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Published: August 18, 2011
Author: Robert Procter
The Wisconsin Builders Association Hot Line is a service provided for the Wisconsin Builders Association by the law firm of Axley Brynelson, LLP. Legal Hot Line Answers should be considered a general statement of applicable legal information. Given this format, it is impossible to fully address all potential legal issues which might apply in any particular situation. A determination of any individual's legal rights in a transaction can only be obtained after a complete analysis of the law and its applicability to the particular fact situation. Please contact the author of the article if additional information is needed, or private counsel, if legal advice is needed.
May a sanitary district impose a fee on vacant lots?
A: For purposes of this answer, we assume that sewerage system facilities have been made available to the vacant lot, but that the vacant lot has not been connected to the system (this would happen upon construction of the residence on the lot).
As a general matter, standby fees may be charged by Sanitary Districts to vacant lot owners for the costs of capital improvements; however, for the reasons set forth below, these standby charges to the property served should bear a reasonable relation to the debt and fixed costs allocated to the portion of the facilities constructed for excess capacity. Any standby fee should be in lieu of a connection charge or should at least be credited against the connection charge, otherwise the Sanitary District would be charging vacant lots twice for the same capital improvements.
Sanitary Districts recover the costs associated with its sewerage system pursuant to Wis. State Statute § 66.0821, which allows a town to “[…] establish sewerage service charges in an amount to meet all or part of the requirements for the construction, reconstruction, improvement, extension, operation, maintenance, repair, and depreciation of the sewerage system, and for the payment of all or part of the principal and interest on any indebtedness incurred for those purposes…”. See Wis. Stat. § 66.0821(4)(a).
This statute further provides that for purposes of making “[…] equitable charges for all services rendered by the sanitary sewerage system […] to citizens […] and other users, the property benefited by the system may be classified, taking into consideration the volume of water, including surface or drain waters, the character of the sewage or waste and the nature of the use made of the sewerage system, including the sewage disposal plant.” Id.
Finally, the statute specifically states that “the charges may include standby charges to property not connected but for which sewerage system facilities have been made available.” Id. This is the statutory provision that authorizes the use of “hookup fees” or “connection charges.” These standby charges are routinely applied when undeveloped property becomes developed and is connected to the municipal sewerage system. The public policy embodied in a connection fee is a recognition that the sewerage system has been designed and constructed to serve existing users and also future users, and that it is fair and equitable to recover from a future user a proportionate share of the cost of the facilities that have been made available to such future users (for example, excess capacity).
It is important to note that that there are generally two types of sewer charges referenced in Wis. Stat. § 66.0821, user charges and connection charges (i.e., standby or hook up fees). Generally, operation and maintenance costs are covered by user charges, which are fees charged on a periodic basis (i.e., monthly) to properties connected to the system. It makes sense that periodic user charges are the vehicle to cover the operation and maintenance costs of the system because it is the current users, and not the vacant unconnected property, that are using the system and causing those costs. Connection fees generally cannot be used for operation and maintenance because the connecting property has never used those services, and those associated charges cannot be proportionally distributed (i.e., the vacant land owner is paying a one time fee for operation and maintenance services he has not received).
The Public Service Commission (PSC) has jurisdiction to review sanitary sewer rates, rules and practices to determine whether such rates, rules or practices are unreasonable or unjustly discriminatory. The DNR also has some review authority under certain circumstances. Under the Clean Water Fund Program, any municipality receiving state funds must adopt a user charge system (UCS). The UCS must proportionally distribute the costs of operations and maintenance among users. See Wis. Adm. Code § NR 162.08. Such costs should not be recovered through a tax levy. If the Sanitary District received state funds, the DNR standards may apply. Moreover, Wis. Stat. § 66.0628 requires any fees imposed by a city, village, town or county bear a reasonable relationship to the service for which the fee is imposed. We believe that this statute would also apply to Sanitary Districts.
Any time that a customer has a question of a Sanitary District as to the basis of a fee imposed on him or her, we suggest that the customer follow up with a letter to the Sanitary District requesting an explanation with supporting documentation as to the following issues:
- The legal basis and citation to the appropriate provision of its Ordinances for imposing the fee
- Tthe method for determining the fee
- The costs that the fee is intended to recover
If the explanation is not satisfactory, a complaint may be filed with the PSC.
For more information about the Wisconsin Builders Association Hot Line, contact Robert Procter at 608.283.6762 or rprocter@axley.com.
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