491 N.W.2d 484 (Wis. 1992), 90-1263, City of Brookfield v. Milwaukee Metropolitan Sewerage Dist.

Docket Nº:90-1263.
Citation:491 N.W.2d 484, 171 Wis.2d 400
Opinion Judge:The opinion of the court was delivered by: Abrahamson
Party Name:CITY OF BROOKFIELD, Village of Butler, Village of Menomonee Falls, City of Mequon, City of New Berlin, Village of Elm Grove, Village of Germantown, Village of Thiensville, Richard E. Ensslin, Donald Wenzel and Raymond Gray, Plaintiffs-Respondents-Cross Appellants, [d] City of Muskego, Plaintiff, v. MILWAUKEE METROPOLITAN SEWERAGE DISTRICT, Defendan
Attorney:For the defendant-appellant-cross respondent there were briefs (in the court of appeals) by Michael J. McCabe, James H. Petersen, Harold B. Jackson, Jr., of Milwaukee Metropolitan Sewerage District and Maurcie J. McSweeney, Allen W. Williams, Jr., Richard M. Esenberg, Michael D. Flanagan and Fole...
Case Date:November 13, 1992
Court:Supreme Court of Wisconsin
 
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Page 484

491 N.W.2d 484 (Wis. 1992)

171 Wis.2d 400

CITY OF BROOKFIELD, Village of Butler, Village of Menomonee

Falls, City of Mequon, City of New Berlin, Village of Elm

Grove, Village of Germantown, Village of Thiensville,

Richard E. Ensslin, Donald Wenzel and Raymond Gray,

Plaintiffs-Respondents-Cross Appellants, [d]

City of Muskego, Plaintiff,

v.

MILWAUKEE METROPOLITAN SEWERAGE DISTRICT,

Defendant-Appellant-Cross Respondent. [dd]

No. 90-1263.

Supreme Court of Wisconsin.

November 13, 1992

Argued Sept. 1, 1992.

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[Copyrighted Material Omitted]

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[171 Wis.2d 408] For the defendant-appellant-cross respondent there were briefs (in the court of appeals) by Michael J. McCabe, James H. Petersen, Harold B. Jackson, Jr., Milwaukee Metropolitan Sewerage District and Maurice J. McSweeney, Allen W. Williams, Jr., Richard M. Esenberg, Michael D. Flanagan and Foley & Lardner, Milwaukee and oral argument by Allen W. Williams, Jr. and Michael D. Flanagan.

For the plaintiffs-respondents-cross appellants there were briefs (in the court of appeals) by Truman Q. McNulty, Ross A. Anderson, Michael J. Lund, Christopher J. Jaekels and Frisch Dudek, Ltd., Milwaukee and [171 Wis.2d 409] oral argument by Truman Q. McNulty, Ross A. Anderson and Michael J. Lund.

Amicus Curiae brief was filed by Robert V. Abendroth, Marcia Rimai and Whyte & Hirschboeck, S.C., Milwaukee for the Joint Organization for Better Sewers.

Amicus Curiae brief was filed (in the court of appeals) by Steven Levine, Madison for Public Service Commission of Wisconsin.

Amicus Curiae brief was filed (in the court of appeals) by Maryann Sumi, Asst. Atty. Gen. with whom on the brief was James E. Doyle, Atty. Gen., for the State of Wis.

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SHIRLEY S. ABRAHAMSON, Justice.

This is an appeal from a judgment of the circuit court for Waukesha County, Robert T. McGraw, Circuit Judge. The judgment estopped the Milwaukee Metropolitan Sewerage District (MMSD) from changing its method of charging the plaintiff municipalities for the recovery of the capital costs of MMSD's sewerage processing and water pollution abatement facilities. It further adjudged, in accordance with the special verdict of the jury, the reasonable value of the capital costs of sewerage service MMSD provided to the plaintiff municipalities. The City of Brookfield, Village of Butler, Village of Menomonee Falls, City of Mequon, City of New Berlin, Village of Elm Grove, City of Muskego, Village of Germantown, and the Village of Thiensville are the plaintiff municipalities. They receive sewerage services from MMSD, but they are located outside MMSD's statutory boundaries. 1 MMSD originally calculated the capital cost charges to the plaintiff municipalities through a [171 Wis.2d 410] usage based formula. 2 Subsequently, MMSD attempted to change to a property value based formula.

This appeal is before the court on certification of the court of appeals. Section 809.61, Stats.1989-90. The plaintiff municipalities brought this action to challenge MMSD's use of a property value based formula to allocate capital costs to municipalities outside MMSD's statutory boundaries. MMSD contended in the circuit court that it has statutory power to apply a property value based formula to the plaintiff municipalities and that it had changed its boundaries pursuant to sec. 66.888(1)(c)2-5, Stats.1989-90, to include the plaintiff municipalities. It is undisputed that MMSD has authority to apply a property value based formula to users within its statutory boundaries.

Granting the plaintiff municipalities' motions for summary judgment, the circuit court held 1) that secs. 66.888(1)(c)2-5, Stats.1989-90, were unconstitutional private, local or special laws under art. IV, secs. 18 and 31, Wis. Const.; 2) that if sec. 66.888(1)(c)2-5, were constitutional, MMSD had not complied with the statutory procedural requirements in changing its boundaries; and 3) that sec. 66.079, Stats.1989-90, did not authorize MMSD to charge municipalities outside its boundaries on a property value basis. The plaintiff municipalities also asserted that MMSD was equitably estopped from charging them on a property value basis.

MMSD counterclaimed for the capital costs it had charged the plaintiff municipalities on a property value formula. It contended that the plaintiff municipalities [171 Wis.2d 411] were precluded from submitting evidence challenging the reasonableness of MMSD's bills, maintaining that the Public Service Commission (PSC) had exclusive jurisdiction over the reasonableness of MMSD's charges.

The circuit court rejected MMSD's challenge to its authority to hear the case. Based on special jury verdict findings of equitable estoppel and of the reasonable value of the capital costs of sewerage services provided to each of the plaintiff municipalities in the years 1985-1988, the circuit court entered judgment in favor of the plaintiff municipalities.

We vacate the circuit court's judgment and remand the cause to the circuit court for dismissal. 3 We conclude that the circuit court should have decided only the constitutionality of sec. 66.888(1)(c)2-5, Stats.1989-90, and that the circuit court

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should have deferred to the PSC to determine the reasonable value of the capital cost of sewerage service provided to the plaintiff municipalities. Further, we conclude that sec. 66.888(1)(c)2-5, does not violate art. IV, secs. 18 and 31, of the Wisconsin Constitution relating to private, local and special laws.

I.

The facts are undisputed for purposes of this appeal. MMSD provides services to municipalities within and outside its statutory boundaries. It charges for these services by allocating its operating and capital costs. Operating[171 Wis.2d 412] costs are allocated to all customers on a usage-volumetric basis. For customers within MMSD's statutory boundaries, charges for capital costs are calculated using a property value based formula. For municipalities outside MMSD's statutory boundaries, pre-1984 contracts provided that capital costs would be allocated on a usage-volumetric basis. These contracts between MMSD and the municipalities were for a fixed period and were automatically renewable unless a party gave notice of intent to terminate. MMSD terminated the contracts in 1984.

In 1977, MMSD began an extensive water pollution abatement program to comply with the Federal Clean Water Act, 33 U.S.C. sec. 1251, et seq. Pursuant to statutory and regulatory requirements, MMSD prepared a Master Facilities Plan (MFP), comparing alternative water pollution abatement proposals. As required, MMSD submitted these plans to the federal Environmental Protection Agency (EPA), Wisconsin's Department of Natural Resources (DNR), and the general public for comment and hearings during a six-month period beginning November 1979.

The cost of MMSD's new water pollution abatement facilities is expected to exceed two billion dollars. Any portion of the cost not supported by state and federal grants will be allocated among MMSD's users through the capital cost component of their sewer service charges. The financial analysis in the MFP, which addressed the period 1985-2005, assumed that capital costs would be charged to municipalities outside MMSD's boundaries on the basis of usage. The MFP also stated, however, that while the financial analysis was based on several assumptions, an optimum financing method would distribute costs evenly among all of MMSD's users. The MFP explicitly referred to an [171 Wis.2d 413] expansion of MMSD's boundaries as a means of obtaining equal cost distribution. Neither the DNR nor the EPA approvals endorsed any particular mode of financing the local share of the project. 4

In 1980, while the MFP was under review, MMSD employed a consultant to analyze its revenue requirements. Based on the consultant's evaluation, MMSD attempted to renegotiate its contracts with the plaintiff municipalities, seeking a modification that would incorporate property value based capital charges. The plaintiff municipalities refused to modify the contracts then in effect, and MMSD continued to honor the existing contracts.

In April 1982, after the MFP was adopted and the necessary approvals were obtained, the state legislature reorganized the state's metropolitan sewerage districts. As a result of the reorganization, MMSD is the state's only metropolitan sewerage district with a first class city. 5 The 1982 law requires MMSD, as reorganized, to collect, treat and dispose of sewerage within designated boundaries. It authorizes MMSD to offset its operating and capital costs by levying taxes upon taxable property within the district, sec. 66.91(6), Stats.1981-82. Prior to enactment of this law, MMSD lacked its own taxing and bonding authority and charges assessed against users within its boundaries were collected by Milwaukee county.

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The 1982 law also permits MMSD to provide services to municipalities outside its boundaries on a contractual[171 Wis.2d 414] basis, sec. 66.898, Stats.1981-82, and to charge those municipalities for capital costs, sec. 66.898(4). It further authorizes MMSD to change its boundaries, sec. 66.888(1)(c)2-5, Stats.1981-82. Although the 1982 law required MMSD to honor its then existing contracts with the plaintiff municipalities through the date of termination, it did not require that MMSD renew the contracts, nor did it impose the terms upon which MMSD would contract with or provide services to municipalities outside its statutory boundaries in the future.

In the 1980's MMSD began its attempts to charge the plaintiff municipalities for capital costs on a property value basis. Prior to August 31, 1984, MMSD notified the plaintiff municipalities of its intention to exercise the...

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