BURLINGTON — A federal court case that brings into question St. Albans City’s ban on new water and sewer hookups went to a hearing here in U.S. District Court on Thursday. The outcome could determine whether commercial development near Interstate 89 Exit 19 remains stalled or is allowed to move ahead.

Judge William Sessions quizzed attorneys for Ingleside Equity Group and St. Albans City on the question of whether the city discriminated against Ingleside when it issued a moratorium on the sale of water and sewer allocations outside the city limits in 2011.

Ingleside, owned by Sam and Rachel Smith, is now unable to purchase allocations needed to develop land at Exit 19. Landowners at Exit 20, however, are exempt from the moratorium by virtue of being part of the north end sewer district. [See accompanying story for the history of the district.]

Ingleside maintains that it is similarly situated to those landowners and that the city is discriminating by continuing to grant water and wastewater allocations for properties within the sewer district, but not to Ingleside. Because of the moratorium, Ingleside was unable to fulfill a 2012 contract for the construction of a Hampton Inn hotel.

The city replies that the sewer district had a pre-existing allocation treated by St. Albans Town and the city as non-expiring. Other landowners in the town holding pre-existing allocations have been able to renew them since the moratorium, the city notes, including Ingleside, which had a pre-existing allocation for a separate property other than the hotel.

Both sides have filed motions seeking summary judgment in their favor.

William Leckerling, attorney for Ingleside, had barely begun to discuss his client’s argument when Sessions asked, “Aren’t there some fairly fundamental issues?”

In order to grant a motion for summary judgment, a judge must find there are no central factual issues in dispute that might alter the outcome of the case. Summary judgment may be issued when all that remain are issues of law not requiring a trial to settle.

In his deposition, Smith said he had built $400,000 worth of water and sewer infrastructure to accommodate future development on a 24-acre parcel at Exit 19 on the recommendation of then city manager William Cioffi. The infrastructure was built along with the Maplefields project, which began the permitting process in 1999 and was finally constructed in 2004-2005.

Smith said he met with the city when he requested allocations for the Maplefields parcel and was advised to put in a 10-inch sewer main and an 8-inch water main. “The city’s practice had been that you extend their main lines and this main line was going to service the entire growth center, the entire area,” said Smith in his deposition.

Sessions asked whether the city had made representations to Smith on which he had relied when building the infrastructure.

Leckerling replied that whether Smith had relied on such a representation was another fact establishing similarity with landowners in the north end sewer district, but was not central to the case and would not prevent the court from rendering a summary judgment.

Sessions raised the issue again with the city’s attorney, Constance Pell, stating, “They relied in good faith upon representations made by the city,” he said of Ingleside. He asked if it was fair to continue to give water and wastewater allocations to sewer district landowners but not the Smiths.

Pell replied the representations were not the same, noting that the Act 250 documents for Smith’s project include provisions regarding application for new allocations as further development occurred.

The city does not require landowners in the sewer district to purchase allocations years in advance, Sessions noted.

“I don’t believe they can be treated the same way,” answered Pell. “There’s no sewer district in this particular area.”

Sessions asked Pell to explain why the city felt obligated to uphold the sewer district agreement.

Pell replied that the creation of the district was based upon representations from the city.

Sessions asked a similar question of Leckerling, noting the town had relied upon representations from the city that the sewer district would have a 100,000-gallon per day allocation and the city felt obligated to uphold that commitment.

“It (the city) has to have a legitimate reasonable governmental basis for doing so,” Leckerling answered. There was no written contract or agreement obligating the city to provide those allocations once the original allocation expired, he argued, only a town ordinance establishing a funding mechanism to pay for the infrastructure.

Sessions noted the town took out a bond and built infrastructure based on a representation from the city. As a result the city had “if not a legal obligation then at least a moral obligation not to stop that by application of this moratorium,” he said.

In his response, Leckerling noted that Smith, like the town, had built infrastructure in anticipation of future development.

Returning to that issue, Session noted Leckerling could make the argument that Smith relied “upon representations of the city to expand infrastructure” then say, “That’s just like people in the northern sewer district.”

Such an argument, Leckerling conceded, would defeat Ingleside’s motion for summary judgment by raising a factual issue requiring trial – the extent to which the city had or had not made representations to Smith about future allocations.

Asked again about a moral obligation on the part of the city to uphold its agreement with the town, Leckerling replied, “The moral obligation is a straw man.”

There are established procedures for securing allocations and under those procedures the town’s allocation for the northern sewer district had expired. The Act 250 permit for the sewer district required the town to seek renewals of the allocations for the district, but it had failed to do so, Leckerling pointed out.

Leckerling also argued the city excluded the north end sewer district because it favors development in one section of the town over the rest of the town. However, he did not suggest a reason for such favoritism.

In his deposition, St. Albans City Manager Dominic Cloud said the north end sewer district would have been included in the moratorium if the city could reasonably have done so.

Sessions took the oral arguments under advisement and will now need to enter a judgment. He could find in favor of either side, or rule that it is not possible to render summary judgment because there are factual issues requiring adjudication. In that case a trial will be held.