WATER/SEWER SERVICES: Suit raises new issues

Records prompt moratorium, allocation debate

Michelle Monroe

By Michelle Monroe

Staff Writer

Just
The Facts

Owned by

They’re just surfacing for the first time as part of this litigation.

- Dominic Cloud, city manager

ST. ALBANS — St. Albans City and St. Albans Town developer Sam Smith have filed dueling motions for summary judgment in a lawsuit brought by Smith over water and sewer services.

The suit has raised numerous questions about the history, and potentially the future, of the north end sewer district, including whether the city could enforce a moratorium on water and sewer serves to the town’s north end growth center.

The two sides agree that Smith’s company, Ingleside Equity Group, sought water and sewer services for a hotel near Exit 19 off of Interstate 89. On June 6, 2012, Smith signed an agreement to sell property to hotel developer John Larkin provided he could obtain water and sewer allocations for his property on the south end of the town.

The city denied the allocations, citing a 2011 moratorium on the sale of water and sewer allocations outside the city limits, stemming from a larger disagreement between the city and town.

Smith filed suit, claiming the city was treating him differently than it was treating property owners in the north end sewer district. When the moratorium was created properties in that district – the town’s northern growth center — were specifically exempted on the grounds that they had a pre-existing allocation.

Smith’s attorney is arguing that in fact the district does not have a pre-existing allocation and that the only difference between Smith’s property and the sewer district properties is how water and sewer lines serving them were funded.

If, in fact, Smith’s property has essentially the same relationship with the city as the property owners on the north end, then the court would likely find the city had discriminated against Smith when it allowed property owners on the north end to continue to obtain water and sewer allocations.

North end district

On Aug. 7, 2001, the Town of St. Albans adopted an ordinance establishing the sewer district. The ordinance states that the city has granted the town an initial allocation of 100,000 gallons per day of water and sewer capacity. Included in the ordinance is a map dividing that allocation among the individual parcels within the district. The ordinance states that as allocations are used they will be deducted from the total allotted to that parcel.

The infrastructure to provide water and sewer services to the district was built by the town with a bond that is paid by a special tax levied on property owners within the district.

In his deposition, St. Albans City Manager Dominic Cloud acknowledged there is no written agreement between the city and the town regarding the district.

However, there is a letter signed by former city manager William Cioffi informing the town that the city council had agreed to grant the town a wastewater allocation of 100,000 gallons per day that will expire on Dec. 31, 2002 for an area along Route 7 from Dunkin Donuts north to Jewett Avenue. There is no indication the town ever paid for the allocation. Instead, individual landowners paid for allocations as they developed their parcels.

The letter was located as part of the city’s effort to provide requested documents to Smith’s attorneys. “That’s the first indication that maybe there was an expiration date on the Route 7 North Sewer District,” said Cloud during his deposition.

If the allocation expired, “it raises all kinds of huge questions about what do you do… There’s all kinds of development that’s occurred since then, presuming that the district was valid. So we haven’t gotten to any of those questions. They’re just surfacing for the first time as part of this litigation,” Cloud said.

In his deposition, Cloud stated that the city had a long history of treating the sewer district as a non-expiring allocation. It is the only allocation listed in city records without an expiration date, and city staff had a practice of treating the allocation as non-expiring, deducting the allocations granted to new developments in the district from the initial 100,000 gallons per day.

Developers in the sewer district are treated differently than developers in both the city and other parts of the town. They have an allocation that hasn’t been paid for and which is not granted to a specific project.

If the city could have included the sewer district in the moratorium, it would have, Cloud said. “That was a pre-existing commitment that we did not believe that we could unwind,” he stated. “We did an analysis to see if there was an ability to exclude it, and the conclusion we arrived at pretty quickly was this is a longstanding feature of governmental service in northwestern Vermont and we can not roll that back. Notwithstanding any imperfections that might exist in the creation of that district, the ability to get out from underneath that district assumption, that was never seriously considered.”

Lawsuit’s claims

It is Smith’s contention that his property is essentially the same as those in the sewer district. In court filings, Smith’s attorney, Lisman Leckerling, discusses the district as though it was a single property owned by a single developer, which it is not.

Nevertheless, he argues that, like the sewer district, Smith’s property is located in an area designated as a growth area by St. Albans Town; there are Act 250 permits for development of multiple parcels (in the case of the district, those permits are held by multiple landowners); both have to follow the same procedures to secure allocations; and both have constructed infrastructure for water and sewer to the city’s specifications. The difference is that Smith paid for the infrastructure serving his property while the town bonded for the infrastructure on the north end.

Leckerling also states that the Smith property and the north end sewer district “are not benefited by any contract which required the city to grant allocations.”

By excluding the sewer district from the moratorium, the city “has singled out one development for preferential treatment,” Leckerling argued.

If Smith prevails, and the court finds that the city did not have an obligation to provide water and sewer services to the district based on previous practice, then the question will become whether the district may be added to the moratorium.

1994 lawsuit

Leckerling also points to an alleged pattern of discrimination on the part of the city. In 1994, Smith’s parents, Avis and Edwin, sued the city alleging the city had improperly denied them water and sewer allocations for a residential development at Exit 19. The court concurred, finding the city denied the allocations based on zoning concerns, such as traffic, which were outside the city’s purview.

By exempting the north end sewer district from the moratorium, the city is encouraging development in one area of the town over others, a zoning decision it is not within the city’s control to make, Leckerling argues, pointing to the 1994 court ruling.

The court’s ruling in the 1994 case was filed as an exhibit in the current case. Interestingly, the judge in that case noted that although town lands were included in a grant application to the Environmental Protection Agency (EPA) to help pay for an upgrade to the city’s sewer plant, the town ultimately withdrew from the grant. The town had initially agreed to pay half of the matching funds for the grant. When the town withdrew the city paid the entirety of the matching funds.

The EPA grant is frequently cited by town residents who believe the city has an obligation to provide water and sewer to the town. During his deposition, Cloud was questioned about planning documents that were part of the grant process. The intent was to determine the phosphorous reduction capacity needed at the plant over a 20-year span if every potential customer signed up for sewer services from the plant. Those potential customers included the Town of St. Albans.

Questioned about those documents during his deposition, Cloud replied, “I have never in all my research, in all of my conversations with the Agency of Natural Resources, I have never been able to find anything which says that the city is obligated to serve the town. I’ve seen planning documents that have a 20-year time horizon expiring in 2010 that says if this growth occurs this technology will be able to treat the plant. But I’ve never seen anything that says the federal government will give us ‘x’ amount of money and in exchange we agree to be the provider of water and wastewater for the Town of St. Albans under any terms regardless of how it impacts us.”

There are now competing motions for summary judgment before the court, with each side claiming it is entitled to a ruling in its favor as a matter of law. The court could find for either side, or determine that there are disputed facts that need to be determined at trial.

It is not known when a ruling will be made.