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Saratoga County Water Authority - Ruling 8, October 5, 1995

Ruling 8, October 5, 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 and ORDERS Following 6/14/95 and 9/21/95 Pre-Hearing Conferences
and on the Companies' 9/27/95 and 9/29/95 Motions

File No. 5-4100-22-1


A pre-hearing conference was held June 14, 1995 at DEC Central Office, 50 Wolf Road, Colonie, NY. Action based on that conference was held in abeyance pending the Commissioner's Ruling on the Applicant's Motion for Leave to Appeal. That Ruling, issued September 11, 1995, remanded the matter back to me for further action. Another conference took place September 21, 1995. Both conferences' overriding objectives were to ascertain the exact nature of the proposed project, how the issues of "public necessity" and "damages" should be developed for the record, and whether or not "damages" could be resolved by permit conditions. Based upon statements made at the September 21, 1995 session and the lack of objection from the Companies in subsequent correspondence, the issue of damages appears to have been resolved by agreement on permit conditions. Thus, the discussion below does not relate to the "damages" issue.

On September 27, 1995, the Companies moved for an order directing Applicant to amend its application to include the proposals stated in its May 1995 Updated Master Plan (UMP), ruling that the UMP will not be considered without such an amendment, directing notification of the Saratoga Glen Hollow Water Supply Corporation of the amendment and offering it the opportunity to intervene, and directing DEC to comply with the ECL's and regulations requirements governing the amended application. On September 29, 1995, the Companies moved for an order adding as issues to the hearing

  1. whether applicant considered other sources of water supplies,
  2. whether the supply will be adequate to meet the needs of the proposed service area and
  3. whether the proposed project is just and equitable to all affected municipalities.

Staff filed its responses in opposition to the motions on September 29 and October 2, 1995. Applicant filed its responses in opposition on October 2, 1995.


The Applicant proposes to acquire the Companies' existing water system to benefit the residents of the current service area, and also the surrounding region, as part of a regionalization plan, set forth in its Master Plan and UMP. The Applicant has noted the public dissatisfaction placed on the legislative record regarding the cost of water and the quality of both service and delivered water from the current owners, and expects to be able to do better. At this point, the Applicant proposes only to acquire the existing system. However, it ultimately intends to make the system part of a regional system to provide better and more reliable service over a wider area. This intention needs to be factored into the decision on its application.

How the existing system could be integrated with other, nearby systems was outlined in Applicant's May, 1995 UMP. Following review of the UMP, DEC Staff changed its position from one requiring that the Applicant establish the public necessity for the acquisition at a hearing, to one that now supports issuance of the water supply permit.

The Companies, however, dispute the need for Applicant to acquire their system. They note that Applicant, so far, has applied only to acquire the existing system, proposing no material changes to it. The Companies argue that their customers would be hurt by regionalization if their system is ultimately joined with nearby systems in the manner detailed in the UMP. The Companies claim that the reserve capacity of their system would be given away to other areas, and that its customers would get little in return.

The parties now recognize that water rates, quality of customer service, and quality of water delivered to the tap (i.e., the things complained about at the legislative hearing) are more directly overseen by the Public Service Commission and the State Health Department, and are the province of the DEC only tangentially. Development of the record in the area of customer dissatisfaction beyond what has already been placed on record at the legislative hearing, would provide little additional information on public need. Although technically not evidence because people were not testifying under oath, notice may be taken of their public acts in open court: they were complaining. From those acts, dissatisfaction with the current situation may be inferred. It is unnecessary to make members of the public come in again, repeat their statements under oath, and be cross-examined. No amount of cross-examination will change the fact that they are dissatisfied.

Whether or not customer dissatisfaction rises to the level of a "public necessity" in the context used by the ECL is another matter. "Public necessity" under ECL 15-1503 relates to the public's need for the particular water supply proposed, and encompasses the conflicting water supply interests among competing private, corporate or municipal bodies. Ton-Da-Lay v Diamond, 44 AD2d 430, 435 (3rd Dept., 1974). This and the statute say that when DEC determines "public necessity," it's really determining the "best" use for a particular water resource given competing needs.

In the context of this case, the "public necessity" issue appears to be the following: Would the resource, currently designated to serve only the needs of a portion of Luthur Forest, be put to better use by "regionalizing" it in the manner described in the Applicant's UMP? Before elaborating on this, the significance of the fact that Applicant is a public authority should be examined.

In Great Neck Water Authority v Citizens Water Supply Co., 12 NY2d 167, 174-175 (1962), the fact that a public authority wished to acquire a privately owned, previously approved system was not enough to obviate the requirement that DEC's predecessor had to make a determination of the public's need for the authority to take over the system before it could do so. Once DEC's predecessor examined the case, the fact that the applicant was a public authority was apparently insufficient for the agency to find that a "public necessity" for the takeover existed. Great Neck Water Authority v Water Resources Commission, 22 AD2d 78 (3rd Dept., 1964). This particular Applicant's enabling statute, Public Authorities Law (PAL) 1199-aaa et seq., does not indicate a legislative intent to do away with the requirement that DEC determine the public necessity to take over an existing system, nor does it indicate that the legislature itself found a public necessity to take over particular water supplies. The statute expressly leaves the powers and duties of the DEC intact (PAL 1199-xxx). Thus, "public necessity" for this proposed take over is still very much an open question for DEC to consider.

The Companies' motion to require the Applicant to amend its application to include the UMP or disregard it, and their motions to add certain issues, put squarely into focus the question, addressed at the June 14 conference, of what it is that Applicant proposes to do: merely acquire a system, or to acquire it and regionalize it. The answer is the latter, with regionalization in concept rather than implementation.

If Applicant is merely proposing a takeover without material change to the system Prior to the June 14, 1995 conference, the application was understood to involve a mere "transfer of authority to operate the existing water supply system without any material changes." (Interim Decision, 2/23/95 p 1). With that understanding, to receive a permit, the Applicant was required to establish the "public necessity" for the proposed taking. (Interim Decision pp 2-3)., the situation appears similar to that of the rejected Great Neck application -- indicating questionable public need for a takeover. This reasoning would not apply if the current permit holder is not, will not, or wishes to discontinue meeting the needs upon which its permit was based (e.g., where the current operator wishes to sell off the business). Such would allow the applicant to claim the pre-existing need as justification for its own permit. However, the instant case was never understood to be such. See also the decision in Village of Florida (WSA #6283, March 11, 1976; a case where a village wanted DEC approval to condemn a private water company). Reliance upon the "high" water rates being charged by the current owners to justify a takeover also appears questionable since the rates were set by the Public Service Commission to be "just and reasonable" as a matter of law. (Public Service Law 89-c). It would likewise appear questionable to base a takeover on alleged poor service or poor quality of delivered water when the responsible agencies, the Public Service Commission and the Health Department, have apparently not seen fit to take action on these issues. Presumably both Staff and the Commissioner recognized the questionable nature of the "public necessity" claim when referring this matter for hearing.

Applicant and Staff now propose to use the UMP as evidence to establish the "public necessity" for the takeover -- i.e., the need to regionalize the existing water system. Although the proponents expect the UMP's regionalization to result in tangible benefits, the Companies dispute this. Furthermore, the Companies question whether or not the resource is capable of handling the additional demands from regionalization, whether or not alternative sources would better serve the region's needs, and whether or not the UMP's proposal is just and equitable to all the municipalities affected (i.e., the classic analysis ECL 15-1503 requires DEC to perform). The Companies want the UMP made part of the application so that all these issues may be tested. This does not appear necessary, however.

The Commissioner's September decision states that "the factual matters raised in the Authority's motion, which contribute importantly to the record in this proceeding, should be taken into account at the hearing." Simply put, the UMP needs to be received in evidence. However, it need not be made part of the permit application, since no request has been made by the Applicant for a permit to modify the SWS system. Applicant recognizes, however, that future modifications will require it to apply to DEC for a permit.

Applicant's UMP, if put into the record and if rational, would be prima facie evidence to satisfy the "public necessity" test. The plan should be put in evidence. Applicant may present a witness to explain the UMP, and to explain, if true, that the UMP provides for a prudent utilization of water resources of the State and is sound from an engineering standpoint. However, it is not appropriate, or necessary, for each particular of the UMP to be analyzed in detail nor for the UMP to be unalterable in the future. The only question at this point is whether the UMP is conceptually prudent and rational from the standpoint of water resource use and water supply engineering. If so, the "public necessity" test is satisfied in this case.

RULING: Motions of the Companies are denied.

Now, therefore it is ORDERED that:

  1. The hearing will focus on and evidence will be limited to testing the prudence and rationality of the plan, with regard to the proposed takeover of the Companies' supply and system, from the standpoint of water resource use and water supply engineering.
  2. The parties are to notify me no later than October 11, 1995 of the dates they are available for hearing during the remainder of October and November. Absent schedule conflicts, I anticipate going to hearing no later than the end of October, 1995, and being able to complete testimony within five hearing days. I also anticipate no need for further discovery. I will notify you of the hearing dates.
  3. The Applicant will be responsible for securing the hearing room and a court reporter for the selected dates.

Frank Montecalvo,
Administrative Law Judge
Albany, New York

Dated: October 5, 1995

To: Official Service List (5/10/95) Via Mail and FAX

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