Bette Dodd Prepares IACT and IMLA’s Friend of the Court Brief to Assist Supreme Court Decision on Competing Utilities

Bette Dodd Prepares IACT and IMLA's Friend of the Court Brief to Assist Supreme Court Decision on Competing Utilities

The Indiana Supreme Court's recent decision in favor of the City of North Vernon concerning a jurisdictional dispute between the City and the Jennings Northwest Regional Utilities ("JNRU") provides some guidance when conflicts arise as to which entity has the right to provide utility service to an area outside the municipality's corporate boundaries. The decision also demonstrates the importance of comprehensive planning.

City of North Vernon v. Jennings Northwest Regional Utilities involved a dispute between the City and JNRU over who would provide sewer service to the Sand Creek Elementary School (the "School"), which was located in JNRU's service area but also within the ten mile radius of the City. Both the trial court and the Court of Appeals found in favor of JNRU, holding that the City could not provide service to the School without JNRU's permission. The Indiana Supreme Court reversed the lower courts and found, under the facts presented, the City had the exclusive right to provide sewer service to the School. The Court stated that where the service areas of a regional district and a municipality overlap, and absent a resolution during the IDEM permitting process, "the district prevails unless the municipality was already providing services to the area at the time the district's service area was created."

Although this holding appears to be clear on its face, it raises the question of what is meant by "providing services to the area". At the time JNRU was created, the City was not providing sewer service to the School, but was serving some customers within the City's ten mile jurisdictional limit. The IDEM order creating the district excluded the area within the City's corporate boundaries, but included in JNRU's service area some of the extraterritorial areas the City was already serving. The School was in the planning stages for construction when JNRU was created.

It appears that providing service within a municipality's statutory limits is sufficient to provide exclusive jurisdiction even if specific customers are not being served at the time a district is created, absent a contrary determination by IDEM. It is important to note this exception. The Supreme Court points out that most jurisdictional disputes should be resolved during the IDEM permitting procedure. The Court's observation reinforces the need for municipalities to be vigilant if and when a regional district or conservancy district is being created. A municipality should actively participate in all administrative proceedings so that it can protect its existing utility service areas.

The decision also reinforces the need for municipalities to have a comprehensive plan. As part of its reasoning, the Court noted IACT's and IMLA's argument that the Indiana Legislature has encouraged municipalities to plan for their future development, that municipalities adopt comprehensive plans to serve as a guide for their long term growth and development and municipalities rely on their statutory right to extend utility services to those anticipated areas. The Court found that a district should not have veto power over a municipality's ability to follow through with those plans. Consequently, the Court's opinion reinforces the importance of having an updated comprehensive plan. The existence of a comprehensive plan may go a long way in protecting a municipality's extraterritorial jurisdiction.

To protect its jurisdiction, a municipality should be alert to any proceeding in which a regional district or conservancy district is being created that might overlap the municipality's current or proposed service areas. It is important to participate in the administrative proceedings creating the district. If the municipality is already serving outside its corporate boundaries, any jurisdictional dispute may be resolved then. In addition, having a comprehensive plan demonstrating the municipality's plans for its future growth and provision of utility services may give the municipality a good chance of prevailing in a jurisdictional dispute at either the administrative or judicial level.

This article appeared in the July 20, 2005 edition of Municipal Dispatch, a Publication of the Indiana Association of Cities and Towns