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Joint Sewer Agency Law in Kentucky Authored by: Ben Wilson February 9, 2003 II. CREATION OF A JOINT SEWER AGENCY IN KENTUCKY:
III. POWERS OF A JOINT SEWER AGENCY: IV. LEGAL LIABILITY OF JOINT SEWER AGENCIES: This article is a summary of the basic requirements for the creation of a joint sewer agency in Kentucky and the resulting powers of a joint sewer agency. In addition, this document addresses the legal liability of a joint sewer agency under Kentucky law. II. CREATION OF A JOINT SEWER AGENCY IN KENTUCKY: A. An Explanation of Sewer Regulation in Kentucky: With the development of modern cities, one principal concern of local governments was the creation and regulation of sewer systems in order to remove accumulated rain and wastewater to provide a safe, healthy living environment for citizens. Many Kentucky cities sought to implement a sewer system through the use of organized drains, ditches, and underground sewers. The terms, "drain" and "ditch" commonly signify a natural or artificial hollow space in the ground where water is collected or drained away. 25 Am. Jur. 2d Drains and Drainage Districts § 1 (2002). Specifically, a "drain" denotes an artificial channel or drainage through which water or sewage is caused to flow. Id. On the other hand, the term "sewer" generally means an underground conduit for carrying off wastewater and filth. Id. It is common for urban communities to use the phrase "sewer", while rural and agricultural communities often use the phrase "drain" to refer to its methods of removing accumulated rain or wastewater. Id. As a general rule, sewers are usually covered in order to prevent the escape of foul odors and noxious gases and to conceal the passage of the contents through the streets of a community; whereas, drains are usually open and uncovered. Id. With the advancement of city and county governments, many local governments sought to have its sewer or drainage system operated by a government municipality called a drainage district. A drainage district is a government municipality of limited powers created by state law in order to oversee the management of a local sewer district. Id. at § 2. In Kentucky, as of 1968, joint metropolitan sewer districts can be established under KRS 76.010. KRS 76.010 (2002). Under KRS 76.010, joint metropolitan sewer districts could be created in cities of first or second class and the counties containing such cities. Id. Under this statute, in the interest of public health and for the purpose of providing adequate sewer and drainage facilities in and around each city of the first and second classes and in each county containing such city, there may be created and established a joint metropolitan sewer district under the provisions of KRS 76.010 to 76.210, having the powers, duties and functions as herein described in KRS chapter 76. KRS 76.010. The name of the joint metropolitan sewer district shall be... (Name of the city of first or second class) AND ... (Name of county) metropolitan sewer district. Id. The chief purpose of KRS 76.010 was to relieve the city of the responsibility for the cost of constructing, extending or maintaining its sewage system and to place the entire duty upon the metropolitan district as a political entity. Rash v. Louisville & Jefferson County Metro. Sewer Dist., Ky. App., 208 S.W.2d 751 (1948). While KRS 76. 010 provides a method for cities of the first or second class to create a government body to oversee its sewer systems, it failed to provide similar avenues for smaller class cities within Kentucky. In response to glaring need of smaller Kentucky cities to create an organization to enhance efficient operation of its sewer systems, in the Kentucky State Legislature passed KRS 76.231 in 1984 and KRS 76.232 in 1998. both of which provided for the creation of joint sewer agencies. KRS 76.231 permits a city of the second class to create a joint sewer agency with its county to provide sewer services, establish sewage rates, and to oversee collection of these rates. On the other hand, KRS 76.232 permits cities of the third to sixth class, along with their county, or a city of the second class, along with its county, to merge existing sewer agencies into one collective joint sewer agency. Under KRS 76.231, as an alternative to establishing a metropolitan sewer district pursuant to KRS 76. 0 10, any city of the second class, together with the county in which it is located, may jointly establish a sewer agency for the purpose of providing sewer and drainage facilities within the city and county. Additionally, any city of the second to sixth class and the county in which it is located that establish a joint sewer agency pursuant to KRS 76.231 may authorize the issuance of revenue bonds pursuant to the procedure set out in KRS 76.150 and KRS 76.160. KRS 76.233 (2002). Furthermore, under KRS 76.232, a city of the third to sixth class, together with the county in which it is located or together with the sanitation district, or any city of the second class together with the county in which it is located or together with the sanitation district, as an alternative to establishing a metropolitan sewer district under KRS 76.010, may establish a joint sewer agency for the purpose of providing sewer and drainage facilities within the city and the county or within the city and the sanitation district. The main difference between KRS 76.231 and KRS 76.232 is that while a city of the third to sixth class can join a joint sewer agency created by a second class city under KRS 76.231, these cities can create a joint sewer agency with its county or sewer district only under KRS 76.232. On the other hand, a city of the second class can form a joint sewer agency under either KRS 76.232 or KRS 76.231. The Kentucky General Assembly has the sole authority to provide for the classification of cities. K.Y. Const. § 156a. The Kentucky General Assembly shall create such classifications of cities as it deems necessary based on population, tax base, form of government geography, or any other reasonable basis and then enact legislation relating to the classifications. Id. Classification of Kentucky cities is provided in KRS 81.010. In this statute, the only city of the first class in Kentucky is Louisville, KRS91.010(1)(2002). Consequently, Louisville is the only city prohibited by statute from creating a joint sewer agency. Instead, a joint metropolitan sewer district established by KRS 76.010 must operate Louisville's sewer system Cities of the second class include: Paducah, Lexington, Bowling Green, Ashland, Covington, Frankfort, Henderson, Hopkinsville, Owensboro, and Richmond. KRS 81.010(2)(2002). These cities have the option of managing their sewer systems as either a joint metropolitan sewer district under KRS 76.010 or as a joint sewer agency under KRS sections 76.321 or 76.232. Cities of the third class include: Mayfield, Murray, and Pikeville. KRS 81.010(3) (2002). Cities of the fourth class include: Benton, Calvert City, Central City, Dawson Springs, Elizabethtown. Fulton, Hickman, Madisonville, Marion (Crittenden Co.), and Princeton. KRS 81.010(4) (2002). Cities of the fifth class include: Cadiz, Clinton (Hickman Co.), Columbus (Hickman Co.), Eddyville, Fredonia, Hardin (Marshall Co.), Grand Rivers, Kuttawa, La Center, and Wickliffe. KRS 81.010(5) (2002). Any incorporated city that is not in the first through fifth class of cities is a city of the sixth class. KRS 81,010 (6) (2002). Cities of the third to sixth classes can only manage their sewer systems as city-operated sewer systems, or joint sewer agencies created by KRS 76.232, unless they opt to join a joint sewer agency created by a city of the second classes permitted under KRS 76.231. C. Creation of Joint Sewer Agency by a City of the Second Class under KRS 76.231: Paducah is a city of the second class and can create a joint sewer agency with its county, McCracken County, under KRS 76.231 if it does not want to establish a metropolitan sewer district under KRS 76.010. As an alternative to establishing a metropolitan sewer district under KRS 76.010, any city of the second class, together with the county in which it is located, may jointly establish a sewer agency for the purpose of providing sewer and drainage facilities within the city and the county. KRS 76.231(l) (2002). This joint sewer agency shall be established upon the enactment by both the legislative body of the city and the fiscal court of the county of identical ordinances establishing and setting out the powers of the agency. KRS 76.231 (2) (2002). Under the statute, all the powers granted to a metropolitan sewer district by KRS 76.010 to 76.279, may be granted by ordinance to the sewer agency. KRS 76.231(3) (2002). Yet, these powers may be restricted or qualified, as applied to the joint sewer agency, in order to conform to the local needs of the county and city. Id. After creation of the joint sewer agency, the legislative body of the city and fiscal court of the county shall establish a schedule of rates, rentals, and charges to be collected from all real property served by the facilities of the joint sewer agency, as provided in KRS 76.090. KRS 76.231(4) (2002). Under KRS 76.090, a joint sewer agency may establish a schedule of rates, rentals, and charges to be collected from all real property within the area served by the facilities of the joint sewer district. KRS 76.090(l) (2002). In addition, the agency may prescribe both the manner and time in which theses fees are to be paid. Id. The manner in which these fees will be collected, as well as the time line in which the fees are to be paid, can be changed by the joint sewer agency from time to time as it deems necessary. Id. The rate schedule developed by a joint sewer agency under KRS 76.090 may be based upon five factors:
Additionally, this rate schedule may include additional charges for treatment of sewage with a surcharge where the sewage contains industrial wastes or other wastes in excess or limitations established by city or county regulations. Id. Prior to the final adoption or modification of the rate schedule for a joint sewer agency, the agency shall adopt a proposed schedule and publish notice of it pursuant to KRS Chapter 424. KRS 76.090(2) (2002). The published notice shall be dated as of the date of the first publication of the notice and shall state that the proposed or revised schedule of rates, rentals, and charges will remain open for public inspection in the office of the joint sewer agency for thirty days from the date of the published notice. Id. In addition, the notice shall provide that objections to the proposed rate schedule shall be in writing and filed with the joint sewer agency within the thirty day time period. Id. The joint sewer agency shall examine and hear any and all complaints regarding the proposed schedule, may modify the proposed schedule, and shall adopt and establish a final rate schedule within sixty days after the date of the public notice. Id. However, the rate schedule shall not become final within a county outside the city limits until the fiscal court of the county has approved it. Id. In addition, the rate schedule shall not become final within the city of the second class until the legislative body of the city has approved it by an ordinance approved by the mayor. Id. The rate schedule adopted by a joint sewer agency, the county, and the city must be uniform for all property falling within the same classification. Id. Classification of real property may be based upon the length of time the property has been in the area covered by the joint sewer agency, the drainage area within the area where the property lies, or any similar or dissimilar reasonable classification, except that the schedule shall be uniform for all residential property. Id. However, KRS 76.231 provides that uniformity of rates for all residential property shall not be required for a period of no more than ten years from the establishment date of the joint sewer agency if the city, county and sewer agency find that local needs warrant inconsistent rates. KRS 76.231(4). The schedule or rates, rentals, and changes shall be established and revised by the joint sewer agency from time to time so as to produce aggregate revenues to the agency sufficient to pay: (1) the interest and principal on all revenue bonds and other obligations of the district, except construction sub-district obligations and bonds; (2) all costs and expenses of operating and maintaining the sewer and drainage systems including but not limited to salaries, wages, and fees of all officers and employees of the agency equitably allocable to operations within or for the area covered by the joint sewer agency; and (3) all costs of renewals and replacement of the sewer and drainage systems of the joint sewer agency, provided that all expenses. salaries, wages, and fees necessary or incident to improvements, for the account of which bonds are issued, may be included as a part of the cost of the improvements and paid from the proceeds of the bonds. Id. Once the rate schedule has been finalized by the joint sewer agency, the agency may collect the sewer rates, rentals, and charges, or cause them to be collected and paid to it by agents it designates or makes a contract with. Id. Whenever any sewer rate for services rendered remains unpaid for thirty days after it becomes due, tile joint sewer agency shall declare the property, the owner of the property, and the user of the service delinquent until such time as all service fees are full paid. KRS 76.090(4) (2002). After establishment of a rate schedule in accordance with KRS 76.090, a joint sewer agency is given some leeway in the establishment or adjustment of future sewage rates. Under KRS 76.231(5), for the purposes of establishing a schedule of rates, rentals, and changes to be collected, the legislative body of the city and the fiscal court of the county may stipulate by joint ordinance for the creation of a single rate adjustment board comprised of members of both legislative bodies. KRS 76.231(5) (2002). Upon creation of a rate adjustment board, a simple majority of the combined board membership shall be required to establish rates, rentals and charges to be collected by the joint sewer agency. Id. Once the joint sewer agency has been established under KRS 76.231(2) and a rate schedule has been adopted under KRS 76.231(4) and KRS 76.090, the joint sewer agency is set to begin operation. The joint sewer agency shall be administered as a separate legal entity or by a jointly appointed administrator or joint board as set out in the establishing ordinances. KRS 76.231(6) (2002). In addition, the legislative body of any city of the third to sixth class may by ordinance elect to be within the jurisdiction of a joint sewer agency created under KRS 76.231 by a city of the second class and its county. KRS 76.231(8). Such a provision may be useful in counties that have multiple class cities and desire to have only one sewer provider rather than multiple providers or if a county and city government sought merger. To dissolve the joint sewer agency, only a joint action by the legislative body of the city and the fiscal court of the county is required. KRS 76.231(7) (2002). While cities of the second class were permitted to form joint metropolitan sewer districts with their counties under KRS 76.010, it appears that the benefit of creating a joint sewer agency arises from the ability of cities of the third to sixth class to elect to become associated with the joint sewer agency, which was not permitted under KRS 76. 010. D Creation of a Joint Sewer Agency under KRS 76.232: In addition, any city of the second to sixth class can opt to create a joint sewer agency along with the county or sanitation district in which it is located. KRS 76.232(l) (2002). In order to establish a joint sewer agency under KRS 76.232, the legislative body of the city, the fiscal court of the county, or the governing body of the sanitation district may vote to merge any existing agency or sanitation district or any portion thereof into the jointly established sewer agency or into an existing city or county sewer agency. KRS 76.232(2) (2002). Thus, under KRS 76.232, a city of the second to sixth class can only create a joint sewer agency by merging existing sewer agencies. This statute would permit a city such as Mayfield to merge its city sewer system with the Graves County sewer system, creating the Mayfield-Graves County Joint Sewer Agency. Similarly, this statute would permit Marshall County to merge its county sewer system with the city sewer systems of Calvert City, Benton and Hardin, creating one joint sewer agency for Marshall County, if the officials of Marshall County deem such an arrangement both economically feasible and efficient. Should the legislative body of the city, fiscal court of the county, or governing body of the sanitation district determines to merge an existing agency or sanitation district into the joint sewer agency, it shall determine a method to satisfy any legal obligations of the existing agency or sanitation district which might be affected. Id. Under KRS 76.322, a joint sewer agency shall be established upon the enactment of identical agreements establishing and setting out the powers of the sewer agency by all parties establishing the sewer agency. KRS 76.232(3) (2002). Any agreement enacted by a city or county shall be by ordinance. Id. Any agreement enacted by a sanitation district shall be done in the same manner as any other official actions taken by the sanitation district. Id. All the powers granted to a metropolitan sewer district and cities of the first class by KRS 76.010 to 76.279 may be granted by ordinance to the joint sewer agency; however, such powers granted to the joint sewer agency may be restricted or qualified in order to conform to the local needs of the city, county or sanitation district. KRS 76.232(4)(2002). Additionally, the joint sewer agency shall be administered as a separate legal entity or by a jointly appointed administrator, joint board, or one of the merging entities. KRS 76.232(5) (2002). Yet, this administrative power must be set out in the ordinance creating the joint sewer agency. Id. A joint sewer agency created under KRS 76.232 can be dissolved only by adoption of an ordinance of the legislative body of the city and the fiscal court of the county. KRS 76.232(6). Also, the ordinance creating the joint sewer agency shall be amended in the same manner as it was originally enacted, which required the enactment of identical agreements or ordinances by all parties who are a member of the joint sewer association. Id. Moreover, similar to KRS 76.232, KRS 76.232 permits the legislative body of any city of the third to sixth class may by ordinance elect to be within the jurisdiction of a joint sewer agency. III.. POWERS OF A JOINT SEWER AGENCY: All the powers granted to metropolitan sewer districts by KRS 76.010 to 76.279 can be granted by ordinance to joint sewer agencies established under KRS 76.231 or 76.232. See KRS 76.231(3) and KRS 76.232(4). While joint sewer agencies can have the same powers as a metropolitan sewer district, the f rm agency retains the power to limit or qualify these powers in order to conform to the local needs of the county, city and sanitation district. Id. KRS 76. 010 to 76.279 lists the potential powers of a joint sewer agency. Among these powers are:
Many potential powers are available to joint sewer agencies; however, the joint sewer agency is under no statutory obligation to adopt all of these powers. Instead, the joint sewer agency remains free to adopt only the powers it feels is necessary for it to meet the needs of its community. IV. LEGAL LIABILITY OF JOINT SEWER AGENCIES: As of February 14, 2003, the legal liability of joint sewer agencies has yet to be addressed by either the Kentucky Supreme Court or Kentucky Court of Appeals in a published opinion. On the other hand, Kentucky courts have addressed the legal liability of metropolitan sewer districts. Since KRS 76.231 and KRS 76.232 permit joint sewer agencies to adopt the powers of a metropolitan sewer district and both metropolitan sewer districts and joint sewer agencies operate as a government created agencies of the state, it would seem that the legal liability of a joint sewer agency would be the same, or at least substantially similar, to that of a metropolitan sewer district. Metropolitan sewer districts are agencies of the state and are cloaked with governmental sovereign immunity. Gnau v. Louisville and Jefferson County Metropo. Sewer Dist., Ky. App., 346 S.W.2d 754 (1961) (citing Fawbush v. Louisville and Jefferson County Metro. Sewer Dist., Ky., 240 S.W.2d 622, 624 (1951). Yet, this sovereign immunity is not a blanket immunity from all tort liability, but for only for the exercise of legislative of judicial functions of the sewer district. Haney v. City of Lexington, Ky. App., 386 S.W.2d 738, 742 (1964). In Gnau the Kentucky Court of Appeals held that the Louisville and Jefferson County Metropolitan Sewer District was an agency of the State with immunity from liability for injury resulting from the negligence of its agents. 346 S.W.2d at 755. The Kentucky Court of Appeals in Gnau supported its continuation of sovereign immunity for metropolitan sewer districts through its reasoning in Fawbush that a sewer district is an independent public corporation entitled to governmental sovereign immunity because it performs a government function in the preservation and promotion of public health. Id. Yet, the Gnau court cautioned that in referring to the metropolitan sewer district as an agency of the State it should not be implied that the sewer district is State agency as used in KRS 44.070. Id. Thus, the Kentucky Court of Appeals in Gnau held that the waiver of sovereign immunity in KRS 44.070 attaches only to those agencies under the direction and control of the central State government and are supported by money distributed by authority of the Commissioner or Finance of the State treasury. Id. In Gnau, the Kentucky Court of Appeals, held that metropolitan sewer districts, although it is a public agency performing a government function and is entitled to sovereign immunity for its negligence, is not one of the branches of government that have a waiver of this immunity. Id. Following Gnau, the rules regarding liability of sewer districts become less clear from decisions such as Haney, 386 S.W.2d at 738 and Louisville and Jefferson County Metropolitan Sewer District v. Kirk, Ky. App. 390 S.W.2d 182 (1965). In Haney, the Kentucky Court of Appeals rejected the common law holding that municipal corporations were immune from liability for ordinary torts. 386 S.W.2d at 742. Yet. the Kentucky Court of Appeals was clear that the Haney opinion would not impose liability on a municipal corporation in the performance of its "legislative or judicial or quasi-legislative or quasi-judicial functions." Id. However, the Kentucky Court of Appeals in Haney noted in dicta that, "so far as governmental responsibility for torts is concerned, the rule is liability--the exception is immunity. In determining the tort liability of a municipality, it is no longer necessary to divide its operations into those which are proprietary and those which are governmental." Id. In Kirk, the Kentucky Court of Appeals followed the holding in Haney that sewer districts had no absolute immunity from liability and held that a sewer district could be held liable for damage to a residence resulting from a breach of easement contract, even in the absence of some overt act of negligence committed in repairing or reconstructing the sewer. 390 S.W.2d at 185. To address the confusion regarding municipal liability after Haney and Kirk, the Kentucky Court of Appeals established in Richmond v. Louisville and Jefferson County Metropolitan Sewer District, Ky. App. 572 S.W.2d 601, 603-604 (1977)(citing City of Louisville v. Louisville Seed Co., 433 S.W.2d 638 (1968)) the current test to determine the liability of a sewer district for tort. In Richmond an action alleging negligent design and construction of a drainage system was brought against the Louisville and Jefferson County Metropolitan Sewer District, the individual contractor, and the engineering company by the father of a teenage boy who was sucked through an open culvert while riding a raft on a pool that had collected behind a submerged culvert. Id. at 601. The Kentucky Court of Appeals in Richmond held that governmental immunity still exists for a sewer district when the activity involves the ultimate function of government, unless the city was dealing with the injured party on an individual basis. Id. at 604. Yet, when the sewer district's act does not involve the ultimate function of government, the sewer district should be required to pay damages, regardless of whether the activity would be classified as proprietary or governmental under old classifications prior to Haney. Id. The Richmond court further held that even where the sewer district's activity does not involve the ultimate function of government, liability results only if the city's negligence resulted in injury to isolated citizens rather than to the general public. Id. The court noted that where the sewer district's act affects all members of the general public alike, it would be unreasonable to apply to it the broad principles of tort liability. Id. Yet, when the city or sewer district, by its dealings or activities. seeks out or separates the individual from the general public and deals with him on an individual basis, it then becomes subject to the same rules of tort liability that are applied to individuals. Id. Applying these principles, the Kentucky Court of Appeals upheld a summary judgment in favor of the Louisville and Jefferson County Metropolitan Sewer District based upon sovereign Immunity because the evidence showed that the sewer district was acting in its government capacity by constructing and maintaining a storm drain. Id. Moreover, sovereign immunity covered the sewer agency because it did not deal with the Richmond family on an individual basis. Id. The Kentucky Court of Appeals holdings in Richmond that: (1) government immunity still exists for a sewer district when its activities involve the ultimate function of government immunity, unless the district was dealing with the injured party on an individual basis and (2) even if the district's activity does not involve the function of government, liability exists only of the district's negligence resulted in an injury to isolated citizens rather than to the general public is the current law in Kentucky regarding sewer district liability. While Richmond clarifies the law of sewer district liability, it did not overrule Haney because tort liability can still exist when the sewer district's actions are not for government purposes and it is dealing with the plaintiff on an individual basis. Furthermore, Richmond did not overrule Kirk because Kirk stands for the principle that a sewer district can be liable for a breach of contract with an individual resident. Joint sewer agencies can be formed by cities of the second class to the sixth class through either KRS 76.231 or KRS 76.232. While these joint sewer agencies can have the same statutory powers as metropolitan sewer districts created by cities of the first class through KRS 76.010, a joint sewer agency has the statutory authority to modify these powers to meet the needs of its local community. Currently, metropolitan sewer districts have limited sovereign immunity from torts when: (1) the district's activities are in the ultimate function of governments and (2) if the action is not in the ultimate function of government, the district deals with the community as a whole, not with the injured plaintiff on an individual basis. Moreover, sewer districts can be liable for a breach of contract with an individual resident. While the Kentucky courts have yet to officially address the tort and contract liability of joint sewer agencies in an official opinion, it seems that joint sewer agencies would have the same liability as metropolitan sewer districts because both entities are statutory creations that serve the government purpose of providing sewer services as well as posses the same statutory powers. These materials are designed to provide general information prepared by professionals in regard to the subject matter covered. It is provided with the understanding that the author is not engaged in rendering legal, accounting, or other professional service. Although prepared by professionals, these materials should not be utilized as a substitute for professional service in specific situations. If legal advice or other expert assistance is required, the service of a professional should be sought. |
