Following $128K Demand By County & More Coming
Following last week’s report that Fairfax County is seeking a refund of $127,877 in alleged overcharges from the City of Falls Church Water System, two complaints have been filed in the Fairfax Circuit Court by County-based apartment complexes seeking refunds totaling $96,558.
According to attorney Timothy B. Hyland, who filed the complaints on behalf of the Idyllwood Village and Providence apartments, there are other suits in the pipeline, and the first two may be only a veritable “tip of the iceberg.”
When contacted by the News-Press about the suits yesterday, Falls Church Public Information Director Barbara Gordon replied, “The City has not seen the suits and therefore cannot comment.”
Hyland told the News-Press yesterday that his clients’ cases are based on the ruling by the Fairfax Circuit Court earlier this year, upheld by the state supreme court, declaring the City’s practice of taking a “return on investment” (ROI) from its water system to fund its operating budget an “unconstitutional tax.”
The suits seek refunds for the amount charged to Falls Church’s Fairfax water customers roughly equal to the ROI portion, which is calculated at “approximately 15 percent” of the cost of the water.
Therefore, Idyllwood Village is seeking a refund of $79,822 for the years of 2007, 2008 and 2009, and Providence is seeking $16,736 for the same three years.
State law has a three-year “statute of limitation” for recovering such funds, and the two complaints filed this week are timed to get in before the end of this calendar year in order that the year of 2007 can be included.
Hyland said that, once filed, the complaints may be amended to include refund requests from 2010, as well, as soon as the final numbers from the current year are calculated.
Each of the complaints state that Falls Church “designs its water rates to generate huge surpluses that are diverted to its general fund, substantially reducing the tax burden on City residents – a burden shifted to the City’s water customers in Fairfax County. Accordingly, a substantial portion of the water fees paid by…(the plaintiffs-ed.) constitute an unlawful and unconstitutional tax.”
Charging that “the City’s water rates generate surpluses that exceed the costs of service” in order to “reduce local taxes,” the filings cite the opinion of Fairfax Circuit Court Judge Terrence Ney dated January 6, 2010 ruling the ROI portion of the City’s water fees to Fairfax County water users constitutes an unconstitutional tax, and the full text of the judge’s opinion was included as “Exhibit A” in the filings.
It was also noted that the cost of water to Fairfax County customers since 2005 has been $3.03 per 1,000 gallons for Falls Church water, compared to the Fairfax Water System’s charge of $1.83.
The City of Falls Church has held that taking a “reasonable return on investment” or a “management fee” for operating its massive system that includes 450 miles of pipes and pumps was legal and in accordance with numerous precedents in Virginia and elsewhere. The practice has been in place since the late 1990s.
When contacted by Fairfax County Executive Anthony Griffin late last month demanding a $127,877 refund to the county government, Falls Church City Manager Wyatt Shields insisted he’d need time to assess the validity of the request and to frame a response. In a public statement, Shields stated that the City “is weighing several options” in response to the county’s “unprecedented demand.”
Hyland said he did not know what will happen next, beyond the City formally being served papers. “A lot will probably depend on how the City responds,” he told the News-Press.
Hyland, who has practiced law in Northern Virginia for over 20 years, is affiliated with the Rockville, Maryland, lawfirm of Stein Sperling. He said he’d been contacted about representing interests in Fairfax County by word of mouth and recommendations, and that he is preparing to represent other clients in similar court actions.
Last week, Alexandria attorney John Charles Bennison held a telephone press briefing where he spelled out options for legal action by potential clients interested in suing Falls Church for a refund.
Working in the City’s favor in the face of a potential deluge of civil legal actions demanding refunds is the City’s superior credit rating, and its comparatively very low current debt load, far below both the Virginia and national average for jurisdictions.