By Kafia A. Hosh
Washington Post Staff Writer
Thursday, March 12, 2009
Leesburg Mayor Kristen C. Umstattd said Tuesday she thinks the town should appeal a Loudoun County judge's ruling that the water and sewer rates paid by Leesburg's out-of-town customers are unreasonably high.
In a 19-page opinion issued Friday, Circuit Court Judge Thomas D. Horne said the 100 percent surcharge Leesburg imposes on those customers is unlawful under the Virginia code. He wrote that when setting utility rates, a legislative body's decision "must be based on more than their own opinion regarding what they believe to be reasonable."
The Town Council enacted the 100 percent surcharge in 2005. A year later, seven homeowners and the River Creek, Lakes at Red Rock and Spring Lakes homeowners associations sued the town, launching the case that led to Horne's ruling.
The town has 90 days from the date of the ruling to enact a new rate structure or respond to Horne's opinion.
Town Council members discussed the case in a closed session Monday night and as of Tuesday evening had not announced how they would respond to the judge's decision. Some council members said they expected to get a recommendation from the town attorney in the next two weeks.
Umstattd said she thinks Leesburg met its burden of proof during the trial of the lawsuit earlier this year.
"I sat through all of the days of the trial, and I'm convinced that the town was absolutely right in setting the rates the way they did," she said in an interview. "I strongly believe that the town has to appeal this decision."
Town Attorney Jeanette Irby said Monday that town officials were "still carefully reviewing the opinion and determining what our best options are going to be."
She said she thinks the town proved that its rates were reasonable through testimony from utility rate experts and finance and utility department chiefs.
But Horne didn't think so.
The judge ruled that to be considered reasonable, the water rate surcharge on out-of-town customers would need to be reduced by 45.51 percent and the sewer rate surcharge by 36.53 percent.
Horne denied the plaintiffs' request for a refund, however.
If the judge's ruling stands, Leesburg would have to adjust its rates to maintain the $13 million to $14 million in annual revenue it receives from water and sewer fees, said town finance director Norm Butts. That revenue pays for the maintenance and operation of Leesburg's utility system and for the debt service on a bond issued to finance the system's upgrade.
Butts declined to say how town residents might be affected by a rate adjustment.
"We'll have to set the rate so that we bring in the same amount of money that we need to continue operations," he said. "Whatever that configuration is remains to be seen."
Umstattd said that if the in-town rates increase, there is a "good possibility" that some town residents could sue Leesburg.
Council member Kenneth D. Reid said he was still reviewing the judge's ruling and would not discuss what legal options he thought the town should pursue. But he said he was "shocked" by the ruling, because "I did think we had a strong case."
He suggested that if Leesburg has to roll back the out-of-town surcharge, it should cut costs in the utility department to hold down the rates paid by town residents.
"I don't think it's fair and I never thought it was fair to jack up the in-town rates to the benefit of the people out of town," he said.
Mike Quinan, the plaintiffs' attorney, said that they were not opposed to Leesburg charging more to out-of-town customers than to town residents and that their main concern was the size of the surcharge.
"The town can charge its own residents whatever it wants," he said. "But what they charge the out-of-town residents has to be fair and reasonable and equitable."
Stewart Curley, the plaintiffs' spokesman, said they viewed the surcharge as a case of taxation without representation.
"We really looked at this as a form of taxation in which we had no impact on the elections of those officials," he said. "That was, of course, very frustrating. The only recourse was through the legal process."
Curley, president of the River Creek homeowners association, said he was disappointed that the plaintiffs would not be getting a refund.
When the 100 percent surcharge took effect, Curley said, water and sewer bills nearly doubled for the roughly 2,800 out-of-town residences served by Leesburg.