The Duty to Serve: When Can Water and Sanitation Districts Deny

Presented by Richard Lyons and Blair Dickhoner
• Common Law.
• Regulatory Requirements.
• Contractual Obligations.
• Statutory Duties.
“It is well settled that parties who carry
on a business which is public in its
nature, or which is impressed with a
public interest, must serve all who apply
on equal terms and at reasonable rates.”
City of Danville v. Danville Water Co., 53 N.E. 118, 122 (Ill.
Common Law Duty to:
Provide safe and adequate service.
NOT discriminate.
Charge just and reasonable prices.
Good faith and fair dealing.
Regulatory Obligation–Public Utility Commissions
Many states regulate providers and mandate a
duty to serve all.
Public has enforceable right to demand service
from a public utility.
Colorado: water/sanitation district are NOT
“public utilities” subject to PUC regulation,
Schlarb v. North Suburban Sanitation District.
Service Obligations Arising from Contracts
A contractual obligation to serve at a long term
fixed rate is enforceable against a district , and is
not a “surrender of legislative power.” National
Food Stores v. No. Washington Street Water &
Sanitation District.
District can be sued for breach of contract to
serve. Alameda Water & Sanitation District v.
Ridgewood Mobile Homes Park, Inc.
Statutory Services
Title 32 defines scope of
obligation and
exemptions to that duty.
§32-1-101, et seq.,
C.R.S. defines the
scope of obligations
and exemptions to
the common law
duties for water and
sanitation districts.
“…special districts… will
serve a public use and will
promote the health,
safety, property, security,
and general welfare of the
inhabitants OF SUCH
DISTRICTS and of the
people of the state.”
Service Plan
Obligations: Types of service, service area,
conditions, and manner of service.
Service Area: Not always identical to
district boundaries.
Enforcement of Service Plan: Plains
Metropolitan District v. Ken Caryl Ranch
Metropolitan District.
Title 32 Implied Duty to Serve - Definitions of
Water District and Sanitation District
Water district: Uses phrase “for public and
private purposes.”
Sanitation district: No mention of “public.”
Neither uses “shall” or “will” in definition.
Title 32 Modifies Common Law
Duty to Serve
Does NOT mandate service!
DOES provide exemptions from duty to
§32-1-1006(I)(b)(I), C.R.S.
Board may decline service to ≥ 10 acre
tracts upon affirmative finding that it is
to extend lines to such areas.
Service Plan
May establish which areas are eligible for
service or require inclusions.
§ 32-1-401, C.R.S.
District may require inclusion in accordance
with statutory procedures.
Outside of Boundaries or Service Area
No duty to serve outside of the boundaries or
service area.
Schlarb v. North Suburban Sanitation District
Reasonable Conditions
A district may establish reasonable conditions
that must be met to receive service but those
conditions must be related to the district’s
statutory powers.
The district’s powers are those expressly
conferred by legislation or reasonably inferred
from the Special District Act. Romer v. Fountain
The district cannot use denial of service as a
planning, zoning or other land use tool because
districts lack these land use powers.
“Feasible, practical, desirable” to serve
(ad hoc decision)?
Master utility plan
that is kept current
§32-1-1001(1)(j)(I), C.R.S. – Rate Setting
Districts can establish “fees, rates, tolls, penalties
or charges for services.”
Rate setting is considered a legislative function.
Krupp v. Breckenridge Sanitation District.
Section 32-1-1001(2)(a), C.R.S. recently passed as
HB 13-1186 requires that districts provide notice
before fixing or increasing rates or fees but
preserves rate setting as a legislative function.
C.R.S., authorizes
division of district
into areas based on
services provided
AND to charge
differing rates based
on those services.
Financing Capital Costs
District can either finance plant, facilities and
infrastructure expenditures through the issuance
of bonds (§32-1-1101, C.R.S.) OR
District can require the landowner to pay for
infrastructure and enter into a reimbursement
agreement with that landowner (§32-1-1006(3),
Reasonable Rules and Regulations
District can establish reasonable rules or
regulations that establish specifications and
conditions of service (§32-1-1001(1)(m), C.R.S.)
YES, if the applicant
cannot or will not
meet the district’s
reasonable and legal
conditions which may
include the following:
Construction of needed facilities
Installation of needed line extension
Expansion of existing facility or line capacity
Payment of all fees
Inclusion (if required) or service by an
executed contract is extraterritorial
Adherence to all rules/regs/specs, Utility
Other utility related reasons
NO, if applicant
meets all established
reasonable utility
related conditions or
Vested Right or Expectation Interest
A vested right arises from a transaction or property
ownership that is perfected to a degree that is not
dependent on statute or common law. Miller v.
Branon, citing Ficarra v. Department of Regulatory
Absent a contract for taps or service, an “expectation”
is not an enforceable right.
Vested rights may still be subject to reasonable
exercise or regulatory “police” powers for the public
good. Lakewood Pawnbrokers, Inc. v. City of
Regulatory Taking
A regulatory taking only occurs if the district’s
regulations or decision causes one of the
The action fails to advance a legitimate district
interest. Trailer Haven MHP, LLC v. City of Aurora;
Even if reasonable reg, denies owner ALL
economically viable use of the property. Animas
Valley Sand and Gravel, Inc. v. Bd. of County
Comm., or
“Fact specific taking” of property (e.g., adverse
impact on legitimate “rights”).
A tract of land is historically zoned low density
residential and as a result, the district’s
infrastructure/master plan extends smaller lines
to the area.
Twenty years later, the land is up-zoned to high
density but the district cannot serve this increased
Is this an expectation interest or a vested right?
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