The Maryland Court of Appeals has struck down a preconstruction fee imposed since 1979 by the Washington Suburban Sanitary Commission on Montgomery and Prince George's counties home builders. But the court refused to order the refund of nearly $55 million raised by the invalidated fee, which stood at $1,560.
In a 38-page opinion, the seven-judge panel in Annapolis confirmed a 1984 Montgomery County Circuit Court's ruling that the WSSC, which provides water and sewer service, had no authority to impose the special fee, which builders were required to pay before obtaining building permits.
The appellate court reversed the conclusion of the lower court, which would have returned the money to the builders, and through them to home buyers.
"I'm very comfortable about the legality of the outcome," said Charles Dalrymple, chief counsel for the home builders and homeowners who filed the class-action suit, "but I think there are some voids in the conclusion." Dalrymple said he will file a motion to have the Court of Appeals, the state's highest court, reconsider ordering a refund.
After the Circuit Court ruling, WSSC sources had suggested that the loss of fee revenues might result in an increase in the basic residential service rate, which averages about $275 a year.
WSSC general counsel Nathan Greenbaum said yesterday that while the court ruled the WSSC had acted without authority, nothing in the state law that created the agency proscribes such a fee. He said that among the options that commissioners will discuss will be asking the General Assembly to amend that law in order to authorize the fee.
The fee, called the system expansion offset charge, was imposed in 1979 to offset the cost of new water and sewer hookups and rose almost immediately from $750 to $1,560 per single-family dwelling. Homeowners inherited the cost from builders, who had said they would also pass refunds along to consumers.
The court's decision to allow the WSSC to retain the $55 million is based on state precedents declaring that fees or taxes paid voluntarily are not recoverable. Dalrymple had argued that the filing of the suit in 1981 indicated that builders were not voluntarily paying the fees.
"I cannot envision it being called 'voluntary payment' when the only alternative is going out of business," Dalrymple said.
According to Greenbaum, the fees brought in a little more than $1 million a month. He called $1,560 a "fair and reasonable" figure based on a "complex formula of discounts and profits," and said the fee "probably represented less than the actual cost" of extending new sewer and water lines.
But Dalrymple said the figure was based on the hypothetical costs of building a new sewage treatment plant and sewer lines. He said that Circuit Court Judge William Miller had specifically noted that "even if WSSC had the authority to impose an impact charge, the $1,560 amount doesn't remotely resemble the real costs of new service."
"We were really hoping to see restitution made to the homeowners," said Susan Matlick of the Suburban Maryland Building Industry Association, which represents about 200 contractors. She said the association estimates the fee was assessed on 30,000 new homes in the two counties over seven years.
Matlick said builders also hoped the Court of Appeals might order the WSSC to pay lawyers' fees in the suit, litigated by the real estate law firm of Linowes and Blocker.