Opinion ID: 1095970
Heading Depth: 2
Heading Rank: 1

Heading: Whether Sweet Home Water and Sewer District could legally charge Lexington Estates, Ltd. an impact fee for the use of the water system?

Text: At issue here is whether Sweet Home possessed the statutory authority to charge an impact fee. [1] A water and sewer district derives its power from the statutory authorization relating to county health, safety, and public welfare: (c) to make and enter into contracts; ... (e) to fix, maintain, collect and revise rates and charges for services rendered by or through the facilities of such district, which rates and charges shall not be subject to review or regulation and review by the Mississippi Public Service Commission except in those instances where a city operating similar services would be subject to regulation and review... . Miss. Code Ann. § 19-5-177 (Supp. 1988); see also Miss. Code Ann. § 19-5-151 (Supp. 1989). A water and sewer district must obtain revenue from reasonable rates, fees, tolls or charges for the services, facilities and commodities of its system... . Miss. Code Ann. § 19-5-195 (Supp. 1988). The revenue should, at a minimum, sufficiently provide for the system's operations and maintenance expenses, bond payments, and reasonable expansion. In the context of larger utilities, this Court has ruled that the reasonableness of utility rates cannot be measured by definite rules and legal formulae, but rests on case-specific facts that a judge must consider. State ex. rel Pittman v. Miss. Pub. Serv. Comm'n, 538 So.2d 387, 394 (Miss. 1989). In this case, the trial court correctly ruled that Sweet Home could not appropriately charge an impact fee to Lexington Estates. While Sweet Home may, under § 19-5-195, assess rates, fees, tolls, or charges, those assessments must be reasonably calculated to provide for the system's functioning and growth. Here, Sweet Home offered absolutely no evidence that it reasonably needed to charge Lexington Estates an impact fee. The water district cited only the fear that the apartment complex would negatively impact the system's operation. The water district chairperson, Lewis, admitted that the idea arose from the system manager's suggestion that she had charged such a fee in another county. Lewis also admitted that the water district singled out Lexington Estates, and that the district has neither before nor since charged another customer with an impact fee. In fact, the impact evidence adduced at trial showed that Sweet Home could support Lexington Estates' needs. The study funded by Miller in fulfillment of FmHA requirements demonstrated adequate capacity, as did the September 1, 1987 letter from Sweet Home's own engineering consultant. Sweet Home cites authority to support the proposition that a utility may legitimately classify users and base charges upon the level of usage. The facts of record demonstrate, however, that Sweet Home offered no reasonable evidence to support putting Lexington Estates in a class by itself and subject to an impact fee. In the case sub judice, this Court concludes that the trial judge's decision has evidentiary support, and that the judge correctly decided that the impact fee assessed by the District against Lexington Estates was, at the very least, arbitrary on its face and as applied and, at worst, discriminatory. Restated, the evidence shows that the District established all other rates and charges in 1985 and had not changed them until the date of the trial (in 1989). In addition, the minutes of the meeting during which the District established the impact fee reveal that the fee was aimed only at Lexington Estates. The record also reveals that the District established the fee: (1) in the absence of a disparate classification of Lexington Estates as a separate class of customer; (2) in the absence of an explanation of the fee's purpose; and (3) in the absence of identification of any increased costs associated with the service it now provides Lexington Estates. The Court notes that the trial judge concluded that the District has adequate capacity to serve Lexington Estates. Finally, the Court disagrees with the District's contention that it had contracted with Lexington Estates to provide water and sewer services in exchange for an impact fee. This Court supports its conclusion by citing: (1) the lack of a written or oral contract; (2) the lack of a meeting of minds with regard to certain matters such as the nature of the impact fee; and (3) the uncertainty as to whether the District even has the authority to contract outside of its rates and charges. Id. at 5. A decision of a circuit judge sitting without jury falls under the manifest error standard of review. Kight v. Sheppard Bldg. Supply, Inc., 537 So.2d 1355, 1358 (Miss. 1989). No manifest error appears in the trial court's ruling, and its decision on this issue should be affirmed.