Court: Supreme Court of Connecticut; July 25, 1963; Connecticut; State Supreme Court
Plaintiffs, residents of Norwalk outside the first taxing district, obtain water from facilities maintained by that district, which, along with the second taxing district, gained exclusive rights to service their area under 1929 legislation. They allege that the water rates they are charged are significantly higher than those for customers within the first taxing district, claiming this constitutes discrimination and is unlawful. The plaintiffs seek to stop this alleged discrimination and demand damages for overpayments made since December 1, 1952. The trial focused solely on the issue of liability regarding the discriminatory nature of the charges, leading to a judgment for the defendant, as the plaintiffs failed to meet their burden of proof.
The first taxing district, a body politic formed from the old city of Norwalk prior to its 1913 consolidation, manages the waterworks and is governed by an elected board of commissioners with the authority to set rules and rates. Property owners within the district are taxed to cover any deficits from water rents. Since 1929, the first taxing district, in agreement with the second taxing district, has had exclusive rights to provide water to the outer district. The district offers two service classes: residential and industrial, though only residential rates are contested.
In contrast to the inner district, where domestic customers were metered starting in 1933, outer district customers have been charged flat rates until 1953, despite a significant population increase in the outer district compared to stagnation in the inner district. Since 1946, the first taxing district has expanded its facilities to accommodate growth in the outer district, including major infrastructure projects funded by taxpayer-backed bonds, while no expansions were necessary for the inner district.
The water department's income has consistently sufficed to cover annual carrying charges on its obligations. There exists a rate differential between inner district consumers, charged 25 cents per 1000 gallons (minimum $1/month), and outer district consumers, charged 50 cents per 1000 gallons (minimum $2/month). The court's role is to determine whether plaintiffs demonstrated that this rate differential constitutes an unfair distinction to their detriment. The inner district has a higher customer density in a compact area, whereas the outer district is more sparsely populated over a larger, hilly terrain, resulting in greater costs for service provision in the outer district due to installation and maintenance challenges.
Both parties presented expert testimony: the plaintiffs' expert, lacking prior experience with municipal water utilities, did not conduct a cost allocation study, while the defendant's expert, a civil engineer with extensive experience, concluded that the rates for the outer district fell within a reasonable range. The court accepted this finding, which the plaintiffs contested, arguing it lacked evidentiary support and was merely a conclusion. The court interpreted the finding to imply that the rates for the plaintiffs were reasonable. The determination of rate reasonableness is a factual issue that considers specific circumstances, with reasonable rates required to ensure fair compensation for services and a fair return on the value of municipal property. The authority to set rates must be respected unless proven excessive, illegal, or arbitrary.
The plaintiffs allege that charging nonresidents higher rates than residents constitutes unlawful discrimination. Generally, municipalities can charge more for services provided outside their limits, but such rates must not be unreasonably high. The plaintiffs bear the burden of proving the unreasonableness of the rates. The trial court favored the defendant’s expert testimony over the plaintiffs’, leading to the conclusion that the plaintiffs did not prove their case.
In their fourth count, the plaintiffs claimed that the rates were improperly set without a public hearing as required by statute; however, the court sustained the defendant's demurrer to this claim, noting that the city charter does not require such a hearing. The plaintiffs' reliance on an outdated statute concerning municipal waterworks financed by revenue bonds was misplaced, as they did not allege that the defendant's system was financed in that manner.
The defendant's special defenses asserted that the rates were fair and comparable to those charged to other suburban consumers. The court deemed the special defenses unnecessary but noted that the error in overruling the demurrer was harmless due to the lack of proof by the plaintiffs regarding the alleged unreasonableness and discrimination of the rates.
A report by the defendant’s expert, Rudd, highlighted operational issues and suggested that rate revisions were needed to increase revenue and address disparities between the rates charged in different districts. Rudd indicated that the financial situation was more practical than legal. Ultimately, the court found no error in the trial court's decisions, with concurrence from other judges.
