantly higher than those calculated f rom the clear words of the R ate

R esolution. Chestnut Arms ’ consumption c harges were also significantly higher than

those calculated f

rom the R ate R esolution ’s patent language

. Owners made

numero us attempts to address the alleged overcharges with the Authority , including
the filing of numerous written complaints on forms prescribed by the Authority

, but
the Authority never provided Owners with an explanation or a response beyond a

statement that t he rates were reasonable and uniform.

Owners commenced two separate civil actions in magisterial court . T he
Authority appealed from both decisions to the trial court

. The trial c ourt held three
hearings and

, by July 14, 2014 verdict

, initially found in the Authority’s favor on the

basis that the issue was identical to that presented in Chicora Commons Limited
Partnership, LLP v. Chicora Borough Sewer Authority , 922 A.2d 986 (Pa. C mwlth.

2007). Thereafter, Owners filed a Motion for Post

- Trial Relief

. 1 On October 7, 2014

, the trial court issued an amended v erdict in Owners’ favor and against the Authority

with accompanying o pinion s dated September 30, 2014 and October 3, 2014

, respectively. The trial court directed the parties to submit a proposed order within 30

1 The Motion for Post

- Trial relief was filed on July 25, 2014. According t o the docket entries

, the trial court entered judgment on the verdict on July 30, 2015. Because the prothonotary can only enter judgment on a verdict upon praecipe of a party if “no timely post

- trial motion is
fil e d[,]” the judgment was improperly dockete d and cannot stand. Pa. R.C.P. No. 227.4(1)(a).4

days covering certain outstanding details . T he Authority appealed to this Court prior

to the submission deadline

. 2

The Authority argues that Pennsylvania law perm its classifications under
the rates charged by municipalities and m unicipal auth orities for water and sewer

service, even when said cl assifications may result in some customers paying m ore for
water and/or sewer as their usage increases. Specifically, the Authority contends that

its structure is reasonably related to services because as the customer receives the

water billed for

, the custome r compensates the Authority for the additional services
required for their high consumption

. It further asserts that the rate is not
discriminatory as all custom ers within the class are treated th e same as Owners

, depending on their respective usage.

Owners rejoin that the A uthority has intentionally disregarded the literal
language of its own Rate R esolution by employing a billing practice that charges

owners of multi

- family residential dwellin gs a premium consumption charge based
upon the specific assignment of a single EDU for each multi

- unit apartment complex
while basing all other charges on the number of dwelling units present. Owners

maintain that s uch practice effectively requires reside ntial apartment owners and

tenants to pay a higher rate for water than owners of single

- family residential
dwellings and

, therefore

, unlawfully discriminates against such owners in violation of

its own Rate R esolution and the legal requirement of uniformit y within a

classification.

Initially, according to the A uthority ’s July 1, 2008 Rate Resolution :

“ Water rates, rents and charges for use of the [w] ater [s] ystem by any [i] mproved
[p] roperty shall be based upon and shall be computed in accordance with the

2 “ Our review of a trial court decision as to whether an authority ’ s utility rate is reasonable is limited to determining whether the findings are supported by substantial evidence and whether the law was pr operly applied to the facts. ” The Scott T w p. Sewer and Water Auth

. v. Ease Simulation,
Inc ., 2 A.3d 1288 , 1289 n.1 (Pa. Cmwlth. 2010)

.5

following: ” (1) “Ready

- to

- S erve Charge [,]” $15.68 for residents and $23.00 for

nonresidents ; (2) “ EDU Charge s

- Water [,]” $3.50 for domestic establishments, $5.431

for commercial establishments, $8.518 for industrial establishments, and $8.518 for
public est ablishments ; and ( 3 ) “ Consumption Charges

. In addition [to] the ready

- to

serve meter charge and the minimum EDU charge, the following consumption
charges are applicable to the excess consum ption per meter over that allowable under
the minimum charge [,]” $ 4.992 per 1

, 000 gallons for residents, $7.371 for

nonresidents . Reproduced R ecord (R.R.) at 9

- 10. Section 5 6 07 (d) of the
Municipal ity Authorities Act (MAA) provides in relevant part:

Every authority may exercise all powers necessary or convenient for the carrying out of the purposes set forth in this section, including, but without limiting the generality of the foregoing, the following rights and powers:

. . . . (9) To fix, alter, charge and collect rates and other charges in the area served by its faci lities at reasonable and uniform rates to be determined exclusively by it for the purpose of providing for the payment of the expenses of the authority, the construction, improvement, repair, maintenance and operation of its facilities and properties [.]

53 Pa.C.S. § 5607 (d) (emphasis added)

. 3 Owners are not arguing that the rates are

unreasonable; rather they assert that the ir application is unreasonable. We agree.

In the instant case, each Owner ’ s p ropert y ha s only one meter. 4 The

A uthority charges t hem a ready

- to

- serve charge and an EDU charge per unit , and an
excess consumption charge per meter , notwithstanding the number of units

. T he
Rate Resolution expressly requires the excess charge “per meter.” R.R. at 9. The

3 Section 5607 of the new MAA replaces Section 4 of the Act of May 2, 1945, P.L. 382

, ( former ly MA A of 1945) which was r epealed by Section 3 of the Act of June 19, 2001, P.L. 287 and reenacted by the same Act . Both sections are identical.

4 Although McLaughlin installed individual meters for each unit in Maple Springs

, the Authority only use s Authority

- installed curb side meter s

.6

rates apply to domestic establi shments; however, domestic establishments are not
classified as single

- dwelling or multi

- dwelling

. Consequently, t he multi

- dwelling
properties are charged an excess rate much sooner than the single

- dwelling
properties

, resulting in multi

- dwelling properti es being charged a much higher rate
overall than single

- family dwellings.

The A uthority argues that Chicora Commons applies to the instant case.

In Chicora Commons

, the apartment owner challenged the sewer authority’s

classification or billing of EDUs f or its properties on the basis that in actual practice a
residential apartment unit consumed less water and used less sewage service than a
single

- residential dwelling. Thus

, the apartment owner questioned the actual
assignment of EDUs by the sewer a uthor ity and claimed that the adopted and
published rate s chedule was unreasonable, discriminatory and arbitrary because it did

not contain different or dedicated rules for multi

- unit residential dwellings. The trial

court determined that

the application of th is rate structure is not arbitrary or unreasonably related to the value of services rendered either as actually consumed, or readily available for use. All apartment units are treated uniformly and each is billed as one equivalent dwelling unit. Flat rat e structures are permitted under Pennsylvania law.

Chicora Commons , 922 A.2d at 995 (quoting trial court op . at 10). This Court

affirmed

, holding that the apartment owner

failed to prove how it was treated differently. Undoubtedly, there are residential customers who also use less water than average, just as certainly as some use more. The line must be drawn somewhere, and the [apartment owner] failed to establish that the [sewer a] uthority abused its discretion when it ‘ drew the line ’ and established th e classification system.
Id. (footnote omitted).7 Unlike the apartment owner in Chicora Commons , Owners do not
challenge the billing of EDUs for its properties or the Rate Resolution. Rather,

Owners maintain that the A uthority unilaterally imposed a meth od of calculating
consumption charges that is discriminatory and unreasonable.

The A uthority ’s expert witness Keith Allen Hill (Hill) testified

, “as a
professional engineer in the field of rate

-- -- establishment and analysis[,]” R.R. at

59

, at the Janua ry 17, 2014 hearing that “this step [the consumption charge] is a tiered
rate approach [that] takes into account the amount of water being used and the more
you use the slightly higher amount you pay per thousand gallons.” R.R. at 62. The

trial court com mented: “It’s somewhat of a penalty.” Id. To which Hill rejoined: “I

don’t know if it’s a penalty or if it’s

– . . . designed to promote the conservation of

water .” I

d. (emphasis added). T he A uthority’s manager Aaron J. Durso also
proclaimed at the Jan uary 17, 2014 hearing that “[ c]onservation is the main reason

behind the rate structure [.]” R.R. at 65 (emphasis added).

However, the A uthority ’s solicitor Doug Rauch explained at the March
18, 2014 hearing as follows:

Q One of the reasons [] McLaughlin’ s here, or FMRR [] is he r e today, i s because they’ re saying that the rates are unfairly applied and unreasonable. What was [ Birdsboro B]orough’ s

-- or the [ A uthority ’s] decision based on when they raised the rates and who they applied them to?

A Again, I think the

-- the raising of the rates was

across

- the

- board just to raise revenue

. The Board treats all residential properties, you know, basically the sam e

. There are 79 properties that are multi

- family residential renta l properties in Birdsboro, and th ey’ re all treated the same. The rates apply the same as to FMRR and [] McLaughlin’ s companies

- - -

. . . .
The Board felt that

-- the policy decision for th e Board was as we’ ve seen

. The more water used, the more you end up8 paying for the usage. S o w h a t

-- the reason behind the adoption of this study and structure of the rates we have now is it encourages conservation

, and it favors the single

- family homeowner

. W hat I mean by that is

, the Board thought i t was fair to charge more to those people that put a greater burden on the system, require more treatment, physical stress to the treatment plant. Those customers who us e a large amount of water, they’ re paying more than the single

- family homeowner. It’ s a l most kind of

a breath of fresh air in this d ay and age of economic development where you’ re finding the bigger companies getting tax breaks by the government. This structure goes the other way. The little guy’ s actually favored.

R.R. at 126 (emphasis added). By favoring single

- family homeowners, the A uthority
is in effect discriminating against multi

- dwelling property owners. While water

conservation is a reasonable basis for the tiered water rate, it cannot be achiev ed by a discriminatory appli cation of the rates against multi

- dwelling propertie s.

As the trial court aptly opined:

In the case sub judice , because there is only one (1) meter for the total twenty

- one (21) units, waste by any one tenant(s) cannot result in that tenant(s) being penalized because all the tenants are billed collective ly. Thus, anyone who chooses not to conserve will not, in turn, pay any penalty. Presently, with only one meter in the entire apartment building, the landlord, not the tenant, pays the increased cost. Not o ne tenant is motivated to conserve
water.

Certa inly, if each tenant is responsible (1) for their own water use, as well as (2) being surcharged for any use of water that exceeds a reasonable allocation, the conservation goal will be realized. If anyone wants to use more water than is reasonable, he or she should pay more

. That is the motivation of an excess water use rate.
To make this work, the monthly average water usage amount must be reasonable. I f the average is not reasonable, tenants will not pay a penalty for water abuse if the average is set at an unreasonably high consumption rate or will be unfairly penalized if the average is set at an9 unreasonably low consumption rate

. In either case, the goal of conserving a natural resource is not properly met either because, on the one hand, the tenan t can use almost as much as he wants without being charged an increased cost or, on the other hand, the tenant is unfairly, prematurely penalized if the average is set at an unreasonably low rate.

Trial Ct. Op. at 2

- 3 (emphasis added). We discern no error in this analysis.

Because, as currently applied, the Rate Resolution makes residential

apartment owners pay a higher water rate than single

- family residential dwellings, the
Authority has unlawfully discriminate d against such owners in violation of the

MAA’s legal requirement of uniformity within a classification. Accordingly, we hold

that the A uthority ’s water and sewer consumption charge calculation methods are
contrary to the MAA’s mandate to charge reasonable and uniform rates because it is

unlawfu lly discriminatory as applied to multi

- dwelling properties.

For all of the above reasons, the trial court’s order is affirmed.

___________________________ ANNE E. COVEY, JudgeIN THE COMMONWEALTH COURT OF PENNSYLVANIA

FMRR Development :

:

v. :

: Birdsboro Municipal Authority :

: Francis X. McLaughlin :

:

v. :

: Birdboro Water Authority :

: Appeal of: Birdsboro Municipal : Authority and Birdsboro Water : No. 1925 C.D. 2014 Authority :

O R D E R

AND NOW, this 7 th day of October , 201 5

, the Berks County Common
Pleas Court’s October 7, 2014 order is affirmed.

___________________________ ANNE E. COVEY, Judge