By Caitlin Gibson
Washington Post Staff Writer
Sunday, November 7, 2010; LZ01
After a years-long, contentious legal battle over utility rates charged by Leesburg to out-of-town customers, the Supreme Court of Virginia ruled Thursday in the town's favor.
The decision overturned a March 2009 ruling by the Loudoun County Circuit Court that outlawed a Leesburg ordinance imposing a 100 percent surcharge on the water and sewer rates for out-of-town customers.
"I am delighted by this outcome," Town Attorney Jeanette Irby, who argued the case on behalf of the town, said in a statement. "This outcome ensures the viability and integrity of our ability to provide water and sewer service to all of our customers in a responsible and efficient manner."
The case originated in 2006, when a group of out-of-town utility customers sued Leesburg for imposing a 100 percent surcharge on water and sewer bills. The case went to trial in January and February 2009, with Circuit Court Judge Thomas D. Horne presiding.
Leesburg maintained that its rate structure -- which changed in 2006 to increase the out-of-town surcharge from 50 to 100 percent -- was fair. Out-of-town residents said the town's method for setting the rates was invalid and put an undue burden on out-of-town customers. Leesburg said the rates before 2006 were not covering the costs of running the utility system.
Horne ruled in March 2009 that the surcharge was unreasonably high and unlawful, ordering Leesburg to set new rates by Sept. 1. The town announced a few weeks later that it would appeal the Circuit Court decision to the Virginia Supreme Court.
New rates for water and sewer service took effect Sept. 1, 2009, but the out-of-town customers took Leesburg back to court, filing a motion claiming that the new rate structure violated Horne's ruling. Horne denied the motion to hold the town in contempt.
The state Supreme Court initially declined to take up Leesburg's appeal last fall, but reversed its decision after the town filed a petition for rehearing. Leesburg was informed early this year that the court had agreed to hear the town's appeal.
"This is a great day for Leesburg residents," Leesburg Mayor Kristen C. Umstattd said in a statement Thursday. "I am thrilled by the Supreme Court's vindication of the Town Council's 2005 decision to raise the out-of-town differential."
Michael J. Quinan, the plaintiffs' attorney, said his clients were disappointed by the ruling.
"We thought Judge Horne, who heard the evidence, made the right decision," he said. "We're disappointed that the Supreme Court has reversed the decision."
It's too soon to know what, if any, additional steps might be taken, he added. "Some of it is going to depend upon what steps the Town of Leesburg takes."
Vice Mayor Kevin D. Wright said that he is pleased with the verdict, "mostly so because it ends what has been a lengthy and costly legal battle for everybody." But he wouldn't support reinstating the 100 percent surcharge for out-of-town customers, he said.
"I would rather have our rate structure move forward in a manner that is going to meet the town utility system's needs," he said, adding that the rate change that took place after the circuit court's original ruling was done not just to comply with the court order but also to deal with the revenue shortfall of a utility system that had not managed rates effectively for years.
"There is work to be done with the rates, but I would rather go through a careful and thoughtful process," Wright said. "I would not support any effort to just make a wholesale, off-the-cuff change without having due diligence done."