B-157316, SEP. 15, 1965

B-157316, SEP. 15, 1965

TO HONORABLE W. J. DRIVER, ADMINISTRATOR, VETERANS ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER OF JULY 22, 1965, WITH ENCLOSURE, REQUESTING ADVICE AS TO WHETHER CONTRACT NO. VAM-22416, DATED DECEMBER 13, 1964, WITH THE CITY OF TOMAH, WISCONSIN, MAY BE CANCELED AND A MORE EQUITABLE CONTRACT EXECUTED.

THE ABOVE CONTRACT PROVIDES, IN PERTINENT PART, AS FOLLOWS:

"THE CITY OF TOMAH, WISCONSIN, A MUNICIPAL CORPORATION HEREBY UNDERTAKES AND AGREES TO EXTEND ITS SEWER LINES TO A POINT ON THE VETERANS ADMINISTRATION HOSPITAL PROPERTY LINE AT TOMAH, WISCONSIN, AT APPROXIMATELY THE SOUTHWEST CORNER OF THE HOSPITAL RESERVATION AND TO CONNECT TO THE HOSPITAL SEWER AT THAT POINT, THE EXACT POINT OF THE CONNECTION TO BE DETERMINED BY AGREEMENT BETWEEN THE CITY ENGINEER AND THE VETERANS ADMINISTRATION WITHIN THIRTY (30) DAYS AFTER CONSTRUCTION OF THE SEWAGE TREATMENT PLANT IS BEGUN. THE CITY OF TOMAH FURTHER UNDERTAKES AND AGREES TO FURNISH TO THE VETERANS ADMINISTRATION HOSPITAL SEWAGE DISPOSAL SERVICE IN ACCORDANCE WITH THE SPECIFICATIONS HEREINAFTER STATED, BEGINNING FROM THE DATE ON WHICH THE SEWAGE CONNECTION IS MADE AND SEWAGE TREATMENT IS RENDERED AND CONTINUING THEREAFTER PERPETUALLY, SUBJECT TO CANCELLATION BY THE VETERANS ADMINISTRATION BY GIVING TO THE CITY OF TOMAH THIRTY (30) DAYS NOTICE IN WRITING, IN CONSIDERATION FOR THE PAYMENT BY THE VETERANS ADMINISTRATION OF THE FOLLOWING CHARGES:

"/A) A SERVICE CONNECTION CHARGE IN THE AMOUNT OF SEVENTY THOUSAND ONE HUNDRED FORTY DOLLARS ($70,140.00), WHICH SHALL BECOME DUE AND PAYABLE WHEN THE CITY OF TOMAH HAS MADE THE SEWER CONNECTION SPECIFIED ABOVE AND WHEN THE SAID SEWAGE DISPOSAL PLANT IS COMPLETED AND READY FOR USE.

"/B) A SERVICE CHARGE OF TWO THOUSAND SEVEN HUNDRED DOLLARS ($2,700.00) PER ANNUM PAYABLE AT THE RATE OF TWO HUNDRED TWENTY-FIVE DOLLARS ($225.00) PER MONTH IN ARREARS.

"IN THE EVENT THAT THE VETERANS ADMINISTRATION HOSPITAL POPULATION SHOULD INCREASE PERMANENTLY TO A NUMBER SUBSTANTIALLY IN EXCESS OF THREE THOUSAND (3,000) AND THAT SUCH INCREASE NECESSITATE AN ADDITION TO THE CITY'S SEWAGE DISPOSAL PLANT, AND/OR AN INCREASE IN THE COST OF OPERATING THE SAID PLANT, THE COST OF CONSTRUCTION OF THAT PART OF THE ADDITION TO THE SEWAGE DISPOSAL PLANT WHICH IS MADE NECESSARY BY THE NEEDS OF THE VETERANS ADMINISTRATION HOSPITAL, INCLUDING MAINTENANCE, REPAIRS, DEPRECIATION AND REPLACEMENT THEREOF, AND ANY INCREASED OPERATING COST ATTRIBUTABLE TO THE ADDITIONAL REQUIREMENTS OF THE VETERANS ADMINISTRATION HOSPITAL WILL BE PAID BY THE VETERANS ADMINISTRATION.'

THE CITY HAS ASKED THE VETERANS ADMINISTRATION TO CONSIDER THE EXECUTION OF A NEW AGREEMENT, INCREASING THE SERVICE CHARGE, BECAUSE THE COST OF OPERATING THE SEWERAGE SYSTEM IS REPORTED TO HAVE INCREASED TO THE POINT WHERE THE VA PAYMENT COVERS ONLY TWELVE PERCENT THEREOF, WHEREAS ITS PROPORTIONATE USE OF SAME IS CLOSE TO TWENTY-FOUR PERCENT. YOU HAVE CITED TWO DECISIONS OF THIS OFFICE, 34 COMP. GEN. 398, AND B-77359, JUNE 10, 1964, IN SUPPORT OF YOUR VIEW THAT THE PRESENT AGREEMENT MAY BE CANCELED AND A MORE EQUITABLE CONTRACT EXECUTED.

WISCONSIN STATUTES, 1963, CH. 66.076 (1) AND (4), PROVIDE AS FOLLOWS:

"66.076 SEWERAGE SYSTEM, SERVICE CHARGE. (1) IN ADDITION TO ALL OTHER METHODS PROVIDED BY LAW ANY TOWN, VILLAGE OR CITY MAY CONSTRUCT, ACQUIRE OR LEASE, EXTEND OR IMPROVE ANY PLANT AND EQUIPMENT WITHIN OR WITHOUT ITS CORPORATE LIMITS FOR THE COLLECTION, TREATMENT AND DISPOSAL OF SEWAGE, INCLUDING THE LATERAL, MAIN AND INTERCEPTING SEWERS NECESSARY IN CONNECTION THEREWITH, OR MAY ARRANGE FOR SUCH SERVICE TO BE FURNISHED BY A METROPOLITAN SEWERAGE DISTRICT OR JOINT SEWERAGE SYSTEM, AND PROVIDE PAYMENT FOR THE SAME OR ANY PART THEREOF FROM THE GENERAL FUND, FROM TAXATION, SPECIAL ASSESSMENTS, SEWERAGE SERVICE CHARGES, OR FROM THE PROCEEDS OF EITHER MUNICIPAL BONDS, MORTGAGE BONDS, MORTGAGE CERTIFICATES OR FROM ANY COMBINATION OF THESE ENUMERATED METHODS OF FINANCING.

"/4) THE GOVERNING BODY OF THE MUNICIPALITY MAY ESTABLISH SEWERAGE SERVICE CHARGES IN SUCH AMOUNT AS TO MEET ALL OR PART OF THE REQUIREMENTS FOR THE CONSTRUCTION, RECONSTRUCTION, IMPROVEMENT, EXTENSION, OPERATION, MAINTENANCE, REPAIR AND DEPRECIATION OF THE SEWERAGE SYSTEM, AND FOR THE PAYMENT OF ALL OR PART OF THE PRINCIPAL AND INTEREST OF ANY INDEBTEDNESS INCURRED THEREOF, INCLUDING THE REPLACEMENT OF FUNDS ADVANCED BY OR PAID FROM THE GENERAL FUND OF THE MUNICIPALITY.'

WHILE IS APPEARS THAT MUNICIPAL CONTRACTS OF PERPETUAL DURATION ARE NOT NECESSARILY INVALID, IT SEEMS EQUALLY CLEAR THAT THE DECISION OF THE COURTS ARE IN SUBSTANTIAL AGREEMENT THAT THE DURATION OF A CONTRACT LET BY A MUNICIPALITY MUST, IN THE ABSENCE OF STATUTE, BE REASONABLE, HAVING REGARD TO THE CIRCUMSTANCES, AND LACKING SUCH REASONABLENESS, WILL BE CONSIDERED TO BE ULTRA VIRES. 10 MCQUILLIN SEC. 29.102, WILMINGTON PARKING AUTHORITY V. RANKEN, 105 A./2D) 614, 634. AN AGREEMENT BY A MUNICIPALITY TO FURNISH SEWAGE DISPOSAL SERVICE PERPETUALLY AT A SPECIFIED RATE WOULD REPRESENT AN ATTEMPT TO CONCLUDE ITSELF BY CONTRACT FROM EXERCISING ITS RATE FIXING POWER, WHICH IT MAY NOT DO. SAN FRANCISCO- OAKLAND TERMINAL RAILWAYS V. CITY OF ALAMEDA, ET AL., 226 F.889.

PERPETUAL CONTRACTUAL PERFORMANCE IS NOT FAVORED IN THE LAW, AND A MUNICIPALITY THEREFORE CANNOT BIND ITSELF BY PERPETUAL CONTRACT, OR BY A CONTRACT OF UNREASONABLE DURATION, UNLESS BY LEGISLATIVE SANCTION, ESPECIALLY WHERE THE SUBJECT MATTER OF THE CONTRACT BEARS ON A LEGISLATIVE OR GOVERNMENTAL FUNCTION OF LOCAL SUBDIVISIONS OF GOVERNMENT, INVOLVING THE EXERCISE OF POLICE POWER IN THE VITAL AREA OF HEALTH AND SANITATION. BOROUGH OF WEST CALDWELL V. BOROUGH OF CALDWELL, 138 A./2) 402.

IN VIEW OF THE FOREGOING, AND IN LINE WITH OUR DECISIONS IN 34 COMP. GEN. 398 AND B-77359, JUNE 10, 1964, WE WILL NOT OBJECT TO THE EXECUTION OF A NEW AGREEMENT FOR SEWAGE DISPOSAL, PROSPECTIVE IN EFFECT, AT RATES NOT TO EXCEED THOSE CHARGED OTHERS FOR SIMILAR SERVICE.