Knob Hill Development LLC ASB LLC RPO Construction, Inc. Written Builders LLC v. Town of Georgetown, Indiana

FILED

Sep 11 2019, 8:37 am

CLERK

Indiana Supreme Court

Court of Appeals

and Tax Court

ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEE

J. Christopher Janak L. Rachel Lerman

Paul D. Vink Barnes & Thornburg LLP

Bradley M. Dick Los Angeles, California

Bose McKinney & Evans LLP Nicholas K. Kile

Indianapolis, Indiana Barnes & Thornburg LLP

ATTORNEY FOR AMICI CURIAE THE Indianapolis, Indiana

NATIONAL ASSOCIATION OF HOME Kristi L. Fox

BUILDERS AND INDIANA BUILDERS Fox Law Offices, LLC

ASSOCIATION New Albany, Indiana

Jason A. Lopp ATTORNEYS FOR AMICI CURIAE

McNeely Stephenson ACCELERATE INDIANA

New Albany, Indiana MUNICIPALITIES AND INDIANA

MUNICIPAL LAWYERS, INC.

Douglas D. Church

Alexander P. Pinegar

Church Church Hittle & Antrim

Noblesville, Indiana

IN THE

COURT OF APPEALS OF INDIANA

Knob Hill Development LLC; September 11, 2019

ASB LLC; RPO Construction, Court of Appeals Case No.

Inc.; Written Builders LLC; 18A-MI-2123

Appellants-Petitioners, Appeal from the Floyd Superior

Court

v. The Hon. Susan L. Orth, Judge

Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 1 of 20

Town of Georgetown, Indiana, Trial Court Cause No.

22D01-1803-MI-307

Appellee-Respondent.

Bradford, Judge.

Case Summary 1

[1] Knob Hill Development LLC; ASB LLC; RPO Construction, Inc.; and

Written Builders LLC (“Builders”) are all real-estate developers who

appeal from the trial court’s refusal to invalidate a 2018 ordinance passed

by the Town of Georgetown (“the Town”) setting charges for new

customers of the Georgetown Municipal Sewage Works (“the System”).

Builders contend that the system development charge (“SDC”), a/k/a

connection fee, in the ordinance is arbitrary, capricious, and contrary to law.

Builders also contend that a provision of the ordinance that automatically

increases the SDC 2% each year is contrary to law. Because we disagree with

Builders’ first contention but agree with the second, we affirm in part, reverse in

part, and remand with instructions.

Facts and Procedural History

1

We heard oral argument in this case on August 21, 2019, in the Court of Appeals courtroom in

Indianapolis. We would like to commend all counsel on the high quality of their written and oral advocacy.

Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 2 of 20

[2] Builders each own property that is or will be connected to the System, which

was constructed in the early 1990’s and had its flow treated by the City of New

Albany at the time. In 1994, the Town received approximately $3.8 million in

grants (“the 1994 Grant”) and, in 1998, the federal government forgave

approximately $1.25 million in loans to the Town (“the 1998 Loan

Forgiveness”). In 2004, the Town adopted an ordinance to finance expansions

to the System, which began charging SDCs per equivalent dwelling unit

(“EDU”) upon connection. The SDCs were initially set at $2300 and $4800 per

EDU for new in-town and out-of-town connections, respectively, to increase

$100 per year after 2004.

[3] In or around 2011, the Town determined that it should build its own treatment

plant, which it did, with the plant having an initial capacity of 350,000 gallons

per day. The Town received a $3.5 million grant pursuant to the American

Recovery and Investment Act (“the ARRA Grant”) to fund construction of the

treatment plant. In the years since, the Town has almost outgrown the plant’s

original capacity and is in the process of expanding it to treat 700,000 gallons

per day. The Town has devoted $3.1 million borrowed from the Indiana State

Revolving Fund and over $900,000 in Town funds to the expansion. On

February 20, 2018, the Town adopted Ordinance Nos. G-18-03 and G-18-04,

which established monthly sewer user fees and new SDCs, respectively.

Ordinance No. G-18-04 imposed a new SDC of $7140 per EDU for both in-

town and out-of-town customers with the SDC to increase 2% each year.

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[4] On March 1, 2018, Builders filed a petition objecting to the rates and charges

set in Ordinance Nos. G-18-03 and G-18-04. On June 19, 2018, the trial court

conducted an evidentiary hearing. Doug Baldessari had advised the Town

regarding the SDCs in Ordinance No. G-18-04 and testified at the hearing.

Baldessari relied on the Water Environment Federation manual, “Financing

and Charges for Wastewater Systems,” (“the WEF Manual”) which included

the following guidance for setting SDCs:

Increasingly, in response to the stated goal to charge new

customers for the full cost of growth, and thereby avoid the

subsidization of new customers by existing customers, many state

laws allow utilities to implement a combined fee approach. This

approach is rapidly gaining favor in many jurisdictions. It

generally applies when the current system facilities could serve

future customers and a portion of the wastewater capital

improvement program is also related to growth. The combined fee

approach includes two separate elements

(1) System reimbursement component. Includes a portion for

new customer to pay for an equitable share of existing

facilities.

(2) Incremental new capacity component (also referred to as

growth-related improvement component). Includes future

facilities that will be constructed to accommodate growth.

Plaintiff’s Ex. 3 p. 192.

[5] With this guidance in mind, Baldessari testified that he had used a combined

method in which the new SDC would be determined by adding (1) the value of

the utility divided by the number of existing EDUs to (2) the net cost per EDU

to finance new development. Baldessari’s calculations, dated February 8, 2018,

are shown below:

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GEORGETOWN (INDIANA) MUNICIPAL SEWAGE

WORKS

CALCULATION OF EQUIVALENT DWELLING UNITS

AND NET EQUITY PER EDU

Equivalent Dwelling Unit - Current:

Annual Operating revenues (12 months ended 10/31/17

unaudited)

Collection and treatment $1,064,200

Divided by l2 months 12

Monthly revenues 88,683

Divided by average residential bill

(4,000 gallons per month) 58.30

Equivalent Dwelling Units - Current 1,521

Existing System Equity

Total estimated existing system

equity at 12/31/17 $8,607,778

Divided by existing number of

Equivalent Dwelling Units (EDUs) 1,521

Equity per existing EDU $5,659

[….]

GEORGETOWN (INDIANA) MUNICIPAL SEWAGE

WORKS

CALCULATION OF ESTIMATED COSTS PER EDU

TO SERVE NEW DEVELOPMENT

(Per Consulting Engineers)

Capacity and Growth Projects

Projects Necessary to Increase Capacity:

Future WWTP Expansion (add 350,000 gpd) $3,000,000

Future Upgrades to East Lift Station 200,000

Future Upgrades to West Lift Station 200,000

Future Upgrades to Misc. Small Lift Stations 200,000

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Net cost of projects to serve new development 3,600,000

Divided by estimated number of proposed EDUs (l) 1,145

Net Cost Per EDU to Serve New Development $3,144

[….]

GEORGETOWN (INDIANA) MUNICIPAL SEWAGE

WORKS

SUMMARY OF CALCULATED CAPACITY FEES

Equity per existing user $5,659

Net cost per EDU to serve new development 3,144

Calculated System Development Charge $8,803

Rounded (Use) $8,800

Current Fee - Inside Town 2018 $5,100

Current Fee - Outside Town 2018 $7,140

Proposed Fees - Inside and Outside Town $7,140

Plaintiff’s Ex. 5 pp. 2–4.

[6] When calculating the total value of the utility, Baldessari testified that grants

given to a utility for the purposes of keeping rates down at the time, such as the

1994 Grant, the 1998 Loan Forgiveness, and the ARRA Grant (collectively,

“the Grants”), did not have to be left out. Baldessari testified that the SDC set

by Ordinance G-18-04 “doesn’t make the inside-of-town customers pay for

growth that they don’t share in[,]” Tr. Vol. II p. 91, and that leaving items such

as the ARRA Grant out of the calculations would likely leave the Town short of

the SDCs needed for growth-related improvements in the future. While

Baldessari’s calculations indicated that the new SDC should be $8800, he

ultimately recommended a new SDC of $7140 for all new users.

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[7] On August 13, 2018, the trial court (1) upheld Builders’ objection to Ordinance

No. G-18-03 because it failed to specify the percentage rate differential between

in-town and out-of-town users as required by Indiana Code section 8-1.5-3-8.1

and (2) overruled Builders’ objection to Ordinance No. G-18-04 on the basis

that the Town had a rational basis for setting the SDCs as they did. The

Builders appeal, claiming that Ordinance No. G-18-04 is arbitrary, capricious,

and contrary to law in setting the base SDC and violates due process because it

provides for an automatic 2% yearly increase in the SDC.

Discussion and Decision

[8] Builders requested that the trial court enter findings of fact and conclusions of

law pursuant to Indiana Trial Rule 52(A). (Appellants’ App. Vol. II p.41.). In

such cases, our standard of review is two-tiered. In re Paternity of B.M., 93

N.E.3d 1132, 1135 (Ind. Ct. App. 2018). “First, we determine whether the

evidence supports the findings, and second whether the findings support the

judgment.” Id. “The trial court’s findings and conclusions will be set aside only

if they are clearly erroneous.” Id. “In reviewing the trial court’s entry of special

findings, we neither reweigh the evidence nor reassess the credibility of the

witnesses.” Id. “Rather we must accept the ultimate facts as stated by the trial

court if there is evidence to sustain them.” Id. “Conclusions of law are

reviewed de novo.” 11438 Highway 50, LLC v. Luttrell, 81 N.E.3d 261, 265 (Ind.

Ct. App. 2017), trans. denied.

[9] As the Indiana Supreme Court recognized some time ago,

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rate-making is a legislative, not a judicial function, and even if a

statute attempted to lodge such power in a court it would be

unconstitutional. Although we have a constitutional system of

government in which the judiciary is said to be supreme in

determining the jurisdiction and limits on the powers of the other

branches of the government, as fixed by the constitution and laws,

yet this supremacy does not extend to the point where we may

substitute our judgment for, or control the discretionary action of

the executive or legislative branches, so long as their action is

within the sphere and jurisdiction fixed by the statutes and

constitution.

Pub. Serv. Comm’n v. City of Indpls., 131 N.E.2d 308, 312 (Ind. 1956).

[10] It is well-settled that we will invalidate a rate-making ordinance only if it is

arbitrary, capricious, or contrary to law. Bd. of Dirs. of Bass Lake Conservancy

Dist. v. Brewer, 839 N.E.2d 699, 701 (Ind. 2005). We will find a municipal

entity’s legislative action arbitrary or capricious only if it is “patently

unreasonable.” S. Gibson Sch. Bd. v. Sollman, 768 N.E.2d 437, 441 (Ind. 2002).

“Judicial review of whether a governmental agency has abused its rulemaking

authority is highly deferential[,]” Ind. High Sch. Athletic Ass’n, Inc. v. Carlberg, 694

N.E.2d 222, 234 (Ind. 1997), and we “will not intervene in a local legislative

process[if it is] supported by some rational basis.” Borsuk v. Town of St. John,

820 N.E.2d 118, 122 (Ind. 2005). “A court is not permitted to substitute its own

judgment for the municipality’s discretionary authority; it may only determine

whether the municipality is acting within its statutory authority.” Bass Lake

Conservancy Dist., 839 N.E.2d at 701 (citation omitted).

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[11] “A municipality may […] acquire, construct, improve, operate, and maintain

sewage works under this chapter[.]” Ind. Code § 36-9-23-2. As for setting rates,

Indiana Code subsection 36-9-23-25 provides, in part, as follows:

[T]he municipal legislative body shall, by ordinance, establish just

and equitable fees for the services rendered by the sewage works,

and provide the dates on which the fees are due.

[….]

(d) The municipal legislative body may use one (1) or more of

the following factors to establish the fees:

(1) A flat charge for each sewer connection.

(2) The amount of water used on the property.

(3) The number and size of water outlets on the property.

(4) The amount, strength, or character of sewage discharged

into the sewers.

(5) The size of sewer connections.

(6) Whether the property has been or will be required to pay

separately for any part of the sewage works.

(7) Whether the property, although vacant or unimproved,

is benefited by a local or lateral sewer because of the

availability of that sewer. However, the owner must have

been notified, by recorded covenants and restrictions or

deed restrictions in the chain of title of the owner’s property,

that a fee or assessment for sewer availability may be

charged, and the fee may reflect only the capital cost of the

sewer and not the cost of operation and maintenance of the

sewage works.

(8) The cost of collecting, treating, and disposing of garbage

in a sanitary manner, including equipment and wages.

(9) The amount of money sufficient to compensate the

municipality for the property taxes that would be paid on

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the sewage works if the sewage works were privately

owned.

(10) Any other factors the legislative body considers

necessary.

Ind. Code § 36-9-23-25.

[12] Of note, it is undisputed that the System is not subject to the jurisdiction of the

Indiana Utility Regulatory Commission (“IURC”). “Nothing in the case law

or in the applicable statutes mandates a certain type of rate-making method for

municipal utilities that have removed themselves from the jurisdiction of the

IURC.” In re City of Clinton Water Works Rate Schedule Adopted Sept. 9, 1997, 707

N.E.2d 807, 810 (Ind. Ct. App. 1999), trans. denied. “Indeed, when a municipal

utility removes itself from that jurisdiction, […] the IURC’s authority is

replaced by local control.” Id. (citing Stucker Fork Conservancy Dist. v. IURC, 600

N.E.2d 955, 959 n.9 (Ind. Ct. App. 1992)). Utilities that are not subject to

IURC jurisdiction are not limited to methodologies generally accepted by the

IURC when setting rates. See id. (“Thus, we conclude that the City in support

of its rate increase was not limited to methodologies generally accepted by the

IURC.”).

[13] Builders contend that (1) the 2018 SDC is arbitrary and capricious because it

took into account the Grants and previously-paid SDCs, (2) the methodology

for calculating the 2018 SDC violates relevant Indiana case law, and (3) the

2018 SDC impermissibly provides for an automatic yearly increase without a

hearing on each increase.

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I. Whether the 2018 SDCs Included

Improper Costs Passed on to New Users

[14] Builders contend that including the Grants and previously-paid SDCs in the

total value of the utility when calculating the 2018 SDCs was arbitrary,

capricious, and contrary to law. The Town argues that it was appropriate to

include those items when calculating the total value of the utility.

A. The Grants

[15] Builders argue that inclusion of the Grants in the calculations of the 2018 SDCs

was arbitrary and capricious. Specifically, Builders argue that including the

Grants in the calculations (1) is essentially a double recovery for the Town and

(2) conflicts with Indiana law because the grants are not “costs” that can passed

on to users of new connections.

[16] As for Builders’ double-recovery argument, inclusion of the Grants is a method

of determining the value of the utility for purposes of calculating the equity

portion of the combined method for setting the SDC, a method which

Baldessari testified was appropriate. While it is true that a higher total value for

the System results in a higher SDC using the combined method, Baldessari

testified that this was not double payment. Baldessari testified that requiring

new customers to pay for all of the new plant, as well as putting them on an

equal equity footing with existing customers, constitutes “paying their fair

share” and is consistent with the WEF Manual. Tr. Vol. II p. 80. The trial

court was entitled to credit this expert testimony and did, a decision we will not

second-guess. See, e.g., Hopkins v. State, 579 N.E.2d 1297, 1303–04 (Ind. 1991)

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(“Any battle of qualified experts, as in the instant case, or other conflict as to

the reliability of evidence is to be resolved by the trier of fact, whose finding in

this regard will be upheld on review as long as the favorable evidence

adequately supports it, as with any sufficiency question.”) (citations omitted).

[17] As for Builders’ argument that Indiana law stands for the proposition that the

Grants are not costs that can be passed on to the new customers, they cite to

Indiana Code subsection 36-9-23-25(e), which provides that

[t]he municipal legislative body may exercise reasonable discretion

in adopting different schedules of fees, or making classifications in

schedules of fees, based on variations in:

(1) the costs, including capital expenditures, of furnishing

services to various classes of users or to various locations; or

(2) the number of users in various locations.

[18] Builders argue that the Town is impermissibly making new customers pay the

Town for the Grants while exempting existing customers, claiming that this is

not a valid variation in the cost of furnishing service that can justify the 2018

SDC. This argument is little more than a variation on the double-payment

argument, and, as mentioned, Baldessari opined that including the grants in the

connection-fee calculation was not considered double payment. We conclude

that including the Grants when calculating the 2018 SDC did not violate

Indiana Code section 36-9-23-25(e).

B. The Previously-Paid SDCs

[19] Builders argue that the approximately $1.26 million in previously-paid SDCs

were contributions in aid of construction (“CIAC”) and should not have been

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used to calculate the 2018 SDC. The Town, however, argues that the

previously-paid SDCs were properly considered revenue, not CIAC, and were

therefore rightfully included in the calculations. The Town also argues that any

requirement that SDCs must be treated as CIAC only applies in cases governed

by the IURC, which all agree has no jurisdiction in this case.

[20] “CIAC has been described as ‘donations provided at no cost to the utility.’

CIAC may come from state or local governments, customers, or developers as

incentives to upgrade utilities to accommodate larger customers without

burdening existing customers.” Ind. Office of Util. Consumer Counselor v. Lincoln

Utils., Inc., 834 N.E.2d 137, 143 (Ind. Ct. App. 2005) (citation omitted), trans.

denied. In support of their argument that previously-paid SDCs must be treated

as CIAC, Builders cite to Indiana Code subsection 8-1-2-6(b), which provides

that, in general, “no account shall be taken of construction costs unless such

costs were actually incurred and paid as part of the cost entering into the

construction of the utility” when valuing a utility. Builders also cite to several

cases in which it was held that previously-paid SDCs were CIAC and could not

be used in calculating future SDCs. Section 8-1-2-6, however, only applies to

utilities under the jurisdiction of the IURC, and all of the cases arose in contexts

governed by the IURC. As mentioned, it is undisputed that the System is not

subject to the jurisdiction of the IURC. Consequently, the law relied upon by

Builders does not stand for the proposition that the Town must abide by the

same restriction.

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[21] That said, Builders also argue that Baldessari’s testimony that previously-paid

SDCs are not CIAC was unsupported by any authority. Baldessari, however,

testified that previously-paid SDCs were not considered CIAC for municipally-

owned utilities like the System and that “the WEF [Manual] even states that

that’s generally considered that they’re user charges.” Tr. Vol. II p. 50.

Baldessari’s reliance on the WEF Manual to support his conclusion on this

point was not challenged at the hearing. Again, Builders are requesting that we

reweigh the evidence on this point, which we will not do. See Hopkins, 579

N.E.2d at 1303–04.

C. Whether Imposing an SDC that Places the Burden of

Improvements on New Users is Contrary to Indiana Law

[22] Builders also argue that imposing an SDC that does not spread the burden of

improvements to current System users is contrary to Indiana law. Builders rely

on one non-IURC case to support this argument, Common Council of City of

Crown Point, Lake Cty. v. High Meadows, Inc., 173 Ind. App. 138, 362 N.E.2d

1166 (Ind. Ct. App. 1977). In High Meadows, landowners challenged the city’s

ordinance which sought to increase fees charged to connect to the city’s sewer

system. Id. at 138, 362 N.E.2d 1167. The trial court sustained the challenge.

Id. On appeal, we noted that while municipal sewage connection charges were

not necessarily limited to recoupment of the cost of the inspection and the

actual work performed, the charges levied under the ordinance in question

exceeded the city’s statutory authority. Id. at 139, 362 N.E.2d 1166, 1167.

Specifically, we concluded that although the city could have established a

connection rate or charge that included amounts to be used for future

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improvements to the system, such charges could not have been levied only

upon new users when there was an established group of users of the same

system who would not have been subject to the charges. Id. at 143, 362 N.E.2d

1166, 1169.

[23] As the Town points out, however, High Meadows was based on statutes which

have been superseded by subsequent legislation, including the Home Rule Act,

as recognized by more recent judicial analysis. In the 1998 case of Taylor v. Fall

Creek Regional Waste District, 700 N.E.2d 1179 (Ind. Ct. App. 1998), trans. denied,

we recognized that the statute at issue in High Meadows, former Indiana Code

section 19-2-5-20, afforded less discretion to sewage utilities than the one at

issue in Fall Creek, Indiana Code section 13-26-11-2(a), which applies to

regional sewage utilities, was enacted in 1996, and allows the utility to

determine rates based on a number of factors, including “(7) A combination of

these or other factors that the board determines is necessary to establish

nondiscriminatory, just, and equitable rates or charges.”

[24] A few years after High Meadows was decided, the General Assembly replaced

Indiana Code sections 19-2-5-19 through -21 with Indiana Code section 36-9-

23-25, the statute at issue in this case. As was the case with the statute at issue

in Fall Creek, section 36-9-23-25 provides a municipality with more discretion

than section 19-2-5-20 afforded. Indeed, subsection 36-9-23-25(d) allows even

more discretion to municipalities than subsection 13-26-11-2(a) does to regional

authorities, as the municipal legislative body may use one or more of several

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listed factors, including “[a]ny other factors the legislative body considers

necessary.”

[25] Moreover, High Meadows predates the Indiana Home Rule Act, enacted in 1980.

High Meadows was decided pursuant to the so-called “Dillon Rule,” which

presumed that local governments possess only those powers expressly

authorized by statute.

Like many other states, Indiana historically adhered to the Dillon

Rule that a municipal corporation could exercise only the

following powers:

First, those granted in express words; second, those

necessarily or fairly implied in, or incident to, the powers

expressly granted; third, those essential to the declared

objects and purposes of the corporation—not simply

convenient, but indispensable.

Tippecanoe Cnty. v. Ind. Mfr.’s Ass’n, 784 N.E.2d 463, 465 (Ind.

2003) (citing Dillon, Municipal Corporations (1st ed. 1872)

(emphasis in original)). A corollary rule of construction required

that a court resolve any reasonable doubt concerning the existence

of a power against the corporation and enjoin the corporation

from exercising it. See id.

Under the Dillon Rule, a person who simply found himself on the

wrong side of some local action could easily challenge that action

by essentially arguing that it was ultra vires. See, e.g., City of S. Bend

v. Chicago, S.B. & N.I. Ry. Co., 179 Ind. 455, 458, 101 N.E. 628, 629

(Ind. 1913) (“[T]he charter of South Bend delegated no power for

the enforcement of the ordinance in controversy….”). The

resulting legal landscape handcuffed municipal corporations,

preventing them from taking a wide range of governmental actions

we might find commonplace today. See, e.g., Pittsburgh, C., C. & St.

L. Ry. Co. v. Town of Crown Point, 146 Ind. 421, 45 N.E. 587 (1896)

(town could not enforce ordinance requiring railroad to post

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watchmen and maintain gates at crossings at railroad’s expense

because statute authorizing ordinances to prevent nuisances did

not provide so specifically).

Recognizing the disadvantages of the Dillon Rule, the Legislature

abrogated it in 1971, when it passed the Indiana Powers of Cities

Act. Act of April 14, 1971, P.L. 250–1971, § 1, 1971 Ind. Acts

955, 967. The Legislature expanded the applicability of this

reforming principle in 1980, when it passed the Indiana Home

Rule Act. Act of February 27, 1980, P.L. 211–1980, § 1, 1980 Ind.

Acts 1657, 1659–62 (codified as amended at Ind. Code §§ 36-1-3-1

to -9 (2007)). In addition to reaffirming the abrogation of the

Dillon Rule, the Home Rule Act provides that in general, a unit is

presumed to possess broad powers of local government, unless the

Indiana Constitution or a statute expressly denies the unit that

power, or expressly grants it to another entity. Ind. Code § 36-1-3-

5 (2007)[.]

Kole v. Faultless, 963 N.E.2d 493, 495–96 (Ind. 2012). Since 1980, then, the

presumption has been that any doubt as to the existence of a power “shall be

resolved in favor of its existence.” Ind. Code § 36-1-3-3(b).

[26] Given the greater discretion granted to the Town by Indiana Code subsection

36-9-23-25(d), along with the presumption that a municipality is presumed to

have a power that has not been expressly taken away, we conclude that High

Meadows no longer stands for the broad proposition that the burden of future

growth in a sewer system cannot be placed primarily on new users. It seems to

us that when the Town was deciding what the 2018 SDC would be, planning

for future growth easily qualifies as “[a]ny other factor[] the legislative body

considers necessary.” Ind. Code § 36-9-23-25(b)(10).

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II. Annual Increase in the SDC

[27] Finally, Builders contend that the automatic yearly 2% increase in the SDC in

Ordinance No. G-18-04 violates Indiana law. Indiana Code section 36-9-23-26

provides, in part, as follows:

(a) After the introduction of the ordinance establishing fees under

section 25 of this chapter, but before it is finally adopted, the

municipal legislative body shall hold a public hearing at which

users of the sewage works, owners of property served or to be

served by the works, and other interested persons may be heard

concerning the proposed fees.

[….]

(b) After the hearing, the municipal legislative body shall adopt the

ordinance establishing the fees, either as originally introduced or

as modified.

[….]

(d) The municipal legislative body may change or readjust the fees

in the same manner by which they were established.

As the Indiana Supreme Court has recognized, the statute requires that “a

municipal legislative body must hold a public hearing before revising sewer

rates.” Farley Neighborhood Ass’n v. Town of Speedway, 765 N.E.2d 1226, 1231

(Ind. 2002).

[28] We have little trouble concluding that Builders are correct on this point. The

2% annual increase in the SDC is a revision of a fee, one that occurs without a

public hearing. The Georgetown Town Council, even though it passed only

one ordinance, is nonetheless revising the fee each year without a hearing. “If

there is a constitutional or statutory provision requiring a specific manner for

exercising a power, a unit wanting to exercise the power must do so in that

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manner.” Ind. Code § 36-1-3-6. So, the Georgetown Town Council may only

“change or readjust the fees in the same manner by which they were

established[,]” Indiana Code section 36-9-23-26(d), i.e., following a public

hearing. We conclude that the automatic 2% annual increase in the SDC in

Ordinance No. G-18-04 violates Builders’ due process rights and is invalid.

[29] The Town argues, without reliance on authority, that the Builders’ challenge to

the automatic increase in the SDC should be rejected as speculative because the

Town could enact a new ordinance at some point in the future. The Town also

argues that the automatic-increase clause is not yet ripe for review because it set

the 2018 SDC lower than Baldessari’s original proposed SDC and it will take

several years of automatic increases for the SDC to reach that figure. We find

neither of these arguments to be compelling. Put simply, whether there may be

a new ordinance in ten years or whether Builders should count themselves

lucky that the SDC was not set higher in the first place are things that have

nothing to do with whether the Town has the authority to revise the SDC

without a hearing, which it does not.

Conclusion

[30] We conclude that the base SDC set by Ordinance No. G-18-04 is neither

arbitrary, capricious, nor contrary to Indiana law. Ordinance G-18-04’s

automatic 2% yearly increase in the SDC, however, violates relevant Indiana

Court of Appeals of Indiana | Opinion 18A-MI-2123 | September 11, 2019 Page 19 of 20

law because it provides for a fee increase without a hearing. 2 It is not disputed

that one such automatic increase has already occurred, so we remand with

instructions for the trial court to enjoin the Town from collecting the additional

2% unless and until an increase in the SDC has been approved and enacted

following a public hearing.3

[31] The judgment of the trial court is affirmed in part and reversed in part, and we

remand with instructions.

Altice, J., and Tavitas, J., concur.

2

Our disposition of the claim regarding the automatic increase has no effect on the other provisions of

Ordinance No. G-18-04. “If any section of this code now enacted or subsequently amended or its application

to any person or circumstances is held invalid, the invalidity does not affect other sections that can be given

effect without the invalid section or application.” GEORGETOWN, IND., CODE OF ORDINANCES § 10.06(A).

3

In addition to nine enumerated powers (which do not include ordering an injunction), Indiana Rule of

Appellate Procedure 66(C)(10) empowers us to “grant any other appropriate relief” in disposing of an appeal.

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