NEW CASTLE COUNTY v. MAYOR AND NEW CASTLE COUNTY

HERRMANN, Chief Justice:

The City of New Castle sought a declaratory judgment in the Court of Chancery as to the validity of a 1975 New Castle County Ordinance increasing the sewer service rates charged to the City and its residents. This increase, the City argued, was in violation of a 1950 Agreement between the City and the County which provided for the interconnection of the City and County sewage systems and established the rate which the City would charge its residents and turn over to the County.1

The County challenged the rate provisions of the Agreement, claiming that the provisions were (1) ultra vires and (2) for an excessive term, and, therefore, against public policy. The Court of Chancery held, as a matter of law, that the rate provisions of the Agreement were neither ultra vires nor for an excessive term. The County appeals the ultra vires ruling only.

The determinative issue is whether the furnishing of sewer facilities and establishing a rate of compensation for such service constituted a governmental or a proprietary function. The implication and consequence of this governmental-proprietary distinction has recently been noted by this Court:

Levy Court of Kent County v. City of Dover, Del.Supr., 333 A.2d 161 (1975); see also 2 McQuillen, Municipal Corporations, § 10.05 (rev.ed.1966).

While the characterization of a function as either governmental or proprietary is often difficult, and there are few hard and fast rules distinguishing one capacity from the other, this Court has considered the geographical and jurisdictional limits of the government involved as most relevant. Compare Levy Court of Kent County v. City of Dover, supra. with Delmarva Enterprises, Inc. v. Mayor & Council of City of Dover, Del.Supr., 282 A.2d 601 (1971).

In the instant case, the County was under no obligation to provide sewer service to the City, an area not within the County's governmental limits. Rather, the County chose to exercise the option, given it by Statute [46 Del.L. c. 294 § 1], of entering into an agreement with the City to provide those services. Moreover, both the City and County benefited from the arrangement: the City by saving the expense of maintaining its own sewage facilities; the County by being able to run its system through rather than around the City, thus utilizing the City's pre-existing facilities.

In Delmarva Enterprises, Inc. v. Mayor & Council of City of Dover, supra. at 602, this Court stated that a city "in supplying water and sewer services [to an area outside the city limits] is acting in its proprietary capacity". Cf. Bancroft v. Mayor & Council of Wilmington, 14 Del.Ch. 185, 123 A. 602 (1924). We reiterated that conclusion in Levy Court of Kent County v. City of Dover, supra., wherein an agreement, by which the County relinquished decision-making power over sewer and water facilities within County jurisdictional limits was held ultra vires.

The County seeks to distinguish these cases by arguing that although the supplying of sewer services may, at times, be a proprietary activity, the determination of the rate of compensation to be charged for such services is always a nondelegable governmental function. The cases cited by the County in support of this proposition are: Mitchell v. City of Mobile, 244 Ala. 442, 13 So.2d 664 (1943); Johnson v. State, 107 Ga.App. 16, 128 S.E.2d 651 (1962); Terrace Heights Sewer Dist. v. Young, 3 Wn.App. 206, 473 P.2d 414 (1970). We find the cited cases inapposite on their facts.

The County's attempted distinction between providing sewage facilities and establishing a rate of compensation for those facilities appears to be the result of an unacceptably narrow construction of 46 Del.L. c. 294 § 1,2 the enabling legislation in effect at the time the Agreement was executed. While a subsequently-enacted Statute expressly authorized the County to contract with a city or town as to the charge to be made for the County's sewer services,3 we find this same authority implied from a fair reading of Chapter 294. Chapter 294 apparently fulfilled a need for legislation enabling the County to contract with municipal corporations not within its governmental jurisdiction. Its predecessor provision, 1935 Code, Ch. 43, § 24, failed to provide for such a situation. Necessarily implied in Chapter 294, in our opinion, was the concomitant authority for the County, when negotiating with a municipal corporation, to contract for a reasonable rate of compensation for its provided services. This conclusion, we believe, is consistent not only with the fundamental idea that the power to contract must include the power to agree upon an essential of the contract, i.e., the consideration, but also with the rationale underlying our decisions in both Delmarva Enterprises, Inc. v. Mayor & Council of City of Dover, supra. and Levy Court of Kent County v. City of Dover, supra.

Accordingly, we conclude that the agreement as to rate of compensation for the service to be performed was a proprietary function and, therefore, not ultra vires.

Affirmed.