Automatic annual sewer connection fee increases struck down

Towns and cities in Indiana may not adopt a sewer connection fee structure that contains annual increases for new construction, the Indiana Court of Appeals ruled Wednesday in a development case closely watched by homebuilders and local governments.

The appellate panel ruled in a case involving a fast-growing community in southern Indiana. Georgetown’s increasing population caused it to outgrow its sewer capacity, so the town began a wastewater treatment plant expansion plan financed in large part by increases in the sewer connection fee. The charge rose in 2018 to $7,140 per new unit — nearly twice the rate an in-town hookup was assessed under the earlier ordinance, and significantly higher than the former charge for out-of-town connections.

Reviewing the Floyd Superior Court ruling in Knob Hill Development LLC; ASB LLC; RPO Construction, Inc.; Written Builders LLC v. Town of Georgetown, Indiana, 18A-MI-2123, the Court of Appeals affirmed the new base fee, but it reversed a provision that increased the fee 2% annually. That provision, Judge Cale Bradford wrote for the panel, “violates relevant Indiana law because it provides for a fee increase without a hearing.”

“It is not disputed that one such automatic increase has already occurred,” Bradford wrote, “so we remand with instructions for the trial court to enjoin the Town from collecting the additional 2% unless and until an increase in the SDC has been approved and enacted following a public hearing.”

The appellate panel rejected the homebuilders’ arguments, however, that the base connection fee was arbitrary, capricious and contrary to Indiana law.

The case garnered amicus briefs for both sides from the National Association of Home Builders, the Indiana Association of Home Builders, Accelerate Indiana Municipalities and Indiana Municipal Lawyers Inc.

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