Unsuccessful defense of lawsuit costs MSD $6.3 million

District pays $5 million in costs, legal fees to plaintiffs in suit

By Gloria Lloyd

The legal fees from the Metropolitan St. Louis Sewer District’s unsuccessful defense of a lawsuit challenging its monthly stormwater charge total more than $6.3 million.

In November, the Missouri Supreme Court agreed with lower courts that MSD’s stormwater fees were unconstitutional, ending a five-year legal battle.

William Zweig, a physician in Chesterfield, challenged the fee in court, contending the fee was actually a tax that violates the clause in the Missouri Constitution’s Hancock Amendment that mandates a tax cannot be instituted without voter approval.

“A tax by any other name remains a tax. It cannot be transformed into a user fee by adept packaging, any more than a zoologist can transform a horse into a zebra with a bucket of paint,” Judge Paul Wilson wrote in the 6-0 opinion handed down in November. “Here, no matter how many stripes MSD paints on it, the stormwater user charge is not a user fee.”

Judge George W. Draper III did not participate in the Supreme Court’s ruling.

The Board of Trustees voted in August 2008 to hire Kohn, Shands, Elbert, Gianoulakis & Giljum of St. Louis to defend the district against Zweig’s lawsuit. For its defense, MSD paid $1,108,439 to its law firm.

Two other residents later joined Zweig as plaintiffs in the case, represented by the Greensfelder, Hemker & Gale law firm with Richard R. Hardcastle III as the lead attorney. The courts doubled Greensfelder’s attorneys’ fees, and after the Supreme Court ruling, MSD paid $5,259,192 for costs and legal fees to the plaintiffs.

The sewer district provided its legal costs for the lawsuit to longtime MSD critic Tom Sullivan of University City.

“MSD has irresponsibly spent millions of dollars of public money trying to be even less accountable to the public,” Sullivan said in a statement. “This is the same sewer district that so often tells residents it has no funds to fix their sewer or stormwater problems.”

In his statement, Sullivan said he warned the board in 2007 that the stormwater fee would be unlawful without voter approval. Chairman James Buford is the only current member who was on the Board of Trustees in 2007.

MSD Manager of Public Information Lance LeComb said the $90 million the agency collected during the years it charged the stormwater fee went to services for customers and saved the houses of some residents in west county when the remnants of Hurricane Ike hit in 2004.

“They would have lost their homes if a few months before, we hadn’t implemented the stormwater fee and erected a 30-foot bank,” he said. “The money we collected as part of the stormwater rate went to serve our customers, customers who were in very dire need of stormwater services. But we’re right back in a boat where we can’t do anything for these folks, and we’re going to have to find a resolution for that at the ballot box.”

Before 2008, MSD funded stormwater services through property taxes and a 24-cent monthly charge on each bill.

In 2008, however, MSD began charging each customer 12 cents per 100 square feet of “impervious” area, increasing to 14 cents in 2009, which in effect doubled the revenue coming into MSD for stormwater improvements. Impervious area includes non-absorbent property, such as driveways, roofs, garages and parking lots.

MSD had contended the stormwater charge was a user fee.

Lincoln County Circuit Judge Dan Dildine first ruled in favor of Zweig in July 2010, after which MSD stopped charging the fee and returned to its previous method of collecting stormwater taxes.

MSD took in $90 million during the two years it charged for impervious area, compared to the roughly $22 million it had taken in each year through its flat-fee stormwater charge.

The Supreme Court upheld the lower courts’ ruling that MSD did not have to return that money to customers.

Before MSD cancelled the charge after more than two years of collecting it, it planned to raise the fee to 22 cents a month in 2011, eventually capping at 29 cents a month in 2014. Once the cap was reached, the average homeowner would have paid about $7.50 a month in impervious fees.

The Supreme Court ruling stated, “…MSD claims that the stormwater charge is a user fee paid for MSD’s service of ensuring the ‘continuous and ongoing’ availability of its stormwater drainage system — and oversight functions — rain or shine. Despite this novel characterization, the basic flaw in MSD’s argument remains that a user fee must be charged in exchange for, and based upon, an individual’s use of the relevant service. Here, no matter how MSD characterizes its service, the stormwater fee is not charged in exchange for, nor is it based on, each individual ratepayer’s use of that service …”

The ruling also stated, “… MSD insists that a tax based on the assessed valuation of a property has no relation to stormwater services, but a stormwater user charge directed at the landowners who, collectively, create the need for stormwater services is much fairer and more easily understood. This may be so, but it also is irrelevant. A tax need not be tied to the payer’s use of the political subdivision’s service, but a user fee must be. A charge based on contributing to the need for — rather than the actual use of — a service might be fair and easily understood, but it cannot be a user fee …”

The ruling noted that the Supreme Court “sympathizes with MSD’s predicament. The services it believes are required may cost more than district voters are willing to pay. Under the Hancock Amendment, however, that decision belongs to the voters. The Hancock Amendment assumes voters will make such decisions in their collective best interest, and it is not for MSD — or this court — to ignore that assumption or deny the voters the right to make such decisions for themselves.”

Zweig also appealed the case to the Supreme Court, so MSD would have had to defend itself even if it had not chosen to pursue the case itself, LeComb said.