Request By:
Mr. Stephen R. Dunn
City Attorney
Box 368
East Main Street
Providence, Kentucky 42450
Opinion
Opinion By: Steven L. Beshear, Attorney General; Walter C. Herdman, Asst. Deputy Attorney General
This is in response to your letter of August 27, 1982 in which you present a number of questions concerning possible alternate methods whereby the city can protect itself from losses which have occurred when residential renters have left owing large utility bills. Utility is city owned and operated.
Your initial proposal is as follows:
"The Council received one proposal which would require any person renting property in the City of Providence, Kentucky, to which city utilities are provided, to post a utility deposit in an amount somewhat larger than utility deposits require of parties using City utilities provided to property owned by the users. "
The above proposal raises a question of unjust discrimination. Referring to the case of
Smith v. Kentucky Utilities Co., 233 Ky. 68, 24 S.W.2d 928 (1930), it was pointed out that whenever a utility company undertakes to furnish electrical current, for example, it cannot discriminate against persons similarly situated. However, under Section 34.97 of McQuillin Municipal Corporations, Vol. 12, the general rule is expressed to the effect that exacting from patrons or consumers payment of rental in advance, while giving credit to others, is not an unjust discrimination.
Referring to Puckett v. City of Muldraugh, 403 S.W.2d 252 (1966), we find a case involving in part the validity of an ordinance permitting a tenant to make application to pay for the utility services rendered to the facility he rents provided the applicant make a cash deposit in the sum of $100 plus $5 to turn the water on. The court held that the fee requirement was arbitrary and therefore invalid because it was excessive, but it did not hold that a reasonable cash deposit would be invalid, though it refused to name what would be reasonable. In view of the position of the court in the Puckett case, it would appear that the city could require a somewhat larger utility deposit from renters than from property owners where the renter is responsible for paying for this service.
Your next proposal is as follows:
"One proposal has suggested that the City hold the property owner who rents his property to a third party to stand liable for any utility services provided to that rental residence which remain unpaid and delinquent because the renters have failed to pay outstanding utility bills. This proposal was suggested in order that utility bills remaining unpaid be absorbed by the landlords who benefit from the services more than the general utility user in that the landlords obtain rent from the residence used by the renter. "
The answer to your second proposal is also found in Puckett, supra, which holds in effect that the city can, pursuant to an appropriate ordinance, require that the owner of the property be held responsible for the renter's utility bills. The ordinance in controversy reads in part as follows:
"The rates and charges aforesaid shall be billed to the owner of the premises except that upon application by the tenant of any premises, who is not the owner thereof, filed with the Board of Trustees of said city, an application to have water and sewer services rendered to said tenant, renter, or party occupying premises."
The court in sustaining the right of the city to make the property owner liable for the utility bills incurred by the person renting the premises acknowledges that this method of charging and collecting utility bills is not the one customarily adopted by public utilities. The case of
Cassidy v. City of Bowling Green, Ky. 368 S.W.2d 318 (1963) was cited upholding a city ordinance requiring that the owners of the property be responsible for garbage disposal services furnished in conjunction with water and sewer services. In its conclusion, the court said in the Puckett case that:
"The water service is furnished to the property owner. He primarily benefits from this service even though the ultimate consumer is one of his tenants. He is the consumer to the extent water is supplied to and used on his premises. If he requests this service or accepts it, he impliedly agrees to pay the service charge as provided in the ordinance. See
Dunbar v. City of New York, 177 App.Div. 647, 164 N.Y.S. 519. There is nothing arbitrary or unreasonable about such a method of collecting water rents, it is not requiring the owner to pay the debt of another, and there is no taking of his property without due process of law. See
Dunbar v. City of New York, 251 U.S. 516, 40 S. Ct. 250, 64 L. Ed. 384."
We are enclosing a copy of OAG 73-520 dealing with this question as it relates to a county water district utility service.
Your third proposal is as follows:
"The third proposal would require proposed users of utility services who rent their residence or commercial building to submit a credit application detailing past credit history and either be credited or denied utility services on the basis of the credit report or in the alternative, be required to post a smaller or larger utility deposit based on the credit record or reports obtained."
The above proposal would also involve the question of unjust discrimination, but more particularly the refusal to render any utility service whatsoever because of a poor credit rating. This we believe would be held completely arbitrary under the theory that a public service facility must furnish services to any applicant within the prescribed territory and cannot unjustly discriminate against patrons simply because they may be a poor credit risk. Of course, if they fail to pay for the service, the utilities may be shut off as held in the case of Cassidy, supra. Also see, McQuillin Municipal Corporations, Vol. 12, Sections 34.89 and 34.90.
Concerning your fourth question relative to the matter of possible liability of disconnecting utility service because of delinquent accounts, we again refer you to the Cassidy case which clearly holding the city had the right to discontinue such service for failure to pay the required service charge as may be provided in the contract. This would appear to effectively preclude any liability on the part of the city for possible damages that may occur as a result of enforcing this service contract following reasonable notice. See