The opinion of the court was delivered by: MUIR
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.
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)
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)
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.
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, ...