ST. ALBANS — The Town of St. Albans will reopen a 2006 lawsuit against St. Albans City regarding water and sewer services, while also seeking to enter into renewed negotiations with the city.

The statement confirming those facts came late Thursday in response to a recent court decision that made void an agreement for the sale of water and sewer allocations by the city to the town. The agreement was part of the settlement of the 2006 case.

Since 2011, the city has had a moratorium on the sale of allocations outside the city limits. An allocation gives a homeowner or business access to a certain number of gallons per day of water and sewer services.

In a press release issued late Thursday, the town said it would seek to reopen a 2006 suit filed against the city. The agreement was part of the settlement of that suit, which the town agreed to have dismissed “with prejudice.”

A dismissal with prejudice means a plaintiff may not raise the same allegations again, but because a portion of the settlement has been voided the town said it would seek the court’s permission to reopen that lawsuit.

“While the town has no interest or desire to resume litigation with the city, preferring to reach an agreement out of court on all issues, the Town must have the ability to return to court and seek relief on claims raised by the town in its 2006 suit should future negotiations fail,” the statement reads.

The court voided the agreement on the grounds that town and city officials did not have a shared understanding of the terms of the agreement at the time it was signed. In addition, Judge Dennis Pearson found the terms of the agreement were not clear.

“The court’s decision emphatically encouraged the town and the city to ‘mutually’ resolve their conflicts without further ‘acrimonious’ litigation. The selectboard intends to pursue the court’s suggestion and will attempt to reopen a dialogue with the city,” the town’s statement reads.

Because a dialog will be resumed, the town argues there will be no need for the moratorium.

“The selectboard believes that, with a willing participant, a resolution can be reached. Furthermore, with a dialogue reopened, the reason for the moratorium will disappear and the moratorium itself should be lifted,” that statement says.

It concludes: “The selectboard is hopeful that with this Decision in hand, the town and the city can move forward and work collaboratively to resolve their issues.”

City manager Dominic Cloud said Friday that the city received notice of the town’s intentions and would not have a response until next week. The city council will likely discuss the situation during its next meeting.

The moratorium itself offers a glimpse into the potential issues at stake in any negotiation.

At the time the moratorium was imposed, the city argued the moratorium was necessary, in part, because of uncertainty over phosphorous reduction requirements. If the current permitted level of phosphorous discharge were to be cut in half, which is a possibility, the facility could meet that limit without substantial investments, as long as it was only serving the city and already allocated areas of the town, according to the moratorium ordinance.

In addition, as Judge Pearson noted in his decision, the city has concerns that access to the city’s wastewater treatment plant has allowed development to occur in the town at a cost to the city’s grand list. At the time the moratorium was imposed, the city manager pointed to two medical offices that were planning to leave the city for new offices in the town.

The moratorium ordinance itself states: “Municipalities should not provide water and wastewater to another community if the providing municipality does not enjoy a share of the benefits of the increased tax base, up front capital investment by the receiving community, or some other equitable arrangement outlined in a long-term agreement.”

2006 Lawsuit

In 2006, the town, several local developers, and three town residents filed suit against the city on behalf of all town residents alleging that the higher rates being paid for water and sewer services by town residents were not legal.

The plaintiffs, which included current selectboard members Bernie Boudreau and Bill Nihan as private citizens, asked the court to determine that the city’s fees were “inequitable, unreasonable and illegal,” and to order the court to repay the plaintiffs and other current and former town users the alleged overcharges.

The plaintiffs maintained the city had agreed to provide sewer services to the town when it used federal funds to upgrade the wastewater plant in the 1980s. However, a previous court ruling had noted that the town, after initially agreeing to apply for the grant jointly with the city, withdrew leaving the city to pay all of the matching funds.

The suit also alleged the city had “selectively denied water and sewer hookup connections to Town residents and businesses as a way to control town growth and further city zoning purposes” in violation of a previous court decision.

According to Pearson’s ruling, town users currently pay about 12 percent more for water and sewer services than city users.

As of last July, before the most recent case went to a three-day trial, St. Albans City and St. Albans Town’s combined legal bills were in excess of $200,000. That figure does not include legal costs incurred in the 2006 lawsuit.