Kliks v. Dalles City

• Decision Date: 11 February 1959
• Parties: B. A. KLIKS and Louise B. Kliks, Respondents and Cross-Appellants, v. DALLES CITY, a municipal corporation of the State of Oregon; M. A. Davidson, Mayor of Dalles City; John H. Skirving, Lay A. Carlisle, Virgil Kelly, John J. Milne, and Ernest A. Miles, Councilmen of Dalles City; Gifford W. Miller, City Manager of Dalles City; Frank W. Johnson, Water Superintendent of Dalles City, and J. Julien Baget, Clerk of Dalles City, Appellants and Cross-Respondents.
• Court: Oregon Supreme Court

Page 366

335 P.2d 366

216 Or. 160

B. A. KLIKS and Louise B. Kliks, Respondents and Cross-Appellants, v. DALLES CITY, a municipal corporation of the State of Oregon;

M. A. Davidson, Mayor of Dalles City; John H. Skirving, Lay

A. Carlisle, Virgil Kelly, John J. Milne, and Ernest A.

Miles, Councilmen of Dalles City; Gifford W. Miller, City

Manager of Dalles City; Frank W. Johnson, Water

Superintendent of Dalles City, and J. Julien Baget, Clerk of

Dalles City, Appellants and Cross-Respondents.

Supreme Court of Oregon.

Argued and Submitted Oct. 28, 1958.

Decided Feb. 11, 1959.

Charles A. Phipps, The Dalles, argued the cause of appellants and cross-respondents. On the brief were Phipps & Phipps, The Dalles.

B. A. Kliks, Portland, argued the cause for respondents and cross-appellants. With him on the brief was Dorothy L. Kliks, Portland.

Before RERRY ^*, C. J., and WARNER, McALLISTER ^**, SLOAN and O'CONNELL, JJ.

O'CONNELL, Justice.

This is a suit brought against the defendant city and several of its officers to determine the validity and construction of certain city ordinances fixing water rates under which the plaintiffs were required to pay for water used in the Commodore Apartments, an apartment building owned by them. In addition to a prayer that the ordinance be declared void on the ground that it establishes discriminatory and unreasonable rates for water as applied to the use in the plaintiffs' apartment building, plaintiffs request the court to fix a maximum charge for their use of water; that the defendant be enjoined from interfering with such use and that there be an accounting with respect to charges and payments for water from and after January, 1954.

The ordinances in question, which establish the water rate structure, are challenged on two principal grounds; (1) that the inclusion of rooming houses, boarding houses, motels, hotels and trailer courts under a classification distinct from, and under a more favorable rate structure than, apartment houses constituted an unreasonable discrimination, and (2) that the minimum service charge applicable to apartment houses was based upon the use of a quantity of water which so far exceeded the actual use of the water by the plaintiffs' tenants that the charge was arbitrary, unreasonable and confiscatory.

The plaintiffs contend that these ordinances violated the Fourteenth Amendment of the Constitution of the United States and Article I, §§ 18 and 20 of the Oregon Constitution. The trial court held that the classification established by the ordinances was not discriminatory but that the minimum rates as they were applied to the plaintiffs' property were arbitrary and that therefore the ordinances were to that extent void. The defendants have appealed from that part of the decree which declared void the minimum unit rates as applied to the plaintiffs' property. The plaintiffs cross-appealed from the decree in its entirety.

Prior to October 1, 1953, apartment houses in The Dalles were classified as commercial users of water and were charged for water at a rate of $2 a month minimum which entitled the customer to use 7,500 gallons of water during that period. All water in excess of 7,500 gallons was charged for at the same meter rate per thousand gallons as that charged all commercial users. In October, 1953 the rate structure applicable to apartment houses was changed by the enactment of Ordinance No. 706. This ordinance provided that apartment houses having more than four living units would be charged $2 per month minimum rate for each apartment unit, which entitled the customer to 7,500 gallons of water for each unit. ¹

Water in excess of the total minimum amount was charged for at the regular meter rate applicable to commercial users.

A further change was made through the enactment of Ordinance No. 721, which became effective August 5, 1955. Under this ordinance the minimum service charge for 7,500 gallons of water per month for apartment houses was changed from $2 per unit to a sliding scale of rates per unit based upon the number of units in the apartment house. ²

Plaintiffs' apartment house was treated by the defendant city as consisting of 70 units although not all of these units were apartments there being six business establishments on the first floor (which, however, used water) and three rooms above the first floor which had no water facilities. The water enters the building through a two-inch tap. All of the water used in the building is measured by one meter. Since the apartment contained more than 20 units, it was entitled to the minimum rate of $1 per unit under Ordinance No. 721. On the basis of 70 units plaintiffs were entitled to 525,000 (70 X 7500) gallons of water per month at a minimum rate of $70.

Prior to the enactment of Ordinance No. 706 plaintiffs' water bill was approximately $21 per month; after its enactment and enforcement plaintiffs' monthly bill for water was $140 (70 X $2). After the enactment of Ordinance No. 721 plaintiffs' monthly bill for water was $70. There was an additional sewage charge in each case.

Plaintiffs contend that because of the great disparity between the quantity of water which they are required to pay for under the minimum rate and the amount of water actually used by them, the rate is unreasonable, arbitrary and confiscatory.

Plaintiffs admit that during the years 1951, 1952 and 1953 the monthly use in the Commodore Apartments ran as high as 400,000 gallons per month. Upon the basis of incomplete records for the period from March, 1954 to June, 1956 the average monthly consumption would approximate 260,000 gallons, the monthly gallonage ranging from 138,000 to 348,000 during that period. If we should accept 260,000 gallons as the monthly average, the actual use of water by the plaintiffs would be approximately 50% of the minimum gallonage of 525,000 for which they were charged. Standing alone, this would appear to impose upon the plaintiffs an unreasonable charge. But a determination of the reasonableness of the rate cannot be arrived at simply by making such a comparison. In the first place, it is eminently clear that a charge for water need not be based entirely upon the amount of water actually used. It is a common and legally accepted practice to fix minimum rates which a customer must pay even though he uses less than the minimum amount of water for which the charge is made. This minimum rate is in effect a service charge for those customers who use less than the minimum amount, differing only from a fixed service charge unrelated to a minimum quantity of water in that under a minimum rate the charge is absorbed when the minimum quantity of water is used. City of Rochester v. Rochester Gas & Electric Corp., 1922, 233 N.Y. 39, 45, 134 N.E. 828, 830. The purpose of the minimum bill is explained by Mr. Justice Cardozo as follows:

'* * * a minimum bill * * * differs from a service charge in this only, that the charge is absorbed and disappears when the minimum is reached. For the man who does not take anything, or less than the amount prescribed, the two devices are the same.' City of Rochester v. Rochester Gas & Electric Corp., supra, 233 N.Y. at page 45, 134 N.E. 828, at page 830.

The purpose of a service charge was well explained in the same case:

'* * * Some [expenses] remain constant whether consumers are few or many. Others increase or diminish at a uniform rate with the number of patrons. A service charge is an attempt to make the incidence of the burden as wide as the incidence of the benefit. From all the items included in the cost of distribution it segregates, and divides per capita, those dependent upon numbers. Such items there always are. Whenever a building is connected with a main, there is expense which continues while the connection is maintained. This expense will be the same though only a trifling quantity of gas, or even none at all, is used by the householder * * *. * * * there is the benefit of facilities, which would otherwise be needless, without the burden of contributing to the cost of supplying or maintaining them. The householder who closes his dwelling for the summer, and pays nothing in the interval, shifts the cost of maintenance incurred in his behalf to the householder whose dwelling is open throughout the year. The occupant who consumes something, but not enough to pay his share of the expense, is carried by his neighbors when rates are increased to compensate for profitless accounts. Sometimes this result is avoided through the device of a minimum bill * * *.' City of Rochester v. Rochester Gas & Electric Corp., supra, 233 N.Y. at pages 44-45, 134 N.E. 828, at page 830.

Although there is no agreement as to what costs should be included in fixing the so-called service charge, the recovery of two types of costs is normally contemplated; (1) the expenses incident to the service of customers in maintaining and reading meters, in keeping customer's accounts and billing them each month, in repairing pipes and other equipment used exclusively in furnishing customers with the service, and similar expenses; (2) the expenses incident to the maintenance of the plant so that the utility has the capacity to supply its customers whenever there is a demand for the commodity being furnished, embracing items of capital outlay for plant and equipment, and operating and other expenses relating to the utility plant as a whole. Here expenses are incurred in constructing and maintaining a plant which can meet the customer's potential use. The charge to recover these costs is sometimes called a readiness-to-serve charge. Lewis v. Mayor and City Council of Cumberland, 1946, 189 Md. 58, 71, 54 A.2d 319, 325; see also Havlik, Service Charges In Gas and Electric Rates (1938).

It is apparent then that the plaintiffs do not prove that the rate applicable to them is unreasonable simply by showing that their average consumption is less than the minimum set for their...