GOVERNMENT REGULATION OF RESIDENTIAL DEVELOPMENTS WATER LINES: GEORGETOWN MUNICIPAL WATER AND SEWER SERVICE V. BUR-WAL, INC. (COA 6/15/2007)

GEORGETOWN MUNICIPAL WATER AND SEWER SERVICE V. BUR-WAL, INC.
GOVERNMENT:  Developers claim for reimbursement for sewer extensions 
2006-CA-000278
PUBLISHED: AFFIRMING IN PART AND REVERSING IN PART
PANEL: MOORE, PRESIDING; LAMBERT, NICKELL CONCURS
COUNTY: SCOTT
Date: 6/15/2007

Two residential subdivision the developers sought declaratory judgments and damages from Appellants Georgetown Municipal Water & Sewer Services (GMWSS) and the City of Georgetown for costs the developers incurred installing water and sewer utility lines within the boundaries of a residential subdivision located within the service area of GMWSS.

The circuit court granted the relief sought by the developers, ordering GMWSS and the City to reimburse the Appellees, from the collections of fees by GMWSS for connections or tap-on to the lines by homeowners, until Appellees were fully reimbursed for the cost of extensions to the water and sewer lines in excess of one hundred feet. At the time of the hearing, this amount was $230,800.00.  Water service and city appealed.

GMWSS is a utility owned by the City of Georgetown responsible for the management and maintenance of the water and sewer utility service in Scott County, Kentucky. The Appellees/developers developed two parcels of property for residential communities where the water and sewer utilities were served by GMWSS.

The developers obtained the required pproval from GMWSS and the City to ensure that the utility lines conformed to established standards and codes and were compatible with the existing water and sewer infrastructure. However, the developers never entered into a contract with GMWSS and the City regarding the payments of the lines, and the developers never requested the same at the time they sought and received approval for the project.  Importantly, neither GMWSS nor the City requested that the developers install the lines on their behalf

Neither document includes a provision for reimbursement or a refund to the developers of either subdivision for the utility lines. Nor is there a separate contract for reimbursement or a refund.   After the lines were dedicated to GMWSS and the City, they have full responsibility for the system, and the developers had no further cost or responsibility associated with the maintenance of the lines.

After their projects were approved, and after the developers received the appropriate certificates to begin construction, they came to believe they were entitled to a “cost recovery” for the costs associated with the installation of the water and sewer lines.

Because they had “footed” the bill, the developers later wanted to recover their costs from GMWSS and the City.   It is undisputed that there was no agreement or understanding beforehand for reimbursement or a refund for the utility lines.

According to the developers’ theory, KRS 96.539 authorizes reimbursement to developers for their costs of installation of the water and sewer lines claiming entitlement to the fees paid by the homeowners to GMWSS to tap into the lines installed by the developer. City disagreed that the developers were entitled to  reimbursement under KRS 96.539 because it does not apply to developers as they are not “customers” nor “applicants” under the facts of this case.

Ultimately, the circuit court ordered GMWSS and the City to reimburse the developers for the costs of the installation of the water and sewer lines in excess of one hundred feet, not to exceed the amount actually collected by GMWSS for connection or tap-on fees charged to customers who connected to the lines installed by the developers. GMWSS and the City appeal this decision.

COA agreed with the circuit court that it is mandatory that GMWSS and the City develop rules to govern extensions of service to unserved customers and areas pursuant to KRS 96.539, but disagreed that GMWSS and the City were required to include in these rules a provision for cost recovery such as that requested by the developers.

COA held that GMWSS and the City are NOT required to reimburse the developers for the costs associated with the installation of the water and sewer lines. KRS 96.539 does not apply in situations such as the one at hand for a variety of reasons and reversed this portion of the circuit court’s opinion.

The plain meaning of the term “customer” is “one that purchases a commodity or service.” Merriam-Webster’s Collegiate Dictionary (10th ed. 2001).   The developers neither purchased water nor sewer service from GMWSS.  Consequently, they cannot be considered as customers under KRS 96.539.

by Michael Stevens

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