decided: April 27, 1983.
TOWNSHIP OF HOPEWELL, APPELLANT
THE MUNICIPAL WATER AUTHORITY OF THE BOROUGH OF ALIQUIPPA, APPELLEE. MUNICIPAL WATER AUTHORITY OF ALIQUIPPA, APPELLANT V. TOWNSHIP OF HOPEWELL, APPELLEE
Appeals from the Order of the Court of Common Pleas of Beaver County in the case of Township of Hopewell, a Municipal Corporation v. The Municipal Water Authority of the Borough of Aliquippa, a Municipal Authority, No. 407 of 1981.
Keith R. McMillen, Duplaga, Tocci, Palmieri & McMillen, for appellant, Township of Hopewell.
Clarence D. Neish, for appellee, Municipal Water Authority of the Borough of Aliquippa.
President Judge Crumlish, Jr. and Judges Craig, MacPhail, Doyle and Barry. Opinion by President Judge Crumlish, Jr. Judge Barry concurs in the result only.
[ 82 Pa. Commw. Page 135]
Township of Hopewell (Hopewell) and the Municipal Water Authority of the Borough of Aliquippa (Aliquippa Authority) cross-appeal a Beaver County Common Pleas Court order approving a sewer rate increase but postponing the payment thereof. We vacate and remand.
In September, 1980, Aliquippa Authority increased the sewer rate charges for Hopewell users from $11.00 to $28.00 per dwelling unit per quarter and increased its resident users' rates from approximately $10.08 to $11.06. These increases were to become effective on November 1, 1980. On February 25, 1981, Hopewell filed a complaint in the common pleas court seeking a declaratory judgment invalidating the rate increase as those increases relate to the residents of Hopewell. On February 12, 1982, that court invalidated the rate increase from September 25, 1980 to June 1, 1981, but held it to be valid after June 1, 1981. Both parties filed
[ 82 Pa. Commw. Page 136]
exceptions and arguments were heard by the common pleas court en banc. That court entered an order approving the sewer rate increase, effective June 1, 1984.*fn1
The factual history began on May 12, 1958, when Hopewell Township and Aliquippa Borough entered into an agreement whereby each agreed to allow certain residents of the other to connect to and be served by their respective sewers and sewer treatment plants when such plants began operations.*fn2 In 1958, Aliquippa Authority sewer system served approximately 550 Hopewell residents, charging a flat rate of $30.00 per Hopewell resident per year. In 1960, the Hopewell Authority sewage treatment plant began operations and served approximately fifty residents of Aliquippa, charging a flat rate of $14.00 per quarter. Subsequently, the respective authorities increased their quarterly charges to their non-resident users. In February of 1980, the Hopewell Authority increased its quarterly charge for both Hopewell and Aliquippa residents from $25.00 to $28.00. In September, 1980, Aliquippa Authority increased its quarterly charges for Hopewell residents from $11.00 to $28.00 while maintaining the $11.00 quarterly charge for Aliquippa residents.*fn3
[ 82 Pa. Commw. Page 137]
The common pleas Court's judicial review of a rate resolution is limited to a determination of whether there has been a manifest and flagrant abuse of discretion or an arbitrary establishment of the rate system. See Brandywine Homes v. Caln Township Municipal Authority, 19 Pa. Commonwealth Ct. 193, 200, 339 A.2d 145, 148 (1975). The burden of proving such an abuse of discretion rests upon the party challenging such action. Id. at 200, 339 A.2d at 149. Where the court below has received the evidence, our scope of review on appeal is limited to considering whether the factual findings are supported by substantial evidence and whether the law was properly applied to the facts. Port Authority of Allegheny County v. Scott, 62 Pa. Commonwealth Ct. 631, 642, 437 A.2d 502, 508 (1981).
Aliquippa Authority's rate-making power is controlled by Section 4B(h) of the Municipal Authorities Act of 1945 (Act), Act of May 2, 1945, P.L. 382, as amended, 53 P.S. § 306 B(h), which provides
B. Every Authority is hereby granted . . . the following rights and powers:
(h) To fix, alter, change and collect rates and other charges in the area served by its facilities at reasonable and uniform rates to be determined exclusively by it, for the purpose of providing for the payment of the expenses of the Authority, the construction, improvement, repair, maintenance and operation of its facilities and properties . . . and to determine by itself exclusively the services and improvements required to provide adequate, safe and reasonable service, including extensions thereof, in the areas served: Provided, That if the service area includes more than one municipality, the revenues from any project shall not be expended directly or indirectly on any other project, unless
[ 82 Pa. Commw. Page 138]
such expenditures are made for the budget of the entire service area.
The court below referred to Section 4B(h) of the Act to establish that Aliquippa Authority had the exclusive power to increase the rates of Hopewell residents. The trial court interpreted letters from the Department of Environmental Resources (DER) as mandating certain capital improvements to the Aliquippa sewer system and relied on the weight of the testimony in determining the need for improvements. The record reveals the DER letters addressed only capital improvements to the treatment system and sewer studies, which represents a small portion of the proposed capital improvements. Aliquippa Authority's witnesses explained the need for the other improvements and testified that these projects are for the immediate improvement of the system. However, the record also indicates that many of the projects have not been planned or started. In fact, one of Aliquippa Authority's own experts stated that the estimates of the sewage facility replacement costs came from a "very preliminary study." The expert further expressed that the rehabilitation replacement program would be an ongoing project that could take place "over the next 15-20 years." We have held that "the appellate court must be furnished with the data used and the mathematical calculations adopted, not only in establishing the rate base, but also in preparing the resulting rate schedule itself." Port Authority of Allegheny County, 62 Pa. Commonwealth Ct. at 643, 437 A.2d at 508. The evidence reveals that the construction plan is speculative and its cost was not available at the time of the rate increase.
Hopewell argues that the trial court committed an error of law by permitting Aliquippa Authority to base a present rate increase upon future capital improvements
[ 82 Pa. Commw. Page 139]
that have not actually been undertaken or are not subject to any timetable.*fn4 The trial court stated, "This point is particularly valid in light of the fact that indefinite collection of said increased rate could, in time, result in collections in excess of Hopewell's proportionate share of planned or contemplated capital improvements." The trial court realized the consequences of Aliquippa Authority's actions but failed to find an abuse of discretion. Instead, the trial court permitted the rate increase, but ordered Aliquippa Authority
to make collections until three years after the date of the first increased rate collection, which is a reasonable period of time for the Authority to begin its proposed capital improvements. After those three years, the Authority must have substantially begun capital improvements or cease to collect these additional funds from the Hopewell users for deposit into a sinking fund.
By imposing a three-year construction timetable for the projected capital improvements, without finding that Aliquippa Authority abused its discretion, the common pleas court exceeded its legal authority.
Hopewell further alleges that the trial court committed an error of law by allowing Aliquippa Authority to increase non-resident rates without increasing resident rates*fn5 in order to pay for future capital improvements
[ 82 Pa. Commw. Page 140]
which benefit the entire system. Hopewell argues that Aliquippa Authority's sewer rate increase is discriminatory and in direct violation of Section 306 B(h) of the Act, which states that all rates must be reasonable and uniform. In its opinion, the trial court noted that Aliquippa Authority may not charge Hopewell residents more than their proportionate share of the costs of services and benefits they receive. Consequently, the trial court ordered Aliquippa Authority "to place into a 'sinking fund for future capital improvements' all amounts collected from the Hopewell users not attributable to operating and depreciation expenses and a reasonable margin of profit . . . ." Therefore, the trial court again modified Aliquippa Authority's rate increase without finding an abuse of discretion.
The trial court further altered Aliquippa Authority's rate increase by postponing the payment of the sewer rate increase nine months beyond the effective date enacted. The trial court observed that Hopewell did not have the recommendation for a sinking fund until March, 1981, and Hopewell did not have access to a factually-supported calculation of sewer rate structures which considered the need for capital improvements until June, 1981. Again, the common pleas court has sua sponte ordered a substantial change to Aliquippa Authority's rate increase without finding an abuse of discretion.*fn6
[ 82 Pa. Commw. Page 141]
Without a showing of bad faith, fraud, capricious action or an abuse of power*fn7 on the part of a municipal authority, a common pleas court cannot assume the role of a rate-setting body by modifying the rate increase. Absent a finding of an abuse of discretion, the court below cannot impose a timetable for capital improvements, direct monies to a sinking fund, and/or postpone a municipal authority's rate increase. "The Court of Common Pleas' duty was to determine the uniformity and reasonableness of the rates established by the Authority, not whether it would choose a different method of establishing reasonable and uniform rates." South Union Township Sewage Authority v. Kozares, 13 Pa. Commonwealth Ct. 325, 332, 320 A.2d 381, 385 (1974). The lower court's modification of the rate increase, absent a finding of abuse of discretion, was clear legal error in that the law was not properly applied to the facts.*fn8
Vacated and remanded.
[ 82 Pa. Commw. Page 142]
The order of the Court of Common Pleas of Beaver County dated December 20, 1982 at No. 407 of 1981 is vacated, and this case is remanded for findings, conclusion and decision pursuant to the principles stated in the foregoing opinion, after affording opportunities to the parties to present additional evidence in accordance with such principles.
Judge Barry concurs in the result only.
Vacated and remanded.