Settlers Landing, LLC v. West Haven Special Service District

March 5, 2015

Utah Court of Appeals

March 5, 2015

2015 UT App 54 (Click for full text of opinion)

The Utah Court of Appeals concluded that the rates charged by a Special Service District were reasonable, and that the district was not obligated to distinguish between different types of residential users.

The West Haven Special Service District (“District”) provides municipal sewer service to areas of West Haven, in Weber County.  The District’s fee structure charges a flat rate to all “equivalent residential units” (ERU), so a home, condominium, and apartment are all charged the same rate. Settlers Landing, which operates an apartment complex in West Haven, challenged the fees,. Settlers argued that the District should have charged a lower rate to apartments and condominiums, because they account for less sewerage than single-family homes.  The trial court concluded that the fees were reasonable, and that there was no obligation to charge different fees to different types of residential uses.

The Court of Appeals agreed, and affirmed the trial court’s decision.  Rate setting by local government entities is a legislative function that is entitled to deference, and the rates chosen will not be disturbed unless they are unreasonable.  Customers may be classified into groups based on common characteristics. The characteristics need only be similar, not identical.  It was thus reasonable to treat each residential unit equally, and so the same rate could be charged to both single family homes and apartments.

The District relied upon state data in its decision to charge a flat rate, rather than the actual amount of wastewater being treated. Since the information about the system usage was limited or unavailable, the Court concluded that it was reasonable to use the data from the State’s Division of Water Quality.

As a final observation, the Court of Appeals specifically used  a “reasonableness” standard of review, criticizing the trial court’s use of the “arbitrary and capricious” standard normally used to review land use decisions.  The more lenient reasonableness standard was appropriate for legislative decisions such as adopting fee schedules.

In addition, the Court also considered the Special Service District as equivalent to a municipal government for the purposes of reviewing decisions on utility rates.