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Camden-Wyoming Sewer & Water Authority v. Town of Camden

Court of Chancery of Delaware

September 18, 2017

CAMDEN-WYOMING SEWER & WATER AUTHORITY, Plaintiff,
v.
TOWN OF CAMDEN, Defendant.

          Date Submitted: August 9, 2017

          Mary E. Sherlock, Esquire of Weber Gallagher Simpson Stapleton Fires & Newby, LLP, Dover, Delaware, Attorney for Plaintiff.

          Craig T. Eliassen, Esquire and William W. Pepper Sr., Esquire of Schmittinger and Rodriguez, P.A., Dover, Delaware, Attorneys for Defendant.

          MEMORANDUM OPINION

          SLIGHTS, VICE CHANCELLOR.

         This case concerns a municipality's authority (or not) to exact a $27, 000 charge from a sewer and water authority for a building permit. Plaintiff, Camden-Wyoming Sewer and Water Authority (the "Authority"), undertook to construct a one million gallon water storage tank in Camden, Delaware (the "Water Storage Tank" or "Tank"), which was to serve that town's residents. In connection with this project, the Authority applied for a building permit from defendant, Town of Camden, and requested that the Town waive any building permit fees. The Town declined to do so, and refused to issue the Authority a building permit for the Water Storage Tank until the Authority paid the Town a $27, 000 "building permit fee." The Authority did not pay the $27, 000 charge, which prompted the Town to issue a "stop work" order respecting the Tank. The Authority filed this suit shortly thereafter, seeking the following relief:

1. a preliminary injunction enjoining the Town from restricting the completion, use, maintenance, and operation of the Tank;
2. a permanent injunction enjoining the Town from restricting the use, maintenance, and operation of the Tank; and
3. a declaratory judgment to the effect that the Town cannot assess the $27, 000 "building permit fee" against the Authority.[1]

         The Court declined to grant the preliminary injunction sought by the Authority, and the parties have since briefed and argued cross-motions for summary judgment. At the Court's request, the parties have also submitted supplemental briefing on certain discrete issues, including whether the $27, 000 "building permit fee" imposed by the Town of Camden is, in actuality, a tax from which the Authority is statutorily exempt.

         For the reasons that follow, I have concluded that the $27, 000 charge, although labeled a "permit fee, " is actually, in this particular case, a tax. Under 16 Del. C. § 1410, the Authority is exempt from taxation. Therefore, the Authority's motion for summary judgment will be granted.

         I. BACKGROUND

         The facts are drawn from the parties' stipulated statement of facts, the evidentiary record developed by the parties through discovery and those matters of which the Court may take judicial notice.

         A. The Parties

         Plaintiff, the Authority, is a duly organized sewer and water authority, established by the Towns of Camden and Wyoming pursuant to 16 Del. C. § 1402.[2]Since the Authority's establishment in 1962, it has constructed pump stations and other water infrastructure within the boundaries of both Camden and Wyoming.[3]Today, the Authority owns and operates the water system and infrastructure for both Towns, generating operating revenue by charging fees for water and sewer services.[4]

         The Authority is organized as a non-stock corporation and operates under the direction of a six-member board of directors ("Board").[5] The Authority's Board consists of three residents of Camden appointed by the Camden Town Council and three residents of Wyoming appointed by the Wyoming Town Council.[6] By virtue of the Authority's status as a sewer and water authority, the Authority is exempt from state, county, and municipal taxes.[7]

         Defendant, Town of Camden, is an incorporated municipality located in Kent County, Delaware. The Town's governing body is the Camden Town Council, which comprises a mayor and four council members.[8] The Camden Town Council is empowered to regulate the issuance of building permits, among other things.[9]

         B. The Water Storage Tank

         The Water Storage Tank is located at 3680 Upper King Road, Camden, Delaware (the "Property").[10] The Authority purchased the Property on February 14, 2014.[11] The Property was originally in the un-annexed boundaries of Kent County, but on December 1, 2014, was annexed into the Town of Camden.[12]

         On April 23, 2015, the Authority submitted a building permit application to the Town of Camden, attaching detailed plans, drawings, photographs and specifications for the proposed Water Storage Tank and its foundation.[13] At that time, the Authority requested in writing that the Town waive any building permit fees, as the Town had done in the past.[14] The Town denied this request. Instead, on August 3, 2015, the Town resolved to charge the Authority a $27, 000 "building permit fee" in connection with the Tank's construction.[15]

         The Town refused to issue a building permit for the Water Storage Tank until the $27, 000 charge was paid.[16] The Authority, in turn, refused to pay the $27, 000 charge. In its riposte, the Town issued a "stop work" order respecting the Water Storage Tank on April 18, 2016.[17] This litigation followed.

         C. Procedural Posture

         The Authority filed its complaint against the Town of Camden on May 17, 2016. Thereafter, the parties quickly agreed to a scheduling order that included the filing of a stipulated statement of facts by the end of August 2016.[18]

         The parties were able to stipulate to most of the relevant facts, which allowed for limited discovery followed by cross-motions for summary judgment. [19] Oral argument on those motions was held on December 29, 2016.

         At the close of that argument, the Court requested that the parties submit supplemental briefing on certain discrete issues, including whether the $27, 000 "building permit fee" charged by the Town of Camden for the Water Storage Tank is, in actuality, a tax from which the Authority is statutorily exempt. The parties submitted simultaneous supplemental briefs addressing this issue, and the Court heard additional oral argument on August 9, 2017.

         II. ANALYSIS

         The parties' cross-motions for summary judgment require the Court to determine whether the Town of Camden may exact the disputed $27, 000 charge from the Authority. Here, the dispositive question is whether that $27, 000 charge is properly characterized as a "fee" or a "tax" in legal contemplation.[20] The ...


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