Ed and Sally Groff weren’t expecting the roughly $760 bill they got in the mail from St. Albans City last month. “This came out of the complete blue,” Sally Groff said.
Along with the bill was a letter describing what the St. Albans Town couple owed: the annual “affiliation fee” for their water and sewer service.
St. Albans City, which is a separate municipality surrounded entirely by the town, charges the fee to homes and businesses that use its water and sewer systems, but live or operate outside city limits.
The fee is levied on top of the city’s regular water and sewer rates and was enacted in 2015. City ordinances say it applies to “new construction or expansion or existing property” that gets a water and/or sewer hookup, unless the property is tax-exempt.
Developers or property owners seeking city water and/or sewer service must go through an application process, and the affiliation fee program is “a direct contract between the property owner and the City of St. Albans,” according to the ordinances.
But the Groffs and multiple neighbors — who all live in a senior housing development near Interstate 89 called the Village at Franklin Park West — said the fee was never disclosed to them and last month’s bill was the first time they’d ever heard of it.
Sue Fortin, who lives next door to the Groffs, said she has been in her home for three years but received a supposedly annual bill for the first time last month.
Not every home that appears to meet the requirements for the fee got a bill last month, Sally Groff said. And the homeowners think it’s unfair to pay this additional fee to a municipality whose government they have no say in electing.
“In our opinion, this is clearly taxation without representation,” Groff said.
Money from the affiliation fee program goes into the city’s general fund, St. Albans City Manager Dominic Cloud said. The fund pays for city services such as fire and police.
About 30 residential and commercial users — all in St. Albans Town — currently pay the fee, he said, bringing in about $100,000 for the city. Fifteen more users have been approved for an allocation and will start paying next year, he said.
City officials calculate the fee based on a property’s appraised value in the municipality where it’s located. For instance, the fee for new construction or expansion of existing property, requiring both water and sewer connections, is 32 cents per $100 of value.
Economic interests
Cloud said the city is not taxing outside its borders, as residents have suggested, but rather entering into contracts as a corporation.
The city’s water and sewer service is akin to a membership program, he said, and town residents and businesses have to pay for an “affiliate membership” if they want to use it.
“The system kind of assumes that the municipality that is providing the service is also getting the tax revenue,” Cloud said. “This is a response to, OK, well, what happens when you’re not?”
Cloud also said the affiliation fee is designed to protect the city’s economic interests. St. Albans Town’s growth, he said, has been bolstered by its access to city water and sewer service, “and the city needs to get a return on our investment.”
The town’s population grew more than 16% over the past decade, while the city’s population has decreased slightly, according to 2020 U.S. Census data.
The city’s ordinances list about a dozen criteria for officials to consider when deciding whether to approve a new water and/or sewer allocation outside the city. These include whether the applicant has demonstrated why their project can’t be built in the city, if the project would increase employment opportunities in the city or the region, and if the project could “undermine the city’s own economic development efforts.”
In a letter to the Groffs, which Cloud provided to VTDigger, he said the town would need to spend more than $50 million to build an equivalent water and sewer system. He suggested the couple ask the town to pay their affiliation fee for them.
“Paying the fees for you and others similarly situated,” he said, “would be the fastest and the cheapest route for the town to secure water and wastewater for their community.”
Several large companies pay the affiliation fee as well, Cloud said, including Ben & Jerry’s and Peerless Clothing. Both operate at the St. Albans Town Industrial Park.
Ben & Jerry’s paid $42,000 for the affiliation fee program between July 1, 2020, and June 30, 2021, according to city data provided to VTDigger.
“One community can’t access another community’s infrastructure,” Cloud said, “without some money changing hands.”
In a statement, St. Albans Town Selectboard Chair Brendan Deso said the city’s water and sewer system is a public good meant to encourage regional economic development, but the city is using it to take advantage of the town’s growth.
“If the city of St. Albans was growing at a rate that would someday max out this infrastructure’s capabilities, I could understand their stance — but the city isn’t growing,” he said.
Deso called the allocation review criteria in the city ordinances “an attempt to establish extraterritorial land use controls in communities the city has no jurisdiction over,” and said the fee is an effort “to capture extraterritorial property tax revenues from grand list growth outside city limits.”
“We don’t pay Green Mountain Power or Vermont Gas 32 cents per hundred based on our assessed property values on an annual basis to have access to their services,” he said. “This is a flawed concept that should be addressed by our Legislature.”
‘Button up’
So why weren’t the Groffs and multiple other residents aware of the fee?
Cloud said their homes’ developer, Malone Properties, appears to have neglected to notify the residents that their properties were part of the affiliation fee program. That hasn’t happened with any other developer in the program so far, he noted.
In an email, Pat Malone, who owns Malone Properties, said he was surprised when he learned about the fee and he feels it is an unfair charge. His attorneys told him sellers are not legally responsible for disclosing the fee any more than they are for disclosing municipal fees such as property taxes or utility bills, he said.
“We will make sure that the listing broker who sells these makes triple sure that prospective buyers are informed now and in the future,” Malone said.
Cloud said he is willing to look into any situation where residents believe that someone is not being charged the affiliation fee but should be, and added the city will do more to make sure town residents are not surprised by the fee in the future.
“We’ve recognized that that’s something that, within the process, we need to button up a little bit,” he said, “to be sure that the developers are actually passing their commitments that they’ve made to us on to the people that ultimately buy the properties.”
A history of dispute
Cloud said the affiliation fee is a product of years of negotiations between the city and the town over water and sewer access that have resulted in little consensus. The two communities have also gone to court multiple times over these disputes.
When the fee was enacted in November 2015, the town sued the city, arguing the city’s criteria for reviewing new water and sewer allocation requests infringed on the town’s authority to plan new development, among other claims.
At the time, city officials also repealed a moratorium on new water and sewer hookups outside the city, which had been in place since May 2011.
Superior Court Judge Gregory Rainville ultimately dismissed the town’s case, stating in a December 2018 decision that the municipality did not present sufficient evidence.
“The town has not demonstrated that either the review criteria or the amount of the affiliation fee assessed are unreasonable,” Rainville wrote in the decision. “Taken in light of the city’s authority to weigh requests for extraterritorial allocations, the town has offered no basis to conclude that the ordinance, either on its face or as applied, is an attempt at extraterritorial zoning.”
He also took note of the dispute’s long history and said he was not surprised it had resulted in lawsuits.
“The parties cannot agree as to whether the affiliation fee, and attendant application process, represent an injury or threatened injury to the town,” Rainville wrote. “The town argues that it does; the city argues that it does not.”
Still, both communities remain closely linked. They share a unified school district with Fairfield, for instance, and town residents shop and dine in the city’s downtown.
“Elected officials should care about the community and its neighbors,” Ed and Sally Groff wrote in a letter to Cloud, “instead of using us as pawns to continue a longstanding dispute.”
