On September 15, 2015, the Ohio Supreme Court issued its long awaited decision in Northeast Ohio Regional Sewer Dist. v. Bath Twp., Slip Opinion No. 2015-Ohio-3705, and found in favor of the sewer district. The Northeast Ohio Regional Sewer District (“NEORSD”) is a sewer district created under Revised Code Chapter 6119 and services 61 communities in and around Cuyahoga County. It sought in 2010 to implement a regional stormwater management program in the communities it services.
In connection with the program, NEORSD assessed fees on every parcel within its service district. The fees were based upon the amount of impervious surface located on each parcel. An impervious surface is one that does not permit the absorption of fluids; typically, artificial structures such as pavement covered by asphalt, concrete, brick and stone, as well as rooftops.
After NEORSD adopted its stormwater management program, it filed a declaratory action in the Cuyahoga County Court of Common Pleas to confirm its authority to establish the program and assess fees on property owners located in its service area. The trial court affirmed NEORSD’s authority to implement the stormwater management program and to assess fees on property owners. Affected communities and several large property owners appealed, and the Ohio Court of Appeals overturned the trial court decision. Prior to the Court of Appeals’ reversal, NEORSD had collected approximately $20 million in fees, which it placed into escrow pending its appeal to the Ohio Supreme Court.
The Ohio Supreme Court addressed 2 issues in its decision: (1) whether NEORSD’s stormwater management program is authorized by statute and by its charter, and (2) whether the related fee structure is authorized by statute and its charter. The court found both the plan and the fee structure to be authorized by statute and NEORSD’s charter.
The answer to (1) hinged on the definition of “waste water” which is defined in in R.C. 6119.011(K)
as “any storm water and any water containing sewage or industrial waste or other pollutants or contaminants derived from the prior use of the water.” The appellees and the Court of Appeals interpreted “waste water” to necessarily mean “water containing waste” and that any storm water would only constitute “waste water” when it is combined with sewage or pollutants. The Ohio Supreme Court interpreted the statute more expansively to indicate that “waste water” comes in two forms, “any storm water” and “any water containing sewage or industrial waste or other pollutants or contaminants derived from the prior use of the water.”
The latter interpretation, as determined by a majority of the Ohio Supreme Court justices, is understandable from reading the text of the statute but is much more expansive in its application than the narrower reading held by the Court of Appeals, and will provide regional sewer districts with a broader reach in their authority.
In determining the second issue regarding fee collection, the Ohio Supreme Court held that while NEORSD currently does not own or operate the various parts of the current stormwater-management system, a “water resource project” includes facilities “that are to be acquired, constructed or operated” by NEORSD. and therefore it may assess fees for this purpose under the statute. The court left the door open for future challenges if NEORSD fails to use the fees it collects to acquire, construct or operate a facility that will be part of the regional stormwater-management system.
Some of the justices on the Ohio Supreme Court raised intriguing dissents regarding NEORSD’s fees as not being authorized by the statute or being structure as a tax masquerading as a fee.
However, neither dissent won over a majority of the court’s justices and NEORSD’s ability to assess fees under its stormwater management plan remains intact.
Now that the Ohio Supreme Court has affirmed NEORSD’s authority to implement the stormwater management plan and assess related fees, NEORSD has indicated it will request that funds be released from the escrow so it can begin implementing stormwater projects. NEORSD further stated on its web site that it will take time to review the court’s decision and establish a plan for reorganizing and re-implementing its stormwater management plan before any fees are assessed against property owners in the future.
This decision will, in the short term, only impact the 61 communities that are part of NEORSD’s service area. However, now that the authority to implement such programs has been upheld by Ohio’s highest court, other regional sewer districts in the State of Ohio may follow suit.
Commercial properties, health care facilities and multi-family projects are some the properties that will be the hardest hit by this decision as these types of projects typically have large areas of impervious surfaces. These higher costs will likely be passed along to tenants in higher rents and to customers/clients in higher prices or fees. It’s only money, right?