Request By:
Honorable E. Preston Young
Attorney at Law
722 Kentucky Home Life Building
Louisville, Kentucky 40202
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Robert L. Chenoweth, Assistant Attorney General
As the attorney for the Jefferson County Board of Education you have asked for advice from the Office of the Attorney General concerning the amount claimed due from the Board to the Louisville and Jefferson County Metropolitan Sewer District (hereinafter "M.S.D.") for the connection to the sewer system of the Middletown Elementary School. M.S.D. has asked the school board to enter into a contract with them wherein the board agrees to pay to M.S.D. the sum of $7,250.00, representing M.S.D.'s Connection Fee of $7,000.00 plus M.S.D.'s charge of $250.00 for the installation of the property service connection. You indicated the school board does not take issue with the $250.00 property service connection charge but believes that M.S.D. has no authority to levy its so-called "Connection Fee" of $7,000.00. You have specifically asked this office to advise on whether the Jefferson County Board of Education can legally sign the contract requiring the payment of the Connection Fee and the actual connection cost demanded by the sewer agency.
We agree the school board is obligated to pay the $250.00 property service connection cost which, as stated in the correspondence dated January 4, 1977, from a representative of M.S.D., is the actual installment contractual cost. See OAG 68-283, copy attached. The problem to be confronted is that in addition to this charge for the property service connection the school board is being asked to pay another "Connection Fee" because the school property has not been previously assessed for the cost of the sewer. The schedule for the M.S.D. "Connection Fee" was adopted pursuant to KRS 76.090, according to the representative of M.S.D.
Before looking more closely at KRS 76.090 it has to be pointed out that a school district may not constitutionally pay an assessment cost for a public improvement. Kentucky Constitution, §§ 184 and 186. See
City of Louisville v. Leatherman, 99 Ky. 213, 35 S.W. 625 (1896) and
Board of Education of Spencer County v. Spencer County, 313 Ky. 8, 230 S.W.2d 81 (1950), and OAG 75-613, copy attached. As we understand the facts concerning this matter, M.S.D. is not as such attempting to assess the school board for the cost of the sewer.
The Connection Fee of $7,000.00 is to be paid by the school system since the school property has not been previously assessed for the cost of the sewer. This Connection Fee is charged pursuant to a schedule of rates and charges under KRS 76.090, which reads in subsection (1) as follows:
"The district may establish a schedule of rates, rentals, and charges, to be collected from all the real property within the district area served by the facilities of the district, and prescribe the manner in which and the time at which the rates, rentals, and charges are to be paid, and may change the schedule from time to time as the district deems necessary, advisable or expedient. The schedule may be based upon either, (a) the consumption of water on premises connected with the facilities, taking into consideration commercial and industrial use of water; or (b) the number and kind of plumbing fixtures connected with the facilities; or (c) the number of persons served by the facilities; or (d) may be determined by the district or any other basis or classification which the district determines to be fair and reasonable, whether similar or dissimilar to those enumerated; or (e) any combination thereof. This schedule may include additional charges for treatment of sewage, with a surcharge where the sewage contains industrial wastes or other wastes in excess of limitations established by regulations of the district."
Reviewing the legislative history of this statute it is found that as to the language in subsection (1) there have been only limited changes from the language of the legislation passed in 1946. Kentucky Acts of 1946, Chapter 104, copy attached. This fact becomes important when the statutes, especially KRS 76.090, are viewed as construed in early litigation which tested the legality and scope of the authority of a metropolitan sewer district. In
Veail v. Louisville and Jefferson Co. Met. Sew. Dist., 303 Ky. 248, 197 S.W.2d 413 (1946), the Acts of 1946, Chapter 104, now KRS Chapter 76, were held to be constitutional. The Kentucky Court of Appeals in the Veail opinion, supra, in giving a run-down of the provision of the law, stated in pertinent part:
"The board . . . is authorized . . . to fix and collect sewer rates, rentals, or other charges, for services rendered by the facilities of the district." (Emphasis ours.) 197 S.W.2d 415.
The Court further stated in reviewing this legislation:
"It is shown by the record that the taxpayers of the city are not the only users of the sewerage system; and it is obvious that some citizens will make greater use of the system than others. It would be entirely equitable to charge them in proportion to their use; thus, it would be legal for the city to establish a rate schedule for charges to all users of the system, though some of them may be the owners of the physical property by reason of the fact that they are taxpayers in the city." 197 S.W.2d 416.
The Court clearly viewed the law as enabling the M.S.D. to establish a rate schedule to charge users for sewer service in proportion to their use. This view is even more evident in the two 1948 cases decided by the Kentucky Court of Appeals.
In
Louisville and Jefferson Co. M.S.D. v. Joseph E. Seagram & S., 307 Ky. 413, 211 S.W.2d 122 (1948), the Court again discussed the powers created for the M.S.D. in the enabling act. The Court said:
"Among the broad powers of the district is that of establishing a schedule of 'rates, rentals and charges to be collected from all the real property served by the facilities,' based upon 'the consumption of water, on premises connected with such facilities, taking into consideration commercial and industrial use of water.' The district was authorized to adopt either of two other specified bases or a combination, or 'any other bases or classification' it should 'determine to be fair and reasonable, whether similar or dissimilar to those enumerated. '" 211 S.W.2d 123.
While the number of bases possible for establishing a schedule has increased, it is still evident that the schedule of "rates, rentals and charges" is to be geared to the use of water. Note also that the statute, as it reads now, also provides that the "schedule may include additional charges for treatment for sewage, with a surcharge where the sewage contains industrial waste or other waste in excess of limitations established by regulations of the district." KRS 76.090(1), supra. The schedule is tied in with the amount of use.
The Court in the Seagram case, supra, cited its holding in the Veail case and stated that "the governing body is given statutory power to make charges for the service proportional to use in order to produce adequate revenue for the operation and maintenance of the system. . . ." (Emphasis ours.) 211 S.W.2d 125. The Court went on to say:
"All of the authorities agree that special charges of this kind are not taxes but rents for the use of the sewers, or in some instances but a method of paying for their construction." (Citations omitted.) 211 S.W.2d 125.
In the second 1948 case,
Louisville and Jefferson County Met. Sewer D. v. Barker, 307 Ky. 655, 212 S.W.2d 122 (1948), the Court specifically considered KRS 76.080(10) which empowers the M.S.D. "to fix and collect sewer rates, rentals, and other charges, for service rendered by the facilities of the district." It is also noted that this provision is repeated and made specific in KRS 76.090(1). The Court stated that "it is to be observed there is no express exemption of any class of property or users of the sewer system. " 212 S.W.2d 123. Jefferson County was claiming it did not have to pay M.S.D. for sewer service charges for the courthouse, armory and other county buildings. In reaching the question before the Court, Commissioner Stanley, writing for the Court, stated:
"The question we have is the existence or nonexistence of power to exact payment of charges for services being rendered currently to public property or to collect what are called sewer rentals from that property." 212 S.W.2d 124.
Commissioner Stanley went on to write:
"Its revenue is derived solely from these collections and is devoted wholly to the maintenance and operation of the sewer system. It is said in Cooley on Taxation, Sec. 36: 'Charges for service rendered or for conveniences furnished are in no sense taxes,' but merely the price of a commodity. Here the price is based on the extent of use as measured by the quantity of metered water supplied by the Louisville Water Company, which is an independent corporate agency of the city itself." (Emphasis ours.) 212 S.W.2d 124.
On further in the opinion it was noted:
"As we have pointed out, sewer rental charges are not taxes or special assessments, but possess commercial characteristics." 212 S.W.2d 125.
The Court stated the schedule of rates and charges possessed commercial characteristics -- the price for a commodity, water. The Court concluded that the county would have to pay for its use of water because there was no user's property excluded in the statute.
There is no contention, and could be none, that the school system did not have to pay for its use of water and the sewer system. See OAG 75-598, copy attached. The M.S.D. property service connection contract No. S-975, a copy of which you provided to us, reads in Paragraph No. 4:
"4. Applicant [Jefferson County Public Schools] agrees that the premises served by the property service connection shall be subject to payment for the use of MSD's facilities at such rates, rental fees and charges as have been or may be established or amended in accordance with its policies." (Emphasis ours.)
The language of this paragraph merely parallels that of KRS 76.090(1). Paragraph No. 7 of the contract reads:
"7. Applicant agrees to pay to MSD the sum of $7,250.00, representing MSD's Connection Fee of $7,000.00, plus MSD's charge of $250.00, for the installation of the property service connection."
According to a representative of M.S.D., the enabling statute for this cost is also KRS 76.090 as noted earlier. If such were the case the same section of the statutes must be construed to authorize two schedules of "rates, rentals and charges" -- one for the use of the M.S.D. facility and the other for the installation of the property service connection. It is our opinion there is no support for a "Connection Fee Schedule" that is not based on use of the sewer service and which is an arbitrarily established flat amount. We believe KRS 76.090 permits the establishing of reoccurring rates and charges for use of the sewer system but we do not believe this section authorizes a one-time charge called a Connection Fee which is in addition to the contractual cost of the service connection, especially when such Connection Fee is charged only when the property in question has not been previously assessed for the cost of the sewer.
Thus, it is our opinion that the $7,000.00 "Connection Fee" charged in lieu of an assessment charge for the cost of the sewer should not be paid by the Jefferson County Board of Education, in keeping with the proscriptions of §§ 184 and 186 of the Kentucky Constitution. In view of this conclusion the Jefferson County Board of Education may wish to institute an action in an appropriate court for a declaratory judgment concerning this matter.