City can’t make itself exclusive utility provider in county land

Customers in an industrial park on unincorporated land in Laurens County will have a choice of utility providers after the South Carolina Supreme Court unanimously ruled that one city could not make itself a monopoly provider beyond its borders simply by being the first to lay claim to the area, overturning a 2018 ruling by the state’s Court of Appeals.

The inaugural tenant of the Owings Industrial Park solicited competing bids for its natural gas service from both the City of Fountain Inn and Laurens Commission of Public Works, a subsidiary of the City of Laurens. LCPW asserted that it had the exclusive right to service businesses in the park, contending that it fell within territory ceded to Laurens as part of a “gentleman’s agreement” struck between the two cities in 1992. LCPW had been exclusively serving that territory ever since (though not the industrial park specifically, due to lack of customers).

LCPW cited a state law which provides that any municipality may, by contract, furnish any of its services outside of its city limits, except within another political subdivision’s “designated service area,” meaning an area in which the service “is being provided or is budgeted or funds have been applied for as certified by the governing body thereof.” Laurens County Circuit Court Judge Cordell Maddox agreed with LCPW’s reading of the law and enjoined Fountain Inn from providing natural gas to the industrial park, and the Court of Appeals affirmed the ruling.

But in a Sept. 18 opinion written by Justice John Kittredge, the Supreme Court disagreed, concluding that the phrase “by the governing body thereof” applied to all parts of the sentence before it, and not just the final clause. As such, only the governing body of the area—in this case, Laurens County—could declare the park a designated service area, and the county had never done so, or apparently even been aware of the two cities’ gentleman’s agreement. The city could not unilaterally make the industrial park part of its exclusive turf, the court ruled.

Accepting LCPW’s reading of the law, Kittredge wrote, would lead to an “absurd result” in which a city could make itself the sole provider of services in the area outside its boundaries, with unrestricted authority to charge whatever rates it pleased, and create a monopoly across an entire county based purely on its being the first to claim the territory, with no ability of the county or nonresidents to stop it.

“When a municipality provides services to its residents, there are inherent safeguards—through the electoral process and otherwise—that ensure accountability. Those safeguards can similarly be maintained through [a] contract,” Kittredge wrote. “The natural safeguards disappear when a municipality becomes a provider of services in a ‘designated service area’ beyond its borders. There is no contract; there is no negotiation; there is no accountability through the electoral process or otherwise … there is simply no choice, and the municipality is wholly unaccountable to the nonresident customers.”

The court’s majority said the language of the statute was unambiguous; Justice John Few wrote a concurring opinion agreeing with the court’s interpretation of the law, but disputing the idea that lawmakers had crafted an unambiguously clear piece of writing.

Sarah Spruill and Nick Nicholson of Haynsworth Sinkler Boyd in Greenville and David Holmes of Holmes Law Firm in Greenville represented the City of Fountain Inn. Spruill declined to comment on the court’s decision.

Robert Widener and Bernie Ellis of Burr & Forman in Columbia and Greenville, respectively, represented the Laurens Commission of Public Works. Ellis also declined to comment on the court’s decision since the deadline to file a petition for a re-hearing had not yet passed.

The 11-page decision is Commissioners of Public Works v. City of Fountain Inn (Lawyers Weekly No. 010-062-19). The full text of the opinion is available online at sclawyersweekly.com.

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