Opinion 89-59

This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

WATER RENTS -- Imposition of (authority to impose water rates to raise both operation and maintenance and capital costs)
WATER DISTRICTS -- Capital Costs (authority to impose water rates to raise both operation and maintenance and capital costs)

TOWN LAW, §§198(3)(d), 202, 202-a: A town board may raise all the operation and maintenance and capital expenses of a water district

You ask whether a town water district may raise the cost of both operation and maintenance and debt service solely by the imposition of water rates on the users of the water district. The district in question was established by a town pursuant to Article 12-A of the Town Law.

Sections 202 and 202-a of the Town Law contain provisions relative to raising expenses of special districts. Subdivision 3 of section 202 provides that the expense of the establishment of a water district "shall be assessed, levied and collected" on an ad valorem basis unless the petition submitted pursuant to Article 12 of the Town Law requesting the establishment of the district, or the order of the town board adopted pursuant to Article 12-A of the Town Law calling the public hearing concerning the establishment of the district, provides that the cost of district improvements "shall" be assessed on a benefit basis. Section 202-a of the Town Law provides that the expenses of operation and maintenance of a special district "shall" be assessed in the same manner as is the expense of the improvement.

Although sections 202 and 202-a seem to contain mandatory language suggesting that all the expenses of establishing, operating and maintaining a district "shall" be assessed on an ad valorem or benefit basis as the case may be, these sections must be read together with section 198(3)(d) of the Town Law and applied harmoniously if at all possible (see Town of Islip v Powell, 78 Misc 2d 1007, 358 NYS2d 985; McKinney's Statutes, §221[1971]). Section 198(3)(d) provides that the "town board shall establish, from time to time, the water rates to be paid by consumers" of a water district which is established pursuant to Articles 12 or 12-A of the Town Law. It is further stated in Town Law, §198(3)(d) that "[s]uch water rates when collected, shall be applied toward the maintenance, operation, enlargement and improvement of the water system and for the payment of the principal and interest of bonds issued for the purposes of such district."

In construing analogous provisions of article 5-A of the County Law relative to county water districts, it has been held that the authorization in County Law, §266(1) to impose user fees provides for a separate method of financing improvement districts, independent of special ad valorem levies or special assessments, which may be used either alone or in conjunction with assessments to finance all costs of the special district (Y.M.C.A. v Rochester Pure Waters District, 44 AD2d 219, 354 NYS2d 201, affd 37 NY2d 371, 372 NYS2d 633; Industrial Refuse Systems, Inc. v O'Rourke, 134 Misc 2d 45, 509 NYS2d 988, mod 129 AD2d 76, 516 NYS2d 940). In reconciling provisions relating to impositions of user fees and the levy of assessments the court in YMCA, supra, stated as follows:

Because of certain mandatory language appearing in §§270 [ad valorem levies] and 271 [benefit assessments], it may be argued that those sections take priority over §266 [user fees] and in some instances, if not in all, they provide the only means by which a special improvement district may be financed under the statutory scheme. If such an interpretation were followed, however, the provisions of §266 would have to be ignored. * * * Furthermore, the use of words such as 'shall' and 'must' in a statute does not always mean that its provisions are mandatory to the exclusion of others. [Citations omitted]. The term 'must' or 'shall' will be interpreted in the sense of 'may' where it is evident from the entire act that it was not intended to receive peremptory construction. [Citations omitted]. (44 AD2d at 222-3, 354 NYS2d at 205).

Although the Appellate Division in the YMCA case relied in part on the fact that the user charge provision of County Law, §266 expressly provides that it may be used "notwithstanding" the ad valorem (§270) and benefit (§271) assessment provisions of the same law, we believe the same reasoning applies to the above-cited provisions of the Town Law. If sections 202 and 202-a of the Town Law were construed to be mandatory and applicable to the exclusion of any other method of raising expenses of a district, section 198(3)(d) would be rendered ineffective, an interpretation to be avoided under general rules of statutory construction (see, McKinney's Statutes, §144). Therefore, it is our opinion that sections 202 and 202-a, when read together and harmonized with section 198(3)(d), require that towns levy assessments for the cost of establishment and operation and maintenance of a water district only to the extent that such costs are not raised by user charges (see 1988 Opns St Comp No. 88-30, p 56).

Accordingly, we conclude that in the absence of a statutory limitation on the use of water rents and given the plain language of section 198(3)(d) permitting water rates to be applied toward both debt service and operation and maintenance, a town board has express authority to impose water rates in an amount which would be sufficient to pay the cost of both maintenance and operation and debt service on obligations issued for district purposes (1986 Opns St Comp No. 86-10, p 17; 23 Opns St Comp, 1967, p 305; 15 Opns St Comp, 1959, p 192; 9 Opns St Comp, 1953, p 341; 5 Opns St Comp, 1949, p 79; see also, 32 Opns St Comp, 1976, p 56).

January 18, 1990
Kim H. Martusewicz, Esq., Town Attorney
Town of LeRay