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Letter: MLWD Litigation With Village of Plandome

Submitted by the Manhasset Lakeville Water District’s counsel

The Nassau County Supreme Court has confirmed the fairness and reasonableness of the water rate charged by the Manhasset-Lakeville Water District to the Village of Plandome, rejecting a legal challenge to the way in which the Water District calculated the Village’s water rate.

“We are pleased at the outcome,” said Chairman Donald O’Brien of the Board of Commissioners of the Water District.  “The Water District was confident in its position through the litigation and was gratified to have the Court agree with it on each point before the Court.” The Village began the lawsuit in October 2012.  By decision dated August 1, 2013, Justice R. Bruce Cozzens, sitting in Mineola, ruled for the Water District.

The Water District was represented by Christopher J. Prior, Esq., and James A. Bradley, Esq., both of Ackerman, Levine, Cullen, Brickman & Limmer, LLP, Great Neck, New York.  Mr. Prior is General Counsel to the Water District.  

The Water District and the Village were parties to a 20-year water supply contract, which expired in December 2011. Although the Village is outside the Water District, it purchases water from the Water District. In the last five years of the contract, the Water District accepted a fixed rate of $3.85 per 1,000 gallons, without increase, while the parties negotiated a contract extension and new water rate.  

Detailed negotiations began in early 2011. The District sought to develop a fair and reasonable rate, to provide the District with revenue to meet its operating and capital expenses allocable to the water sold to the Village, and with a reasonable return.  Using in part a method developed by the American Water Works Association, Water District Superintendent Paul Schrader, a 20-year water supply industry veteran, developed a series of proposed rate formulas, but the Village rejected each proposal.

Early in 2012, after the earlier contract had expired, the Water District, in a letter from Commissioner Brian Morris, advised the Village that it would provide water at a new formula rate, and that the Village would accept the terms by accepting the water.  The Village accepted the District water, but refused to pay the new rate from January 2012 until September 2012, when the Village finally paid the arrearage that had developed.  

Then, the Village commenced the legal proceeding against the Water District that has now culminated in the Court’s decision, confirming that the Water District acted fairly and reasonably.

Water District Commissioner Andrew DeMartin noted that “the costs of complying with local, state and federal public water supply requirements have been steadily increasing for many years.  Property owners in the Manhasset-Lakeville Water District who use Water District water must pay the Water District both a water use charge and Water District property taxes, while neither the Village nor any of its residents pay any taxes to the Water District.”  

The Court also rejected the position of the Village that it is a “captive customer” of the Water District.  The Village owns water supply wells, which it used to supply water to its residents until the early 1990’s, when it determined that complying with Department of Health regulations was too costly.  Instead, the Village decided that purchasing water from another supplier made more sense.  The Court recognized that the Village has other sources available for water, including reactivating its own wells.

Chairman O’Brien said that the Water District “regretted that the taxpayers of the Village and the Water District were forced to finance the costs of the litigation commenced by the Village Board.”  Chairman O’Brien added that, according to newspaper accounts, the Village spent more than $325,000 of Village taxpayer dollars on the case, including legal fees for special counsel from Washington, D.C.  “We hope that the Village Board will not exacerbate the Village’s situation by appealing the Supreme Court’s decision, which would necessitate even more legal fees to be paid by the taxpayers of both local governments.”

Christopher J. Prior, Esq.

Ackerman, Levine, Cullen, Brickman & Limmer, LLP