Opinion ID: 1194908
Heading Depth: 2
Heading Rank: 1

Heading: User Rate Case Analysis

Text: Shawnee Hills Mobile Homes, Inc. v. Rural Water District, 217 Kan. 421, 537 P.2d 210 (1975), is a user rate case. This case involved a water user, Mobile Homes, which operated a mobile home court lying within the boundaries of RWD No. 6. Mobile Homes requested an injunction against RWD No. 6, alleging that the rates it charged were unreasonable, excessive, and confiscatory. The trial court agreed that the rates RWD No. 6 charged Mobile Homes were unreasonable, and the court enjoined RWD No. 6 from collecting the charge. RWD No. 6 appealed to this court. This court reversed the trial court's grant of the injunction, finding that RWD No. 6's rates were not unreasonable. In so holding, this court stated: District No. 6 is a quasi-municipal corporation (K.S.A. 82a-604) and no claim is made that it is subject to supervision and control by the state corporation commission. Nonetheless, the district is not free to exact whatever rate it sees fit to impose. In Holton Creamery Co. v. Brown, 137 Kan. 418, 419, 20 P.2d 503 [1933], this court considered a challenge directed against rates charged by a municipal corporation for water services and there we said: `... Such rates must be reasonable; and persons and corporations dependent on these utilities are entitled to judicial protection against excessive or confiscatory rates....' (Emphasis supplied.) In the Holton case, this court defined the standard by which the reasonableness of municipal water rates are to be gauged. As the court announced, rates must be reasonable in the sense that they are not excessive or confiscatory. It is in this frame of reference that we must judge the circumstances of this case. It is generally recognized that water rates set by a municipality are presumed to be valid and reasonable until the contrary has been established. ( Usher v. City of Pittsburg, 196 Kan. 86, 90, 410 P.2d 419 [1966]; 94 C.J.S., Waters, § 289a, p. 173) and the burden of overcoming this presumption rests upon the challenging party.... .... From 1966 to 1970 Mobile Homes paid for water at the rate of $1 per thousand gallons above a 30,000 gallon minimum. We find nothing in the record that Mobile Homes complained during that period of time that the rate was excessive, oppressive or confiscatory. It was not until [the plaintiff] was informed in September, 1970, that the district had experienced a good year that he unilaterally reduced payments to 50 cents per 1,000 gallons over the minimum, basing his action on an alleged agreement which the trial court found was not established. No cross-appeal has been taken from this finding. In support of its charge of unreasonableness, plaintiff primarily relies on the testimony of Harold W. Gerlach, a professional engineer who, according to his own testimony, had never previously developed a water rate. Although he expressed the opinion, or the suggestion as he sometimes put it, that a rate of 80 cents per thousand gallons would be reasonable, his testimony taken as a whole falls short, in our view, of establishing the rate charged plaintiff as being excessive or confiscatory. 217 Kan. at 428-30. This case demonstrates that a litigant who is not actually a party to the water purchase contract, but is merely a water user who is subject to the rates, may still challenge the rates as improper if the litigant can overcome the rates' presumption of validity and prove that the rates are unreasonable, excessive, and confiscatory. In this case, Bodine pays his water rates to RWD, not the City. Thus, Bodine has sued RWD, not the City, claiming that the water rates are improper. This court analyzes whether RWD's water rates, not the City's water rates charged to RWD, are unreasonable, excessive, or confiscatory. Since RWD's water rates are presumed valid, Bodine has the burden of overcoming this presumption and proving the rates are unreasonable. Bodine does not make any direct arguments to prove that RWD's water rates are unreasonable under a Shawnee Hills analysis. This is because Bodine does not think a Shawnee Hills analysis applies to this case. He contends that this is a contract rate case instead of a user rate case. The trial court found that the rates charged by RWD were not unreasonable, excessive, or confiscatory. We agree with the trial court. Bodine has not offered any evidence to overcome the presumption of validity as to RWD's rates and to prove that the rates are unreasonable, excessive, or confiscatory. From 1978 to 1995, Bodine paid for water at rates which were greater than the rates set out in the contract. There is no indication that he complained to the court during this time that the rates were excessive, oppressive, or confiscatory. See Shawnee Hills, 217 Kan. at 430. Bodine did not offer any evidence that RWD is charging rates which will yield it more than a fair profit or that RWD's rate is disproportionate to the service it renders, which is purchasing water from the City and providing it to users. See 217 Kan. at 431. Bodine tries to argue that RWD's rates are unreasonable because it passes through to the ratepayers the City's unreasonable rates. In other words, Bodine is trying to indirectly attack the City's water rates. This is not permissible in a user rate case. Bodine receives his water from RWD and pays his rates to RWD, not the City. Thus, the question is whether RWD's rates, taking into account its expenses (such as paying the City for the water), are so excessive that RWD will yield a large profit. This is not the case. Taking into account what RWD was required to pay the City for the water, RWD's rates are not disproportionate to the service rendered. As such, Bodine has not overcome the presumption of validity and proven that RWD's rates are unreasonable, excessive, oppressive, or confiscatory, even when all the facts are viewed in favor of Bodine. Bodine's claim, as a noncontract water user, that RWD's rates are improper, fails. The trial court properly granted summary judgment to RWD on this water user rate claim.