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PENNSYLVANIA DEPT. OF ENVTL. RESOURCES v. WILLIAMS

UNITED STATES DISTRICT COURT, MIDDLE DISTRICT OF PENNSYLVANIA


September 15, 1980

COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF ENVIRONMENTAL RESOURCES, Plaintiff,
v.
WILLIAMSPORT SANITARY AUTHORITY, and all other Pennsylvania municipal authorities, municipalities or persons similarly situated et al., Defendants

The opinion of the court was delivered by: MUIR

OPINION

I. Introduction.

 This case requires the Court to determine whether the Commonwealth of Pennsylvania, Department of Environmental Resources (DER) or the Williamsport Sanitary Authority was entitled to the $ 198,600.00 paid to DER in July 1974 by the United States Environmental Protection Agency (EPA) pursuant to § 206(a) of the 1972 amendments to the Water Pollution Control Act, 33 U.S.C. § 1286(a). If the Court concludes that the Sanitary Authority was entitled to the money, the Court must determine whether the Eleventh Amendment bars relief in this case.

 An action for declaratory relief was commenced by DER in the Commonwealth Court of Pennsylvania and removed to this Court pursuant to 28 U.S.C. § 1441. The Authority has asserted counterclaims for damages, declaratory relief, and injunctive relief. The Court has previously dismissed the counterclaims against DER because they are barred by the Eleventh Amendment. Because the individual counterclaim defendants are being sued in their official capacities, the Court will refer to them as DER.

 The case was tried to the Court from August 25 to August 27, 1980. The following constitute the Court's findings of fact, discussion, and conclusions of law.

 II. Findings of Fact.

 1. The Plaintiff is the Commonwealth of Pennsylvania, Department of Environmental Resources (DER) with principal offices at 9th Floor, Fulton Building, 3rd and Locust Streets, Harrisburg, Pennsylvania, 17120 (Undisputed fact, hereinafter designated U).

 2. The Defendant and Counterclaim Plaintiff is the Williamsport Sanitary Authority, WSA, the Sanitary Authority or the Authority. (U)

 3. The WSA is a municipal corporation incorporated pursuant to the terms of the Municipality Authorities Act of 1945, 53 P.S. §§ 301 et seq. Its principal office and place of business is at 253 West Fourth Street, Williamsport, Pennsylvania, 17701. (U)

 4. Counterclaim Defendant Clifford L. Jones is Secretary of the Commonwealth Department of Environmental Resources. He has held this position since February 1979. (U)

 5. Counterclaim Defendant Louis W. Bercheni is Director, Bureau of Water Quality Management, Commonwealth Department of Environmental Resources. He has held this position since February 1980. From April 1979 until February 1980 he held the position of Acting Director, Bureau of Water Quality Management. (U)

 6. Counterclaim Defendant Cedric Karper is Chief, Planning and Evaluation Section, Division of Sewerage and Grants, Commonwealth Department of Environmental Resources. He has held this position since April 1979. (U)

 7. Counterclaim Defendant Mark Roller is Regional Director, Environmental Protection, Commonwealth Department of Environmental Resources. He has held this position since June 1978. From January 1970 until June 1978 he was Williamsport Regional Sanitary Engineer, Commonwealth Department of Environmental Resources. (U)

 8. The WSA initially constructed its sewerage facilities in 1953. (U)

 9. The WSA facilities consist of two plants, the Central Plant and the West Plant, both of which facilities are owned by the WSA. (U)

 10. The cost of these sewerage facilities was $ 5,100,000.00. (U)

 11. The funding for this project was provided from local funds, to-wit, a bond issue in the amount of $ 5,100,000.00, with the exception of a state grant-in aid in the amount of $ 26,725.54 toward the engineering expenses for the project paid to the City of Williamsport. (U)

 12. No federal funding was received for the initial construction project. (U)

 13. In 1969, the WSA received an order from the Commonwealth Department of Health, one of the predecessor agencies to DER, instructing the WSA to upgrade its treatment at its two sewage treatment plants, the Central Plant and the West Plant, to secondary treatment. (Defendant's Exhibits 122-123). (U)

  14. The purpose of this upgrading was to protect the waters of the Susquehanna River. (U)

 15. The upgrading took the form of a planning, design, and construction project, hereinafter for reference purposes only sometimes referred to as "Project No. 420486", "Project No. C-420486", or "Project WPC Pa. 486". (U)

 16. This construction project to upgrade the WSA's facilities undertaken by the WSA and for which the WSA was responsible was solely the WSA's construction project.

 17. The WSA, not DER, designed and planned Project No. 420486, contracted with the engineers for this project, and entered into the construction contracts with the contractors.

 18. The WSA, not DER, was responsible for the day-to-day operations of and general supervision of Project No. 420486.

 19. The WSA, not DER, had both the direct and ultimate financial responsibility for Project No. 420486 and for complying with the order to upgrade its sewage treatment facilities.

 20. The cost of Project No. 420486 was $ 4,094,752.86. (U)

 21. The "eligible costs" of Project No. 420486 were $ 4,060,752.86. (U)

 22. "Eligible costs" as used herein means costs which can be included for federal construction grant participation. (U)

 23. The WSA applied for a federal construction grant under § 8(b) of the Federal Water Pollution Control Act, P.L. 84-660, for its construction Project No. 420486.

 24. The WSA applied for state grant funds under the Pennsylvania Land and Water Conservation and Reclamation Act, Act No. 443 of 1968, 32 P.S. §§ 5101 et seq., in particular, under 32 P.S. § 5116 (hereinafter referred to as "Act 443"). (U)

 25. The WSA originally applied for and was awarded a grant in the amount not to exceed $ 851,600.00 from the DER. (U)

 26. At the time the state grant of $ 851,600.00 was made, § 206(a) had not yet been enacted. (U)

 27. The WSA's grant was later adjusted, because the actual construction costs of the project were less than the amount estimated at the time of the application, to $ 802,400.00. (U)

 28. The WSA received $ 802,400.00 in state grant funds under Act 443. This was the full amount authorized by the grant offer. (U)

 29. The WSA's state grant was awarded under Act 443, in particular, under 32 P.S. § 5116. (U)

 30. The WSA's state grant contained, inter alia, the following Terms of Offer:

 

1. In the event the actual cost of the project is less than the estimated cost upon which the grant offer is based, such actual cost shall be used to determine the amount of the state grant and the grant shall be reduced as necessary.

 

2. Project accounting and fiscal records relative to state grant assistance shall be maintained and be accessible to duly authorized representatives of the DER for the purpose of audit and examination.

 

3. All funds granted pursuant to the Land and Water Conservation and Reclamation Act shall be expended solely for carrying out the approved project.

 

4. The applicant must adhere to the project construction schedule listed on the federal application form, except that under item c.2. the time limit must not be greater than 100 days. Any required additional documentation must be submitted within 30 days of request. (U)

 31. Since January, 1978, the DER has been using a new form for grants awarded under the Pennsylvania Land and Water Conservation and Reclamation Act, Act 443. This new form for state grants includes the following condition: "If any additional Federal funds become available for this project, it is the Commonwealth of Pennsylvania's intent to recoup any or all of the Land and Water Conservation and Reclamation Act funds paid to the Authority for this project." (Exhibit D14) (U)

  32. The state grant offer was signed by William Saltzer on behalf of the DER on February 24, 1971 and was accepted on behalf of the WSA by John C. Youngman, Sr., on March 3, 1971. (U)

 33. The WSA used the grant it received under the Pennsylvania Land and Water Conservation and Reclamation Act, Act 443, for construction of its secondary sewage treatment facilities for its Central and West Plants, which secondary treatment facilities provided added protection for the waters of the West Branch of the Susquehanna River. (U)

 34. The WSA has performed all of its obligations under the terms of this state grant agreement.

 35. This state grant did not set forth that it was pre-financing for the federal share of Project No. 420486. (Exhibit P-3).

 36. This state grant did not set forth that it was refundable or subject to reimbursement by WSA or any other party, other than in the event the actual costs of the project were less than the estimated costs on which the grant was based. (Exhibit P-3).

 37. The DER administered the sewerage construction grant programs under Act 443 to accomplish two goals: (1) to qualify projects for the highest level of federal funding available in any funding year and (2) to insure equity among projects funded in any funding year by equalizing the combined federal-state grants of each year.

 38. The 1971 Grant Agreement between the DER and the WSA contains no provision barring Pennsylvania DER from accepting subsequent federal funding to augment its Act 443 grant program.

 39. The 1971 Grant Agreement between the DER and the WSA contains no promise by the DER to forego any subsequent federal funding which may become available to augment its state grant program.

 40. There is no provision in the 1971 Grant Agreement between the DER and the WSA by which the DER agreed to pay to the WSA federal funds for which the DER may become eligible after the execution of the 1971 Grant Agreement.

 41. There is no provision in the 1971 Grant Agreement between the DER and the WSA by which any individual counterclaim Defendant in his official capacity agreed to pay any § 206(a) money to the WSA.

 42. Since 1954, WSA has received an annual grant for its operating costs in the amount of 2% of the construction costs of its facilities, less the amount of any federal or state construction assistance under Act 339 of 1953, 35 P.S. §§ 701-703, hereinafter Act 339.

 43. The grant payments made to WSA under Act 339 were placed into the WSA's operating budget and have been used solely for the operating costs of the WSA.

 44. The grant payments made to the WSA under Act 339 were for the WSA's operating expenses, not for capital improvements or construction costs.

 45. The 2% annual operating costs state grants under Act 339 received by WSA were unconditional.

 46. The 2% annual operating costs state grants under Act 339 received by WSA were not prefinancing for future federal grants and were not subject to reimbursement.

 47. WSA was never advised that the 2% state operating grants under Act 339 were pre-financing for future federal grants or subject to reimbursement.

 48. WSA used the 2% state grants it received under Act 339 for the purposes specified by the Act and intended by DER.

 49. The payments pursuant to Act 339 to the WSA prior to November 17, 1972 totalled approximately $ 1,121,649.00. (U)

 50. The grant payments received by WSA attributable to Project 420486 pursuant to Act 339 totalled $ 200,835.99 for the period 1973-1978.

 51. The grants pursuant to Act 339 were annual payments based on a percentage of the cost of construction and acquisition of sewage treatment plants which represent an additional state contribution to the WSA's sewage treatment plants.

  52. WSA expended the funds it received under the Land and Water Conservation and Reclamation Act and under Act 339 with the understanding that the grants were outright, unconditional grants, not subject to repayment or reimbursement by WSA or any other party other than as set forth in the "Terms of Offer."

 53. WSA's understanding that the state grants to it were not subject to reimbursement, other than as set forth in the "Terms of Offer," and were not pre-financing, and its expenditure of these funds based on this understanding, was reasonable and in good faith.

 54. The WSA applied for a federal construction grant for Project No. 420486 under § 8(b) of the Federal Water Pollution Control Act, P.L. 84-660. (Exhibit D-2). (U)

 55. State grants under both Act 339 and Act 443 were certified by the DER to be applied to meet state matching grant provisions under § 8(b) of the Federal Water Pollution Control Act, P.L. 84-660, then codified at 33 U.S.C. § 1158(b), the act in effect prior to the 1972 amendments. (Exhibits P-49 and P-56.) (U)

 56. As a result of the certification under § 8(b) and the contribution of state funds under Act 339 and Act 443 WSA received a higher level of federal funding under the Federal Water Pollution Control Act, P.L. 84-660 than it would otherwise have received.

 57. By letter dated February 19, 1971, Warren Carter of the U.S. EPA notified the WSA that the Authority was to be offered a federal grant in an amount not to exceed.$ 1,703,200.00 and that the grant documents would be forwarded to the Authority through the DER and should be returned to the U.S. EPA through the DER. (Exhibit D-3.1) (U)

 58. By letter dated December 3, 1971, the WSA was notified that it had received the federal grant. (Exhibit D-7) (U)

 59. The WSA was awarded federal construction grant assistance under Section 8(b) of the Federal Water Pollution Control Act, P.L. 84-660, in the amount of 40% of its eligible costs. (U)

 60. The $ 802,440.00 state grant to WSA under the Land and Water Conservation and Reclamation Act was the state matching grant for purposes of section 8(b) of the Federal Water Pollution Control Act.

 61. The WSA also received a 10% planning grant under Section 8(f) of the Federal Water Pollution Control Act, P.L. 84-660. The Authority was notified of the award of a planning grant in the amount of 10% of the grant under section 8(b), $ 170,320.00, on August 11, 1971. (Exhibit D-46) (U)

 62. The total federal grant assistance received by the WSA under the Federal Water Pollution Control Act, P.L. 84-660, was $ 1,765,360.00, 44% of the eligible costs. (U)

 63. The WSA received all of the federal grant funding it was awarded under Sections 8(b) and (f) of the Federal Water Pollution Control Act, P.L. 84-660. (U)

 64. The WSA was not eligible for the maximum amount of federal assistance under Section 8(b) of the Federal Water Pollution Control Act, P.L. 84-660, 55% of the eligible cost for Project No. 420486, because the DER had not enacted water quality standards for the West Branch of the Susquehanna River into which the Authority discharged. (U)

 65. All of the municipalities and municipal authorities in Pennsylvania that received 50-55% federal funding under the Federal Water Pollution Control Act, P.L. 84-660, discharged into waters for which the Commonwealth of Pennsylvania or the appropriate agency had enacted the requisite water quality standards. (U)

 66. The total federal grant assistance received by the WSA under the Federal Water Pollution Control Act, P.L. 84-660, was $ 1,765,360.00. (U)

 67. Project No. 420486 was jointly funded by a 20% state contribution, a 44% federal contribution, and a 36% local contribution toward the total eligible project costs.

  68. After being notified by telephone on April 17, 1972 that grants authorized by § 206(a) of the 1972 Amendments to the Water Pollution Control Act, P.L. 92-500, 33 U.S.C. § 1286(a), hereinafter referred to as "§ 206(a)" would be available, the DER acted speedily to notify potentially eligible parties.

 69. The DER urged as many of the potentially eligible municipal corporations or municipal authorities in the Commonwealth of Pennsylvania as it could reasonably contact to apply for grant funding under § 206(a). (U)

 70. The DER's contacts with these municipal corporations and municipal authorities were made through the Regional Sanitary Engineers or their staff members for the regions in which those projects were located in the Commonwealth of Pennsylvania, pursuant to guidelines provided by the Harrisburg office of the DER. (U)

 71. The DER stated that the various municipal authorities and municipal corporations in the Commonwealth of Pennsylvania, including the WSA, should forward their applications for § 206(a) funds to the DER which, in turn, would forward the applications to the U.S. EPA. (U)

 72. On November 17, 1972, Counterclaim Defendant Mark A. Roller telephoned L. Vernon Frye at his home. (U)

 73. Neither Mark Roller nor L. Vernon Frye recall the exact words of the telephone conversation of November 17, 1972. (U)

 74. In this conversation, Mr. Roller suggested that the WSA apply for a federal grant under § 206(a) for its construction project, Project No. 420486. Mr. Roller suggested that the WSA apply for the § 206(a) grant through DER and stated that DER would forward the application to EPA. Mr. Roller stated that DER would assist WSA in applying for a § 206(a) grant.

 75. At the time of the conversation, Mr. Roller did not know if DER would apply for any portion of the § 206(a) grant for WSA's construction project, Project No. 420486, for DER.

 76. In the November 17, 1972 telephone conversation, L. Vernon Frye did not inquire whether Mark Roller was authorized to enter a contract.

 77. On November 17, 1972, L. Vernon Frye did not inquire as to what approvals were necessary for DER to enter into a contract.

 78. Counterclaim Defendant Roller sent L. Vernon Frye, Executive Director of the WSA, the letter dated November 20, 1972. (Exhibit P-2) (U)

 79. The letter of November 20, 1972, stated, inter alia, "This is to confirm our telephone call on November 17, 1972" and that "you are urged to promptly apply for funding for which your municipality or authority may be eligible." (U)

 80. On the basis of the telephone conversation between Mr. Roller and Mr. Frye and the November 20, 1972 letter of Mr. Roller, the WSA reasonably understood that the § 206(a) payment for its construction project, Project No. 420486, would be paid to the WSA and that DER would assist WSA in obtaining the full section 206(a) grant.

 81. On the basis of the conversation between Mr. Roller and Mr. Frye and the November 20, 1972 letter of Mr. Roller, the WSA reasonably understood that DER would assist WSA in obtaining a § 206(a) grant from EPA for WSA.

 82. In making the telephone call on November 17, 1972, and in sending the letter dated November 20, 1972, Counterclaim Defendant Roller was acting upon the instructions of his superiors in the DER, Walter Lyon and Daniel Drawbaugh. (U)

  83. Walter Lyon and Daniel Drawbaugh had the authority to issue the instructions contained in Exhibit D-48. (U)

  84. In response to this conversation and letter, the WSA filed a letter of application for a § 206(a) grant with the U.S. EPA through the DER. (U)

  85. The DER forwarded the applications for § 206(a) funds for municipal authorities and municipal corporations in the Commonwealth of Pennsylvania, including the WSA's application, to the U.S. EPA on October 10, 1973. (Exhibit D-23) (U)

  86. In processing the applications for § 206(a) funding, the DER verified the date of the initiation of the applicants' projects for the U.S. EPA. (U)

  87. The DER also provided the U.S. EPA with a "reimbursement listing" of Pennsylvania projects qualified for § 206(a) funding. (Exhibit D-23). (U)

  88. The DER certified the projects in Pennsylvania for EPA which DER thought eligible for § 206(a) grants.

  89. The letter of application was dated November 17, 1972 and signed by L. Vernon Frye for John C. Youngman, Sr., Chairman of the WSA, upon John C. Youngman's express authorization. (Exhibit D-9) (U)

  90. The WSA's letter of application for the § 206(a) funds was received by the DER. (U)

  91. The instructions from Walter Lyon and Daniel Drawbaugh to Mark Roller contained no authorization for Roller to enter any contract with the WSA.

  92. On November 17 and 20, 1972, Mr. Roller did not state that he had any authority to enter a contract on behalf of the DER with the WSA.

  93. On November 17 and 20, 1972, Mark Roller made no offer to enter any contract with the WSA.

  94. Mr. Roller's letter of November 20, 1972, contains no offer to enter a contract on behalf of the DER with the WSA.

  95. On November 17 and 20, 1972, Mr. Roller did not offer to pay the WSA any § 206(a) money.

  96. Mr. Roller's letter of November 20, 1972 contains no offer or promise to pay to the WSA any § 206(a) money.

  97. At the time of Mark Roller's November 17 and 20, 1972 communications with the WSA, Mark Roller had not identified or secured approval of any state appropriation which would authorize a payment to the WSA.

  98. Executive Directive # 95, Plaintiff's Exhibit 10, was promulgated by the Governor of Pennsylvania, Raymond Shafer, on February 4, 1970.

  99. Executive Directive # 95 was in effect on November 17 and 20, 1972.

  100. Executive Directive # 95 sets forth the approval process for contractual agreements entered by Pennsylvania state agencies under the Governor's jurisdiction for the period 1971-1973.

  101. Executive Directive # 95 requires the following approvals for the valid execution of a contractual agreement binding upon Pennsylvania for less than $ 100,000.00:

  (a) The agency head (here the Secretary of DER) must approve all grant award contracts;

  (b) The agency attorney is responsible for drafting the contract and must attest to its contents;

  (c) The Comptroller's Office must review all contracts entered by state agencies under the Governor's jurisdiction.

  102. One of the purposes of Executive Directive # 95 is to insure the availability of state appropriations to pay for contracts entered by the state.

  103. Pursuant to Executive Directive # 95, all contracts of any nature for $ 100,000.00 or more were required to be submitted to the Bureau of Systems Analysis, Office of Administration for approval.

  104. "Administrative Directive 95" was not a published agency regulation or otherwise made available to the general public.

  105. The permits for the upgrading of the West and Central Plants, which was Project No. 420486, were executed and issued by Counterclaim Defendant Roller on behalf of DER. (Exhibits D-114, D-115).

  106. If any agreement was entered into by Mr. Roller on November 17 or 20, 1972, it was not approved by the Comptroller of Pennsylvania. (U)

  107. If any agreement was entered into by Mr. Roller on November 17 or 20, 1972, it was not approved by any Commonwealth attorney. (U)

   108. If any agreement was entered into by Mr. Roller on November 17 or 20, 1972, it was not approved by the Pennsylvania Office of Administration, Bureau of Systems Analysis. (U)

  109. Any agreement entered into by Mr. Roller on November 17 and 20, 1972, did not have approval by the Bureau of Systems Analysis.

  110. The DER did all that Mark Roller told L. Vernon Frye it would do by forwarding the applications of the WSA and other municipalities to the U.S. EPA.

  111. By letter dated November 20, 1972, from Walter A. Lyon to Edward Furia, Regional Administrator, U.S. EPA, Pennsylvania itself applied for § 206(a) money. (Exhibit P-12) (U)

  112. Because the DER itself applied, there were in effect two competing applications for § 206(a) money for Project No. 420486, that of the DER and that of the WSA.

  113. By letter dated September 4, 1973, Marshall Cashman, Chief, Program Services Section, Bureau of Water Quality Management, DER, advised the WSA that "Your sewerage construction project WPC-Pa.-486 meets the requirements for reimbursement funding under § 206(a) of the Federal Water Pollution Control Act Amendments of 1972, Public Law 92-500." Mr. Cashman further advised the WSA that "we are currently processing your letter request for submission to the Regional Administrator by the October 18, 1973 filing date set forth in the Federal Register, Volume 38, No. 122, dated June 26, 1973." (Exhibit P-11) (U)

  114. Mr. Cashman's letter of September 4, 1973, contained no language evidencing an agreement by DER to forego any § 206(a) money for which DER itself might be eligible.

  115. Mr. Cashman's letter of September 4, 1973, was not approved by the Comptroller of Pennsylvania. (U)

  116. Mr. Cashman's letter of September 4, 1973, was not approved by any Commonwealth attorney. (U)

  117. Mr. Cashman's letter of September 4, 1973, was not approved by the Pennsylvania Office of Administration, Bureau of Systems Analysis. (U)

  118. On or about April 16, 1974, the U.S. EPA approved Project No. 420486 for a grant under § 206(a) in the amount of $ 220,700.00. (U)

  119. Of the $ 220,700.00 referenced in the last preceding paragraph, $ 198,600.00 was paid by the U.S. EPA to the DER. (U)

  120. The $ 198,600.00 for Project No. 420486 was paid to and received by the DER on July 10, 1974, along with grant payments based on other projects in one lump sum of $ 8,948,099.00. (U)

  121. The $ 198,600.00 payment made to the DER represented approximately one-half of the § 206(a) grant for which Project No. 420486 was approved as eligible, the balance not being awarded at that time because of insufficient congressional appropriation. As a result of the insufficient congressional appropriation, the U.S. EPA determined to make grants in the amount of approximately 50% of the eligibility of each of the projects at that time. (U)

  122. The WSA was not advised prior to April 1974 that DER was claiming or would claim that DER was entitled to receive payment of the § 206(a) grant for the WSA's Project No. 420486. (U)

  123. The DER first advised the WSA that DER considered the grant to be subject to reimbursement or pre-financing under § 206(a), or in any other sense, on April 20, 1974. (U)

  124. The first time that the WSA was advised that the § 206(a) grant for Project No. 420486 would be paid to the DER was by the April 23, 1974 letter of Fred Grant of the U.S. EPA sent with the Notice of Reimbursement Action. (U)

  125. On the "Multipurpose Wastewater Treatment Reimbursement Action" form used by the U.S. EPA for its grant action with respect to § 206(a) payment for Project No. 420486, Plaintiff's Exhibit 4, the "Williamsport Sanitary Authority" appears in the block entitled "grantee."

   126. The "Multipurpose Wastewater Treatment Reimbursement Action" form further contains the following condition: "In accepting this award of amendment and any payment made pursuant thereto, (1) the undersigned represents that he is duly authorized to act on behalf of the grantee organization ...." (U)

  127. The block designated for signature on behalf of the grantee organization on the "Multipurpose Wastewater Treatment Reimbursement Action" form contains the inscription "n/a". (U)

  128. A cover letter dated April 23, 1974 (Plaintiff's Exhibit 5), was attached to the "Multipurpose Wastewater Treatment Reimbursement Action" form. It stated, inter alia, "Our records indicate the Commonwealth of Pennsylvania prefinanced a portion of the Federal grant to assure a grant at the applicable percentage level, therefore, reimbursement will be made directly to the Commonwealth." (U)

  129. The cover letter and "Multipurpose Wastewater Treatment Reimbursement Action" form were received by the WSA on April 25, 1974. (U)

  130. The DER accepted the $ 198,600.00 received for Project No. 420486 as grantee.

  131. The DER did not accept the $ 198,600.00 for Project No. 420486 on behalf of the WSA.

  132. The WSA never authorized DER to accept any payment of any funds or any grant moneys on its behalf. (U)

  133. The WSA never acquiesced in the payment of the $ 198,600.00 of § 206(a) grant for its Project No. 420486 to DER.

  134. The U.S. EPA did not designate the DER to receive the $ 198,600.00 for Project No. 420486 on behalf of the WSA.

  135. The WSA waited more than five years after receiving notice that the § 206(a) funds were paid to the DER before asserting claims against DER in any legal action for the funds.

  136. The WSA never filed an administrative appeal under 40 C.F.R. § 35.895 demanding payment to it of § 206(a) funds received by the DER.

  137. The WSA's first legal action against the DER for the § 206(a) funds was the counterclaim filed in this action on June 6, 1979.

  138. The cover letter of April 23, 1974 advised the WSA that if it had any questions or inquiries concerning this matter, it should contact a Mr. E. D. Knott, Pennsylvania Team Leader, Grant Operations Staff, Office of Grants Coordination, of the U.S. EPA. (U)

  139. On April 30, 1974, L. Vernon Frye telephoned Mr. Knott and spoke to Mr. Knott concerning the payment of § 206(a) grants to the DER. (U)

  140. Mr. Knott advised Mr. Frye to call Marshall Cashman of DER if he questioned the payment of the funds to DER.

  141. In his telephone conversation with Mr. Knott, Mr. Frye protested the payment of the § 206(a) grant to DER.

  142. Mr. Knott did not tell Mr. Frye of any other procedure or avenue for appealing the payment of the § 206(a) grant to DER.

  143. Also on April 30, 1974, L. Vernon Frye telephoned Marshall Cashman, Chief, Program and Board Services Section, Bureau of Sanitary Engineering, DER, to inquire into the payment of the § 206(a) grant to the DER. (U)

  144. Mr. Frye was unable to speak to Mr. Cashman and was referred to Mrs. Gertrude Bryson with whom he spoke concerning the payment of the § 206(a) grant to the DER. (U)

  145. Mrs. Bryson advised Mr. Frye that DER was claiming the § 206(a) grant for Project No. 420486 because the State Land and Water Conservation and Reclamation Act grant was considered to be pre-financing for the federal funding for WSA's construction Project No. 420486 and that the state grant was subject to reimbursement.

  146. In his conversation with Mrs. Bryson, Mr. Frye protested DER's claim to and receipt of the § 206(a) grant for the WSA's construction project and asserted WSA's right to receive the grant payment.

   147. Between April 30, 1974 and December 17, 1974, Mr. Frye wrote four letters to the DER concerning the WSA's position with respect to its entitlement to the § 206(a) funds. (Exhibits D-18, D-19, D-20, and D-21) (U)

  148. DER advised WSA to apply to the federal government, not DER, for payment of the $ 198,600.00 in § 206(a) grant funds for WSA's construction project to DER. (Exhibit 17)

  149. WSA attempted to resolve the dispute concerning the entitlement to the § 206(a) grant funds diligently and in good faith.

  150. When the WSA was not able to obtain an amicable resolution of its differences with the government agencies involved informally, the WSA filed a civil action against the then administrator of the U.S. EPA, Russell Train, Williamsport Sanitary Authority v. Train, Civil Action No. 75-1377, in the United States District Court for the Middle District of Pennsylvania. (U)

  151. Civil Action No. 75-1377 was filed on November 11, 1975 and was assigned to the Honorable R. Dixon Herman of this Court.

  152. The WSA sought to recover the entire $ 441,350.00 § 206(a) grant, including the $ 198,600.00 paid to DER, for WSA's Project No. 420486 in Williamsport Sanitary Authority v. Train, Civil Action No. 75-1377.

  153. Judge Herman issued his decision in Williamsport Sanitary Authority v. Train on February 6, 1979 published at 464 F. Supp. 768 (M.D.Pa.) (U)

  154. The DER learned that the WSA had instituted the Williamsport Sanitary Authority v. Train, supra, Civil No. 75-1377, on December 11, 1975, when it received a copy of the complaint filed by the WSA from the U.S. EPA. (U)

  155. The DER provided background information to the U.S. EPA in the Williamsport Sanitary Authority v. Train, supra, litigation. (Exhibits D-38, D-39) (U)

  156. On May 17, 1979, the DER filed a Petition for Declaratory Judgment in the Commonwealth Court of Pennsylvania which upon removal to this Court became this suit.

  157. Counsel properly noticed Williamsport Sanitary Authority v. Train in the initial papers filed with the Clerk of Court with the removal petition.

  158. At the time the DER filed its Petition for Declaratory Judgment in Commonwealth Court, the WSA was considering the possibility of and researching the requirements for a suit against the Commonwealth and appropriate officers, to recover the $ 198,600.00 paid to the DER. (U)

  159. The total amount paid to the DER by the U.S. EPA under § 206(a) was $ 9,225,883.00. (U)

  160. The § 206(a) payments were received by the DER in the following amounts on the following dates: $ 8,948,099.00 received July 10, 1974; $ 21,900.00 received September 7, 1974; $ 2,430.00 received January 14, 1975; $ 8,400.00 received January 16, 1975; $ 39,770.00 received April 21, 1975; $ 45,614.00 received October 3, 1975; and $ 159,670.00 received February 10, 1976. (U)

  161. The DER believed it was entitled to § 206(a) funds when it applied for, received, and made disposition of the funds.

  162. Project No. 420486 was one of 132 sewerage projects for which the DER received grant payments under § 206(a).

  163. Pursuant to Act 443, the DER made grants to municipal authorities and municipalities for those 132 projects in the amount of $ 35,799,160.00. (U)

  164. The total amount paid by the U.S. EPA to municipal authorities and municipalities for the 132 projects for which the DER received some payment under § 206(a) to date totalled $ 30,636,113.00. (U)

  165. Section 206(a) grants for approximately 98 other projects in the Commonwealth of Pennsylvania were paid directly to a municipal authority or municipal corporation. (U)

   166. Payments were made by the U.S. EPA to either the DER or municipalities based on the U.S. EPA's determination as to whether the DER or a municipality was eligible to receive the funding.

  167. The DER did not serve as an agent for disbursing § 206(a) money when the U.S. EPA determined that money should be paid to a municipality.

  168. When the U.S. EPA determined that a municipality was eligible to receive the § 206(a) payment, such payment was made directly to the municipality by the U.S. EPA.

  169. The U.S. EPA and the DER did not enter any agency agreement for administration of the § 206(a) grant program.

  170. The DER did not serve as the U.S. EPA's agent in awarding § 206(a) grants.

  171. The § 206(a) grants claimed and received by the DER were used to augment the state grant program under Act 443 which benefitted municipalities and municipal authorities.

  172. Project No. 420486 is not eligible for payment of additional state funds under Act 443 and the regulations promulgated thereunder at 25 Pa.Code Chapter 103.

  173. All checks received by the DER, including checks received for § 206(a) grants, were and are forwarded to the State Treasury Department (Treasury) through the DER's comptroller and the State Department of Revenue.

  174. Treasury also receives other checks and monies, including but not limited to tax revenues, proceeds from sales of bonds and fees.

  175. Treasury conveys the checks and monies it receives to a bank and the bank credits the amount received to Treasury's bank account.

  176. The amounts credited to Treasury's bank account are invested as soon as possible or paid out as necessary.

  177. The amounts credited to Treasury's bank account are not credited to any particular source or purpose. (U)

  178. The DER itself does not hold any monies from which it can make payments to grantees or vendors.

  179. Payments of state grants awarded by the DER are made by means of checks issued by Treasury.

  180. To make payments, the DER must forward a requisition to Treasury through DER's comptroller. The approval of the comptroller and the Treasury is required.

  181. "Fund 39" is a term used to identify funds credited to the Land and Water Development Fund by the DER and certain other executive agencies. (U)

  182. The Land and Water Development Fund was created as a result of the passage of Act 443.

  183. The Land and Water Development Fund includes monies received from the sale of bonds and notes, pursuant to Act 443, and federal funds from several sources including all § 206(a) funds.

  184. Monies received by the DER under § 206(a) were credited to Restricted Revenue Account 92. (U)

  185. Restricted Revenue Account 92 was created in 1971 by administrative action of DER.

  186. Restricted Revenue Account 92 is designated Appropriation Symbol 92 by DER's Comptroller and by Pennsylvania's accounting system.

  187. A restricted revenue account is an account code which functions as a discrete revenue identifier. The purpose of an account code is to enable the state to identify and restrict the revenue credited to an account. "Restricted Revenue Account 92" is used by the DER for certain federal grants paid to the DER, including § 206(a) grant funds. (U)

  188. The characteristics of a restricted revenue account include the following: a restricted revenue account does not require legislative action for its creation; once a restricted revenue account is created, the account continues from year to year without any further action by the governor or the legislature; money credited to a restricted revenue account is restricted in the purposes for which it can be spent and is restricted in the sources of revenue which can be credited to it.

  189. A restricted revenue account is not a bank account. (U)

  190. The only funds credited to Restricted Revenue Account 92 are federal grant funds, specifically, funds received under §§ 205(g), 206 and 208 of the Federal Water Pollution Control Act.

  191. There is no physical entity known as Fund 39.

  192. There is no physical entity known as Restricted Revenue Account 92.

  193. Fund 39 and Restricted Revenue Account 92 are names of ledger accounts.

  194. The Department of Environmental Resources keeps separate records for all payments credited to and disbursements from Restricted Revenue Account 92.

  195. The Office of the Comptroller of DER prepares separate reports for Restricted Revenue Account 92.

  196. DER can deduce the ultimate disbursement and expenditure of § 206(a) funds. (U)

  197. Restricted Revenue Account 92 is a division of Fund 39. Restricted Revenue Account 92 is separately administered from the rest of Fund 39 by DER in that the funds credited to Restricted Revenue Account 92 are restricted to federal grants, the use to which the restricted revenue funds are to be put is restricted, separate personnel in DER are responsible for the administration of Restricted Revenue Account 92, and separate reports are prepared for Restricted Revenue Account 92 to distinguish funds credited to Restricted Revenue Account 92 from other funds credited to Fund 39.

  198. The receipt of federal funds from several sources, including § 206(a), was recorded by the DER under Restricted Revenue Account 92.

  199. The § 206(a) funds received by the DER were commingled with other state and federal funds.

  200. In its accounting, Treasury concerns itself only with Fund 39 as a whole, not with Restricted Revenue Account 92 or any other part of Fund 39.

  201. The individual Counterclaim Defendants do not have physical possession of the § 206(a) grant funds. (U)

  202. The individual Counterclaim Defendants did not acquire the § 206(a) funds through execution process. (U)

  203. The individual Counterclaim Defendants did not acquire the § 206(a) funds through replevin or any other judicial process similar to execution process.

  204. DER can determine the balance of § 206(a) funds carried in Restricted Revenue Account 92 at any time and has determined the balance of the section 206(a) funds in Restricted Revenue Account 92 for purposes of this suit.

  205. There is a balance of $ 3,170,075 of section 206(a) grant funds in Restricted Revenue Account 92 at this time.

  206. The DER encumbered $ 6,055,808.00 of the § 206(a) money it received as grant payments to municipalities and municipal authorities as follows on the indicated dates. (U) Amount of Date of Encumbrance Project Encumbrance $ 20,180.00 State Grant to 9-10-75 Loysville Village Mun. Auth. 4.708,778.00 State Grant to 9-16-75 Valley Forge Sewer Auth. 605,280.00 State Grant to Boro 12-4-74 of Ambridge Mun. Auth. 72,570.00 State Grant to Boro 5-20-76 of Jefferson.

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