The general rule of law is that all rates and fees must be reasonable. This required by the State Constitution. The disputes arise over what is reasonable and who decides. The act defines a hookup fee as a reasonable charge for connecting to a water system which does not exceed the approximate average cost to the city or town for the actual physical connection to the system. In other words a hookup fee should not be a profit center for the city or town.
Any connection charge over and above the hookup fee is by definition an impact fee.
All impact fees must be established in strict accordance with the Impact Fee Act. This act requires certain studies, public hearings, and procedures. These include regulations controlling the accounting for and the use of the money collected. While rates and charges for water service must be reasonable a city or town will be given very broad discretion by a court in their decisions as to what a reasonable fee is. Courts have held that the rates charged by a city are presumptively valid and that any person who challenges the rates carries a heavy burden to show that the rates are unreasonable or discriminatory.