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City of Wilmington v. Diamond State Port Corp.

Superior Court of Delaware, New Castle

August 15, 2014

The City of Wilmington, Plaintiff,
v.
Diamond State Port Corporation, Defendant.

Submitted: May 19, 2014

C. Malcolm Cochran, IV, Esquire argued, Christine D. Haynes, Esquire argued, Richards, Layton & Finger. Attorneys for Plaintiff.

Karl G. Randall, Esquire argued, Michael Houghton, Esquire argued, Morris, Nichols, Arsht & Tunnell, LLP. Attorneys for Defendant.

OPINION

JAN R. JURDEN, JUDGE

INTRODUCTION

In 1995, the City of Wilmington ("City") sold the Port of Wilmington ("Port") to the State of Delaware ("State").[1] The State created the Diamond State Port Corporation ("DSPC") in conjunction with the Port of Wilmington Acquisition Agreement ("Agreement") to own and operate the Port.[2] Later, the City began to charge stormwater fees to property owners in the City to support its stormwater management plan.[3] After DSPC refused to pay, the City brought this action, asking the Court for a declaratory judgment against DSPC that DSPC's obligation to pay the stormwater fees and a judgment for unpaid charges[4] DSPC counterclaimed, alleging breach of contract and asking for a declaratory judgment against the City that the City may not charge DSPC for stormwater management.[5]DSPC now moves for summary judgment.[6]

BACKGROUND

In 2006, the City created a stormwater utility[7] pursuant to state statute.[8]Stormwater utility fees fund the City's stormwater management program, which the City describes as an ongoing investment that includes "storage, transport, control[, ] and monitoring systems that are bringing . . . the City into compliance with national 'CSO' (combined sewer overflow) policies and [Delaware Department of Natural Resources and Environmental Control's ("DNREC")] 'TMDL' (total maximum daily load) requirements.[9] Ultimately, the City notes that the Federal Water Pollution Control Act, [10] as implemented by the Environmental Protection Agency ("EPA") as well as DNREC, is the source of its obligation to control and treat stormwater.[11]

In accordance with the statutory requirement that utility fees "be reasonable and equitable, "[12] the City's stormwater fees are intended to be "proportionate [to the] burden that each non-exempt City property places on the City's stormwater management system."[13] While the City's storm sewers and combined sewers are part of managing stormwater, [14] the City also considers the Delaware and the Christina Rivers to be part of its stormwater system, which DSPC makes "use" of by allowing untreated stormwater to run off the Port property and into those water bodies.[15] Almost all stormwater at the Port directly discharges into the Christina and the Delaware Rivers, carrying pollutants with it.[16] The City does not achieve its water quality goals for water bodies around the City by capturing and treating the runoff from the Port, but by compensating for the Port runoff through treatment of the water that the City does control.[17]

Unlike water consumption, which can be directly measured through meters, the City maintains that there is no feasible way currently available to determine exactly how much stormwater runoff a property produces.[18] So, the fee charged to each non-exempt property in the City is derived from an estimation of the impervious surface area of the property.[19] However, fees can be modified if evidence of actual property conditions is submitted to the City's stormwater appeals system.[20] As characterized by the City, stormwater charges represent an equitable allocation of the costs of the City's stormwater management program based on "the actual burden placed on the City's stormwater management system [inclusive of water bodies] by each participating property (relative to all others in the City)."[21] The cost of stormwater management includes, among other things, maintenance of the combined sewer system, water quality monitoring, regulatory compliance, and watershed planning.[22]

The City maintains that, historically, it recovered its stormwater management costs through the City's sewer service charge.[23] DSPC paid, without objection, what the City billed as sewer service charges[24] until the establishment of the City's stormwater utility.[25] Since the establishment of the utility, the City has changed its stormwater fee structure several times.[26] Each time the City attempted to charge DSPC the stormwater utility fee, DSPC protested the City's property classification of the Port, and, twice, the Port received a favorable reclassification of the Port property, such that DSPC's fees were significantly reduced.[27]Nevertheless, the dispute over stormwater charges continued, and, eventually, DSPC settled with the City to satisfy their disputes up to that point.[28] In 2009, the City once again changed its fee structure for the stormwater utility, eliminating the property classification that favored the Port and resulting in much higher bills for DSPC.[29] Once DSPC received the City's bills under the revised stormwater utility fee structure, it refused to pay, precipitating the current litigation.[30]

STANDARD OF REVIEW

To obtain a ruling in its favor on a motion for summary judgment, the moving party must demonstrate that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."[31] All facts must be ...


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