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Saratoga County Water Authority - Ruling 4, May 17, 1995

Ruling 4, May 17, 1995


In the Matter
the Application of SARATOGA COUNTY WATER AUTHORITY 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 to Include Issue for Adjudication

File No.5-4100-22-1


Under cover letter of Usher Fogel, Esq., dated May 2, 1995 (received in the Office of Hearings May 3, 1995), Saratoga Water Services, Inc. (SWSI), and Luther Forest Corporation (LFC) (collectively, "the Companies") moved for an order ruling that the Applicant's ability to provide for fair and equitable damages to persons or property resulting from the acquisition of the Companies' property is a substantive and significant issue for adjudication. Applicant's response opposing the motion was received May 9, 1995. DEC Staff took no position on the motion.


Relative to ECL 15-1503(2) The provision requires DEC to determine, among other things "whether there is provision for fair and equitable determinations of and payments of any direct and indirect legal damages to persons or property that will result from the acquisition of any lands in connection with the proposed project or from the execution of the proposed project.", the Companies note that in the Interim Decision (at page 3), the Commissioner stated that the Applicant would need to show that " ... there would be a source of funds available to pay for any legal damages incurred ..." The Companies point out that the Commissioner encouraged resolution of the issue without adjudication, but now claim that such is not possible. The basis for this claim is their contention that the Applicant has failed to identify any source of funding to pay for damages in the event of withdrawal of the condemnation proceeding. The Companies reiterated that a withdrawal of the condemnation would leave Applicant without a revenue stream to cover damages, and claimed that the remaining proceeds of an IDA loan will also be inadequate. Therefore, the Companies seek to have the issue resolved through adjudication.


Applicant argues that this issue is one which should not be added at this time pursuant to the Commissioner's Interim Decision. Applicant characterizes the ALJ's [Issues] Rulings regarding the ability to pay legal damages as not an issue for adjudication, and notes that the Commissioner did not add this item as an issue. Applicant contends that the Commissioner has limited inquiry to a determination if adequate and dependable funding sources exist. Applicant argues that change in these determinations must be made at the commissioner level, and that the motion thus should be denied.

Applicant further argues that the issue of damages is one reserved for the court, and that DEC lacks jurisdiction to inquire on Applicant's ability to respond to damages.

Applicant contends that it does not have to pay for obligations from a specific source, that its bonding power will establish sufficient revenues to fund its undertakings and operations, and that bonds can be issued to cover awarded damages which will be funded from the general revenues generated.

Applicant confirmed that it does not presently contemplate abandoning its attempt to condemn the water system and argued that it is unlikely that a court would use any valuation system other than income capitalization [which would permit it to withdraw from condemnation].

Applicant notes that it obtained a source of revenue funding from the Saratoga County IDA. Applicant argues that the Companies assume that more funds would be needed and, if so, that IDA would vote adversely to granting more because of assumed public opposition during a required hearing. Applicant contends that the public has generally abandoned the Companies at hearings.

Applicant further argues that its being required to prove it is able to respond to damages runs counter to the Eminent Domain Procedure Law (EDPL) 402, and that governmental condemners are not required to deposit a bond or undertaking with the Court Clerk upon vesting of title. Applicant thus wants the motion denied.


The Commissioner, as cited above (and earlier, ALJ Dickerson "I find the present record is inadequate to make the required statutory determination and that it is incumbent for the Applicant to come forward with a proposal which will deal with this eventuality." (Rulings, December 5, 1994, p. 10) "The following issues must be addressed but may not require adjudication depending on the submittals required herein: ... 4. Whether there is adequate provision for the determination and payment of legal damages which may be incurred by the proposed project." (Id., p. 11)) essentially stated that the Applicant had not demonstrated compliance with the statutory requirement regarding provision for legal damages. This meant that the permit could not be issued based on the information then available. This was a tacit finding that an adjudicable issue existed based on the available record. If Applicant believed that it already supplied sufficient information, it would either have to establish that position through adjudication, or resolve the issue by some other means, in order to receive a permit.

The Interim Decision (and the earlier Rulings) contemplated that this issue would be resolved by means other than adjudication. Again, the Interim Decision and Rulings expressed concern over a scenario in which the assets of Luther Forest could be acquired but, because of issues involving the valuation of the assets of SWSI, the Applicant could take advantage of provisions in its enabling statute to withdraw the condemnation proceeding, thus effectively terminating the project. Under these circumstances, it was believed that the Authority would have no project revenues to pay for the Luther Forest acquisition or for the temporary use of SWSI's assets. The Commissioner suggested that the Applicant "consider securing a guarantee from Saratoga County or some other mechanism that is not dependant on project revenues." (Interim Decision, p. 4). This effectively placed the burden on Applicant to come up with something new to show compliance (in effect, to supplement its application).

It's noted that Staff's Draft Permit was issued after the Rulings, and before the Interim Decision, but was not mentioned in the Interim Decision. Special Condition 12 is the only one that addresses damages, but it merely requires that they be paid either as agreed upon or as assessed by a court. It doesn't address the issue of whether there will be an adequate and dependable funding source to pay legal damages.

Since the Interim Decision, the file does not show Applicant having offered a guarantee from the County or other mechanism not dependant on project revenues. Rather, Applicant reargues its appeal position that DEC "lacked jurisdiction to make inquiry relative to the ability of the applicant to respond to damages" (Applicant's Response, p. 2), argues why the withdrawal from condemnation scenario is unlikely, and notes that it "has also obtained a source of revenue funding from the IDA of Saratoga County" (Response, p. 3). (The IDA funding does not appear to be a new development, having been mentioned at the Issues Conference (Transcript, p. 53)). Thus, the issue remains unresolved.

The issue continues to be one that seems amenable to resolution without adjudication. It is assumed that all parties would prefer this route to save the cost and time of litigation. It is only with respect to the withdrawal from condemnation scenario mentioned above that there is a concern. The potential causes of damages should be identifiable if not quantifiable. An alternative to identifying a funding source to pay legal damages would be to take measures which would prevent damages from being incurred. I would like to set up a conference to explore this avenue and will contact the parties shortly in this regard.

The Companies' motion is essentially moot: the issue it wants to add has always been considered one that had to be adjudicated if it could not otherwise be resolved. The Ruling below clarifies this point.


"Whether there is adequate provision for the determination and payment of legal damages which may be incurred by the proposed project" (Rulings, December 5, 1994, p. 11) is an issue that will be adjudicated unless resolved by other means.

Frank Montecalvo
Administrative Law Judge
Albany, New York

Dated: May 17, 1995

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

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