Court rules against Marana over sewage plant costs

PHOENIX — The town of Marana acted illegally in putting the entire cost of an upgrade to its sewage treatment plant on future development, the Arizona Supreme Court ruled Tuesday.

In a unanimous opinion, the justices acknowledged that increasing the capacity on the plant and improving the quality of the discharge will help ensure that the town can accommodate future development. That includes guaranteeing the legally required assured 100-year supply of water for new subdivisions.

But Justice Clint Bolick said it’s also clear the upgrade will benefit the entire community. And that, he said, made it unfair — and illegal — to put the $17.5 million cost entirely on new homes.

In a prepared statement, town officials said they will now “determine whether the existing customers must pay a larger portion of the wastewater facility costs.’’

Friday’s ruling has implications beyond this specific dispute.

In siding with the Southern Arizona Home Builders Association, the high court set some clear rules for how and when communities across the state can pass on the costs of projects that benefit more than new development and, more to the point, to whom they can pass them on.

The dispute dates back to 2013 when Marana voters approved taking over the plant from Pima County.

One thing that accomplished is that it enabled the town to obtain “recharge credits’’ to demonstrate the legally required adequate long-term water supply.

Four years later the town approved a capital improvement project. That enabled the town to improve the discharge from barely meeting Class B+ standards for the discharge to Class A+. And that has re-use possibilities including crop and residential landscape irrigation and fire protection systems.

That, in turn, resulted in new water and sewer impact fees to finance the project. The town then assigned 100% of the debt service, beyond $3.2 million already allocated to the project, to future water and sewer customers through development impact fees that generally get added to the price that home buyers pay.

Home builders then filed suit.

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Both a trial judge and the state Court of Appeals sided with the town. But Bolick said those decisions were wrong.

He cited a 2011 law that specifically requires that development fees must not be used to impose a burden on new residents for something that benefits all taxpayers. And Bolick said the evidence presented is that the upgrades were helping more than just future developments.

“Most if not all of the acquired, new, improved, and expanded facilities clearly provide necessary public services,’’ he wrote.

Attorneys for the town argued that the level of service for existing residents remained unchanged, even to the point of saying, “They get tap water. They flush the toilet and it goes away.’’

Bolick said that ignores the reality of the situation.

“The uncontroverted evidence demonstrates that the improvement in water quality from B+ to A+, which the Arizona Department of Environmental Quality mandated as a condition of the project, provides healthier water that may be used for a wider variety of purposes — to the entire community’s benefit,” the justice said. And given the requirement for achieve a “fair allocation of costs,’’ Bolick said the town cannot impose the entire price tag for the project and its improved water quality solely on new residents.

In ruling against the town, however, the justices did not void the development fees but instead sent the case back to a trial judge to determine how the costs of the project should be allocated.

“The facilities confer a beneficial use on new development given that without the assurance of a water supply, developers would be unable to develop and market their land,’’ Bolick said.

“SAHBA remains free to argue that certain expenses may not be included in development fees at all,’’ he said. Conversely, he said, the town can present evidence that certain expenses pertain exclusively to new development.

Photos: Rillito River swelled with runoff at Craycroft Road