FILED Sep 11 2019, 8:37 am
CLERK Indiana Supreme Court Court of Appeals and Tax Court
ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEE J. Christopher Janak L. Rachel Lerman Paul D. Vink Barnes & Thornburg LLP Bradley M. Dick Los Angeles, California Bose McKinney & Evans LLP Nicholas K. Kile Indianapolis, Indiana Barnes & Thornburg LLP ATTORNEY FOR AMICI CURIAE THE Indianapolis, Indiana NATIONAL ASSOCIATION OF HOME Kristi L. Fox BUILDERS AND INDIANA BUILDERS Fox Law Offices, LLC ASSOCIATION New Albany, Indiana Jason A. Lopp ATTORNEYS FOR AMICI CURIAE McNeely Stephenson ACCELERATE INDIANA New Albany, Indiana MUNICIPALITIES AND INDIANA MUNICIPAL LAWYERS, INC. Douglas D. Church Alexander P. Pinegar Church Church Hittle & Antrim Noblesville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Knob Hill Development LLC; September 11, 2019 ASB LLC; RPO Construction, Court of Appeals Case No. Inc.; Written Builders LLC; 18A-MI-2123 Appellants-Petitioners, Appeal from the Floyd Superior Court v. The Hon. Susan L. Orth, Judge
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 1 of 20 Town of Georgetown, Indiana, Trial Court Cause No. 22D01-1803-MI-307 Appellee-Respondent.
Bradford, Judge.
Case Summary 1
[1] Knob Hill Development LLC; ASB LLC; RPO Construction, Inc.; and
Written Builders LLC (“Builders”) are all real-estate developers who
appeal from the trial court’s refusal to invalidate a 2018 ordinance passed
by the Town of Georgetown (“the Town”) setting charges for new
customers of the Georgetown Municipal Sewage Works (“the System”).
Builders contend that the system development charge (“SDC”), a/k/a
connection fee, in the ordinance is arbitrary, capricious, and contrary to law.
Builders also contend that a provision of the ordinance that automatically
increases the SDC 2% each year is contrary to law. Because we disagree with
Builders’ first contention but agree with the second, we affirm in part, reverse in
part, and remand with instructions.
Facts and Procedural History
1 We heard oral argument in this case on August 21, 2019, in the Court of Appeals courtroom in Indianapolis. We would like to commend all counsel on the high quality of their written and oral advocacy.
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 2 of 20 [2] Builders each own property that is or will be connected to the System, which
was constructed in the early 1990’s and had its flow treated by the City of New
Albany at the time. In 1994, the Town received approximately $3.8 million in
grants (“the 1994 Grant”) and, in 1998, the federal government forgave
approximately $1.25 million in loans to the Town (“the 1998 Loan
Forgiveness”). In 2004, the Town adopted an ordinance to finance expansions
to the System, which began charging SDCs per equivalent dwelling unit
(“EDU”) upon connection. The SDCs were initially set at $2300 and $4800 per
EDU for new in-town and out-of-town connections, respectively, to increase
$100 per year after 2004.
[3] In or around 2011, the Town determined that it should build its own treatment
plant, which it did, with the plant having an initial capacity of 350,000 gallons
per day. The Town received a $3.5 million grant pursuant to the American
Recovery and Investment Act (“the ARRA Grant”) to fund construction of the
treatment plant. In the years since, the Town has almost outgrown the plant’s
original capacity and is in the process of expanding it to treat 700,000 gallons
per day. The Town has devoted $3.1 million borrowed from the Indiana State
Revolving Fund and over $900,000 in Town funds to the expansion. On
February 20, 2018, the Town adopted Ordinance Nos. G-18-03 and G-18-04,
which established monthly sewer user fees and new SDCs, respectively.
Ordinance No. G-18-04 imposed a new SDC of $7140 per EDU for both in-
town and out-of-town customers with the SDC to increase 2% each year.
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 3 of 20 [4] On March 1, 2018, Builders filed a petition objecting to the rates and charges
set in Ordinance Nos. G-18-03 and G-18-04. On June 19, 2018, the trial court
conducted an evidentiary hearing. Doug Baldessari had advised the Town
regarding the SDCs in Ordinance No. G-18-04 and testified at the hearing.
Baldessari relied on the Water Environment Federation manual, “Financing
and Charges for Wastewater Systems,” (“the WEF Manual”) which included
the following guidance for setting SDCs:
Increasingly, in response to the stated goal to charge new customers for the full cost of growth, and thereby avoid the subsidization of new customers by existing customers, many state laws allow utilities to implement a combined fee approach. This approach is rapidly gaining favor in many jurisdictions. It generally applies when the current system facilities could serve future customers and a portion of the wastewater capital improvement program is also related to growth. The combined fee approach includes two separate elements (1) System reimbursement component. Includes a portion for new customer to pay for an equitable share of existing facilities. (2) Incremental new capacity component (also referred to as growth-related improvement component). Includes future facilities that will be constructed to accommodate growth. Plaintiff’s Ex. 3 p. 192.
[5] With this guidance in mind, Baldessari testified that he had used a combined
method in which the new SDC would be determined by adding (1) the value of
the utility divided by the number of existing EDUs to (2) the net cost per EDU
to finance new development. Baldessari’s calculations, dated February 8, 2018,
are shown below:
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 4 of 20 GEORGETOWN (INDIANA) MUNICIPAL SEWAGE WORKS CALCULATION OF EQUIVALENT DWELLING UNITS AND NET EQUITY PER EDU Equivalent Dwelling Unit - Current:
Annual Operating revenues (12 months ended 10/31/17 unaudited) Collection and treatment $1,064,200 Divided by l2 months 12 Monthly revenues 88,683 Divided by average residential bill (4,000 gallons per month) 58.30 Equivalent Dwelling Units - Current 1,521
Existing System Equity Total estimated existing system equity at 12/31/17 $8,607,778 Divided by existing number of Equivalent Dwelling Units (EDUs) 1,521 Equity per existing EDU $5,659
[….]
GEORGETOWN (INDIANA) MUNICIPAL SEWAGE WORKS CALCULATION OF ESTIMATED COSTS PER EDU TO SERVE NEW DEVELOPMENT (Per Consulting Engineers)
Capacity and Growth Projects
Projects Necessary to Increase Capacity: Future WWTP Expansion (add 350,000 gpd) $3,000,000 Future Upgrades to East Lift Station 200,000 Future Upgrades to West Lift Station 200,000 Future Upgrades to Misc. Small Lift Stations 200,000
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 5 of 20 Net cost of projects to serve new development 3,600,000 Divided by estimated number of proposed EDUs (l) 1,145
Net Cost Per EDU to Serve New Development $3,144
GEORGETOWN (INDIANA) MUNICIPAL SEWAGE WORKS SUMMARY OF CALCULATED CAPACITY FEES
Equity per existing user $5,659 Net cost per EDU to serve new development 3,144 Calculated System Development Charge $8,803 Rounded (Use) $8,800 Current Fee - Inside Town 2018 $5,100 Current Fee - Outside Town 2018 $7,140 Proposed Fees - Inside and Outside Town $7,140 Plaintiff’s Ex. 5 pp. 2–4.
[6] When calculating the total value of the utility, Baldessari testified that grants
given to a utility for the purposes of keeping rates down at the time, such as the
1994 Grant, the 1998 Loan Forgiveness, and the ARRA Grant (collectively,
“the Grants”), did not have to be left out. Baldessari testified that the SDC set
by Ordinance G-18-04 “doesn’t make the inside-of-town customers pay for
growth that they don’t share in[,]” Tr. Vol. II p. 91, and that leaving items such
as the ARRA Grant out of the calculations would likely leave the Town short of
the SDCs needed for growth-related improvements in the future. While
Baldessari’s calculations indicated that the new SDC should be $8800, he
ultimately recommended a new SDC of $7140 for all new users.
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 6 of 20 [7] On August 13, 2018, the trial court (1) upheld Builders’ objection to Ordinance
No. G-18-03 because it failed to specify the percentage rate differential between
in-town and out-of-town users as required by Indiana Code section 8-1.5-3-8.1
and (2) overruled Builders’ objection to Ordinance No. G-18-04 on the basis
that the Town had a rational basis for setting the SDCs as they did. The
Builders appeal, claiming that Ordinance No. G-18-04 is arbitrary, capricious,
and contrary to law in setting the base SDC and violates due process because it
provides for an automatic 2% yearly increase in the SDC.
Discussion and Decision [8] Builders requested that the trial court enter findings of fact and conclusions of
law pursuant to Indiana Trial Rule 52(A). (Appellants’ App. Vol. II p.41.). In
such cases, our standard of review is two-tiered. In re Paternity of B.M., 93
N.E.3d 1132, 1135 (Ind. Ct. App. 2018). “First, we determine whether the
evidence supports the findings, and second whether the findings support the
judgment.” Id. “The trial court’s findings and conclusions will be set aside only
if they are clearly erroneous.” Id. “In reviewing the trial court’s entry of special
findings, we neither reweigh the evidence nor reassess the credibility of the
witnesses.” Id. “Rather we must accept the ultimate facts as stated by the trial
court if there is evidence to sustain them.” Id. “Conclusions of law are
reviewed de novo.” 11438 Highway 50, LLC v. Luttrell, 81 N.E.3d 261, 265 (Ind.
Ct. App. 2017), trans. denied.
[9] As the Indiana Supreme Court recognized some time ago,
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 7 of 20 rate-making is a legislative, not a judicial function, and even if a statute attempted to lodge such power in a court it would be unconstitutional. Although we have a constitutional system of government in which the judiciary is said to be supreme in determining the jurisdiction and limits on the powers of the other branches of the government, as fixed by the constitution and laws, yet this supremacy does not extend to the point where we may substitute our judgment for, or control the discretionary action of the executive or legislative branches, so long as their action is within the sphere and jurisdiction fixed by the statutes and constitution. Pub. Serv. Comm’n v. City of Indpls., 131 N.E.2d 308, 312 (Ind. 1956).
[10] It is well-settled that we will invalidate a rate-making ordinance only if it is
arbitrary, capricious, or contrary to law. Bd. of Dirs. of Bass Lake Conservancy
Dist. v. Brewer, 839 N.E.2d 699, 701 (Ind. 2005). We will find a municipal
entity’s legislative action arbitrary or capricious only if it is “patently
unreasonable.” S. Gibson Sch. Bd. v. Sollman, 768 N.E.2d 437, 441 (Ind. 2002).
“Judicial review of whether a governmental agency has abused its rulemaking
authority is highly deferential[,]” Ind. High Sch. Athletic Ass’n, Inc. v. Carlberg, 694
N.E.2d 222, 234 (Ind. 1997), and we “will not intervene in a local legislative
process[if it is] supported by some rational basis.” Borsuk v. Town of St. John,
820 N.E.2d 118, 122 (Ind. 2005). “A court is not permitted to substitute its own
judgment for the municipality’s discretionary authority; it may only determine
whether the municipality is acting within its statutory authority.” Bass Lake
Conservancy Dist., 839 N.E.2d at 701 (citation omitted).
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 8 of 20 [11] “A municipality may […] acquire, construct, improve, operate, and maintain
sewage works under this chapter[.]” Ind. Code § 36-9-23-2. As for setting rates,
Indiana Code subsection 36-9-23-25 provides, in part, as follows:
[T]he municipal legislative body shall, by ordinance, establish just and equitable fees for the services rendered by the sewage works, and provide the dates on which the fees are due. [….] (d) The municipal legislative body may use one (1) or more of the following factors to establish the fees: (1) A flat charge for each sewer connection. (2) The amount of water used on the property. (3) The number and size of water outlets on the property. (4) The amount, strength, or character of sewage discharged into the sewers. (5) The size of sewer connections. (6) Whether the property has been or will be required to pay separately for any part of the sewage works. (7) Whether the property, although vacant or unimproved, is benefited by a local or lateral sewer because of the availability of that sewer. However, the owner must have been notified, by recorded covenants and restrictions or deed restrictions in the chain of title of the owner’s property, that a fee or assessment for sewer availability may be charged, and the fee may reflect only the capital cost of the sewer and not the cost of operation and maintenance of the sewage works. (8) The cost of collecting, treating, and disposing of garbage in a sanitary manner, including equipment and wages. (9) The amount of money sufficient to compensate the municipality for the property taxes that would be paid on
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 9 of 20 the sewage works if the sewage works were privately owned. (10) Any other factors the legislative body considers necessary. Ind. Code § 36-9-23-25.
[12] Of note, it is undisputed that the System is not subject to the jurisdiction of the
Indiana Utility Regulatory Commission (“IURC”). “Nothing in the case law
or in the applicable statutes mandates a certain type of rate-making method for
municipal utilities that have removed themselves from the jurisdiction of the
IURC.” In re City of Clinton Water Works Rate Schedule Adopted Sept. 9, 1997, 707
N.E.2d 807, 810 (Ind. Ct. App. 1999), trans. denied. “Indeed, when a municipal
utility removes itself from that jurisdiction, […] the IURC’s authority is
replaced by local control.” Id. (citing Stucker Fork Conservancy Dist. v. IURC, 600
N.E.2d 955, 959 n.9 (Ind. Ct. App. 1992)). Utilities that are not subject to
IURC jurisdiction are not limited to methodologies generally accepted by the
IURC when setting rates. See id. (“Thus, we conclude that the City in support
of its rate increase was not limited to methodologies generally accepted by the
IURC.”).
[13] Builders contend that (1) the 2018 SDC is arbitrary and capricious because it
took into account the Grants and previously-paid SDCs, (2) the methodology
for calculating the 2018 SDC violates relevant Indiana case law, and (3) the
2018 SDC impermissibly provides for an automatic yearly increase without a
hearing on each increase.
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 10 of 20 I. Whether the 2018 SDCs Included Improper Costs Passed on to New Users [14] Builders contend that including the Grants and previously-paid SDCs in the
total value of the utility when calculating the 2018 SDCs was arbitrary,
capricious, and contrary to law. The Town argues that it was appropriate to
include those items when calculating the total value of the utility.
A. The Grants [15] Builders argue that inclusion of the Grants in the calculations of the 2018 SDCs
was arbitrary and capricious. Specifically, Builders argue that including the
Grants in the calculations (1) is essentially a double recovery for the Town and
(2) conflicts with Indiana law because the grants are not “costs” that can passed
on to users of new connections.
[16] As for Builders’ double-recovery argument, inclusion of the Grants is a method
of determining the value of the utility for purposes of calculating the equity
portion of the combined method for setting the SDC, a method which
Baldessari testified was appropriate. While it is true that a higher total value for
the System results in a higher SDC using the combined method, Baldessari
testified that this was not double payment. Baldessari testified that requiring
new customers to pay for all of the new plant, as well as putting them on an
equal equity footing with existing customers, constitutes “paying their fair
share” and is consistent with the WEF Manual. Tr. Vol. II p. 80. The trial
court was entitled to credit this expert testimony and did, a decision we will not
second-guess. See, e.g., Hopkins v. State, 579 N.E.2d 1297, 1303–04 (Ind. 1991)
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 11 of 20 (“Any battle of qualified experts, as in the instant case, or other conflict as to
the reliability of evidence is to be resolved by the trier of fact, whose finding in
this regard will be upheld on review as long as the favorable evidence
adequately supports it, as with any sufficiency question.”) (citations omitted).
[17] As for Builders’ argument that Indiana law stands for the proposition that the
Grants are not costs that can be passed on to the new customers, they cite to
Indiana Code subsection 36-9-23-25(e), which provides that
[t]he municipal legislative body may exercise reasonable discretion in adopting different schedules of fees, or making classifications in schedules of fees, based on variations in: (1) the costs, including capital expenditures, of furnishing services to various classes of users or to various locations; or (2) the number of users in various locations. [18] Builders argue that the Town is impermissibly making new customers pay the
Town for the Grants while exempting existing customers, claiming that this is
not a valid variation in the cost of furnishing service that can justify the 2018
SDC. This argument is little more than a variation on the double-payment
argument, and, as mentioned, Baldessari opined that including the grants in the
connection-fee calculation was not considered double payment. We conclude
that including the Grants when calculating the 2018 SDC did not violate
Indiana Code section 36-9-23-25(e).
B. The Previously-Paid SDCs [19] Builders argue that the approximately $1.26 million in previously-paid SDCs
were contributions in aid of construction (“CIAC”) and should not have been
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 12 of 20 used to calculate the 2018 SDC. The Town, however, argues that the
previously-paid SDCs were properly considered revenue, not CIAC, and were
therefore rightfully included in the calculations. The Town also argues that any
requirement that SDCs must be treated as CIAC only applies in cases governed
by the IURC, which all agree has no jurisdiction in this case.
[20] “CIAC has been described as ‘donations provided at no cost to the utility.’
CIAC may come from state or local governments, customers, or developers as
incentives to upgrade utilities to accommodate larger customers without
burdening existing customers.” Ind. Office of Util. Consumer Counselor v. Lincoln
Utils., Inc., 834 N.E.2d 137, 143 (Ind. Ct. App. 2005) (citation omitted), trans.
denied. In support of their argument that previously-paid SDCs must be treated
as CIAC, Builders cite to Indiana Code subsection 8-1-2-6(b), which provides
that, in general, “no account shall be taken of construction costs unless such
costs were actually incurred and paid as part of the cost entering into the
construction of the utility” when valuing a utility. Builders also cite to several
cases in which it was held that previously-paid SDCs were CIAC and could not
be used in calculating future SDCs. Section 8-1-2-6, however, only applies to
utilities under the jurisdiction of the IURC, and all of the cases arose in contexts
governed by the IURC. As mentioned, it is undisputed that the System is not
subject to the jurisdiction of the IURC. Consequently, the law relied upon by
Builders does not stand for the proposition that the Town must abide by the
same restriction.
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 13 of 20 [21] That said, Builders also argue that Baldessari’s testimony that previously-paid
SDCs are not CIAC was unsupported by any authority. Baldessari, however,
testified that previously-paid SDCs were not considered CIAC for municipally-
owned utilities like the System and that “the WEF [Manual] even states that
that’s generally considered that they’re user charges.” Tr. Vol. II p. 50.
Baldessari’s reliance on the WEF Manual to support his conclusion on this
point was not challenged at the hearing. Again, Builders are requesting that we
reweigh the evidence on this point, which we will not do. See Hopkins, 579
N.E.2d at 1303–04.
C. Whether Imposing an SDC that Places the Burden of Improvements on New Users is Contrary to Indiana Law [22] Builders also argue that imposing an SDC that does not spread the burden of
improvements to current System users is contrary to Indiana law. Builders rely
on one non-IURC case to support this argument, Common Council of City of
Crown Point, Lake Cty. v. High Meadows, Inc., 173 Ind. App. 138, 362 N.E.2d
1166 (Ind. Ct. App. 1977). In High Meadows, landowners challenged the city’s
ordinance which sought to increase fees charged to connect to the city’s sewer
system. Id. at 138, 362 N.E.2d 1167. The trial court sustained the challenge.
Id. On appeal, we noted that while municipal sewage connection charges were
not necessarily limited to recoupment of the cost of the inspection and the
actual work performed, the charges levied under the ordinance in question
exceeded the city’s statutory authority. Id. at 139, 362 N.E.2d 1166, 1167.
Specifically, we concluded that although the city could have established a
connection rate or charge that included amounts to be used for future
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 14 of 20 improvements to the system, such charges could not have been levied only
upon new users when there was an established group of users of the same
system who would not have been subject to the charges. Id. at 143, 362 N.E.2d
1166, 1169.
[23] As the Town points out, however, High Meadows was based on statutes which
have been superseded by subsequent legislation, including the Home Rule Act,
as recognized by more recent judicial analysis. In the 1998 case of Taylor v. Fall
Creek Regional Waste District, 700 N.E.2d 1179 (Ind. Ct. App. 1998), trans. denied,
we recognized that the statute at issue in High Meadows, former Indiana Code
section 19-2-5-20, afforded less discretion to sewage utilities than the one at
issue in Fall Creek, Indiana Code section 13-26-11-2(a), which applies to
regional sewage utilities, was enacted in 1996, and allows the utility to
determine rates based on a number of factors, including “(7) A combination of
these or other factors that the board determines is necessary to establish
nondiscriminatory, just, and equitable rates or charges.”
[24] A few years after High Meadows was decided, the General Assembly replaced
Indiana Code sections 19-2-5-19 through -21 with Indiana Code section 36-9-
23-25, the statute at issue in this case. As was the case with the statute at issue
in Fall Creek, section 36-9-23-25 provides a municipality with more discretion
than section 19-2-5-20 afforded. Indeed, subsection 36-9-23-25(d) allows even
more discretion to municipalities than subsection 13-26-11-2(a) does to regional
authorities, as the municipal legislative body may use one or more of several
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 15 of 20 listed factors, including “[a]ny other factors the legislative body considers
necessary.”
[25] Moreover, High Meadows predates the Indiana Home Rule Act, enacted in 1980.
High Meadows was decided pursuant to the so-called “Dillon Rule,” which
presumed that local governments possess only those powers expressly
authorized by statute.
Like many other states, Indiana historically adhered to the Dillon Rule that a municipal corporation could exercise only the following powers: First, those granted in express words; second, those necessarily or fairly implied in, or incident to, the powers expressly granted; third, those essential to the declared objects and purposes of the corporation—not simply convenient, but indispensable. Tippecanoe Cnty. v. Ind. Mfr.’s Ass’n, 784 N.E.2d 463, 465 (Ind. 2003) (citing Dillon, Municipal Corporations (1st ed. 1872) (emphasis in original)). A corollary rule of construction required that a court resolve any reasonable doubt concerning the existence of a power against the corporation and enjoin the corporation from exercising it. See id. Under the Dillon Rule, a person who simply found himself on the wrong side of some local action could easily challenge that action by essentially arguing that it was ultra vires. See, e.g., City of S. Bend v. Chicago, S.B. & N.I. Ry. Co., 179 Ind. 455, 458, 101 N.E. 628, 629 (Ind. 1913) (“[T]he charter of South Bend delegated no power for the enforcement of the ordinance in controversy….”). The resulting legal landscape handcuffed municipal corporations, preventing them from taking a wide range of governmental actions we might find commonplace today. See, e.g., Pittsburgh, C., C. & St. L. Ry. Co. v. Town of Crown Point, 146 Ind. 421, 45 N.E. 587 (1896) (town could not enforce ordinance requiring railroad to post
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 16 of 20 watchmen and maintain gates at crossings at railroad’s expense because statute authorizing ordinances to prevent nuisances did not provide so specifically). Recognizing the disadvantages of the Dillon Rule, the Legislature abrogated it in 1971, when it passed the Indiana Powers of Cities Act. Act of April 14, 1971, P.L. 250–1971, § 1, 1971 Ind. Acts 955, 967. The Legislature expanded the applicability of this reforming principle in 1980, when it passed the Indiana Home Rule Act. Act of February 27, 1980, P.L. 211–1980, § 1, 1980 Ind. Acts 1657, 1659–62 (codified as amended at Ind. Code §§ 36-1-3-1 to -9 (2007)). In addition to reaffirming the abrogation of the Dillon Rule, the Home Rule Act provides that in general, a unit is presumed to possess broad powers of local government, unless the Indiana Constitution or a statute expressly denies the unit that power, or expressly grants it to another entity. Ind. Code § 36-1-3- 5 (2007)[.] Kole v. Faultless, 963 N.E.2d 493, 495–96 (Ind. 2012). Since 1980, then, the
presumption has been that any doubt as to the existence of a power “shall be
resolved in favor of its existence.” Ind. Code § 36-1-3-3(b).
[26] Given the greater discretion granted to the Town by Indiana Code subsection
36-9-23-25(d), along with the presumption that a municipality is presumed to
have a power that has not been expressly taken away, we conclude that High
Meadows no longer stands for the broad proposition that the burden of future
growth in a sewer system cannot be placed primarily on new users. It seems to
us that when the Town was deciding what the 2018 SDC would be, planning
for future growth easily qualifies as “[a]ny other factor[] the legislative body
considers necessary.” Ind. Code § 36-9-23-25(b)(10).
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 17 of 20 II. Annual Increase in the SDC [27] Finally, Builders contend that the automatic yearly 2% increase in the SDC in
Ordinance No. G-18-04 violates Indiana law. Indiana Code section 36-9-23-26
provides, in part, as follows:
(a) After the introduction of the ordinance establishing fees under section 25 of this chapter, but before it is finally adopted, the municipal legislative body shall hold a public hearing at which users of the sewage works, owners of property served or to be served by the works, and other interested persons may be heard concerning the proposed fees. [….] (b) After the hearing, the municipal legislative body shall adopt the ordinance establishing the fees, either as originally introduced or as modified. [….] (d) The municipal legislative body may change or readjust the fees in the same manner by which they were established. As the Indiana Supreme Court has recognized, the statute requires that “a
municipal legislative body must hold a public hearing before revising sewer
rates.” Farley Neighborhood Ass’n v. Town of Speedway, 765 N.E.2d 1226, 1231
(Ind. 2002).
[28] We have little trouble concluding that Builders are correct on this point. The
2% annual increase in the SDC is a revision of a fee, one that occurs without a
public hearing. The Georgetown Town Council, even though it passed only
one ordinance, is nonetheless revising the fee each year without a hearing. “If
there is a constitutional or statutory provision requiring a specific manner for
exercising a power, a unit wanting to exercise the power must do so in that
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 18 of 20 manner.” Ind. Code § 36-1-3-6. So, the Georgetown Town Council may only
“change or readjust the fees in the same manner by which they were
established[,]” Indiana Code section 36-9-23-26(d), i.e., following a public
hearing. We conclude that the automatic 2% annual increase in the SDC in
Ordinance No. G-18-04 violates Builders’ due process rights and is invalid.
[29] The Town argues, without reliance on authority, that the Builders’ challenge to
the automatic increase in the SDC should be rejected as speculative because the
Town could enact a new ordinance at some point in the future. The Town also
argues that the automatic-increase clause is not yet ripe for review because it set
the 2018 SDC lower than Baldessari’s original proposed SDC and it will take
several years of automatic increases for the SDC to reach that figure. We find
neither of these arguments to be compelling. Put simply, whether there may be
a new ordinance in ten years or whether Builders should count themselves
lucky that the SDC was not set higher in the first place are things that have
nothing to do with whether the Town has the authority to revise the SDC
without a hearing, which it does not.
Conclusion [30] We conclude that the base SDC set by Ordinance No. G-18-04 is neither
arbitrary, capricious, nor contrary to Indiana law. Ordinance G-18-04’s
automatic 2% yearly increase in the SDC, however, violates relevant Indiana
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 19 of 20 law because it provides for a fee increase without a hearing. 2 It is not disputed
that one such automatic increase has already occurred, so we remand with
instructions for the trial court to enjoin the Town from collecting the additional
2% unless and until an increase in the SDC has been approved and enacted
following a public hearing.3
[31] The judgment of the trial court is affirmed in part and reversed in part, and we
remand with instructions.
Altice, J., and Tavitas, J., concur.
2 Our disposition of the claim regarding the automatic increase has no effect on the other provisions of Ordinance No. G-18-04. “If any section of this code now enacted or subsequently amended or its application to any person or circumstances is held invalid, the invalidity does not affect other sections that can be given effect without the invalid section or application.” GEORGETOWN, IND., CODE OF ORDINANCES § 10.06(A). 3 In addition to nine enumerated powers (which do not include ordering an injunction), Indiana Rule of Appellate Procedure 66(C)(10) empowers us to “grant any other appropriate relief” in disposing of an appeal.
Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 20 of 20