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Saratoga County Water Authority - Ruling 5, May 19, 1995

Ruling 5, May 19, 1995


In the Matter


for a Water Supply Permit pursuant to Environmental Conservation Law
(ECL) Article 15, Title 15 and Title 6 of the Official Compilation of Codes
Rules and Regulations of the State of New York (6 NYCRR) Part 601

RULING on Companies' Motion Regarding Admissibility of Testimony

File No.


Under cover letter of Usher Fogel, Esq., dated May 3, 1995 (received in the Office of Hearings May 5, 1995), Saratoga Water Services, Inc. (SWSI), and Luther Forest Corporation (LFC) (collectively, "the Companies") moved for an order

"(a) precluding the submission of testimony concerning the valuation of the property of the Companies sought to be acquired, or, in the alternative, convening an on-the-record conference of the parties to address whether and to what extent testimony concerning valuation of the Companies' property is admissible in this proceeding; (b) directing that valuation testimony shall only be admitted for the limited issues subject to the jurisdiction of the Department; (c) that admission of any valuation testimony herein shall not, in any way, bar any party hereto from presenting valuation testimony in any subsequent proceeding or action brought in a court of law or before an administrative agency on the grounds of collateral estoppel or res judicata; (d) directing the parties to stipulate that the doctrines of collateral estoppel and res judicata will not apply to any valuation testimony submitted in this proceeding, or bar the submission of valuation data in any subsequent or other proceeding or action brought in a court of law or before an administrative agency; and (e) for such other relief as the ALJ deems just and equitable."

Applicant's response opposing the motion was received May 9, 1995. DEC Staff took no position on the motion.


The Companies note that the Applicant intends to offer testimony regarding valuation of the Companies' water supply system. The Companies contend that this testimony should be precluded because it is neither admissible nor relevant to the determinations that the Department must make under ECL Article 15 Title 15. The Companies cite the law of this case As noted by ALJ Dickerson in his December 1994 Rulings (p. 10) "[t]he Department and its predecessors did not make any determination of damages which might result from the proposed project. The determination of damages was not within the jurisdiction of the Department or its predecessors but was a matter for the court to determine under the former Condemnation Law."

In his Interim Decision (pp. 3-4) the Commissioner stated that "[t]he 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." , and court decisions City of New York [Brookfield Refrigeration Corp.], 58 NY2d 532 (1983); Keystone Associates v Moerdler, 19 NY2d 78 (1966)., to argue that only the court, not DEC, may render valuation of property to be acquired through condemnation.

Recognizing that some assessment of the Applicant's acquisition costs needs to be considered by the DEC, and contending that use of valuation testimony raises "serious questions of propriety, relevancy and admissibility," the Companies request a conference to determine the extent to which such information may be admissible.

In the event valuation testimony is admitted, the Companies want the ALJ to rule that the testimony will only be admitted and considered for the limited issues within DEC jurisdiction, and that collateral estoppel or res judicata will not bar submission of valuation testimony in any subsequent legal action or administrative proceeding.


Applicant essentially argues that it is forced to present a valuation of the Companies' water supply system in order to demonstrate that it can equal or better the rate charged by SWSI for water services (because the cost of acquiring the system will be financed through the rates charged). Applicant contends that the other parties regard rates as a factor to be considered in determining "public necessity," that the Interim Decision has adopted this approach, and that Applicant objects to it.

Applicant reiterates its previous opposition to having to make a showing on rates. Pointing to provisions in its enabling statute, it notes that neither the Public Services Commission (PSC) nor any other board or commission of like character shall have jurisdiction over the Applicant in the management and control of its properties or operations, or any power over the regulation of rates fixed or charges collected by the Applicant (PAL 1199-ddd). It therefore argues that the statute prohibits DEC from considering rates.

Applicant argues that granting the motion would prevent it from presenting what appears to be some of the most important proof on rates -- crippling it, and preventing it from making a case on a question that the other parties have raised. Applicant contends that if such a motion is granted, then rates should not be adjudicated at all and the draft permit should be issued.

Regarding res judicata and collateral estoppel, Applicant maintains that this [presumably, the valuation of assets] is a matter which should be determined by the courts in the EDPL proceeding rather than here, but if determined here, it would have res judicata / collateral estoppel effect.

Applicant has no objection to the Companies' request for an on the record conference to attempt to resolve this issue.


First addressing the Companies' second through fourth requests, these either state normal practice and require no ruling, or ask for relief which the ALJ has no authority to grant. That any and all testimony in DEC proceedings is admitted for issues subject to the jurisdiction of the Department is normal practice and requires no ruling (disposing of request "(b)"). The ALJ does not have the authority to determine whether or not admission of any valuation testimony here will bar any party from presenting valuation testimony in any subsequent proceeding or action brought in a court of law or before an administrative agency. The ALJ has no general power to enjoin someone from attempting to offer testimony elsewhere, and it would be for the other tribunal to determine the extent to which res judicata and collateral estoppel apply. (This disposes of request "(c)"). Likewise, the ALJ has no authority to compel the parties to stipulate that the doctrines of collateral estoppel and res judicata will not apply to any valuation testimony submitted in this proceeding, or bar the submission of valuation data in any subsequent or other proceeding or action brought in a court of law or before an administrative agency. However, the parties remain free to stipulate to such if they wish, and are encouraged to do so if it resolves a problem between them. (This disposes of request "(d)").

Regarding the matter of admissibility of testimony on valuation of assets (request "(a)"), both Applicant and the Companies appear to be correct on certain points. There seems to be agreement that the determination of "damages," per se, is for the court in the condemnation proceeding, not DEC, though it's obvious from ECL 15-1503(2) that DEC has responsibilities to ensure adequate provisions have been made for them. As pointed out by Applicant, its enabling statute appears to preclude DEC's jurisdiction over the "rates" that may be set by Applicant. It's noted that the Public Service Commission, rather than DEC, has jurisdiction over the rates that are charged by SWSI. Given the apparent lack of jurisdiction over rates, per se, a determination of "rates" and/or comparison of "rates" in this proceeding does not appear appropriate. (It's noted that the ECL gives DEC responsibility over rates under circumstances that are not applicable here).

What is appropriate would be for DEC to make a determination or comparison of the efficiencies or economics of operation -- long regarded as within DEC's purview, particularly in cases such as this. Efficiency or economics of operation are among the primary considerations in determining "public necessity" for proposed acquisitions of an existing water supply and distribution system. Application of the Village of Florida, WSA 6283, Decision 3/11/76, Report p. 4).

As already stated in this matter, "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.)" Great Neck Water Authority v Water Resources Commission, 22 AD2d 78 (3rd Dept., 1964). As a point of clarification, it's noted that this case specifically referred to neither "rate" nor "quality of service," but, rather, affirmed the commission's finding that there was no evidence that the acquisition would result in "substantial benefits to the ultimate consumer" -- an indication that the public necessity determination focuses on the water consumers. Interim Decision p. 3). This does not mean that "rates," per se, should be adjudicated, but that impacts to rates should be looked at. Differences in efficiency or economics of operation between the existing and proposed conditions could be expected to impact rates.

The admissibility of valuation testimony cannot be determined at this point. Since the value of the assets presumably would be the same whether owned by the Companies or by the Applicant, the need or lack of need for this information is not clear without an understanding of the role such value would play in the economics of the existing and proposed operations.

Since the value of assets may be also be a component in determining the adequacy of provisions regarding legal damages Its role there is unclear as well., a matter to be addressed in a conference (see Ruling 5/17/95 p. 4), it would be efficient to have the conference also address the extent to which such information may be admissible regarding public necessity. If the question is not resolved in conference, it will be resolved at hearing when the foundation for the testimony will be laid. Applicant has agreed to the conference that the Companies requested.


The Companies' motion is granted to the extent that an on-the-record conference will be convened to address whether and to what extent testimony concerning valuation of the Companies' property is admissible in this proceeding. The Companies' motion in all other respects is denied. The parties will be contacted shortly regarding setting up the conference.

May 19, 1995
Albany, New York

Frank Montecalvo,
Administrative Law Judge

To: Official Service List (5/10/95)

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