Submitted by Charles Burns
On April 25, 2012, Joanne Conlon, acting on behalf of a class of Fernandina Beach property owners, filed a Complaint against the City of Fernandina Beach in the 4th Judicial Circuit of Florida. Judge Brian Davis is presiding over the case. In order for the action to continue as a class action, the class has to be certified as meeting the requirements for a class in the State of Florida. The individuals and businesses in the class have paid at least one Water Utility impact fee during or after March, 2003. In short, the complaint is that the City of Fernandina Beach overpaid when it purchased its Water Utility from Florida Public Utilities in 2003. Further, the City then imposed impact fees on new customers or new services in order to generate the revenue needed to pay for the overpayment.
The plaintiffs allege that, at the time of the sale, FPU had built the utility to accommodate future capacity and that this “excess capacity” was included in the appraised value of $19,400,000. Based on state approved water rates, but without supplemental charges, FPU would recoup its investment in the water plant. The City eventually paid a “total cash purchase price” of $18,950,000 for the water utility. In addition the City also agreed to “futures” payments of $7,500,000 over a period of seven years.
Central to the case is whether the City, by agreeing to the “futures” payments in addition to the purchase price, overpaid for the Water Utility, or whether, in addition to the purchase price, FPU deserved further return on the money it had invested in the extra capacity. If it’s the former, is it legal in the State of Florida to use impact fees for the purchase? If it’s the latter, is it legal to use impact fees to pay for extra capacity already purchased, rather than the typical way: building the extra capacity as needed by tapping a reserve fund that holds the impact fees?
On October 24, 2012, the City of Fernandina Beach filed an Answer to the plaintiffs’ Complaint. The City agreed with allegations that are facts that are a matter of public record, such as names, dates, and meetings held, but denied all other allegations.
Specifically, the facts alleged and questions presented in this lawsuit are:
1) Prior to the purchase, had Florida Public Utilities constructed excess capacity in its Water Utility?
2) What was the appraised value of the Water Utility?
3) Did the City pay more than appraised value for the Water Utility?
4) Did the City’s purchase price include the purchase payment plus “futures” payments for excess capacity?
5) Did the City conceal from the public the fact that, by also paying “futures” payments to FPU, the City purchased the Water Utility for an amount greater than the appraised value?
6) Did the City conceal the means (impact fees) by which it would raise the money for the “futures” payments?
7) Did the City impose impact fees on new customers in order to collect the money to make the contractually obligated “futures” payments?
8) Was there a sufficient connection (in law called a “Rational Nexus Test”) between anticipated need for additional water facilities and the anticipated new growth in the area served by the Water Utility?
9) Was there a sufficient connection (Rational Nexus Test) between the use of the impact fees and any benefits to those who paid the impact fees?
10) Did the impact fees impose a substantial burden on those who paid them?
11) Are the impact fees approximately what it cost to provide water to those who paid them?
12) Are the impact fees necessary to carry out a substantial government purpose?
13) Did the impact fees violate the 4th Amendment of the U.S. Constitution by taking the property of those who paid them, without just compensation?
14) Did the City carry out the required analysis of the Dual Rational Nexus Test (#8 and #9 above), which is required under Florida law?
15) Has the City concealed that it did not carry out the Dual Rational Nexus Test?
16) What are the damages that each member of the class has suffered?
17) Should the City be stopped from collecting the impact fees?
On June 7, 2013, Judge Davis issued a Court Order which denied the City’s Motion for Summary Judgment which, if granted, could have dismissed the case. City Attorney Tammi Bach told the Fernandina Observer that the City may appeal this decision. As part of the same Court Order, Judge Davis granted plaintiff’s Motion for Class Certification. Ms. Bach said that the City may appeal that decision as well. While appeal(s) take place, discovery (pre-trial procedures) in the case will continue, but there will be no more rulings from Judge Davis. A date for the trial has not been set.
Editor’s Note: Charles Burns, a local businessman, is a Fernandina native. He received a law degree from the University of Colorado. Burns was asked by the Fernandina Observer to summarize the case before Circuit Court Judge Brian Davis.
June 25, 2013 8:05 p.m.