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Portland Water v. Town of Standish
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Decision:1999 ME 161
Argued:	September 9, 1999
Decided:	November 16, 1999



	[¶1]  The Town of Standish appeals from a judgment entered in the
Superior Court (Cumberland County, Cole, J.) following a trial in which the
court determined that, with the exception of five disputed elements, the
Sebago Lake Water Treatment Facility (the treatment facility) recently
constructed by the Portland Water District was exempt from municipal
property taxes by virtue of 36 M.R.S.A. § 651(1)(E) (1990).{1}  The District in
turn cross appeals from an earlier summary judgment entered in the
Superior Court (Cumberland County, Saufley, J.) determining that the
treatment facility was not tax-exempt pursuant to the provisions of 36
M.R.S.A. § 651(1)(D) (1990){2} and that certain supplemental assessments
issued by the Town were valid pursuant to 36 M.R.S.A. § 713 (1990).{3}  The
District also appeals from the denial of its post-trial motion to amend
findings.  On appeal, the District repeats the argument set forth in its
motion that our opinion in Town of Embden v. Madison Water District, 1998
ME 154, 713 A.2d 328, establishes that the entire treatment facility is tax-
exempt pursuant to section 651(1)(E).  We agree that Embden is controlling
and we vacate the judgment.
	[¶2]  The relevant facts may be summarized as follows:  The District, a
public municipal corporation, owns property in Standish that it uses to
provide water service to Standish and nine other Cumberland County
municipalities.  Although the District's legislative charter includes Standish
within the District's service area, the District's territory is defined as
Portland, South Portland, Westbrook, Cape Elizabeth, Cumberland,
Falmouth, Gorham, Scarborough, and Windham.  See P. & S.L. 1975, ch 84,
§ 1.  The District has exclusive authority to serve the municipalities within
its service area and currently serves approximately ten percent of Standish's
population.  See id. § 2(B).
	[¶3]  In 1992 and 1993, the District decided to change its method of
disinfecting water from chlorination to ozone treatment.  The District
constructed an ozone treatment plant on Sebago Lake in Standish to replace
its chlorination plant in Gorham.  This treatment facility, completed in
1994, produces approximately 21 million gallons of disinfected drinking
water per day. 
	[¶4]  In 1993, the assessor for Standish assessed the treatment facility
on a cost basis.  Although the total cost was approximately $23 million, he
concluded that all but an approximately $4 million portion of the facility was
tax exempt pursuant to section 651(1)(E).  In August of 1995, Standish
hired a new assessor.  Shortly after beginning employment, he reassessed all
of the property within Standish.  After reviewing data provided to him by the
District, he concluded that the prior assessor had incorrectly applied
section 651(1)(E) and that "the disinfection facility does not qualify for
property tax exemption."  The assessor included all property related to the
disinfection facility in the District's assessment and issued supplemental
assessments for the 1993, 1994, and 1995 tax years.   
	[¶5]  Following this reassessment, the District filed an action in
Superior Court, seeking a declaratory judgment pursuant to 14 M.R.S.A. §
5951 et seq. and M. R. Civ. P. 57.  The District maintained that the entire
treatment facility  was tax-exempt pursuant to section 651(1)(D), or, in the
alternative, that all or part of the treatment facility was tax-exempt pursuant
to section 651(1)(E).  In addition, the District argued that the supplemental
assessments were illegal and void because they did not comply with the
requirements of 36 M.R.S.A.  § 713.  The District and Standish filed cross
motions for summary judgment.  The court granted Standish's motion in
part, holding that section 651(1)(D) did not apply because the phrase
"corporate limits and confines" in the statute was co-extensive with the
legislative definition of the District's territory.  Because the treatment
facility was outside the District's territory, it was not tax-exempt under
section 651(1)(D).  The  court concluded, however, that the assessor had
misinterpreted section 651(1)(E),{4}  and ordered a reassessment of the
	[¶6]  In his reassessment, the assessor adopted a restrictive view of
section 651(1)(E), reasoning that the Legislature had not intended the
section to exempt treatment plants.  Consequently, he concluded that the
treatment facility was taxable.  Following this reassessment, the District and
Standish agreed on the taxable status of several elements of the treatment
facility, a schedule of which was titled "Joint Exhibit B of Items Not In
Dispute."  Forty-nine additional elements remained in dispute and were
listed in "Joint Exhibit A of Items In Dispute."  Following a trial, the court
held that all but five of the disputed items were tax-exempt.  Following the
entry of judgment, the District filed a motion to amend findings, arguing
that all of the treatment facility was tax-exempt under section 651(1)(E) as
interpreted in Embden.  The court denied the motion, and the matter is
now before us on appeal. 
	[¶7]  The District presses the argument in its cross-appeal that the
treatment facility is located within its "corporate limits and confines," as
that phrase is used in section 651(1)(D), and that the Superior Court
consequently erred when it denied the District's motion for summary
judgment.  We review the entry of a summary judgment for errors of law de
novo.  See H.E. Sargent, Inc. v. Town of Wells, 676 A.2d 920, 923 (Me.
	[¶8] We have not previously interpreted the phrase "corporate limits
and confines" in section 651(1)(D).  The parties point to three cases --
Greaves v. Houlton Water Co., 140 Me. 158, 34 A.2d 693 (1943) (Greaves I),
Greaves v. Houlton Water Co., 143 Me. 207, 59 A.2d 217 (1948) (Greaves II),
and Inhabitants of Boothbay v. Inhabitants of Boothbay Harbor, 148 Me. 31,
88 A.2d 820 (1952) -- that each side claims supports its position on this
issue.  None of these cases deal specifically with the phrase "corporate
limits and confines" because in each case we were only asked to determine
the taxable status of property under the predecessor to section 651(1)(E). 
See Greaves I, 140 Me. at 159-60, 34 A.2d at 694; Greaves II, 143 Me. at
208­p;09, 59 A.2d at 218; Boothbay, 148 Me. at 32, 88 A.2d at 821.
Nonetheless, in all three cases the question of the territorial limits of the
municipal corporations was central to the issue of whether the corporations
were public or private and, consequently, whether the exemption in the
predecessor to section 651(1)(E) was available to them.  
	[¶9]  In Greaves I, we ruled that a municipal corporation acting to
benefit  those outside its legislatively granted authority acted as a private
rather than a public corporation.  See Greaves I, 140 Me. at 165, 34 A.2d at
696.  Five years later, we held that the same corporation was nonetheless a
public municipal corporation when benefitting the use outside its boundaries
because the Legislature had amended the water company's charter to deem
it to be a public municipal corporation.  See Greaves II, 143 Me. at 213, 59
A.2d at 220.  In a later case, we held that property located in Boothbay and
used by Boothbay Harbor to provide service to both towns was tax-exempt as
the property of a public municipal corporation.  See Boothbay, 148 Me. at
38, 88 A.2d at 823.   In this instance, the Legislature had specifically
authorized Boothbay Harbor to provide service to Boothbay.
	[¶10]  These three cases explain the Legislature's placement of
Standish within the service area but outside the territory of the District. 
Greaves I provides a strict definition of a public municipal corporation. 
Municipal corporations that act outside of their territorial boundaries must
do so for the benefit of the citizens within those boundaries; "the public
outside [the municipal corporation] may [only] be incidentally benefitted . . .
."  See Greaves I, 140 Me. at 164, 34 A.2d at 696.  Greaves II and Boothbay
created an exception to that strict rule by allowing a municipal corporation
to remain public even though it benefitted those outside of its territorial
boundaries if the Legislature authorized the municipal corporation to
provide those extraterritorial services.  See Greaves II, 143 Me. at 211, 59
A.2d at 219; Boothbay, 148 Me. at 41-42, 88 A.2d at 825.  In the present
case, the inclusion of Standish in the District's service area allows the
District to fall within the Greaves II and Boothbay exception.  It was not
intended to expand the District's "corporate limits and confines" which the
court correctly held was co- extensive with the District's territory.
	[¶11]  Having determined that the treatment facility is not entirely
tax- exempt as property located within the District's "corporate limits and
confines," we now turn to the question presented at trial: namely what
portion, if any, of the treatment facility is exempt pursuant to
section 651(1)(E). 
	[¶12]  In Embden we noted that section 651(1)(E), while narrower
than section 651(1)(D) that exempts both facilities and land, still grants
broad exemptions to public municipal corporations for property used in
providing important public services: 
The effect of the amendment [adding the predecessor to
sections 651(1)(D) & (E) in 1911] was to make public municipal
corporations responsible for the property tax on land owned
outside of its corporate limits,{5} while retaining the tax-exempt
status of components of the corporation's facilities used to
provide valuable public services such as the delivery of water,
power, and light.
Embden, 1998 ME 154, ¶ 8, 713 A.2d at 330.  When the Legislature
enacted section 651(1)(E) in 1911, it defined the parameters of the
exemption by providing a then current list of necessary components of a safe
water treatment facility.  See id. ¶ 6, 713 A.2d at 330.  We noted in Embden
that a strict reading of the 1911 list, ignoring technological advances in safe
water treatment, would frustrate legislative intent.  See id.  Reasoning that
the Legislature did not intend to discourage investments in technology to
make water safer by linking those investments with a loss of tax-exempt
status, we held in Embden that section 651(1)(E) exempted all property
that was an essential component of a modern water treatment facility.{6}  See
id. ¶ 8, 713 A.2d at 330.
	[¶13] In the present case, all the components of the treatment facility
have been itemized in Joint Exhibits A and B.  We conclude that the
components listed in the two exhibits are essential to building and operating
a modern water treatment facility.{7}  Consequently, the trial court erred in
failing to rule that the treatment facility is tax-exempt in its entirety
pursuant to section 651(1)(E).  Because there is no taxable property, we
have no occasion to consider the propriety of the supplemental assessments.
	The entry is:
Judgment vacated.  Remanded to the Superior Court with
instructions to enter a judgment consistent with the opinion
herein declaring that the Sebago Lake Water Treatment Facility,
exclusive of land, is tax exempt in its entirety.

Attorneys for plaintiff: Michael T. Healey, Esq., (orally) Jacqueline W. Rider, Esq. Verrill & Dana, LLP One Portland Square Portland, ME 04112-0586 Attorneys for defendants: Kenneth M. Cole III, Esq., (orally) Sally J. Daggett, Esq. Jensen Baird Gardner & Henry P O Box 4510 Portland, ME 04112-4510
FOOTNOTES******************************** {1} . . The statute exempts: "The pipes, fixtures, hydrants, conduits, gatehouses, pumping stations, reservoirs and dams, used only for reservoir purposes, of public municipal corporations engaged in supplying water, power or light, if located outside of such public municipal corporation . . . ." 36 M.R.S.A. § 651(1)(E) (1990). {2} . . The statute provides that "[t]he property of any public municipal corporation of this State appropriated to public uses, if located within the corporate limits and confines of such public municipal corporation" is exempt from taxation. 36 M.R.S.A. § 651(1)(D) (1990). {3} . . The statute provides, in pertinent part: "Supplemental assessments may be made within 3 years from the last assessment date whenever it is determined that any estates liable to taxation have been omitted from assessment or any tax on estates is invalid or void by reason of illegality, error or irregularity in assessment." 36 M.R.S.A. § 713 (1990). {4} . . In his initial assessment, the assessor assumed that the phrase "used only for reservoir purposes" in section 651(1)(E) modified all the items listed in that section. {5} . . Although the District argued in its motion to amend findings that the land section under the treatment facility was also exempt under Embden, it conceded at oral argument that § 651(1)(E) would not alter its responsibility for the property tax on its land in Standish. {6} . . In Embden, the procedural posture of the case made it unnecessary to determine whether any portion of the property in question was not an essential component of a modern water treatment facility. See Embden, 1998 ME 154, ¶ 8, n.3, 713 A.2d at 330, n.3. {7} . The parties have debated whether various "soft costs" -- such as bond and insurance costs, excavation and stripping costs, etc. -- were properly classified as taxable or should have instead been included in the general valuation of the treatment facility. Because these costs are necessary for the construction of a safe water treatment facility, they are exempt under section 651(1)(E).