Fairfax County Judge R. Terrence Ney ruled this afternoon that the City of Falls Church’s Return on Investment transfer is in violation of the City Charter and is an unconstitutional tax. This ruling was regarding Fairfax Water’s complaint against Falls Church on the constitutionality of the City’s water service charges and water fund transfer.

“While the City has the utmost respect for Judge Ney, we are very disappointed in the ruling,” said City Manager Wyatt Shields. “We are reviewing the ruling with legal counsel and examining all options including the filing of an appeal.”  Shields noted that the General Assembly has authorized cities throughout the Commonwealth to transfer utility fund proceeds to the general fund, as a reasonable return on investment and compensation for the financial risk born by their tax payers.

On December 8, 2008, Fairfax Water brought litigation against the City of Falls Church, alleging interference with its attempt to selectively provide water service for customers in the City’s traditional service area. Fairfax Water subsequently amended its suit to add a count on the constitutionality of the City’s return on investment from the water fund. The trial regarding Fairfax Water’s complaint against of the City of Falls Church on the constitutionality of the City’s water service charges and water fund transfer ended on Sept. 23, 2009. Additional counts regarding antitrust claims in the Fairfax lawsuit against Falls Church Water is scheduled to be heard in Fairfax Circuit Court beginning Feb. 1.

For additional background on the water litigation visit the City web site at www.fallschurchva.gov.

Judge Ney’s ruling letter can be found here (PDF): https://www.fallschurchva.gov/Content/Docs/FinalDecreeConcerningWaterRatesandFundTransfer_010610.pdf