Opinion
14-P-263
11-05-2014
WINDSOR COURT, LLC v. LYNNFIELD WATER DISTRICT.
NOTICE: Decisions issued by the Appeals Court pursuant to its rule 1:28 are primarily addressed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, rule 1:28 decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28, issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The Lynnfield water district (water district) charged the plaintiff, Windsor Court, LLC (Windsor Court), $243,400 to connect to its water system. Windsor Court filed this suit, claiming that the charge is an impermissible tax, rather than a permissible fee. Following a jury-waived trial, a judge of the Superior Court disagreed and ruled in favor of the water district. Windsor Court now appeals. We affirm.
Background. The parties agree that the judge applied the correct three-prong test to determine whether the charge was a permissible fee rather than an impermissible tax:
"Fees '[1.] are charged in exchange for a particular governmental service which benefits the party paying the fee in a manner not shared by other members ofDenver St. LLC v. Saugus, 462 Mass. 651, 652 (2012) (Denver St. LLC), quoting from Emerson College v. Boston, 391 Mass. 415, 424-425 (1984) (Emerson College).
society[;] . . . [2.] are paid by choice, in that the party paying the fee has the option of not utilizing the governmental service and thereby avoiding the charge[;] . . . and [3.] . . . are collected not to raise revenues but to compensate the governmental entity providing the services for its expenses.'"
The undisputed facts are that in 1998, the water district commissioned the civil engineering firm Tata and Howard to perform a water distribution study and make recommendations for improvements based on current needs and a twenty-year projection of future demand based on expected population growth. In 2005, due to greater than expected projected population growth from new high density development in Lynnfield, the water district commissioned a second water distribution study from Tata and Howard. The 2005 study recommended improvements based on a projected fifty percent increase in water usage. In particular, an upgrade to the pump station was recommended, as well as increased supply from the Massachusetts Water Resources Authority (MWRA), which required a new transmission main. At the time of the 2005 study, the system was near its capacity, which would have limited its ability to serve any new developments.
Also in 2005, the water district hired the firm Consultants to Management to devise a new fee structure implementing a "system development charge." System development charges are fees paid only by new customers connecting to the system or existing customers seeking to upgrade their current system, and are a way for municipalities to finance costly capital projects. Following the firm's recommendation, the water district adopted a new connection fee schedule, with escalating charges based on the diameter of pipe being connected to the system, in addition to a per unit hook-up fee. The water district collected system development charges from new customers and existing customers expanding their service, with the funds being placed in an account separate from the water district's general fund. The water district then used those funds, as they became available, to finance both the upgraded pump station and the switch to a larger transmission main from the MWRA.
The new connection fee schedule was orders of magnitude greater than the prior schedule. For example, to connect a one-inch pipe to the system, the charge increased from $100 to $6,000.
Windsor Court at the time of trial was constructing a forty-four unit residential development on previously undeveloped land in the town of Lynnfield. Gregg Monastiero, a principal of Windsor Court, testified that, after signing the purchase and sale agreement for the land, and just prior to closing, he learned that Windsor Court would be charged a system development charge of $195,000 plus an additional $1,100 per unit. Monastiero deemed the amount "pretty excessive" based on his twenty-year prior experience as a developer, but went ahead with the purchase and paid, under protest, the system development charges as they became due.
At the time of trial, seven of fifteen proposed buildings were either completed or under construction.
Monastiero testified that for developments he had built in Lynnfield's other water district, he had paid about $12,000 in connection fees for each development. He further testified that for all of his prior development projects -- in Lynnfield, as well as in other nearby communities -- he had paid no system development charge or any other utility fee of the magnitude charged in this case.
On July 13, 2010, Windsor Court filed a complaint against the water district seeking "an order declaring the connection fees to be an unlawful tax." In his memorandum of decision on the water district's motion to dismiss, the judge concluded that the evidence, as a matter of law, satisfied both the first and second prongs of the Emerson College test, but that disputed factual issues remained as to the third prong. Following a one-day jury-waived trial, the judge found in favor of the water district as to the third prong, and determined that "the system development fees charged by the Lynnfield Water District . . . were plainly legitimate fees."
Although the water district's motion was styled as a motion to dismiss, the parties agree that the judge treated it as a motion for summary judgment.
Discussion. On appeal, Windsor Court challenges both the judge's decision on summary judgment (see note 4, supra) that the system development charge satisfied prong one of the Emerson College test, and the judge's determination, after the bench trial, that prong three was satisfied. We review a grant of summary judgment de novo. The standard of review is "whether, viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to a judgment as a matter of law." Coviello v. Richardson, 76 Mass. App. Ct. 603, 607 (2010), quoting from Siebe, Inc. v. Louis M. Gerson Co., 74 Mass. App. Ct. 544, 548 (2009). We review the judge's decision after trial for errors of law. The case was tried on largely undisputed facts, and we accept the judge's findings of fact (none of which were challenged on appeal). Compare New England Canteen Serv., Inc. v. Ashley, 372 Mass. 671, 674-675 (1977).
Both parties concede that, in the wake of Morton v. Hanover, 43 Mass. App. Ct. 197, 202 (1997), the second prong set forth in Emerson College is not conclusive.
1. Particularized benefit. Windsor Court argues that because all of the water district's users benefit from the improvements to its infrastructure funded by the system development charge, Windsor Court enjoys no "sufficiently particularized" benefit in exchange for payment of that charge. Emerson College, 391 Mass. at 425. The argument is misdirected. Whether other water district customers may have received some benefit from the system upgrades is inconsequential, as "[our] inquiry does not involve an exact measuring or quantifying of the comparative economic benefits of the limited group and the general public. Instead, the inquiry is whether the limited group is receiving a benefit that is, in fact, sufficiently specific and special to its members." Denver St. LLC, 462 Mass. at 660. Here, according to the undisputed facts, prior to the implementation of the system development charge, the water district was nearing its maximum capacity. Therefore, without improvements to the system to increase capacity, Windsor Court would not have been able to connect to the system, a situation unique to Windsor Court and other developers seeking connection to the water district's system. For this reason, the judge did not err in concluding that the connection charge was assessed in exchange for a particular governmental service benefitting Windsor Court in a manner not shared by others.
This case is similar to Bertone v. Department of Pub. Util., 411 Mass. 536 (1992) (Bertone). In Bertone, the Hull municipal lighting plant (HMLP) instituted a hook-up fee for new customers in anticipation of imminent condominium development and substantial increases in peak loads, where, as here, the existing infrastructure was only capable of meeting the then- current demand for service. Id. at 539. Under those circumstances, the court held the hook-up fee to be a permissible fee, as "[t]he benefit of new or expanded service (including both the service itself and the new construction which make it possible) is conferred only on those who connect to the system after [the inauguration of the new hook-up fee policy]. The fact that system improvements will also serve existing HMLP customers is not significant because . . . the product received and paid for by those customers . . . remains unchanged (unless they seek expanded service, in which case they must pay a hook-up charge)." Id. at 549. See Denver St. LLC, 462 Mass. at 660 (sufficiently particularized benefit found where "developers gained immediate access to the sewer system for their new connections" at a time when, without the charge imposed there would have been a moratorium on new development).
The plaintiff's argument that the facts in this case are distinguishable from those in Bertone because here the calculation of the system development charge was not limited to "site specific" work "necessitated by this project" is unavailing. See Bertone, 411 Mass. at 539 ("The hook-up charge assessed to the [plaintiffs] covered the cost of both the general system improvements and the site-specific improvements required [by their condominium project]").
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2. Use of the funds collected. To meet the third Emerson College prong, the funds collected by the water district through system development charges must have been "collected not to raise revenues but to compensate the [water district] for its expenses." Emerson College, 391 Mass. at 425. See Southview Co-op. Hous. Corp. v. Rent Control Bd. of Cambridge, 396 Mass. 395, 404 (1985); Denver St. LLC, 462 Mass. at 661. The judge did not err in concluding that the standard was met here. Although the fee in this instance was sizeable, "reasonable latitude must be given to the agency in fixing [the amount of] charges." Southview Co-op. Hous. Corp. v. Rent Control Bd. of Cambridge, supra at 403. The evidence at trial supported the judge's findings (which are undisputed on appeal) that the funds collected through the system development charge were used exclusively for water system infrastructure improvements and not for general revenue. Moreover, as the trial judge found, the water district had the discretion to reject other alternatives, including raising water rates for all customers, or issuing a bond, thereby increasing its debt. These approaches would have spread the costs created by the expansion to existing customers an option rejected by the water district.
Conclusion. While we agree with the judge's determinations, "[a]s the action was one for declaratory relief, the . . . judge was required to make a declaration of the rights of the parties." Dupont v. Dracut, 41 Mass. App. Ct. 293, 297 (1996), citing Boston v. Massachusetts Bay Transp. Authy., 373 Mass. 819, 829 (1977). Accordingly, the judgment shall be modified to declare that the system development charges imposed by the Lynnfield water district on the plaintiff were permissible fees, and not taxes. As so modified, the judgment is affirmed.
So ordered.
By the Court (Cohen, Wolohojian & Blake, JJ.),
Clerk Entered: November 5, 2014.