It was a case of a small town taking on a big corporation. This time, the small town - Town of Niagara - won, and at the same time gave municipalities across the state additional legal precedent to help fight challenges to special district charges.
"We're the smallest town in Niagara County. They thought we would roll over," said a satisfied Steve Richards, town supervisor, last week, noting that the problem with Niagara Mohawk has been ongoing for eight years. "We beat them in the New York Court of Appeals."
In Niagara Mohawk Power Corporation d/b/a National Grid v. Town of Niagara, the Appellate Division, Fourth Judicial Department, upheld municipal sewer charges upon utility substations and transmission towers that was approved by Niagara County Supreme Court Justice Richard Kloch Sr. following a two-day trial in January 2010. In so doing, the appellate court agreed with Hodgson Russ LLP's argument that these improvements were benefited by the town's sewer system and dismissed the petitions filed by National Grid. On Sept. 13, the New York Court of Appeals dismissed Niagara Mohawk's last-ditch request for permission to appeal this decision.
National Grid had challenged its sewer assessments annually for eight years, claiming its land, substations, and transmission towers were not benefited by the town's sewer system. To prevent other Town of Niagara taxpayers and ratepayers from having to pay National Grid's share of these legitimate special district charges, Richards turned to Hodgson Russ for assistance in defending the town against the challenges brought by National Grid.
According to Richards, Niagara Mohawk has been paying the town's sewer bill under protest
If the town had lost the sewer case, it would have had to refund National Grid more than $200,000. The 8-year court battle cost the town $67,314.22, with the Niagara County Sewer District reimbursing the town $50,000 of the $67,314.22.
In Kloch's two-part decision upholding the sewer assessments, the court found that the distribution substations are fully capable of using the sanitary sewer system and not only are they "potentially benefited" by the town's sanitary sewer system, but also the transmission lines and substations are "actually benefited" by the sanitary sewer system due to the infiltration of storm water into the sewer and the costs of treating the storm water.
On appeal, National Grid sought to void the town's ad valorem sewer assessments and once again claimed that its transmission facilities were not benefited by the sewer system.
"This decision is a major victory for the municipality as well as its taxpayers, and an important tool for municipalities to use in defending against National Grid challenges to special district charges," said Town Attorney Michael Risman of Hodgson Russ. "National Grid is aggressively challenging special district charges for a wide variety of services in municipalities throughout the state."
This case reinforces the liberal court standard for a finding of benefit associated with municipal special district charges. In addition, the ad valorem assessments on National Grid-owned land, substations, and transmission towers were all held to be lawful. National Grid continues to mischaracterize current case law in this field in the hope that municipalities will consider compromising legitimate special district assessments rather than defend its legal attacks, according to Risman.
"The Town of Niagara's case sets a strong precedent for defending municipal assessments upon public utility property throughout New York state," Risman said.
"A big footnote of this case is that National Grid could have sued any town in Niagara County over the sewer tax, but targeted Town of Niagara as the smallest town in the county (thus, the reason I refer to them as a 'Predatory Utility' company), and they never thought we would have the resources or the ability to defend ourselves," Richards said. "They thought we would drop the tax. If we would have done that, they would have went after the other 11 towns using us as a hammer to get the rest to drop the tax."