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Saratoga County Water Authority - Interim Decision, February 23, 1995

Interim Decision, February 23, 1995

STATE OF NEW YORK DEPARTMENT OF ENVIRONMENTAL CONSERVATION
50 Wolf Road
Albany, New York 12233-1550

In the Matter

-of-

Application of SARATOGA COUNTY WATER AUTHORITY

for a permit pursuant to Environmental Conservation Law, Article 15, Title 15
to acquire and operate the existing water supply and distribution system
of Saratoga Water Services Inc.

DEC Project No. 5-4100-22-1

INTERIM DECISION

February 23, 1995

INTERIM DECISION

This Interim Decision resolves appeals filed in response to the December 5, 1994 Issues Ruling of Administrative Law Judge ("ALJ") William J. Dickerson in the above-captioned matter. The Saratoga County Water Authority (the "Authority" or the "Applicant") has applied for a permit pursuant to Environmental Conservation Law ("ECL"), Article 15, Title 15 (Water Supply) to acquire and operate the existing water supply and distribution system of Saratoga Water Services, Inc. ("SWS") including the Cold Spring Road Well (well PW-7) along with approximately four acres of land surrounding the well that is owned by the Luther Forest Corporation ("Luther Forest").

In its Notice of Appeal, the Authority raises objections to the ALJ's determination that the issues of alternative water supply sources and public necessity require adjudication. It also appeals the ALJ's request for further submissions with respect legal damages and watershed protection (ECL 15-1503[2]). SWS and Luther Forest (collectively, "the Companies") appeal ALJ Dickerson's holding that whether the Authority is legally constituted is a question that should be decided by the courts and not by the Department.

Authority's Appeals

Alternative Sources

The ALJ ruled that ECL 15-1503 requires an applicant applying for a water supply permit to consider alternative sources of water supply regardless of whether the permit is sought for a new source or the takeover of an existing source. He found that, in this case, there is a substantive issue concerning the consideration of alternative water supply sources.

The Department has already held in prior administrative decisions that, where the permit authorization sought is only for the transfer of ownership of an existing water supply system, the scope of regulatory review pursuant to ECL 15-1503 is limited to issues that are incident to the transfer of ownership (see e.g., In the Matter of the Village of Tannersville, Decision of the Commissioner, September 29, 1988). This approach has been upheld on judicial review [Catskill Center v. Jorling, 164 AD2d 163 (3d Dep't 1990), app. dis., 78 NY2d 919 (1991)].

In this case, the Authority has requested the transfer of authority to operate the existing water supply system without any material changes. Therefore, it is unnecessary to examine any issue related to alternative water supply sources. Similarly, since the existing permit provides for watershed protection and the Authority has agreed to the Department's draft condition requiring watershed protection, there is no need to examine this issue further.

Public Necessity

ALJ Dickerson ruled that the issue of the public necessity of this acquisition is appropriate for adjudication. In particular, he held that there were substantive questions about whether operation by the Authority would result in improved and more economical system operation. The Authority maintains that this question cannot be considered by the Department in the permit proceeding as it has already been definitively resolved by the courts in the special proceedings concerning the condemnation pursuant to the Eminent Domain Procedures Law ("EDPL").

The Authority premises its argument on the identity of the standard in EDPL 207(C)(4) [whether a public use, benefit or purpose will be served by the acquisition] with that of ECL 15-1503(2) [whether the project is justified by public necessity]. This argument is faulty as the courts have made it clear that these two standards are distinct.

In Great Neck Water Authority v. Water Resources Commission, 22 AD2d 78 (3d Dep't 1964), the court reviewed Commission's rejection of a water authority's application to condemn a private water supply company based on lack of public necessity. The Commission is the predecessor agency to the Department and the law under which its determination was being made, the Conservation Law, is the predecessor to the ECL. With respect to the public necessity criteria at issue, there has been no change in the substantive law since the decision. In that case, the court held, "A preliminary determination by the [Great Neck Water] Authority of a superior public use as an incident to the exercise of the right of eminent domain granted by the statute which created it cannot be equated to the establishment of public necessity. To hold otherwise would diminish the power and duty confided to the [Water Resources] commission by the Conservation Law to determine whether a proposed acquisition is justified by public necessity, the abridgement of which the creating act itself proscribes." Id. at 80.

In effect, the public use determination under the EDPL is concerned with whether the property is being put to use for the public benefit rather than for private gain (see, e.g., Terrace West Inc. v. City of Plattsburgh, 73 AD2d 763 [3d Dep't 1979]; First Broadcasting Corp. v. City of Syracuse, 78 AD2d 490 [4th Dep't 1981]; Duryea v. Town of East Hampton, 172 AD2d 752 [2d Dep't 1991.]) By contrast, the public necessity determination under the ECL focuses on the impact of the acquisition on the water consumers, e.g., rate or quality of service impacts (Great Neck, supra).

Similarly, it is also clear that the Authority's objection in its brief to the Department's permit jurisdiction over this application which is based on the same legal premise, has no merit.

I affirm the ALJ's ruling on the issue of public necessity.

Ability to Pay Legal Damages

ECL 15-1503(2) requires that in making a determination on a water supply permit, the Department address the issue of whether there is provision for payment of legal damages resulting from any land acquisition. Because of certain provisions in the Authority's enabling legislation (Public Authorities Law [PAL] 1199-eee[5]), the ALJ found that circumstances could occur which would leave the Authority without a source of project revenue to pay such legal damages. He directed the Applicant and Department Staff to consult on a permit condition that would create a legally enforceable mechanism to address this concern.

The Applicant indicates that its enabling statute contains adequate mechanisms to pay for an legal damages that are incurred in the course of the acquisition. It states in its appeal that it views the ruling as an inappropriate attempt to inject the Department into the actual determination of damages and the financial ability of the Authority.

The Companies raise a scenario in which the assets of Luther Forest could be acquired but, because of issues involving the valuation of the assets of SWS, the Authority could take advantage of provisions in its enabling statute to withdraw the condemnation proceeding, thus effectively terminating the project. Under these circumstances, the Authority would have no project revenues to pay for the Luther Forest acquisition or for the temporary use of SWS's assets. In all submittals to date, the source of funds that the Authority has indicated would be available to pay legal damages are all dependent on project revenues.

In order to make the required determination under ECL 15-1503(2), the Authority will need to show that, in the above scenario, there would be a source of funds available to pay for any legal damages incurred. The Department's inquiry is limited to determining that an adequate and dependable funding source exists for the payment of legal damages, not into a determination of the value of the damages themselves.

ALJ Dickerson is encouraged to continue to try to resolve this issue without resort to adjudication. The Authority should consider the possibility of securing a guarantee from Saratoga County or some other mechanism that is not dependent on project revenues.

Companies' Appeal

Legal Capacity of the Authority

As noted above, the Companies moved to dismiss the application of the Authority on the grounds that the proposed project was not properly authorized pursuant to PAL 1199-ddd. In addition, the Companies submitted this matter as an issue for adjudication. In essence, the Companies' argument is that because PAL 1199-ddd requires that the Authority's Board be comprised of residents of the municipality with which the Authority has service contracts and the Authority does not yet have any such contracts, the Board was not empowered to resolve to go forward with this project. The ALJ dismissed the Companies' motion and rejected this matter as an issue for adjudication finding that, the ECL only requires authorizing resolutions from the governing body and does not anticipate an inquiry into the legitimacy of that body itself. He declined to interpret the relevant portions of the Authority's establishing legislation (PAL 1199-ddd) on the grounds that it was outside the Department's jurisdiction.

It is the duty of an agency responsible for the administration of a statute to determine the construction of its terms. Harder's Express v. State Tax Comm'n, 70 AD2d 1010, 1011 (3d Dep't 1979). However, in this case, as the PAL is not a statute that the Department administers nor is it essential to interpret the statute in order to resolve the issues in the case, the Department should limit its review of the authorization of the application to requiring proof that the putative governing body has adopted an acceptable authorizing resolution. Whether that body itself is properly constituted under its enabling legislation in the PAL is outside of the expertise of the Department and should be decided by a court of competent jurisdiction. The ruling of the ALJ is sustained.

Summary

The issue of watershed protection is clarified as set forth above and with respect to the remaining issues, except as to the issue of alternative sources of water supply the ALJ's rulings are affirmed. This matter is remanded to ALJ Dickerson for further proceedings consistent with this Interim Decision.

IN WITNESS WHEREOF, the Department of Environmental Conservation has caused this Interim Decision to be signed and issued and has filed the same with all documents relating thereto in its office in the County of Albany, New York this 23rd day of February, 1995.

DEPARTMENT OF ENVIRONMENTAL CONSERVATION
LANGDON MARSH, COMMISSIONER

/s/

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