The town of Camden and the Camden-Wyoming Sewer and Water Authority have spent a combined figure of at least $24,000 in a legal case over a building permit fee the Authority claimed was illegal.
The issue stems from proceedings concluded Sept. 18 in the Delaware Court of Chancery, decided in the Authority’s favor by Vice Chancellor Joseph R. Slights III. The case revolved around the town’s attempt to charge the Authority a $27,000 fee for a water tank and tower it wanted to build on Upper King Road.
The Dover Post has learned the Authority incurred $13,114 in legal costs to avoid paying the fee, while Camden put out about the same amount in an effort to force the payment.
CWSWA attorney Mary E. Sherlock provided the figure on behalf of the Authority, while Camden town solicitor Craig T. Eliassen estimated that since May 2016 the municipality was billed between $11,000 and $13,000 trying to get the Authority to pay the fee.
Sherlock said she did not know how much the Authority originally had budgeted for its legal fees. That data is not posted online and a spokeswoman for the Authority said she would not provide that information, referring all questions back to Sherlock.
While Camden officials similarly sent all queries about its legal expenditures to Eliassen, budget documents covering Camden’s past two fiscal years, available online, show council allocated $16,000 annually to cover its legal fees. The budget documents do not reveal how much of that was spent in litigation against the Authority.
‘A narrow issue’
The quarrel over the water tower began in April 2015 when the Authority submitted plans for the one-million-gallon tank to be built adjacent to the Nellie Stokes Elementary School. Town council members, however, turned down the Authority’s request to waive the $27,000 permit fee, setting up the legal confrontation. Although the town ordered construction halted at one point, it eventually allowed work to continue pending the outcome of the lawsuit. The tank was completed and put into service even though the suit still was pending.
Overall, the case turned on a point of law not often argued, if at all.
“It’s a very narrow issue, whether or not the permit fee was basically a tax in disguise,” Sherlock said. Under legislation setting up any sewer and water authority, that body is exempt from taxation, she said.
Eliassen, however, argued the payment actually was a fee needed to help the town defray costs it incurred, even though the Authority was responsible for the tower’s construction.
“There’s an administrative cost to making sure the construction is done right and done correctly and done safely,” he said. “It’s essentially a cost to ensure the health, safety, and welfare of the general public.”
Under Delaware law, such a fee was permissible, Eliassen argued.
Eliassen conceded both the town’s building inspector and engineer had not been involved with work on the tower but argued the town’s police department had spent time and money to include the tank on its regular patrols. There was additional work done by other town officials, he added.
In his decision, however, Slights said that involvement was not enough to sway the argument in favor of the town’s position.
“That the government labels a particular pecuniary exaction a ‘fee’ does not make it so,” Slights wrote, adding he considered the $27,000 an “impermissible tax.”
Eliassen said Camden’s council next must decide if it wants to appeal Slights’ decision.
“We haven’t gotten there yet,” he said.
CWSWA Chairman Michael Quinn said the Authority is pleased with the outcome of the case.
“We think it’s best for our customers,” he said. “We would not want to have to pay the fee because then they’d simply turn around and charge another fee for anything else we try to build in Camden.
“Hopefully, this will stop that notion that they can charge a building fee that’s really a tax.”