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Nestlé USA - Beverage Division, Inc. v. Manasquan River Regional Sewerage Authority

330 N.J. Super. 510, 750 A.2d 157 (App. Div. 2000)

SEWERAGE AUTHORITIES; CONNECTION FEES—Even though a user substantially increases its water usage, a new sewer connection fee may not be charged unless a new actual physical connection or an enlargement or modification of an existing connection is made.

The sole issue before the Court was whether a regional sewage authority was authorized by New Jersey statute “to charge a user who is already in the system an additional connection fee when its wastewater flow increases even though it will pay an increased service charge based on the additional daily gallonage.” The lower court held that an additional connection fee may not be charged based only on increased usage when there is in fact no actual additional physical connection. The Appellate Division agreed. An industrial plant added a new product line, resulting in a projected increase in its daily flow from 500,000 gallons to 720,000 gallons. This increased flow entailed no new or additional physical connections to the sewer system and the supply lines were fully adequate to handle it. Nonetheless, the sewage authority took the position that it was entitled to charge the user a connection fee and calculate it based on the measure of an “equivalent dwelling unit (EDU).” The increased flow constituted 733 EDUs and the authority demanded a connection fee based on a price per EDU as a condition of its approval of the application for increased flow. New Jersey statute permits two types of fees, a connection fee and a service fee. It also permits in “addition to any such periodic service charges, a separate charge in the nature of a connection fee or tapping fee, in respect of each connection of any property with the sewerage system.” According to the Court, the connection fee has two components: “the cost of physical connection if made by the authority and an amount representing ‘a fair payment’ by the connector ‘toward the cost of the system.’” The fundamental scheme is for a new user, who is benefitting from the authorities’ capital costs, to contribute to the authority’s already incurred debt service. The Court thought it plain that a “new connection fee may not be charged unless a new actual physical connection or an enlargement of other such modification of an existing connection is made.” In the Court’s view, the New Jersey Supreme Court previously limited the charge of a connection fee to those not already in its system, and, the Court was persuaded that what the authority was attempting to do by charging the user a connection fee based on increased flow, was to achieve an absolute mathematic precision to recover its sunk costs which the New Jersey Supreme Court had already determined was not feasible and for which the Legislature had given no warrant. When the sewage authority attempted to point to the definition of “connection” that was found in a portion of the Administrative Code promulgated by the Department of Environmental Protection, the Court responded that while the New Jersey Pollutant Discharge Elimination System might be complimentary to activities of a sewerage authority, it is entirely separate and apart in implementation, applicability, and definition. Therefore, definitions in connection with such permits could not be used when it came to determining whether a user had or had not “connected” to the sewer system upon increasing its water usage.


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