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Ingleside Equity Group, Lp v. City of St. Albans

United States District Court, D. Vermont

May 21, 2014

INGLESIDE EQUITY GROUP, LP, Plaintiff,
v.
CITY OF ST. ALBANS, Defendant.

OPINION AND ORDER

WILLIAM K. SESSIONS, III, District Judge.

Plaintiff Ingleside Equity Group ("Ingleside") brings suit against the City of St. Albans ("City") for its refusal to grant a wastewater allocation to its proposed development in the Town of St. Albans ("Town"). Plaintiff entered into a Purchase and Sale Agreement in 2012 to sell and develop the parcel of land in question; the Agreement was contingent upon receiving a water and wastewater allocation from the City. The City denied Ingleside's allocation request based on a 2011 Moratorium on new water and wastewater allocations outside the City, and Ingleside lost the contract. Because the Moratorium has an exception for a specific district within the Town (which Ingleside's parcel is not in), Ingleside claims that the City acted discriminatorily when it denied the allocation request. Ingleside filed suit against the City asserting that (1) the City unlawfully discriminated against Ingleside in violation of Chapter 1 Article 7 of the Vermont Constitution and its equal protection rights under the Fourteenth Amendment; (2) the City's actions amounted to unlawful extraterritorial zoning and were therefore ultra vires; and (3) the City breached its statutory obligations under Title 24.

Before the Court are cross motions for summary judgment. For the reasons stated below, the Court denies Ingleside's motion for summary judgment, ECF No. 28. The Court grants in part and denies in part the City's motion for summary judgment, ECF No. 27. Summary judgment is granted as to the state law claims but denied as to the Equal Protection claim. This claim must be determined by a finder of fact.

BACKGROUND

I. Ingleside Equity

On or about June 6, 2012, Ingleside entered into a Purchase and Sale Agreement ("Agreement") with John P. Larkin for the sale of approximately two acres of land located in the Town. The parcel of land is located near Exit 19 off I-89 at Route 104 and was under contract to be sold and developed as a Hampton Inn ("Hampton Inn Parcel"). The Agreement was contingent on Ingleside receiving a conditional use permit ("CUP") from the Town and a wastewater and potable water allocation from the City. Ingleside received a CUP from the Town on August 31, 2012.

On January 31, 2013, the City sent a letter notifying Ingleside that its request for a water and wastewater allocation had been denied pursuant to the City's Moratorium on new water and wastewater applications for properties located outside the City. The Moratorium, adopted on May 2, 2011, prohibits the City from providing new water and/or wastewater allocations to anyone outside of the legal limits of the City, with the exception of "properties that are part of the Route 7 North Sewer District ("Sewer District") as adopted by the Town of St. Albans on August 27, 2001." See Moratorium § 3 (City's SUF Ex. 2). Because the Hampton Inn Parcel is located outside the City and the Sewer District, the City found that the allocation was proscribed by the Moratorium and refused Ingleside's application on this basis.

Prior to the enactment of the Moratorium, the City frequently granted allocation applications to Town property owners outside the Sewer District, including Ingleside. In 2005, Ingleside completed a project on property located at I-89 and Route 104 for a Co-Op and Maplefields Store (also known as the "Milk & Maple" project). The Milk & Maple project is located in the same development as the Hampton Inn Parcel. The City granted Ingleside a water and wastewater allocation for the Milk & Maple project in 1999. Even though Ingleside only received an allocation specifically for the Milk & Maple project, when Ingleside received this allocation, it built water and wastewater infrastructure sufficient to serve the projected needs of the entire development area. This infrastructure cost Ingleside $430, 994.27. According to Ingleside, it built this substantial infrastructure based on the understanding that it would be permitted to seek allocations from the City for future projects in the development area.

Ingleside argues that this reliance was reasonable based on several alleged representations made by the City to this effect. In 2004, Ingleside obtained Act 250 approval for a development plan based in part, according to Ingleside, on the representation that it would be serviced by the City's water and wastewater facilities. It is undisputed that the City was a noticed party in the Act 250 proceedings. Ingleside also contends that it built this infrastructure pursuant to construction requirements set by the City. Specifically, Ingleside submits that the City requested that Plaintiffs include a 10-inch main sewer and 8-inch water main in their infrastructure in order to accommodate the projected future needs of the development. Because these mains would not have been necessary to service solely the Milk & Maple allocation, Ingleside argues that it relied on the City's representations that it would be permitted to seek allocations for future developments when it invested in this infrastructure.

According to the City, it did not require Ingleside to use a specific sized pipe for the infrastructure. Then-City Manager William Cioffi stated in an affidavit that he never indicated to Ingleside that the City required a specific size of infrastructure or pipe, nor did anyone from the Department of Public Works. In fact, he stated that "it is not regular practice for the City of St. Albans to determine the required sizing of pipes for infrastructure construction." Cioffi Aff. ¶7. Instead, sizing requirements are made by the state through the Act 250 process, and engineers for specific projects would make recommendations for sizing depending on the particular details of a given project.

In addition to these 2005 projects, Plaintiff alleges that the City denied permits to Ingleside's owners regarding unrelated projects during the 1990s based on personal animus.

II. The Moratorium

The Moratorium, adopted on May 2, 2011, prohibits the City from providing new water and/or wastewater allocations to anyone outside of the legal limits of the City, with the exception of "properties that are part of the Route 7 North Sewer District ("Sewer District") as adopted by the Town of St. Albans on August 27, 2001." See Moratorium § 3. The Moratorium also provides that "allocations that were previously granted outside the legal limits of the City will not be renewed upon expiration unless the property is located in the Route 7 North Sewer District." Id. § 6.

The Moratorium was created with the understanding that the City has no duty to provide such services to Town residents except as modified by "specific agreement to do so, " such as in the case of the Sewer District. It contains an outline of why it was enacted, in particular, it cites the anticipated costs to upgrade the City's water treatment plant weighed against the fact that the Town does not contribute to the tax base that would pay for such upgrades. The concerns underlying the Moratorium also include that:

• The City of St. Albans owns the water and wastewater infrastructure but presently has no long term agreement to provide water and sewer services to the Town of St. Albans. The Town has no obligation to help upgrade the plant to accommodate the demands of its residents. Moratorium § 2 ¶ 4.
• The City is experiencing an erosion of its tax base through businesses that are choosing to expand in the Town rather than the City while still accessing ...

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