Pat Harrison Waterway Dist. v. Cnty. of Lamar

• Decision Date: 19 March 2015
• Docket Number: No. 2013–CA–01535–SCT.,2013–CA–01535–SCT.
• Citation: 185 So.3d 935
• Parties: PAT HARRISON WATERWAY DISTRICT v. COUNTY OF LAMAR, Political Subdivision of the State of Mississippi; Board of Supervisors of Lamar County, Joe Bounds, President; Tax Collector of Lamar County, Jack Smith, Collector.
• Court: Mississippi Supreme Court

185 So.3d 935

PAT HARRISON WATERWAY DISTRICT

v.COUNTY OF LAMAR, Political Subdivision of the State of Mississippi; Board of Supervisors of Lamar County, Joe Bounds, President; Tax Collector of Lamar County, Jack Smith, Collector.

No. 2013–CA–01535–SCT.

Supreme Court of Mississippi.

March 19, 2015.

Neville H. Boschert, Kaytie M. Pickett, Jackson, Jolly W. Matthews, attorneys for appellant.

Office of the Attorney General by Harold E. Pizzetta, III, R. David Kaufman, R. Richard Cirilli, Jr., Perry W. Phillips, attorneys for appellees.

En Banc.

DICKINSON, Presiding Justice, for the Court:

¶ 1. Lamar County wishes to withdraw from the Pat Harrison Waterway District ("the District"). The question presented is the amount of money Lamar County must pay to do so. The chancery court found that Lamar County owed $337,088, excluding the District's perpetual park operating and maintenance obligations as "contractual obligations ... that are outstanding" under the statute. We affirm.

FACTS AND PROCEDURAL HISTORY

I. The Pat Harrison Waterway District

¶ 2. In 1962, in order to develop Mississippi's water resources, the Mississippi Legislature created the Pat Harrison Waterway District, which included Lamar and fourteen other counties within the Pascagoula River Basin.¹ Funding for the District primarily is provided by assessments of the member counties.²

II. The District's Governmental Contracts

¶ 3. After it was formed, the District worked with the United States Army Corps of Engineers to develop a comprehensive development plan under which the District entered into a series of eight contracts with various departments of the federal and state governments to operate its water parks.³

A. Land and Water Conservation Fund Contracts

¶ 4. The District established four water parks under contracts with the United States Department of the Interior, which provided funding from its Land and Water Conservation Fund ("LWCF").⁴ These contracts, under the "Project Termination" heading, provide that the federal government may seek specific enforcement of its contracts in case of a breach of performance by the State. And the District's general obligations for the "Use of Facilities" under the LWCF contracts require that:

1. The State shall not at any time convert any property acquired or developed pursuant to this agreement to other than the public outdoor recreation uses specified in the project proposal attached hereto without the prior approval of the Director.

2. The State shall operate and maintain, or cause to be operated and maintained, the property or facilities acquired or developed pursuant to this agreement in the manner and according to the standards set forth in the Manual.

¶ 5. Finally, the 2008 LWCF State Assistance Program Manual—referenced in the District's contracts—provides post-completion operation and maintenance obligations:

Property acquired or developed with LWCF assistance shall be operated and maintained as follows:

1. The property shall be maintained so as to appear attractive and inviting to the public.

2. Sanitation and sanitary facilities shall be maintained in accordance with applicable health standards.

3. Properties shall be kept reasonably open, accessible, and safe for public use. Fire prevention, lifeguard, and similar activities shall be maintained for proper public safety.

4. Buildings, roads, trails, and other structures and improvements shall be kept in reasonable repair throughout their estimated lifetime to prevent undue deterioration and to encourage public use.

5. The facility shall be kept open for public use at reasonable hours and times of the year, according to the type of area or facility.

6. A posted LWCF acknowledgment sign shall remain displayed at the project site....

¶ 6. The LWCF Manual also provides the following escape from operation and maintenance costs when facilities become obsolete: "Project sponsors are not required to continue operation of a particular recreation area or facility beyond its useful life." According to the District's 2011 audits, the "estimated useful lives" of the District's assets are 5–30 years for buildings, 5–25 years for building improvements, 5–50 years for improvements other than buildings, 5–20 years for equipment, and 15–50 years for capital leases. Obsolescence may also arise, among other reasons, if "changing recreation needs dictate a change in the type of facilities provided," or "park operating practices dictate a change in the type of facilities required."

B. Soil Conservation Service and National Watershed Protection and Flood Prevention Contracts

¶ 7. Three of the District's water parks were established with funding through the United States Department of Agriculture's Soil Conservation Service Department and the National Watershed Protection and Flood Prevention Act Program.⁵ Under the Dry Creek contract, the relevant provision provides that:

The Dry Creek Water Management District and the Pat Harrison Waterway District agree that all land acquired on which Federal assistance is provided will not be sold or otherwise disposed of for the evaluated life of the project, except to a public agency which will continue to maintain and operate the recreational development in accordance with the operation and maintenance agreement.

¶ 8. Under the Turkey Creek Soil Conservation Operations and Maintenance Agreement, the District agreed to operate and maintain "project measures" developed through the program and to use the real property "for the purpose for which it was acquired and in accordance with the [Operations and Maintenance] agreement." The District's maintenance obligations require only that:

A. The Sponsor will:

1. Be responsible for and promptly perform or have performed without cost to the Service ... all maintenance of the structural measures determined by either the Sponsor or the Service to be needed.

2. Obtain prior Service approval of all plans, designs and specifications for maintenance work involving major repair.

B. The Service will upon request of the Sponsor and to the extent that its resources will permit, provide consultative assistance in the preparation plans, designs and specifications for needed repair of the structural measures.

¶ 9. Notably, the contract provides that "[a]dmission or users fees shall be charged only as necessary to produce revenues required by the Sponsor(s) to ... provide adequate inspection, operation, maintenance, and replacement of the [project measures]." Additionally, under the National Watershed Program's 2009 Manual, "[t]he term of the [Operation and Maintenance] agreement expires when the evaluated life of the works of improvement has been met."

¶ 10. Finally, under the Big Creek Soil Conservation Agreement, the District agreed to "assume responsibility for operation and maintenance in accordance with the Operation and Maintenance Agreement." Like the Turkey Creek contract, the Big Creek contract also contains the same language from the National Watershed Program's 2009 Manual about the operation and maintenance agreement expiring at the end of the improvements' life span.

C. Lease Agreement with the Army Corps of Engineers

¶ 11. In establishing the Okatibbee Creek Water Park, the District leased the land and water areas from the United States Army Corps of Engineers. The term of the original lease agreement was for fifty years—beginning July 1, 1968, and ending June 30, 2018. But in 1973, the District and the Army agreed to a supplemental lease agreement providing:

This lease may be relinquished by the lessee at any time prior to tender by the Government and acceptance by the lessee of any cost-sharing payments pursuant to The Contract by giving to the Secretary of the Army, through the District Engineer, at least 30 days notice in writing. Subsequent to such tender and acceptance, this lease may be relinquished by the lessee at any time after 30 June 1999 by giving notice as provided above.

So, while the District's lease term does not expire until 2018, the District has the option to terminate the lease at any time by giving thirty days' written notice to the Army.

D. Agreement with the Mississippi Wildlife Heritage Committee

¶ 12. Finally, the District maintains a state historic site at Dunn's Falls through a 1982 agreement with the Mississippi Wildlife Heritage Committee. As part of its agreement with the State, the District agreed to various obligations, including:

4. Pat Harrison Waterway District agrees to maintain with paint the property lines which have been established by the property survey....

5. Pat Harrison Waterway District agrees to assign an employee to live on the Dunn's Falls property and shall be responsible for any salary or other expenses which might result from this employment.

6. Pat Harrison Waterway District agrees to enforce the rules and regulations adopted by the Pat Harrison Waterway District Board....

III. Lamar County's Withdrawal from the District and the Withdrawal Statute

¶ 13. On September 6, 2011, Lamar County notified the District that it was exercising its right to withdraw under Mississippi Code Section 51–15–118, which provides that "[t]he withdrawing county shall be responsible for paying its portion of any district bonds, contractual obligations, and any other indebtedness and liabilities of the district that are outstanding on the date of such county's withdrawal from the district."⁶ Under the statute, the withdrawing county's obligation "shall be determined through an independent audit conducted by a certified public accountant."⁷

IV. Litigation Between the District and Lamar County

¶ 14. In January 2012, Wolfe, McDuff & Oppie, PA—the District's own certified public accounting firm—sent Lamar County an "Independent Accountant's Report" which claimed that Lamar County's portion of district bonds, contractual obligations, and other indebtedness and liabilities was $9,201,619. Lamar County disagreed, and this litigation soon followed.

A. Petition for Injunction and Appointment of Independent Auditor

¶...