IS A STORM WATER PUBLIC UTILITY IN YOUR FUTURE?

Management of storm water increasingly is a hot issue for municipalities. Several drivers are contributing to this situation, including:

1. The federal Clean Water Act and USEPA regulations that may require collection and treatment of contaminated storm water.

2. Environmental laws and regulations that may require separation of storm water mains from wastewater mains. When storm water is allowed to enter into the wastewater system, wastewater mains can become surcharged, causing basement backups, and wastewater biological process treatment facilities can wash out. (See my blog, "Illegal Storm Water Connections...Going Away From The Flow", May 7, 2010).

3. Flooding of properties, buildings and streets upon major rain events.

One possible approach for storm water management may be for municipalities to form and operate storm water public utilities, much in the manner that they may own and operate water, wastewater or electric public utilities. A recent Florida example is discussed in City of Gainesville v. State, 778 So.2d 519 (FL. App. 2001).

The City formed a storm water public utility and billed properties in the city a utility charge for storm water management utility services. The charges are based on the cost of providing storm water management services to different classes of properties. The charges are computed based upon equivalent residential units (ERU) of 2,300 square feet, representing the average impervious area for all developed, detached single family homes in the city. The ERU for commercial properties is computed based upon measurement of the developed, impervious area of each property. Undeveloped properties and properties which do not contribute to storm water runoff are exempt. Credits are available to property owners who retain all or a portion of storm water runoff from their property.

The Court held that, under Florida law, the city had authority to establish storm water management systems and to finance them by collecting utility charges. Of course, the availability of the storm water public utility approach depends on the legislative authority of a particular state. See also State v. City of Charleston, 513 S.E.2d 97 (1999). For a related discussion, also see "Strapped Cities Hit Nonprofits With Fees", Wall Street Journal, December 27, 2010, Sec. A-1, p.1.

IS THERE A SANTA CLAUS?

At this Holiday time of year, it is difficult to find a water topic that is appropriate. However, the general scope of the law does not disappoint. So, I digress temporarily to see what the law may say about Santa Claus.

One may recall the classic movie "Miracle On 34th Street" where a judge, after a trial. found a jolly old man to be Santa Claus because the Post Office delivered tons of mail to him addressed to Santa Claus. Of course, the movie is both fictional and dated, as today the Post Office likely would deliver only tons of catalogs addressed to "occupant."

There are, however, real court decisions involving Santa Claus, and I will share three of them.

In an Ohio case, a man petitioned the court to change his name to "Santa Robert Claus." The court noted that he "is a rotund gentleman with a full white beard and wears wire glasses, which he says attributes to people commenting on his resemblance of Santa Claus." According to the court, the petitioner stated "I don't want people to say you look like Santa, I want to be Santa."

The Court denied the petition, finding it to be against public policy. The court reasoned as follows:

"The court finds that there is an economic value to the name of Santa Claus. The court finds no fraudulent intent of the petitioner to take advantage of the economic value for the use of the name. However, the court finds public policy reasons to deny the petitioner's request, particularly the interference with the rights of others. The petitioner is seeking more than a name change. He is seeking the identity of an individual that this culture has recognized throughout the world, for well over one hundred years. Thus, the public has a proprietary interest in the identity of Santa Claus, both in the name and the persona. Santa Claus is really an icon of our culture; he exists in the minds of millions of children and adults.

"The history of Santa Claus-the North Pole, the elves, Mrs. Claus, reindeer-is a treasure that society passes on from generation to generation, and the petitioner seeks to take not only the name of Santa Claus, but to take on the identity of Santa Claus. Although thousands of people every year do take on the identity of Santa Claus around Christmas, the court believes it would be very misleading to the children in the community, particularly the children in the area that the petitioner lives, to approve the applicant's name change petition." (In re Name Change of Handley, 736 N.E. 2d 125 (Ohio Prob. 2000)).

An opposite result was reached in a Utah decision. A man petitioned to change his name to "Santa Claus." The trial court denied the petition. It found that such a name change would likely create confusion and misunderstanding, and might discourage people from ever suing someone named Santa Claus. On appeal, the Utah Supreme Court reversed, ordering the name change to be granted. It said that there was no evidence that confusion and misunderstanding would result from the name change. It noted that the man already tells others that he is Santa Claus, and allowing him to legally change his name to reflect his practice is more likely to avoid confusion. A dissenting opinion cited the Ohio decision in the Handley case in support of denial of the petition. (In the matter of the Application of David Lynn Porter, 31 P. 3rd 519 (Utah 2001)).

It appears that being Santa Claus may not avoid legal issues either. In another Ohio case, a man was charged with a misdemeanor because he displayed to a police officer an Ohio identity card which identified him as Santa Claus. The man presented various documents in support of his motion to dismiss the charge, including:

A certificate of birth for one Santa Claus born at the North Pole December 25 in 383 A.D. to Mr. Claus and Holly Noel with Dr. Snowflake attending;

Ohio identification cards for various years issued to Santa by the state, with photos and indicating residence at i Noel Drive, North Pole USA;

A certificate of title and vehicle registrations issued to Santa at the same address for a 1965 Volkswagen.

The court dismissed the charge. It stated, in part: "Santa routinely paid (and the state of Ohio accepted) taxes and registration fees under the name of Santa for many years....To sustain the burden of going forward, the state must make a showing that Santa knowingly displayed an identification card that was 'fictitious'. This the state has not done. The fact that Santa had an ongoing relationship for 20 years with the BMV is not indicative of 'artificiality or contrivance' for, in fact, under the publicly held records of the Ohio Bureau of Motor Vehicles, Santa has been a 'real person' since as early as 1982." (State of Ohio v. Hayes a.k.a. Santa Claus, 774 N.E. 2d 807 (Ohio Mun. 2002)).

So, is there really a Santa Claus? You be the judge.

THE ICEMAN GO-ETH

Water has several properties. One of these is ice-a liquid becomes a solid at a certain temperature. In the 21st century, most of us likely think of ice only as something to slip and fall on in winter and something to chill our beverages in summer.

However, ice became a significant necessity in the latter half of the 19th century and early part of the 20th century-as a "refrigerant." In Chicago, for example, several companies emerged to engage in the business of cutting blocks of lake ice, storing the ice under sawdust and straw in warehouses, and delivering ice to houses and businesses.

It appears that a common source for Chicago ice were lakes in northern Indiana, particularly in LaPorte county. Indeed, my parent's cottage property on one of such lakes was subject to an old easement along the lake shore for harvesting of ice by a packing company. Most likely, Indiana ice was shipped to Chicago by railroad.

Prior to the electric compressor refrigerator we use today, homes used blocks of ice in their "ice boxes"-a term still often used to refer to a modern refrigerator. Frequently, such old ice boxes are viewed as desirable antiques by collectors, and thereby retain a life in the 21st century.

By the 1950s, sales of block ice had diminished, along with the ice companies. I can recall two exceptions: milk delivery trucks still rumbled down neighborhood streets, cooled by large blocks of ice which dripped melting water wherever they stopped. And a vacation car trip necessitated a metal cooler in the trunk for beverages and sandwiches, chilled by a block of ice which took up half of the cooler and soaked the sandwiches with melted water. Ice would be purchased from gas station vending machines along the route, the machines emblazoned with "ICE" in huge red letters. If one visits today Cedar Pass Lodge in the South Dakota Badlands, one still will see a large ice vending machine. Though inoperable, it stands as a Mount Rushmore of the ice industry.

Yes, the ice man go-eth, but memories linger.

A WATER CURRENCY EVENT

A few days ago, in a fit of uncharacteristic cleaning, I removed a drawer from a small Eastlake chest I use to store things I never look at again but think I may do so some day.

At the back of the inside of the chest, behind the drawer, an interesting item was wedged. It is a colonial note for four shillings, dated August 2, 1775, issued by the Colony of New York to finance its water works. The top of the note reads: "New York Water Works." It is small, about 2 inches by 31/2 inches, and is hand signed. It reads, in part: "This note shall entitle the Bearer to the sum of Four Shillings current money of the Colony of New York, payable on Demand, by the Mayor, Aldermen, and Commonalty of the City of New York, at the Chamberlain of said City, pursuant to a vote of the said Mayor, Aldermen, and Commonalty, of this date." On the back of the note are pictured a water pumping station and flowing fountains.

This note, as well as similar notes, were colonial currency of the day. I had purchased it early in my career as a curious illustration of an early form of financing for a municipal water system.

Interestingly, this note, which is over 235 years old, was issued less than one month after the signing of the Declaration of Independence. It also was a time when there were many loyalists in New York, some of which still thought that a compromise could be reached with the king of England.

Today, some water system improvements are financed by the issuance of bonds, with the debt service recovered in rates paid by the users of the systems-a procedure not that different from the essence of the 1775 note. However, today there appears to be a growing trend, and dependence, toward "financing" water system improvements by receipt of grant money from the federal and state governments. Of course, not every system can receive a grant, which means that users of other systems may be financing systems that provide no benefit to them.

There were no grants in 1775 to finance water system improvements. How did they do it? Maybe, occasionally we need to look at the back of a drawer for unseen ideas forgotten because we see only the immediate.

DISCRIMINATION IN RATES: FREE SERVICE AND DISCOUNTS

Historically, utilities frequently have provided service without charge to public and governmental buildings and uses, such as administrative offices, libraries, schools and even churches. Utilities have attempted to explain such free service on public relations-good will grounds or as a franchise concession.

However, free service cannot be justified by cost of service ratemaking principles and is unreasonable discrimination on its face. So, for example, a New Jersey court held that a contract was unjustly discriminatory because an electric utility agreed to provide free lighting service to municipal buildings. City of Plainfield v. Public Service Electric and Gas Company, 412 A.2d 759 (N.J. 1980). The Wisconsin Public Service Commission has prohibited a municipal owned water utility from providing free or discounted service to municipal departments. City of Westby, 2-U-5017; City of Brodhead, 2-U-5092, 1958 WL 7484. An Indiana court has held that the state regulatory commission could set telephone rates to be charged a city even if the franchise granted the telephone company called for free service. Winfield v. Public Service Commission, 118 N.E. 531 (Ind. 1918).

Discounted rates, such as for senior citizens or for lifeline programs have been held to be invalid discrimination in some states. For example, see Mountain States Legal Foundation v. Utah Public Service Commission, 636 P. 2d 1047 (Utah 1981). Along lines similar to discounted rates, a Massachusetts court held that a disproportionate large water rate increase to one industrial customer compared with other industrial customers was illegal discrimination. Massachusetts Municipal Wholesale Electric Company v. City of Springfield, 726 N.E. 2d 973 (Mass. App. 2000).

Some states have approved economic development discounted rates as legal discrimination when the evidence shows all customers will benefit from the assumed additional load and revenue. Re Northern Indiana Public Service Company , 96 PUR4th 267 (Ind. U.R.C. 1988).

DISCRIMINATION IN SERVICE

The word "discrimination" can be emotionally charged, particularly when used in racial, religious, nationality and similar contexts. In such settings, a legal prohibition against discrimination generally tends to be absolute.

In the public utilities world, a prohibition against "discrimination" also can be applicable. Typically, such discrimination can arise in two situations: (1) establishment of rates and (2) extension of service.

However, in the public utilities world, not all discrimination necessarily is illegal. Discrimination can be reasonable or just-a legal discrimination.

A future posting will discuss rate discrimination. An Illinois Appellate Court decision will illustrate a claim of service discrimination. (Schroeder v. City of Grayville, 520 NE2d 1032 (5th Dist. 1988)

Plaintiffs were non-residents of a city. In their complaint, they accused the city of discrimination because it refused to supply water to their property located outside the city limits. Plaintiffs alleged that refusal to extend water service to their property was in retaliation to their prior refusal to grant an easement requested by the city. The complaint alleged that the city improperly discriminated against plaintiffs because the city had supplied water to other non-residents similarly situated.

Plaintiffs argued that a city owning and operating a water system does so in its business or proprietary capacity and is obligated to refrain from unreasonable discrimination against persons similarly situated. The city argued that it had no duty to provide water to non-residents in absence of a contractual undertaking obligating it do so.

The Appellate Court noted established caselaw that a municipality owning and operating a water system is no different than a private water utility; and that private utilities are prohibited from engaging in unreasonable discrimination in rates or manner of service. The Court concluded that "the reasoning in these cases supports plaintiffs' claim that defendants' refusal to provide them water, while providing water to others similarly situated, is an unreasonably discriminatory manner of service." (Id. at 1034)

Arguably there may be circumstances where a municipality can refuse service to non-residents without bumping into a discrimination issue. For example, a city may have a firm policy requiring a non-resident to enter into an annexation or pre-annexation agreement. Or a city may not have sufficient "backbone" plant capacity to take on additional non-resident customers. Or the city may not have distribution facilities in proximity to the non-resident land and, therefore, requires payment for an extension of lines, for which the non-resident is unwilling to pay. The point is that establishing the existence of unreasonable discrimination in service is not always a simple matter.

GOOD TO THE LAST DROP

Recently, I attended an estate auction held in a farm yard surrounded by hovering corn stalks, mysterious metal storage structures and biting flies. Several generations of possessions were piled upon farm wagons awaiting eager bidders. On one of the wagons, I spied two cast iron water hand pumps, one red, the other green.

When a ring man held up the green one for the auctioneer to start his chant, the ring man pumped the handle up and down as if he were pumping water at a sink in an imaginary farm kitchen. But, of course, there was no water to be pumped--only the dusty air of the farm yard. At that moment, I wondered what it would be like if my pump or faucet were dry and produced only air. Many parts of this country as well as other parts of the world face that prospect.

But, alas, there WAS water to be had at the auction, though at a significant cost. A food vendor squeezed within a small trailer next to the auction site was selling bottles of drinking water for about $1 each. That works out to be about $8 per gallon or $8,000 per 1,000 gallons.

What is the point? There are two points to be made. First, safe drinking water increasingly is becoming a scare commodity, particularly as demand grows across the world.

Second, to deliver safe drinking water to our hand pumps and faucets costs more and more as time goes on. In August, Black & Veatch issued the findings of its sixth "50 Largest Cities Water and Wastewater Rate Survey." The survey found that the average annual increase in typical residential water bills from 2001-2009 was 5.3%, and for residential sewer bills, 5.5%. These annual increases were more than twice the average annual CPI-D increases of 2.4%. (See www.bv.com/top50ratesurvey)

According to Black & Veatch's analysis of the survey, causes for the bill increases included:

1. Increases in operating and maintenance expenses, such as for electricity and chemicals.

2. Lower usage, and corresponding lower revenue to cover fixed costs such as debt service.

3. Pension and health care benefits.

4. Regulatory and legal requirements.

5. Aging infrastructure, requiring replacement and upgrading.

To the list, I would add the "scarcity factor." In some areas, ground water supplies are diminishing and surface water supplies are becoming less reliable or more costly to utilize. Utility systems are being compelled to search for alternative supplies, which may involve construction of transmission pipelines or more extensive treatment facilities.

No, I did not bid on either hand pump, nor did I buy a bottle of water. I journeyed home thirsty but more appreciative of the glass of cool water from my faucet. It really was good to the last drop.