B-89424, AUG. 31, 1955

B-89424: Aug 31, 1955

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UNITED STATES AIR FORCE: REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 3. FOR AMOUNTS WHICH HAVE BEEN ADMINISTRATIVELY DEDUCTED FROM BILLS FOR WATER SERVICE FURNISHED THE MCCONNELL AIR FORCE BASE. THERE WAS DISCUSSED THE PROPRIETY OF THE PAYMENT OF SURCHARGES BY THE GOVERNMENT AND WHETHER SUCH SURCHARGES CONSTITUTED A TAX. IN THAT DECISION PAYMENT OF THE SURCHARGES WAS HELD TO BE PROPER IN THAT THE GOVERNMENT CONTRACTED TO PAY THE CHARGES FOR THE SERVICES FURNISHED BY THE CITY OF WICHITA IN THE PRODUCTION AND PURIFICATION OF WATER. IT IS APPARENT THAT SOME MISUNDERSTANDING STILL EXISTS AS TO THE BASIS FOR THE IMPOSITION OF THE SURCHARGE BY THE CITY OF WICHITA AND WHETHER THIS CHARGE MUST BE REGARDED AS A TAX.

B-89424, AUG. 31, 1955

TO CAPTAIN N. L. MORTON, FINANCE OFFICER, UNITED STATES AIR FORCE:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 3, 1955, FORWARDED HERE THROUGH THE DIRECTOR OF FINANCE, DEPARTMENT OF THE AIR FORCE, ENCLOSING VOUCHERS IN FAVOR OF THE WICHITA WATER COMPANY, WICHITA, KANSAS, FOR AMOUNTS WHICH HAVE BEEN ADMINISTRATIVELY DEDUCTED FROM BILLS FOR WATER SERVICE FURNISHED THE MCCONNELL AIR FORCE BASE, KANSAS, BY THE WATER COMPANY. THE AMOUNTS REPRESENT SURCHARGES INCLUDED IN THE BILLS ON BEHALF OF THE CITY OF WICHITA, KANSAS. YOU REQUEST AN ADVANCE DECISION ON POINTS OF ISSUE NOT FULLY COVERED IN DECISION OF OUR OFFICE B-89424, DATED JANUARY 26, 1950.

IN B-89424 OF JANUARY 26, 1950, THERE WAS DISCUSSED THE PROPRIETY OF THE PAYMENT OF SURCHARGES BY THE GOVERNMENT AND WHETHER SUCH SURCHARGES CONSTITUTED A TAX. IN THAT DECISION PAYMENT OF THE SURCHARGES CONSTITUTED A TAX. IN THAT DECISION PAYMENT OF THE SURCHARGES WAS HELD TO BE PROPER IN THAT THE GOVERNMENT CONTRACTED TO PAY THE CHARGES FOR THE SERVICES FURNISHED BY THE CITY OF WICHITA IN THE PRODUCTION AND PURIFICATION OF WATER.

FROM A READING OF YOUR LETTER OF FEBRUARY 3, 1955, IT IS APPARENT THAT SOME MISUNDERSTANDING STILL EXISTS AS TO THE BASIS FOR THE IMPOSITION OF THE SURCHARGE BY THE CITY OF WICHITA AND WHETHER THIS

CHARGE MUST BE REGARDED AS A TAX. THE RECORDS BEFORE OUR OFFICE INDICATE THAT THE CITY OF WICHITA OWNS AND OPERATES A WALL FIELD SOME DISTANCE FROM THE CITY AND PIPES WATER TO A CITY OWNED AND OPERATED PURIFICATION PLANT. UNDER ORDINANCE NO. 13-520, THE CITY OF WICHITA AUTHORIZED THE WICHITA WATER COMPANY TO DISTRIBUTE THE WATER THUS PRODUCED AND PURIFIED BY THE CITY TO CUSTOMERS WITHIN THE CITY AND IN CLOSE PROXIMITY THERETO. ORDER TO COMPENSATE THE CITY FOR ITS SERVICES IN PRODUCING AND PURIFYING THE WATER, THE WATER COMPANY WAS REQUIRED TO INCLUDE IN ITS BILLINGS A SURCHARGE BASED ON A PERCENTAGE OF THE CHARGE MADE BY THE WATER COMPANY. IT IS APPARENT, THEREFORE, THAT THE FURNISHING OF WATER IN WICHITA AND ITS ENVIRONS IS A JOINT OPERATION OF THE CITY AND THE WATER COMPANY AND, THEREFORE, EACH IS ENTITLED TO CHARGE FOR ITS SERVICES TO THE PATRONS OF SUCH SERVICE.

HAVING IN MIND THE JOINT NATURE OF THE VENTURE, IT MUST BE RECOGNIZED THAT THE SURCHARGE MADE IS A CHARGE FOR THE SERVICES RENDERED BY THE CITY OF WICHITA IN THE PRODUCTION AND PURIFICATION OF THE WATER TO THOSE WHO USE THE SERVICE AND CANNOT BE CONSIDERED IN ANY SENSE AS A TAX. UNDER THESE CIRCUMSTANCES, THE GOVERNMENT AS A CUSTOMER OF WATER SERVICE IS NOT CONCERNED WITH THE INTERNAL MANAGEMENT OF AMOUNTS COLLECTED BY MEANS OF THE SURCHARGE AND THERE IS NO BASIS TO INQUIRE AS TO THE USE OF REVENUE DERIVED BY THE CITY IN THIS OPERATION. THERE IS NO REQUIREMENT THAT THE FEDERAL GOVERNMENT PROCURE ITS WATER FROM THE WICHITA WATER COMPANY BUT IF IT DOES SO, IT IS OBLIGATED TO PAY AT THE AGREED RATES THE CHARGES FOR THE WATER. ACCORDINGLY, THERE IS NO NEED TO ANSWER MORE SPECIFICALLY THE FIRST GROUP OF QUESTIONS RAISED WITH RESPECT THERETO IN YOUR LETTER.

WITH RESPECT TO THE LIABILITY FOR THE SURCHARGE WHERE THE WATER COMPANY FURNISHES WATER FROM ITS OWN WELLS, REFERENCES TO SECTION 4 OF ORDINANCE NO. 13-520 INDICATES THAT THIS OCCURS ONLY WHERE THE WATER SUPPLIED FROM THE CITY WELLS IS TEMPORARILY DISCONTINUED OR IS INADEQUATE. IN THESE CIRCUMSTANCES, THE PURIFICATION PLANT OPERATED BY THE CITY IS STILL USED AND HENCE THE CITY IS PERFORMING SERVICES FOR THE BENEFIT OF THE WATER PATRONS. FURTHERMORE, THE ARRANGEMENT BETWEEN THE CITY AND THE WATER COMPANY APPEARS TO BE A CONTRACTUAL MATTER BETWEEN THEM, AND THE GOVERNMENT AS A CUSTOMER IS NOT CONCERNED WITH ARRANGEMENTS MADE BETWEEN THE PARTIES TO GUARANTEE AN ADEQUATE SUPPLY OF WATER AT ALL TIMES.

ON THE COROLLARY QUESTION RAISED WITH RESPECT TO THAT PART OF SECTION 8 (A) OF ORDINANCE NO. 13-520 CONCERNING SURCHARGES PAYABLE BY INDUSTRIAL CONSUMERS, WHICH SECTION REFERS TO PARAGRAPH (A) ON PAGE 115 OF A DOCUMENT THEREIN SPECIFIED, IT MUST BE ASSUMED THAT THE REFERENCE WAS AN INADVERTENT ERROR SINCE THE OBVIOUS REFERENCE SHOULD HAVE BEEN TO PARAGRAPH (C) WHICH REFERS TO INDUSTRIAL CONSUMERS IN THE SPECIFIED DOCUMENT. SUCH AN ERROR, THEREFORE, IS NOT TO BE REGARDED AS AFFECTING THE SURCHARGE PAYABLE BY THE GOVERNMENT. ON THE QUESTION OF WHETHER THE AIR FORCE IS ENTITLED TO BE CONSIDERED AN INDUSTRIAL USER OF WATER, THE OPERATING INSTRUCTIONS DEFINE INDUSTRIAL USERS IN TERMS OF MANUFACTURING AND INDUSTRIAL CONSUMERS. MUNICIPAL USERS (PAGE 115 (D) ( IS DEFINED AS INCLUDING SALES OF WATER FOR CITY, COUNTY, STATE AND FEDERAL USERS AND IT WOULD SEEM THAT THE USE BY THE GOVERNMENT WOULD FALL IN THAT CLASSIFICATION GENERALLY RATHER THAN IN THE CATEGORY OF AN INDUSTRIAL USER. HOWEVER, IF THE USE MADE BY THE AIR BASE OF THE WATER OR ANY SUBSTANTIAL PORTION THEREOF ADMINISTRATIVELY IS DETERMINED REASONABLY TO FALL WITHIN THE CATEGORY OF AN INDUSTRIAL USE, AS DEFINED IN THE OPERATING INSTRUCTIONS, IT IS SUGGESTED THAT THE PROPER OFFICIALS OF THE WATER COMPANY AND THE CITY OF WICHITA BE CONTACTED WITH A VIEW TO SECURING THE LOWER "INDUSTRIAL" RATE AS TO WATER SO USED.

ON THE QUESTION OF WHETHER A DISCOUNT MAY BE TAKEN WITH RESPECT TO THE AMOUNT OF SURCHARGE WITHHELD ON THE ORIGINAL PAYMENT VOUCHER AND WHICH AMOUNT IS NOW VOUCHERED FOR PAYMENT, YOU ARE ADVISED THAT THE DISCOUNT MAY NOT BE TAKEN SINCE PAYMENT OF THAT PORTION OF THE BILL FOR WATER SERVICES WAS NOT MADE WITHIN THE DISCOUNT PERIOD PROVIDED IN THE CONTRACT.

AS TO THE FINAL QUESTION, IT IS IMMATERIAL WHETHER THE RATES IN THE CONTRACT BE EXPRESSED IN TWO PARTS, THAT IS, ONE PART REPRESENTING THE RATE AUTHORIZED TO BE CHARGED BY THE WATER COMPANY FOR ITS SERVICES AND THE OTHER AS A SURCHARGE CALCULATED AT THE PERCENTAGE RATE SPECIFIED IN THE CURRENT CITY ORDINANCE, OR IS SET OUT IN AMOUNTS WHICH COMBINE THE WATER COMPANY RATE AND THE SURCHARGE PERCENTAGE IN ONE RATE.

ACCORDINGLY, THE VOUCHERS ENCLOSED WITH YOUR LETTER ARE RETURNED HEREWITH AND MAY BE PAID IF OTHERWISE CORRECT.