City of Pompano Beach v. Oltman

• Decision Date: 08 October 1980
• Docket Number: No. 78-197,78-197
• Citation: 389 So.2d 283
• Parties: CITY OF POMPANO BEACH, Appellant, v. L. M. OLTMAN, Gerald F. Glass and Floyd F. Toomey, and other not named but made parties as members of a class, Appellees.
• Court: Florida District Court of Appeals

Page 283

389 So.2d 283

CITY OF POMPANO BEACH, Appellant, v. L. M. OLTMAN, Gerald F. Glass and Floyd F. Toomey, and other not named but made parties as members of a class, Appellees.

No. 78-197.

District Court of Appeal of Florida, Fourth District.

Oct. 8, 1980.

Rehearing Denied Nov. 13, 1980.

Arthur C. Koski of Koski, Mateer & Gillespie, P. A., Boca Raton, for appellant.

Roger H. Harper of Delray Beach, for appellees.

FAGAN, OSEE R., Associate Judge.

The City of Pompano Beach appeals from an adverse final judgment rendered in a class action brought on behalf of users of the city water system. The complaint attacked the validity of a rate ordinance requiring water users outside the city to pay double the rates for in-city users. Plaintiff-appellees sought injunctive relief and an award of money damages for the amount of the alleged wrongful charges.

The suit was brought in May, 1967, and following various evidentiary hearings before the trial judge in 1971 and 1972 a Final Judgment was rendered November 7, 1977 which declared the rates for users of water outside the city to be unjustly discriminatory and illegal. The final judgment awarded a money judgment against the city for the sum of $338,282.10, being only a portion of the difference in revenues collected under the rate ordinance held to be invalid, and the court awarded pre-judgment interest of $189,754.23. The trial judge made his own determination as to the rates that the city should have charged water users outside the city in excess of the rates charged users in the city and awarded interest at 6% on the amounts he found to be excessive for each of the years the rate ordinance was in effect prior to the date of the judgment.

All the property involved here is now included in the corporate limits of the city.

The city has appealed on various grounds and plaintiff-appellees have cross-appealed agreeing with the city, however, that the trial judge improperly engaged in rate making.

We reverse for the reasons that we now summarize. The findings of fact and conclusions of law were based on two erroneous premises: that the City of Pompano Beach is under a duty to explain and justify its legislative decisions in setting its utility rates and that the city may not charge users residing outside the corporate limits a different rate than that charged within the city (except for actual additional costs of rendering such service). Further the trial judge erroneously engaged in rate making, a legislative function. And finally, the inclusion in the judgment of interest on an unliquidated amount in dispute is clearly erroneous. Bryan and Sons Corp. v. Klefstad, 256 So.2d 382 (Fla. 4th DCA 1972).

The city adopted a rate ordinance in 1965 and an amended ordinance in 1968. The rates charged under both ordinances to users outside the city were double that charged to users within the city. The present suit first attacked the 1965 rate ordinance and was later consolidated with a similar action attacking the 1968 ordinance. Following the close of plaintiffs' evidence the city moved for judgment in its favor and that motion was renewed after plaintiffs were allowed to reopen and present additional evidence. These motions were denied.

Plaintiffs' evidence consisted primarily of the testimony of an expert witness whose entire thesis was that the city earned too high a "rate of return" on its water system and that the "rate of return" was greater from users outside the city than from users within the city. These conclusions were reached by plaintiffs' "expert" by calculations based on assumed and unsupported data from which were drawn the varied conclusions to support an erroneous thesis. The witness testified that the city is entitled to "... no rate of return because everything is taken care of above the line, or within their operations.", that the city is not entitled to make a profit on its investment, ".... they have no equity. The profit is on equity." The witness further testified that the "rate of return" as calculated by him was above 9.9% and "I believe that is an excessive rate of return." After later calculations this witness made new determinations that the "rate of return" for the entire water system was 12.01% with outside users contributing 17.89% and in-city users contributing 9.52%. His later testimony was that an 8% "rate of return" was proper, and that users both in and outside the city were paying rates in excess of those which would produce his determined "reasonable rate of return." In response to a question by the court as to whether there was a recognized increased cost of service to water users outside the city this witness answered, "No sir."

Plaintiff also produced a witness who was then sheriff of Broward County and a former Pompano Beach city commissioner, who testified that additional water rates were charged to those outside the city because of the many advantages otherwise provided by the city to those in proximity to it.

Plaintiff's final witness was the city engineer who testified that additional charges are necessary for water users outside the city because of increased pumping capacity and pressures required, the greater expense of distribution of water to such users, the greater demands on the total system because of such outside additional users in larger feeder mains, additional peak-loading, additional plant capability, and additional well-field and storage capacities required. Such testimony, by...