In April 2006, the Ohio Supreme Court considered two key cases regarding annexation and the provision of services by a municipality to customers outside its boundaries. In the first case, Bakies v. Perrysburg,1 the Court held that a municipality could condition the continued provision of extraterritorial services on an agreement to annex. It was already established that a municipality could condition the provision of such services on annexation, but this case clearly states that a municipality can incorporate such conditions at any time, as long as there is not a contractual obligation to provide the services without such conditions. This could result in a number of municipalities revisiting the terms by which they provide extraterritorial services.

The second case is also related to conditions on the provision of extraterritorial services, but focuses on a County Health Regulation. This regulation requires homeowners to abandon their septic system, or not construct one, if the homeowner has access to a sanitary sewer system. The homeowner in the Clark v. Greene Cty. Combined Health Dist.,2 case did not want to connect to the municipal sewer system when it became accessible because of the conditions required for connection, including annexation. The Court separated the two issues finding the Health Regulations valid and finding the municipal conditions for extraterritorial services valid; therefore, the homeowner was required to connect once the sanitary system became accessible and abide by the municipal conditions imposed for such connection.

Bakies v. Perrysburg

In this case, the city of Perrysburg provided water and sewer services to the unincorporated portions of Wood County during the 1970s and 1980s. In 1983, Perrysburg enacted an ordinance that required all new extraterritorial customers to agree to petition for annexation immediately or do so once their property became contiguous to any part of the city. In 1988 the city announced its intention to annex all urbanized areas and all low density areas when it became apparent that those areas would become urbanized. The two appellants in this case were Gregory and Karen Bakies, who purchased a home in the unincorporated portion of the county in 1988 and signed a contract for water service with the city of Perrysburg, and Richard Smith, who purchased a home in the unincorporated portion of the county in 1978 and was provided water and sewer services by the city of Perrysburg without any type of contract.

The Written Contract

The Bakies argued that Perrysburg could not require consent to annexation as a condition of continued service, but only as a condition for the provision of services. The Court did not agree with this position. The Court held that the Ohio Constitution allows a municipality to sell surplus water and sewer services outside its territorial boundaries, but that municipalities that do, have no duty to do so absent of a contractual obligation. Citing Grandview Heights v. Columbus3, the Court reaffirmed that when a contract for the provision of extraterritorial service does exist, but does not provide a termination date of such services, either party may terminate upon reasonable notice. Also citing State, ex rel. Indian Hill Acres, Inc. v. Kellogg4, the Court reaffirmed that a municipality does not assume a duty to continue supplying extraterritorial services because it had previously agreed to provide such services.

In summary, the Court found no distinction between a municipality’s authority to impose conditions at the time it extends extraterritorial service and its authority to impose conditions upon continued service; therefore, Perrysburg’s condition that extraterritorial customers agree to annex property or face termination of services was a valid and enforceable contract.

The Oral Contract

Mr. Smith argued that Perrysburg has been providing him water and sewer services since 1978 pursuant to an oral contract and that Perrysburg cannot now unilaterally alter the terms of that contract. The Court was unable to find any evidence of an oral contract, but did agree that Perrysburg has been providing water and sewer services to Mr. Smith for more than 27 years. Following its earlier analysis, the Court held that absent a contractual obligation, Perrysburg had no duty to continue the provision of water and sewer services to Mr. Smith, and the evidence shows that Perrysburg enacted ordinances in 1983 and 1998 notifying extraterritorial customers of the conditions for the continued receipt of services. Mr. Smith’s continued receipt of services after those enactments subjected him to those conditions. Therefore, Mr. Smith must comply with Perrysburg’s conditions for the provision of exterritorial services or face termination of services.

Finally, the Court addressed the constitutionality of the Perrysburg ordinances. The Court concluded that ordinances requiring extraterritorial customers to agree to annex in exchange for the continued provision of services is a valid exercise of the police power of a municipality. The Court also held that because Perrysburg demonstrated a legitimate basis for the required annexation, including tax revenue, proximity to the corporate limit, and the creation of a larger tax base, the ordinances were not unreasonable, arbitrary or capricious and did bear a rational relationship to the health, safety, and welfare to the citizens of Perrysburg.

Clark v. Greene Cty. Combined Health District

In this case, the appellant, Thomas D. Clark, planned to build a home on property in Bath Township. Mr. Clark contacted the Fairborn City Engineer to inquire about the availability of water and sewer services to the property. Mr. Clark was told that the city had no plans to extend sewer services to that part of the township and that such extension would cost roughly $18,000. Mr. Clark decided to install a septic system on the property and obtained a permit from the Greene County Combined Health District to do so.

Several months later Mr. Clark was informed that Fairborn had extended the sewer line and it was now available for connection, but that Mr. Clark must pay certain fees and agree to consent to any future annexation of his property in order to connect to the sewer line. Upon learning that the Fairborn sewer line was available for connection by Mr. Clark, the Greene County Combined Health District notified Mr. Clark that the permit to install the septic system was being rescinded. The Health District based this rescission on a County Sewage Regulation that prohibits the installation, maintenance or operation of a septic system on property with access to a sanitary sewage system. Mr. Clark applied for a variance from this regulation, but was denied.

The Ohio Supreme Court held that Ohio law allows a health district to adopt rules to protect the public health and prevent disease, and that it is well established that a health district may require a household sewer to be connected to a sanitary sewer system whenever such a system becomes accessible to the property, and such a requirement is not arbitrary or unreasonable and does not constitute a deprivation of due process of law.

Mr. Clark argued that the Fairborn sewer line was not accessible, but only conditionally accessible because of the fees and annexation requirement necessary for connection to the line. The Court held that the conditions required by Fairborn for connection to the sewer line were valid and enforceable conditions, citing the Bakies decision. The Greene County Health District has no control over the conditions imposed by Fairborn for connection to the sewer line, but that lack of control does not negate the authority of the District to require Mr. Clark to connect to a sanitary sewer system whenever it becomes accessible. The Court concluded that Mr. Clark did not have to connect to the Fairborn sewer line, but would risk a nuisance abatement action by the Greene County Combined Health District.

Conclusion

These two cases could have a significant impact on the annexation and utility services policies of many municipalities. Municipalities may now enact annexation requirements for the continued provision of extraterritorial services in areas where such conditions did not previously exist. Additionally, if such action is taken in areas where a County Health Regulation requires connection to an available sanitary sewer system, municipalities may extend sewer systems to areas it wishes to annex and force property owners into the municipality by conditioning, what would be required connection under the Health Regulations, the connection upon annexation to the municipality.

Footnotes

1. Bakies v. Perrysburg, 108 Ohio St. 3d 361, 2006-Ohio-1190, 843 N.E.2d 1182 (2006).

2. Clark v. Greene Cty. Combined Health Dist., 108 Ohio St.3d 427, 2006-Ohio-1326, 844 N.E.2d 330 (2006).

3. Grandview Heights v. Columbus, 174 Ohio St. 473, 190 N.E.2d 453 (1963).

4. State, ex rel. Indian Hill Acres, Inc. v. Kellogg, 149 Ohio St. 461, 79 N.E.2d 319 (1948).

Reprinted from Finley’s Ohio Municipal Service, with the permission of the publisher and copyright owner, West Group.