Baltimore County v. Batza

²⁸⁵ WILNER, Judge. We have before us in these cross-appeals a dispute between Baltimore County and some citizens of the county who reside in the Hampton community. The dispute arose from the county’s decision to extend public sewerage into part of the Hampton community under a composite of ordinances and executive policies that would have the property owners benefited by the extension ultimately pay for about 52% of its $2.77 million cost. Upon the property owners’ second amended complaint, the Circuit Court for Baltimore County declared the “legislative determination” that the owners bear 52% of the cost invalid and remanded the case to the County Council “for a redetermination of the proper amount of the assessment imposed upon the property owners.” In its appeal, the county gives us seven reasons why it believes the court erred; some of them, we think, have merit.

In their cross-appeal, the owners make two other complaints, neither of which, in our view, has merit. BACKGROUND In 1924, the General Assembly created the Baltimore County Metropolitan District for the purpose of providing adequate water, sewerage, and storm-water drainage systems to the populous areas of the county adjacent to Baltimore City. The Act—a comprehensive one—was described in some detail in Dinneen v. Rider, 152 Md. 343 , 136 A. 754 (1927), where the Court upheld it against a multifaceted Constitutional attack. Essentially, the Act empowered the county commissioners—then the governing body of Baltimore County—to develop and implement a plan for constructing and extending water, sewer, and drainage systems in all those parts of the district “in which there is, in their judgment, a need for water supply, sewerage or drainage.” 1924 Md.Laws, ch. 539, § 4.

To finance these projects, the county commissioners were authorized to issue bonds secured by the faith and credit of ²⁸⁶ the county, and to meet the debt service requirements of those bonds, the commissioners were directed (1) to assess a reasonable connection charge against property owners who connect to the public system, (2) to levy an annual front-foot assessment on all properties bounding on a road or right-of-way in which a line has been built, whether or not the property owner actually chose to connect to the line, (3) if those sources proved insufficient, to levy an ad valorem tax on all property in the district, and (4) if that proved insufficient, to levy an ad valorem tax on all property in the county. 1 Notwithstanding the commissioners’ ability to levy against property not affected by a particular project, the Court in Dinneen construed the Act as making it “mandatory upon the commissioners to collect the entire cost less the relatively insignificant amount receivable on account of the connection charge, by the front-foot assessment.” 152 Md. at 361 , 136 A. 754 (emphasis added). The 1924 Act was amended a number of times by the General Assembly prior to the advent of charter government in Baltimore County in 1956. It now appears in § 307 of the County Charter and in §§ 34-11 through 34-78 of the County Code. The charter provision merely allocates between the County Executive and the County Council the executive and legislative functions, insofar as governance of the district is concerned, that were formerly exercised by the county commissioners.

It provides, in relevant part, that (1) the affairs of the district shall be administered as a division of the county department of public works, (2) the County Executive, or the chief engineer of the district acting under the authority of the County Executive and under the supervision of the county administrative officer, “in respect of the [district]” has “all duties and powers relating to the appointment and discharge of ... employees ..., the prepa ²⁸⁷ ration of all accounts and reports, the giving of notices, the fixing of special assessments and connection charges, and all other executive functions relating to day-to-day administration of the district...,” and (3) the County Council, “in respect of the [district]” has “all duties and powers relating to the approval of extensions to the boundaries of the [district], the issuance of bonds ... by the district, and all over [sic, overall] legislative functions which [formerly] were vested in the county commissioners____” (Emphasis added.) Several provisions of the County Code are pertinent. We start with §§ 34-27 and 34-28, which deal with the county’s authority to undertake extensions that will not be self-supporting. Section 34-27 generally prohibits the extension of a water or sewer system unless the chief sanitary engineer of the district (who, on an ex officio basis, is the director of the county department of public works) determines that the project “will be financially self-supporting within a reasonable time after completion....” There are two exceptions to that requirement stated in § 34-27. One deals with extensions undertaken upon request of the property owners to be benefited by them.

In such a case, the “property owners requesting [the extensions] shall finance their cost upon a basis that will make them a permanently self-supporting part of the [district].” The other proviso states that, where the county proceeds on its own initiative, the serf-supporting requirement will not apply if the chief sanitary engineer: (1) finds that the cost involved in the exercise of that authority “is not readily or fairly susceptible of allocation among property owners in the affected area” through connection charges and normal front-foot assessments; (2) finds further that the exercise of that authority “is for a purpose necessary and useful to the operation or maintenance” of a water or sewer system “constructed or to be constructed” in the district; and ²⁸⁸ (3) “prepares a schedule of equitable apportionment of cost among the property owners in the drainage area benefited by such project in order that the difference between cost of such project and capitalized assessment may ultimately be recovered in lump sum payments from property owners as and when their lands are subdivided.” With particular regard to this third condition, § 34-27 requires that all property owners benefited by the project must be notified of the proposed apportionment of cost contained in the schedule and that, after a hearing, the county may adopt the schedule as prepared or amended. In any event, no levy may be made against a property owner of the amount apportioned to his property until his lands are subdivided. 2 Section 34-28 provides another exception to the “self-supporting” requirement. It states: “Whenever, in the opinion of the county health officer and the director of public works, it is necessary, for the protection of the public health, that the water supply and/or sewer systems be extended to serve existing housing units which previously had been permitted to be constructed without public water supply and/or sewer systems, the county is authorized to construct such extensions of said systems without meeting the requirement that such project be self-supporting; provided, all property owners affected shall have been given a public hearing by the department of public works and made aware of all costs that will be their responsibility prior to presentation of a resolution to the county council; and provided, the county council approves such extension by resolution duly adopted.” ²⁸⁹ Sections 34-52—34-70, which comprise Division 3 of the law, deal with charges and assessments. Section 34-52 states that, for the purpose of paying the debt service on bonds issued to finance the construction of water, sewer, and drainage systems, the county is directed (1) to make a “proper and reasonable charge for connection” with the system, and (2) “to fix an annual assessment on all properties ... binding on a street ... or right of way in which a water main, sewer or drain has been built.” The annual assessment “shall be made upon the front foot basis, except in situations where property owners have agreed with the county on another or additional basis of assessments upon their property under the provisions of section 34-27 of this Code.” For the purpose of assessing benefits, the county must classify assessable property into five categories—agricultural, small acreage, industrial or business, subdivision, and remote.

Sec. 34-53. Benefit charges must be fixed in accordance with those classifications, sec. 34-53, and they must be “uniform for each class of property ... throughout the district.” Secs. 34-55. Section 34-69 provides that, when the owners of 60% of the assessable frontage of property along a road desire an extension of a water or sewer pipe or when the chief engineer determines that an extension is necessary “for health reasons” but the extension “so desired or so required will not be financially self-supporting unless a deficit deposit is made with the county,” the chief engineer is to determine the amount of the deficit, which is then to be apportioned, on a front-foot basis, among “each of the owners of assessable frontage properties____” Those “charges” are to be added to the “assessment accounts of such owners” on or before April 15 following the availability of service from the extension. They are to be known as “Deficit Charges” and are to constitute a lien upon the properties until paid.

The director of finance is empowered to add one-tenth of the charge (plus interest at the rate of 6% from the date the whole charge was levied) to each annual tax bill ²⁹⁰ and to collect that amount in the same manner and at the same time as State and county taxes are collected. Property owners are given the option of accelerating the ten installments in order to avoid the interest. This statutory scheme clearly anticipates, and purports to require that, the full cost of water and sewer extensions be paid by the property owners benefited by the extensions. As a general rule, extensions are not to be made unless they will be self-supporting—i.e., that their full cost will be recovered from connection charges and the uniform special benefit assessments determined on a front-foot basis in accordance with the classification of the property.

In those instances where non-self-supporting extensions are authorized, the deficit—i.e., that part of the cost that will not be recovered through connection charges and uniform special benefit assessments—must also be paid by the affected property owners, either through a special arrangement under § 34-27 or through an additional front-foot assessment. In 1979, that legislative direction was modified. Upon recommendation of the director of public works (who, as noted, also acts as the chief sanitary engineer of the district) and “[i]n order to provide more meaningful relief for homeowners required to connect to sewer and/or water main extensions mandated by the Department of Health,” the county administrative officer approved the following policies for all extensions mandated by the health department and undertaken after May, 1979: “1. Except for extensions in geographical areas designated as Remote Areas by existing statutes, the prevailing Standard Rate shall be applied as the Benefit Assessment Charge. 2.

Homeowners shall be responsible (except as noted in 3. below) for one-half of the calculated net deficit based upon relative front footage of each and the Metropolitan District will be responsible for the other half. By ‘net deficit’ is meant the calculated deficit less all outside contributions to the costs of an extension, as Federal and State grants. ²⁹¹ 3. No tax account shall be responsible for more than $600 on the first $5.00 per front foot of the homeowners’ portion of net deficit responsibility.” No one has questioned the authority of the county administrative officer to effect this change of policy, and so we shall assume that it was not an ultra vires act. What it means essentially is that, where, for health reasons, the county acts under § 34-28 to extend a water or sewer line that will not be self-supporting, it will pay, from general district funds, one-half of the deficit.

The property owners will continue to pay the connection charges, the “standard” front-foot special benefit assessment, and, through an additional front-foot assessment, the other half of the deficit. That, together with certain other adjustments not at issue here, is what produced the 52%/48% allocation of cost in this case. With this background, we now look at the particular facts before us. The Hampton area lies about midway between Towson, on the south, and Loch Raven reservoir, on the north.

It was developed essentially in two stages: the earlier development, known simply as Hampton, was constructed either before or in the early 1950’s and consists of lots of one-third acre or more; the newer development, built sometime in the mid-1950’s, is known as Hampton Village and generally consists of somewhat smaller lots. The community lies within a single drainage area sloping from south to north. It is bisected by a stream (Hampton Branch) that flows north into Loch Raven reservoir. That reservoir is the major supplier of drinking water to the metropolitan Baltimore area.

Although the public water main was extended to serve the homes when the community was developed, the public sewerage system was unavailable at that time north of Towson. The homes therefore were built and sold with private septic systems and remain entirely dependent on them. Unfortunately, because of topography, soil condi ²⁹² tions, or a high water table, or some combination thereof, some of the land was not conducive to a septic tank system. Moreover, at least before June, 1956, county supervision of the location and installation of the individual septic systems was haphazard at best and poor at worst.

Percolation tests were not required and inspections were sporadic; as a result, systems were placed where they should not have been placed. By 1958, many of the septic systems in the older section were proving inadequate. A county health department survey conducted in May, 1958, revealed that 43 out of the 53 homes visited “showed definite signs of failure.” The department noted its concern that a number of owners had attempted to correct the problem by extending their drainfields, and that, “It is strongly suspected that many systems have been extended to conveniently located storm drains or streams. In so doing, the lawns were freed of nuisances but the effluent now reaches the Loch Raven reservoir by means of a more direct course.” For whatever reason, nothing of significance was done for nearly 20 years.

In the meanwhile, a number of the residents installed “run off” pipes that allowed the effluent from their tanks to run into Hampton Branch. When, at various times, individual residents questioned the department of public works as to whether public sewerage could be extended, the response was that the sewer would be extended only upon petition of 60% of the property owners. Finally, another survey was made by the county health department which, on January 26, 1978, reported: “The results of the survey revealed that of the 204 properties inspected, 63 had failing disposal systems. Some of these systems are being pumped frequently to prevent overflows.

Many others are discharging sewage into storm drains and some directly to Hampton Branch. Bacteriological samples were collected from various points in the stream which resulted in high fecal coliform counts. These results are made more significant by the fact that Hampton Branch is a tributary of the Loch Raven reservoir. ²⁹³ It is estimated that the age of the disposal systems in this community is between 20 and 30 years. This suggests that more systems will fail in the near future.

Most of these failing systems cannot be adequately corrected due to limited expansion area, poor soil conditions and/or shallow bedrock. Therefore, the only method of permanent corrections is with the extension of public sewers.” To prevent further degradation to Hampton Branch “and to prevent sewage pollution from entering this drinking water reservoir,” the bureau recommended that “every effort be made to extend sewers to the gravity flow area of Hampton” and that, if necessary, the county proceed under § 34-69 (see ante, pp. 289-290). This report finally got the slumbering and lumbering bureaucratic process moving. Shortly after February 16, 1978, the directors of public works, finance, and budget signed a “Project Directive” requesting funds for a “preliminary plan, cost estimate and report on the feasibility of extending a sanitary sewer main in the gravity area of Hampton____” Two months later, they signed a revised “Project Directive” directing the preparation of construction drawings and specifications.

As described in this directive, the project was estimated to cost $2,130,000, of which $1,305,000 would come from front-foot assessments. A deficit of $640,000 was projected, to be added, on a 40-year basis, to the property owners’ tax bills. In September, 1978, the County Executive, in a letter to the President of the Hampton Improvement Association, noted that the project was still “in the early stages of design” and that at least three years would be required to complete the design, acquire rights-of-way, and secure necessary approvals for the commencement of construction. When alerted that they would be expected to pay most of the cost of the project, either through the “standard” front-foot assessment, then set at $2.50 a foot, or through half the deficit charge, some of the residents challenged the ²⁹⁴ health department survey, voiced opposition to the extension, and began to search for alternative solutions to the problem.

For a time, in 1979, work was halted on the project pending another survey by the health department. That survey was begun in May, 1979; ultimately, one-third of the homes were found to have failing sewage disposal systems. The sanitarian who.conducted the survey concluded: “The occurrence of rock formations, high water table fluctuation, soil types, density of properties and problems with reconstruction of old systems all contribute to the pollution of the drinking water of Loc[h] Raven Reservoir. Public sewers are recommended at this time.” Notwithstanding this recommendation, the project remained in limbo.

In March, 1981, the county health department informed the director of public works that it “continues its previous recommendations to extend sewers to the gravity flow area of Hampton,” noting that soil conditions made “onsite corrections unfeasible.” At some point in or before September, 1981, the county health department again certified the need for an extension, whereupon design work by the department of public works started up again. Plans were completed and approved in August, 1982, a construction permit was issued in April, 1983, and the project was advertised for bid in December, 1983. The bid accepted by the county showed a net construction cost, after allowances, of $2.2 million. Of that amount, according to the county’s financial analysis, $82,500 would be received from connection charges and $690,000 would come from the standard front-foot assessment, leaving a deficit of $1,432,000.

Application of the 1979 policy would have the 150 residents to be served by the extension paying a total of $1.4 million ($82,500 connection charges, $690,000 standard front-foot assessment, and $682,500 deficit assessment) and the county paying $1.3 million. 3 ²⁹⁵ On January 31, 1984, a hearing was held for the purpose of discussing with the residents the financing of the proposed extension. From the brief “minutes” prepared by the director of public works, 49 residents appeared and all registered opposition to the project. Despite that opposition, the matter was presented to the County Council, which directed the county health department to conduct a resurvey to determine whether the conditions noted could be corrected by alternative means, without the need of public sewerage. The resurvey was conducted and confirmed that public sewerage was necessary.

In light of that conclusion, and after several hearings and work sessions, the Council adopted Bill No. 20-84 on April 2, 1984. Bill No. 20-84 was a Resolution of the Council approving the extension. In the “WHEREAS” clauses, the Council recited that the county health officer and the director of public works had “found it necessary, for the protection of the public health,” to extend the sewer line, that “all property owners affected have been given a hearing by the Department of Public Works and made aware of all costs that will be their responsibility,” that authority for the project was found in § 34-28 of the Code, and that the Council deemed it “necessary for the protection of the public health that said sanitary sewer system be constructed....” Twenty-six Hampton property owners responded with this lawsuit attacking Bill No. 20-84 and asking the court to declare it illegal and to enjoin the county from taking any action under it “until the conclusion of these proceedings.” In their second amended complaint, they claimed that their septic systems and those of a majority of other residents in the area “are in efficient and sanitary working condition,” that it was “not necessary for the protection of the public health” to extend the sewer line, and that any contrary determination by the county health officer or the director of public works was arbitrary. They argued further that (1) Bill No. 20-84 was arbitrary, (2) the bill was unconstitutional because they were not given a proper hearing as required ²⁹⁶ by § 34-28, (3) it was vague because it failed to specify the boundaries of the Hampton area and location of the proposed sewer extension, (4) it was invalid because the health officer and public works director had no adequate standards for determining whether the extension was necessary for the protection of the public health, (5) the county’s decision to proceed under § 34-28 rather than § 34-27 denied them equal protection of the law, (6) the “failing systems” in Hampton were the direct result of the county’s failure to supervise their initial installation, and (7) the primary purpose of the extension was to protect Loch Raven, it was therefore a “special benefit” to the general public, and, as a result, the assessment of the cost to the plaintiffs constituted a denial of due process of law.

After an evidentiary hearing, the court, on May 14, 1985, filed a memorandum opinion discussing and disposing of these issues and those raised by the county in defense. It rejected the county’s .arguments that (1) the action was premature because no assessment had yet been actually levied, (2) the plaintiffs failed to exhaust available administrative remedies, and (3) no relief was possible under the pleadings. It also rejected the owners’ arguments that the extension was not necessary for health reasons, that the owners did not receive an adequate public hearing, and that the county was estopped from requiring them to contribute to the cost. Relying primarily on Montgomery County v. Schultze, 302 Md. 481 , 489 A.2d 16 (1985), however, it accepted the plaintiffs’ final contention that the allocation of cost was invalid because “the County Council did not consider that benefit accruing to the general public by reason of the improvement.” It therefore concluded that “Bill 20-84 cannot stand as the basis of the assessment rendered against the residents” and, on that basis, in a separate order remanded the case to the County Council “for a redetermination of the proper amount of the assessment to be imposed upon the property owners____” ²⁹⁷ THE ISSUES The county, as we have said, raises seven issues in its appeal: “I. From the standpoint of pleading, the court below should not have reached the merits of the assessment issue.

II

The evidence did not establish the existence of a justiciable controversy.

III

The exhaustion of administrative remedies doctrine prohibited the court below from reaching the merits of the assessment issue.

IV

Even if the court below should have reached the merits of the assessment issue, the Constitution does not