Special Districts, Antitrust Law & the Infrastructure Crisis

Jacob B. Carlton, Special Districts, Antitrust Law & the Infrastructure Crisis, 43 Gonz. L. Rev. 671 (2008).

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Shortly before 6 pm on July 18, 2007 a steam pipe in one of the busiest parts of Manhattan exploded unexpectedly.[1] The blast, which killed one person and injured over thirty individuals, sent a cloud of hot steam mixed with mud and pieces of pavement into the sky.[2] With the events of September 11, 2001 still fresh in the minds of many New York residents, some people fled the area “so fast their shoes came off” while “[o]thers dropped their briefcases and purses.”[3] However, officials were quick to rule out the possibility of terrorist attacks.[4] New York City Mayor, Michael Bloomberg, clarified that the blast was not attributable to “anything other than a failure of our infrastructure.”[5] While this explosion undoubtedly alarmed city residents, it was not the first of its kind in New York City’s history.[6] More than a dozen steam pipes have exploded within New York City in the past twenty years.[7] In 1989, for example, a steam pipe burst near Gramercy Park in New York City killing three people and causing millions of dollars in damage.[8]

Less than a month after the 2007 steam pipe explosion in Manhattan, a bridge in Minnesota collapsed during rush hour traffic, and America’s infrastructure suddenly became the topic of conversation.[9] Much of this conversation centered on a 2005 study issued by the Society of Civil Engineers that until quite recently had largely been disregarded.[10] This study estimated that it would cost $1.6 trillion dollars, or $5,300 for every American to update the nation’s infrastructure.[11] In fact, the report card issued by the Society of Civil Engineers gave America’s road system and electrical grid a “D” while wastewater management systems received a “D-.”[12] Similarly, another report issued in 2005 by the American Society of Civil Engineers surfaced which strongly criticized the condition of infrastructure systems in the United States.[13] It stated that “[t]he physical condition of many of the nation’s 16,000 wastewater treatment systems is poor because of the lack of investment in plant, equipment and other capital improvements.”[14] The cost to replace or build wastewater systems to meet increasing demands was estimated at $390 billion dollars.[15]

These infrastructure failings in New York and Minnesota, in addition to the 2003 collapse of the Silver Lake Dam in Michigan, and the failure of New Orleans’ levees in the aftermath of Hurricane Katrina have alerted many Americans to the problems facing our nation’s infrastructure.[16] Additionally, Congress has taken notice by appropriating $283 billion to upgrade America’s failing infrastructure within a five-year period.[17] While this is a start, it will not be nearly enough.[18] %CODE2%
Compounding the problem further is the fact that the responsibility to cure failing infrastructure systems will, to a large extent, fall on local governments which are unable to generate funds sufficient to update failing infrastructure.[19] For example, in 1990 the federal government invested approximately $8.9 billion in infrastructure projects while state and local governments invested about $87.7 billion.[20] Local governments simply cannot meet this burden. Infrastructure projects often involve enormous costs and there are limits on the amount of debt state and local governments are able to issue.[21] In addition, “fiscal powers of many cities and counties . . . are being curtailed by voter-enacted limitations on taxes and spending.”[22]

Yet despite these problems, there is hope. One possible solution is the use of special districts to fund infrastructure projects. In general, special districts are able to take advantage of revenue bond financing while also allowing states and local governments to avoid reaching their debt limits.[23] More so than cities and counties, special districts rely on user charges to finance infrastructure projects providing them with the means to isolate funding for the services they provide.[24] In spite of these benefits, special districts remain subject to federal antitrust law. This can severely hamper a local community’s efforts to fund critical infrastructure. A special service district subject to an antitrust suit, for example, will incur tremendous legal costs defending the suit, and may have to pay the plaintiff’s legal fees in the event the plaintiff prevails.[25] This consumes valuable community resources that could have been spent on needed infrastructure.

This article will explore antitrust liability issues surrounding special service districts. More particularly, it will explain why Congress should enact legislation that explicitly outlines when a special district is subject to federal antitrust laws and why this legislation should be highly deferential to the decisions of special districts. Part I of this article will explore the history of the state action doctrine from its birth in the historic Parker v. Brown[26] decision up to the present. In addition, Part I will examine the state action doctrine’s applicability to municipalities and private conduct authorized by state law. Part II discusses reasons why a municipality might opt to form a special district in order to finance infrastructure projects. Part III will then critically analyze a recent Utah Supreme Court decision in which the court held that a special district had violated antitrust law. Finally, Part IV will conclude by offering reasons why Congress should enact legislation in order to clarify when a special district is and is not subject to federal antitrust law.

II. History of the State Action Doctrine

A reading of the Sherman Act[27] today does not reveal any distinction between the anticompetitive conduct of a private entity and that of a governmental entity.[28] Rather, the statute merely states that any formation of a “contract, combination . . . or conspiracy, in restraint of trade or commerce” is illegal.[29] Congress’ failure to include a distinction between public and private actors in the Sherman Act could possibly be attributed to Congress’ inability to foresee conflicts arising between state regulation and antitrust law due to the narrow interpretation of the Commerce Clause at the time.[30] On the other hand, Congress may have intended for the Sherman Act to only apply to private firms.[31] Whatever the reason may be, the fact is that over fifty years elapsed between the passing of the Sherman Act and the arrival of the state action doctrine.[32]

A. Beginnings

Shortly after the Great Depression, raisin producers in California faced the distressing condition of having to sell their crops below cost due to a supply surplus and low demand.[33] In response to this crisis, California enacted the California Agricultural Prorate Act to protect raisin growers in the state by implementing programs designed to restrict the supply of raisins in order to reduce competition amongst the growers in an effort to maintain prices.[34] By doing so, California acted contrary to federal antitrust laws which were enacted in order to protect each individual business’s freedom to compete.[35] Nevertheless, the Parker Court held that there was “nothing in the language of the Sherman Act or in its history to suggest that its purpose was to restrain a state or its officers or agents from activities directed by its legislature.”[36] Thus, the state action doctrine which exempted acts of government by the state from antitrust law was born.[37]

The state action doctrine articulated in Parker remained, for all intents and purposes, untouched by the Court for over thirty years.[38] However, beginning in 1975 the Supreme Court started to limit the Parker holding by distinguishing between public and private antitrust offenders.[39] In Goldfarb v. Virginia State Bar, the Fairfax County Bar Association, a private organization, published a minimum fee schedule for attorneys who examined titles.[40] The petitioners were unable to find an attorney who would examine the title to their newly purchased home for less than the minimum fee schedule published by the Fairfax County Bar Association.[41] The Virginia State Bar, an administrative agency through which the Virginia Supreme Court regulated the practice of law, was brought into the lawsuit for enforcing the minimum fee schedule.[42] The Court held that the Virginia State Bar violated the Sherman Act and was not immune under the state action doctrine articulated in Parker because no Virginia statute authorized its anticompetitive activities.[43]

Less than a year later, the Court refined this distinction between public and private actors when it held that an electric utility that distributed free light bulbs to its customers did not qualify for state action immunity from the Sherman Act because “notwithstanding the state participation in the decision, the private party exercised sufficient freedom of choice to enable the Court to conclude that he should be held responsible for the consequences of his decision.”[44] Justice Stewart aptly summed up the holding of these two cases when he stated: “In Goldfarb and . . . Cantor . . . the Court held that private action must be compelled by the state legislature in order to escape the reach of the Sherman Act.”[45]

B. State Action and Municipalities

In 1978, the United States Supreme Court tackled for the first time the issue of whether a municipality engaged in anticompetitive conduct was immune under the state action doctrine.[46] The city of Lafayette, Louisiana owned and operated an electrical utility system which operated both within and outside the city limits.[47] The city brought suit against Louisiana Power and Light Company, a competing electric utility service, alleging that the company was engaging in unlawful monopolistic acts.[48] Louisiana Power and Light counterclaimed alleging that the city had engaged in conduct that violated antitrust law.[49] The city moved to dismiss the counterclaim by arguing that since it was a subdivision of the state, and that as such was only empowered to exercise the powers the state delegated to it, it was exempt from antitrust law under the state action doctrine articulated in the Parker case.[50]

The Court was not persuaded.[51] Instead, it determined that even if public corporations are acting for the good of its constituency, rather than for its own private profit, there is no assurance that it will act for the “interests of national economic well-being.”[52] Thus, the Court concluded that the state action doctrine only exempted municipalities from anticompetitive conduct if the state subdivision’s actions were “pursuant to state policy to displace competition with regulation or monopoly public service.”[53] The Court, however, was quick to point out that under the test it articulated, the political subdivision did not have to “be able to point to a specific, detailed legislative authorization before it properly . . . assert[ed] a Parker defense to an antitrust suit.”[54]

It might seem odd that actions by a state government and a local government have been treated differently, especially in light of the fact that the language of the Sherman Act does not even recognize a difference between governmental and private conduct.[55] Yet, the Parker Court stated that there was “nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature.”[56] The Parker Court stressed that since the Constitution grants sovereignty to the states, “an unexpressed purpose to nullify a state’s control over its officers and agents is not lightly to be attributed to Congress.”[57] Thus, under the Constitution’s federalism structure, the Sherman Act could not properly take away the control a state exercised over its own officers and agents since nothing in its text suggested that Congress was attempting to remove that power.[58] Since the Parker case dealt with a legislative act by the California legislature, the Court had no reason to determine how municipalities fit into the Constitution’s federalism structure.[59]

The City of Lafayette Court faced the question as to how local governments fit under the Constitution’s federalism structure.[60] The city’s principal argument in Lafayette centered on the idea that since a city only had power to do what the state authorized it to do, it was “merely a subdivision of a state.”[61] The city argued that for this reason, a city, similar to a state, is exempt from the Sherman Act under Parker state action.[62] The Court was unpersuaded by this line of reasoning stating that the federal government and state governments were the only two sovereigns recognized in the Constitution’s federalism structure.[63] Thus, since cities are not sovereign, “they do not receive all the federal deference of the States that create them.”[64] This federalism structure explains why state governments’ actions are granted immunity under the Sherman Act while those of a local government are not.

Nonetheless, the Court continued to refine the state action doctrine as it applied to municipalities.[65] In Community Communications Company v. City of Boulder, the city of Boulder enacted an ordinance granting the petitioner, a private cable company, a nonexclusive right to carry out its business within the city.[66] When technology improved the petitioner sought to expand its services outside the city borders.[67] At the same time another private cable company expressed interest in obtaining a permit from the city to provide cable service throughout the city.[68] As a result, the Boulder City Council enacted an emergency ordinance prohibiting the petitioner from expanding its business for three months so that the City Council could draft a city ordinance that would invite new businesses to the area.[69] The city reasoned that without the moratorium, the petitioner’s expansion would “discourage potential competitors from entering the market.”[70] Although these facts are similar to the facts in the City of Lafayette case, the Court had to deal with a new wrinkle—Boulder was a home rule city.[71] Boulder argued that, as a home rule city, it carried every power the state legislature had with respect to local and municipal affairs.[72] The city argued that it had met City of Lafayette’s requirement of “clear articulation and affirmative expression.”[73] However, the Court held that “the requirement of ‘clear articulation and affirmative expression’ is not satisfied when the State’s position is one of mere neutrality respecting the municipal actions challenged as anticompetitive.”[74] Rather, clear articulation is satisfied if the state has “‘contemplated’ the specific anticompetitive actions for which municipal liability is sought.”[75]

C. Local Government Antitrust Act of 1984

The United States Supreme Court’s holdings in City of Lafayette and City of Boulder generated a good deal of “controversy and activity.”[76] In 1914 Congress passed the Clayton Act in order to remedy problems that had surfaced in the Sherman Act.[77] While the Clayton Act, similar to the Sherman Act, did not distinguish between the antitrust activities of public actors and private actors,[78] it did allow persons injured by actors engaging in anticompetitive behavior to recover treble damages.[79] After the City of Lafayette and City of Boulder cases, critics asserted that allowing plaintiffs to recover treble damages against local governments “would smash local government as we now know it.”[80] In Senate and House Committee hearings on the issue, one person stated that “his city has become ‘a frozen wasteland,’”[81] while another stated that the threat of antitrust suits had brought “government to a grinding halt.”[82]

To remedy this problem, Congress passed the Local Government Antitrust Act of 1984.[83] This act disallowed plaintiffs bringing antitrust suits from recovering treble damages from local governments.[84] While this helped to lessen the hit local governments generally take in antitrust suits, it did nothing to deter the Federal Trade Commission or the Department of Justice from bringing antitrust claims against municipalities.[85]

D. Current State Action Doctrine

While the decisions by the Court in City of Lafayette and City of Boulder set the course for the current test used to determine applicability of the Parker state action doctrine, the final piece came from the Court in the 1980 case of California Retail Liquor Dealers Association v. Midcal Aluminum[86] in which a California statute required wine growers, producers, and rectifiers to file price schedules with the state.[87] The statute further prohibited wine merchants from selling wine to a retailer at a price different from the price schedule.[88] Although the state fixed the prices, it was private companies that actually set the price.[89] The Court took this opportunity to expand the Parker immunity test[90] and stated that in order for a party to be able to demonstrate that the Parker antitrust immunity applied to its actions, the party had to show that “the challenged restraint [was] ‘one clearly articulated and affirmatively expressed as state policy’ [and that] the policy [was] ‘actively supervised’ by the State itself.”[91]

However, in 1985 a case made the “actively supervised” prong of this test inapplicable to municipalities.[92] In that case, three neighboring towns filed suit against the city of Eau Claire, Wisconsin alleging that it had violated the Sherman Act by monopolizing sewer treatment services in the area and by tying sewage collection and transportation services to the sewage treatment services.[93] The district court, in ruling for the city of Eau Claire, found that a state statute dealing with sewage service expressly allowed the replacement of competition with regulation.[94] In addition, the court held that the state had adequately supervised the city’s conduct.[95] On appeal, the Seventh Circuit affirmed.[96] While the United States Supreme Court agreed with the outcome of the proceeding, it tweaked the state action doctrine as it applies to municipalities.[97] The Court stated that the second prong of the state action doctrine, the active state supervision requirement, was inapplicable when the actor engaging in the challenged conduct is a municipality.[98] The Court reasoned that where the actor is a municipality, there is no danger that it will seek to further its own interests.[99] Instead, the Court insisted that there was only a minimal danger that the municipality would further its own interests by furthering “purely parochial public interests at the expense of more overriding state goals,” since the municipality had to “act pursuant to a clearly articulated state policy.”[100] In addition to making the active state supervision requirement inapplicable to municipalities,[101] the Court also clarified that a “clearly articulated state policy” did not mean that the state legislature had to state “explicitly that it expected the City to engage in conduct that would have anticompetitive effects.”[102] Rather, the state policy only had to “foreseeably . . . result in anticompetitive effects.”[103]

This approach was reiterated in a 1991 United States Supreme Court case.[104] In that case, Columbia Outdoor Advertising, Inc. controlled more than 95% of the local market but started experiencing competition from Omni, another private corporation.[105] Columbia Outdoor Advertising had a good relationship with the City of Columbia and urged the city to enact zoning ordinances to restrict the construction of billboards.[106] The city responded by enacting an ordinance placing various restrictions on the size, location, and spacing of billboards.[107] Omni responded by filing suit against the city and Columbia Outdoor Advertising alleging that they had conspired to restrain trade.[108] The Supreme Court found that the statute, under which the city acted in this case, unquestionably authorized “the city to regulate the size, location, and spacing of billboards.”[109] The majority went on to state this statute satisfied the requirement that a municipality act with a “clearly articulated state policy” since a foreseeable result of the zoning ordinance was the suppression of competition.[110] After all, “[t]he very purpose of zoning regulation is to displace unfettered business freedom in a manner that regularly has the effect of preventing normal acts of competition, particularly on the part of new entrants.”[111]

Today, the Parker state action doctrine involves three different levels of immunity from federal antitrust laws.[112] The level of immunity an actor receives depends upon whether the actor responsible for the anticompetitive conduct is the state, a municipality, or a private person.[113] An act by a state legislature, the highest state court, or the governor is “per se immune from antitrust scrutiny.”[114] On the other hand, a municipality is only immune from antitrust scrutiny if it acts pursuant to state policy that has the foreseeable effect of displacing competition.[115] Finally, “anticompetitive restraints by ‘private’ persons are . . . immune only if clearly authorized and actively supervised by the state.”[116]

III. Why Form Special Districts?

Under this current state action doctrine framework, it is likely that a special district would receive the same treatment as a municipality in an antitrust lawsuit. A special district is, after all, a subdivision of the state created by either a state agency or a local government.[117] However, notable differences exist between special districts and municipal governments. The United States Census Bureau defines a municipal government as a type of “general-purpose government,”[118] while defining special districts as “independent, special-purpose governmental units (other than school district governments) that exist as separate entities with substantial administrative and fiscal independence from general-purpose governments.”[119] Since many entities call themselves either “districts” or “authorities” and are “closely related to county, municipal, town . . . or state governments,”[120] there are three attributes that an entity must have to be considered a special district—“[e]xistence as an organized entity,”[121] “governmental character,”[122] and “substantial autonomy.”[123] Under this definition, special districts “include ‘all organized local entities other than counties, municipalities, townships, or school districts’ that provide only one or a limited number of designated functions and that have sufficient administrative and fiscal autonomy to qualify as separate governments.”[124] It is this classification as a separate government that would afford a special district the same treatment as a municipality in an antitrust lawsuit.

In order to fully appreciate what special districts have to offer and why a local government might choose to form one,[125] this section will focus on five principal advantages that special districts typically have over municipalities in financing infrastructure: greater financial and administrative capacities, the means to target services to special groups, the ability to link costs to benefits, the ability to provide more efficient services, and greater independence from politics.[126]

A. Greater Financial and Administrative Capacities

It is not uncommon for local governments to lack the tax base and the debt capacity to support the costs associated with building or modernizing critical infrastructure.[127] While state laws frequently place limits on the amount of debt a city is able to issue, special districts do not have such limits.[128] In addition, special districts “have their own revenue-raising powers.”[129] They have the authority to levy property taxes as well as user charges[130] which makes special district financing of infrastructure a good alternative to municipal funding.

B. Geographic Flexibility

While “general-purpose governments are geographically rigid . . . special-purpose governments are geographically adaptable.”[131] The ability of special districts to cross municipal boundaries or to only include a small portion of a municipality allows for greater efficiency since “[g]eographically flexible units can more readily realize economies of scale or avoid diseconomies of scale.”[132] It makes more sense to create “[a] flood control district that crosses several jurisdictional boundaries but [ultimately] serves all the residents of a particular floodplain” than it does to limit flood control services “to areas within legally specified boundaries.”[133] In addition, the ability of special districts to adjust the size of the district to only include the taxpayers who benefit from the district’s services makes taxpayers less likely to oppose the costs charged by the special district.[134]

To illustrate these points, Los Angeles officials in the 1920s sought to bring water from the Colorado River to southern California in order to secure a long-term water supply for its residents.[135] However, Los Angeles was the only governmental entity in southern California that could afford such an undertaking.[136] In order to remedy this situation, a water district was formed that issued bonds to finance the construction of the needed infrastructure.[137] Governmental units that wanted the benefit of the water had to be a member of the water district which required them to financially support the water district’s activities.[138] This system enabled four different counties to provide needed infrastructure for the benefit of their citizens while at the same time ensuring that “no free riders” were receiving the benefit without having to pay the costs.[139]

C. Linking Costs to Benefits

At times, it is difficult for citizens to persuade a local general-purpose government to put forth the money to pay for new services or to improve already existing services.[140] This reluctance on the part of local governments in some instances is attributable to the enormous costs involved to fund the project and the reluctance on the part of local taxpayers to bear those costs through tax increases.[141] In general, taxpayers are hesitant to pay taxes for public services from which they receive no corresponding benefit in return.[142] In fact, for the last quarter of century, “citizens have often used the voting booth to express their resistance to increases in the property tax.”[143]

Special districts are typically able to solve this problem since they “often rely on user charge financing to ensure that revenues correspond closely with the quantity of service being provided.”[144] In this case, user charge financing refers to a manner of financing which is “based on the benefits-received principle.”[145] The idea behind this principle is that “those who use a public service should pay directly for at least a part of the cost of that service.”[146]

While municipalities have no legal obligation to provide a benefit in exchange for the taxes paid by its taxpayers,[147] a city resident paying a user charge should receive some sort of corresponding benefit for that payment.[148] Thus, citizens are generally more willing to pay user charges without resistance than they are to pay an increase in property taxes.[149] While special districts have the power to levy property taxes in addition to user charges, they typically finance their services through user charges more so than other governmental entities.[150] In fact, “in 1996-97 special districts accounted for only 3.7 percent of local government general taxes in the United States,” yet during the same time period they “accounted for 20.1 percent of local government charges.”[151]

D. Efficient Services

The services that special districts supply typically enhance efficiency through both administrative and economic efficiency.[152] Unlike general-purpose governments, special-purpose governments typically perform a single function, although it is not atypical for special districts to provide several related services.[153] A special district board’s ability to focus solely on performing one function provides special districts “a greater degree of concentrated effort in providing services.”[154] It also allows greater ease in “measuring production and costs and revenues of consumption.”[155]

Furthermore, special service districts’ heavy reliance on user charges promotes efficiency by providing a way to ration the goods provided in order to discourage excessive or wasteful consumption.[156] In addition, user charges allow consumers to balance the value of the service with the cost of providing such a service.[157] In other words, user charges enable consumers to monitor their personal cost for the service provided by the district.[158] If the consumer determines that the cost is too high, he or she may then decrease the use of the service to reduce his or her individual cost.[159] Raising property taxes to finance the cost of services does not offer these same cost-effective benefits.[160]

E. Political Independence

To be classified as a special district government by the United States Census Bureau, an entity must have “substantial administrative and fiscal independence from general-purpose local governments.”[161] This means that “apart from periodic appointment of district board members or the possible review of proposed bond issues, local governments do not control the actions of special districts, leaving district boards free to concentrate on providing good service.”[162] This political independence insulates special districts from adverse decisions of municipalities.[163] Public officials of general-purpose governments, for example, might “defer needed capital spending for infrastructure to respond to the short-term concerns of many voters.”[164] The political and fiscal independence of special districts, on the other hand, allows them “to program and implement needed improvements in a predictable and business-like manner.”[165]

The ability of special districts to focus on providing one service, free from politics, allows them to make decisions faster than general-purpose governments.[166] While it has been argued that the public’s unawareness of special districts makes them “less responsive than . . . [other] general-purpose governments to resident preferences,” political visibility often brings with it “delay, service compromise, and political stalemate.”[167] Thus, unlike general-purpose governments, special districts are unlikely to face “political impasse and institutional paralysis to the detriment of public welfare.”[168]

IV. Summit Water Distribution Company v. Summit County:

A Recent Relevant Case

A. Background

One of the fastest growing and affluent areas in the United States is Snyderville Basin in Summit County, Utah.[169] In addition, it is home of one of the key venues of the 2002 Olympic Games in Salt Lake City.[170] Despite these accolades, it has had its share of water infrastructure problems.[171] In 1982, Summit County formed the Atkinson Special Service District (“Atkinson”) which served the industrial center and approximately two hundred homes in Silver Creek, Utah.[172] By 2000, Atkinson “was delivering bottled water to its customers, due to water quality problems from a large severely overworked well.”[173] This was not the only water problem residents in the area encountered as several other small water systems in the area struggled to provide the appropriate level of service to their customers.[174] A resident from Summit Park, for instance, was frustrated that “more dirt than water [came] out of her kitchen sink.”[175] “In addition, she only had water every fourth day[—]a condition [that is] barely tolerated in some third world countries.”[176] In addition to poor service, the infrastructure used by these water companies was sparse in some places and unnecessary in others.[177]

These failings prompted Summit County to replace the struggling Atkinson with Mountain Regional Water Special Service District (“Mountain Regional”).[178] Mountain Regional was formed for the purpose of fulfilling two important objectives. First it was to combine many of the small and struggling water systems from the Snyderville Basin into Mountain Regional in order to improve the long term quality of water service in the area.[179] Second, Mountain Regional was to import new water into the area and to prepare the water systems to receive that new water.[180] In order to assist Mountain Regional in these endeavors, “[Summit] County [implemented] new concurrency ordinances that required developers seeking new building permits . . . to prove they had obtained a commitment from a water company with a sufficient concurrency rating to provide water to their developments.”[181] The county subsequently contracted with a private company to perform the concurrency ratings.[182] A water company’s concurrency rating is based on the company’s ability to supply water to county residents.[183] If a company is not satisfied with its concurrency rating, it has the option to appeal either through a peer review process or directly to the Board of County Commissioners[184]—the same entity that served as the governing board of Mountain Regional.[185]

The formation of Mountain Regional and the ordinance implemented by Summit County placed Mountain Regional in direct competition with other private water companies in the area.[186] While Mountain Regional’s concurrency rating was deemed sufficient to provide water to new developments in the area, Summit Water Distribution Company (“Summit Water”), a private water company, was dissatisfied with its concurrency rating.[187] While Summit Water was tied up in its concurrency rating battle with the county, Mountain Regional was busy acquiring smaller water companies and had by September 2001 obtained all but three water companies operating in the Snyderville Basin.[188]

B. Procedural History

Summit Water, dissatisfied with the manner in which the county chose to handle its water problems, brought suit against Summit County and Mountain Regional alleging that the defendants’ actions had in essence tied “approval of developers’ building permits to their contracting for culinary water from Mountain Regional in an attempt to restrain trade and monopolize the private water market.”[189] In response, the defendants moved to dismiss these claims.[190] The defendants argued that because the Utah Antitrust Act did not prohibit “the activities of a municipality to the extent authorized or directed by state law,”[191] they were exempted from antitrust liability.[192] Summit Water countered this by contending that the term “municipality” as used in the Utah Antitrust Act did not refer to either a county or a special district, nor were the defendants’ actions authorized by state law.[193] In addition, Summit Water argued that even if counties and special districts were municipalities for purposes of the state antitrust laws, the Utah Constitution, revised after the state antitrust laws, superseded inconsistent provisions in the state antitrust laws and provided an independent ground for civil liability and monetary damages.[194] The district court, persuaded by the plaintiff’s arguments, initially denied the defendants’ motion for summary judgment.[195]

Undeterred by this ruling, Summit County and Mountain Regional subsequently filed a motion to reconsider and dismiss.[196] To support its motion, the defendants also filed exhaustive briefs that addressed the legislative history.[197] In addition to this new material, the defendants served the Attorney General of Utah with a Notice of Intent to Appear and be Heard who entered an appearance and “took a position entirely in support of the defendant on all issues.”[198] After reviewing this new material, the district court granted the defendants’ motion and subsequently denied the plaintiff’s motion to reconsider.[199] Summit Water appealed the district court’s ruling and the appeal was then transferred to the Utah Supreme Court.[200]

C. Decision of the Utah Supreme Court

Summit Water alleged that the district court erred in granting the defendants’ motion for dismissal because the Utah Antitrust Act which exempts “the activities of a municipality”[201] acting pursuant to state law only applies to cities and towns, not counties or special districts.[202] In addition, Summit Water contended that even if the defendants were municipalities, the Utah Constitution superseded all conflicting provisions in the Utah Antitrust Act.[203] The Utah Supreme Court first looked at whether the term “municipality” as used in the Utah Antitrust Act included counties and special service districts, or whether it referred only to cities and towns.[204] While the court found the term, on its face, unambiguously referred only to cities and towns, it also found that interpretation of the Utah Antitrust Act required courts to “be guided by interpretations given by the federal courts to comparable federal antitrust statutes and by other state courts to comparable state antitrust statutes.”[205] However, after looking at the relevant federal statutes and the Parker state action line of cases, the Utah Supreme Court declined to determine whether counties and special districts were “municipalities” since it could not “perceive any logical reason for including cities and towns in the municipality exemption but excluding other units of local government.”[206]

Assuming that the defendants were “municipalities,” however, the court went on to determine whether the activities engaged in by Summit County and Mountain Regional were authorized or directed by state law.[207] The court looked at the relevant statutes that bestowed state authority upon counties[208] in addition to the Special Service District Act which granted special service districts certain powers to carry out their functions.[209] Using the holdings from the City of Lafayette, City of Columbia, and Town of Hallie cases, the court determined that a municipality’s activities are authorized or directed by state law “when the anticompetitive conduct alleged by the plaintiff ‘is a foreseeable result’ of a state’s grant of authority in a particular area.”[210] The court held, however, that “lacking from the statutes is any suggestion that a county might use its planning or zoning authority to facilitate the operation or growth of special service districts once they are created.”[211] In addition, the court pointed to the fact that while counties were allowed to “enter into ‘development agreements’ in a number of areas,” nothing in the statutes mentioned “the provision of water or other utility services.”[212] As a result, the court reversed the district court’s dismissal of Summit Water’s claim because the defendants’ activities were not authorized or directed by state law.[213]

D. Problems with the Court’s Reasoning

Though the Utah Supreme Court held off deciding whether the term “municipality” should properly be construed broadly so as to include counties and special service districts, or narrowly so as to only encompass cities and towns,[214] good reasons exist why it should have interpreted the term broadly. The Utah Supreme Court reasoned that since the City of Lafayette case and its progeny did not use the term “municipality” unless it was actually referring to a city or town, “municipality” did not refer to a unit of local government in the antitrust setting.[215] Thus, the Utah Supreme Court suggested that the Utah statute exempting municipalities from the state antitrust act only applied to cities and towns, not counties and special districts.[216]

While the City of Lafayette decision dealt specifically with a city, the United States Supreme Court’s reasoning clearly indicates that its holding applied to all of a state’s subdivisions, not just cities and towns.[217] The City of Lafayette Court, for instance, held that “the Parker doctrine exempts only anticompetitive conduct engaged in as an act of government by the State as sovereign, or, by its subdivisions, pursuant to state policy to displace competition with regulation or monopoly public service.”[218] The Court also explained that its holding did not require “a political subdivision . . . [to] be able to point to a specific, detailed legislative authorization before it properly may assert a Parker defense to an antitrust suit.”[219] This language strongly suggests that the United States Supreme Court intended that the state action doctrine applied to a state’s political subdivisions, not just its cities and towns.[220] Since the Utah Constitution explicitly states that a special service district is a political subdivision of the state,[221] the United States Supreme Court’s reasoning strongly suggests that a special district would be entitled to Parker immunity in Utah.[222]

Furthermore, the City of Lafayette Court’s reasoning makes little sense if it only applies to cities and towns while excluding other state subdivisions. The Court points out, for instance, that the economic choices made by state political subdivisions are no more “likely to comport with the broader interests of national economic well-being than are those of private corporations.”[223] In addition, the United States Supreme Court points out that the Parker doctrine is based upon a dual system of government in which the federal government and the states are the only sovereigns.[224] The Court even states that “Parker’s limitation of the exemption to ‘official action directed by a state’ is consistent with the fact that the States’ subdivisions generally have not been treated as equivalents of the States themselves.”[225] Since under the Court’s reasoning, counties and special districts are not sovereigns and they are just as likely to act for their own interests as are private corporations, the City of Lafayette holding should apply to counties and special districts in addition to cities and towns. Even the Utah Supreme Court admitted that it was “unable to perceive any logical reason for including cities and towns in the municipality exemption [while] excluding other units of local government.”[226]

In addition to this failure to broadly interpret the holding of the City of Lafayette line of cases, the Utah Supreme Court held that there was no state statute that revealed “a state policy of allowing counties to displace competition with a special service district unless the special service district is successful through its own competitive efforts in acquiring an exclusive market share within its area.”[227] Furthermore, the court held that Summit County’s tying of building permits and planning approvals to acceptance of Mountain Regional as the water provider was “not a foreseeable result of the statutory scheme.”[228]

The Utah statutory scheme, however, clearly contemplated the anticompetitive activities engaged in by both Summit County and Mountain Regional. Summit County, acting pursuant to a Utah statute which allows counties to establish special service districts in order to provide water,[229] created Mountain Regional to remedy its immediate and escalating water supply problems and rapidly decaying water systems.[230] Furthermore, the state legislature required every county to come up with a long-range general plan to provide for “the efficient and economical use, conservation, and production of the supply of . . . water.”[231] At the same time, the state legislature authorized Summit County to enact ordinances it considered necessary or appropriate to use and develop land in the unincorporated portion of the county.[232] This is exactly what Summit County did. Acting pursuant to these statutes, the county enacted a concurrency ordinance that both measured the ability of culinary water companies to supply water to new developments and required developers to obtain a commitment from a water company before it could obtain a building permit.[233] The Utah Supreme Court, however, found that these statutes did not authorize the anticompetitive conduct of the defendants since the statute allows counties to enter into development agreements but failed to include agreements dealing with “the provision of water or other utility services.”[234]

The fact that the enabling legislation does not expressly mention water or other utility services does not mean that these services are outside the reach of the statute. The statute allows counties to enact ordinances “they consider necessary or appropriate for the use and development of land . . . including ordinances, . . . governing uses, . . . structures, buildings, . . . [and] infrastructure, . . . unless expressly prohibited by law.”[235] A proper reading of this statute does not preclude a county from enacting an ordinance dealing with water services since nothing suggests that the list of subject matters contained in the statute is exhaustive. Rather, this list merely provides examples of the types of ordinances, resolutions and rules that counties may pass with respect to land use controls.[236] The statute begins by stating that “[t]o accomplish the purposes of this chapter, counties may enact all ordinances, resolutions, and rules and may enter into other forms of land use controls and development agreements that they consider necessary or appropriate for the use and development of land within the unincorporated area of the county.”[237] This language allows counties to enact ordinances addressing water service needs especially since the purpose of the statute is “to provide for the health, safety, and welfare, and promote the prosperity, improve the morals, peace and good order, comfort, convenience, and aesthetics of each county.”[238]

Even if the legislature did intend the list to be all-inclusive, the ordinance enacted by Summit County could easily be deemed an “ordinance . . . governing . . . infrastructure.”[239] The ordinance passed by Summit County required developers to present to the county a letter from a water supplier “permanently committing a portion of the water system and source capacity to a particular project or development”[240] in order to receive a building permit. For the water supplier to receive an adequate concurrency rating, it had to demonstrate that it had “the water quantity requirements capable of meeting peek daily demand” which included a showing that the water system’s “infrastructure capacity” was adequate.[241] Since each water supplier had to demonstrate that its “infrastructure capacity” was adequate, this ordinance could properly be characterized as “an ordinance . . . governing . . . infrastructure.”

The Utah Supreme Court also erred in its determination that Mountain Regional’s acts were “not a foreseeable result of the statutory scheme.”[242] The enabling statute in Utah grants special service districts “[t]he power to exercise all powers of eminent domain possessed by the county . . . which established the service district” in addition to “[t]he power to enter into contracts considered desirable by the governing authority of the service district to carry out the functions of the service district.”[243] Since the power of eminent domain entitles governmental entities to “take privately owned property . . . and convert it to public use, subject to reasonable compensation for the taking,”[244] it is not unforeseeable that a special service district would use this power to acquire other water companies.

While the municipality’s conduct in the City of Columbia case did not involve the power of eminent domain, its holding is instructive. In that case, the municipality, which possessed the power to zone, was granted the authority to “regulate the location, height, bulk, number of stories and size of buildings and other structures.”[245] The United States Supreme Court held that a city’s restrictions hindering a billboard company’s ability to compete with a local billboard company was a foreseeable consequence of the city’s zoning power.[246] It was, after all, foreseeable that the city would use its zoning power to pass an ordinance restricting the size, location and spacing of billboards within the city since “[t]he very purpose of zoning regulation is to displace unfettered business freedom in a manner that regularly has the effect of preventing normal acts of competition.”[247] Using the power of eminent domain to suppress competition, it seems, is just as foreseeable as using zoning powers for the same purpose. In light of these considerations and current federal law, the Utah Supreme Court should have refused to find any antitrust liability on the part of Summit County and Mountain Regional.

V. Why Congress Needs to Pass New Legislation Concerning the

Antitrust Liability of Special Districts

The Summit Water Distribution Company case and another recent Fifth Circuit case[248] raise questions as to the willingness of courts to hold special districts immune from antitrust liability in the face of a clearly articulated state policy having the foreseeable result of displacing competition.[249] In light of these recent developments, Congress needs to enact legislation explicitly outlining when a special district is subject to federal antitrust laws. This new legislation should be more deferential to the decisions made by special districts.

The primary reason courts are willing to grant automatic immunity from federal antitrust laws to states while only granting conditional immunity to state political subdivisions rests in federalism considerations.[250] The plurality in City of Lafayette stated that since “[c]ities are not themselves sovereign; they do not receive all the federal deference of the States that create them.”[251] While some have argued that grounding the state action doctrine in federalism principles has promoted values of federalism such as citizen participation in government and governmental efficiency,[252] not everyone agrees.[253] While these arguments have revolved around antitrust implications for municipalities, the reasoning behind them applies equally, if not more so, to special districts. This section will argue specifically that Congress should pass new legislation highly deferential to the decisions made by special districts for three reasons: 1) they pose no monopoly threat to voters within their district; 2) economic efficiency is improved by treating them immune from antitrust liability; and 3) government efficiency is enhanced through their immunity.

A. No Monopoly Threat

It is interesting to note that the state action doctrine arose in an era in which the public had “exceptional confidence in government,” and regarded governmental entities “as unbiased and conscientious defenders of the public interest.”[254] The decision by the Parker court was “dominated by the belief . . . that a dose of monopoly would be just the thing to boost sagging industries.”[255] By the time the Court decided City of Lafayette, however, it was presumed that governmental entities would act in “an economically self-interested manner.”[256] In fact the plurality opinion in City of Lafayette even acknowledged that “the economic choices made by public corporations in the conduct of their business affairs . . . are not inherently more likely to comport with the broader interests of national economic well-being than are those of private corporations acting in furtherance of the interests of the organization and its shareholders.”[257]

It has been stated that “[p]eople have two principal responses to dissatisfaction with the state of things: exit and voice.”[258] The concept of exit, or people “vot[ing] with their feet” rather than with the ballot, creates competition among political bodies.[259] While this competition may not completely persuade jurisdictions to enact laws most beneficial to the population in order to dissuade people from leaving, it can be said to have “a powerful tendency toward optimal legislation.”[260] This suggests that local governments, including special districts, are more likely than not to act in public interest. In addition, special districts’ heavy reliance on user fees[261] suggest that special districts act in the public interest since they are required to confer a benefit on those paying the user fees.

Even if special districts are not more likely to act in the best interests of the general well-being than they are to act in the best interests of their constituents, they should not be subject to federal antitrust law due to the checks placed on their powers. The governing boards of special districts, for example, are frequently elected by the people within the district’s boundaries.[262] Because it is subject to popular control, like a municipality, a special district will “normally avoid anticompetitive activity that does not promote the greater good.”[263] Even if the governing board of special district is appointed, some states require special districts to file annual financial reports and audits with the state or to report any proposed bond issues to the nearby local government.[264] In addition, state statutes authorizing the creation of special districts provide for their dissolution as well.[265] This dissolution process is a relatively easy process. In Utah, for example, the county or municipality that forms the special service district “may by resolution approve the dissolution of the district upon a determination that the district is no longer needed for the purposes for which it was formed.”[266] Since special districts are subject to these checks, they should not face liability for violations of federal antitrust law as well.

B. Economic Efficiency

By subjecting special districts to antitrust liability, valuable resources are taken away that could otherwise have been used to update or replace outdated infrastructure.[267] This may occur in three ways. First, antitrust suits can be extremely expensive.[268] Even if a special service district is able to victoriously defend an antitrust lawsuit, its attorney’s fees are not reimbursable.[269] In 1982, for example, the city of Sharpsburg, Maryland was forced to spend $12,000 of its $18,000 yearly budget to defend itself from an antitrust claim.[270] Second, if the special district does lose the lawsuit, federal law requires the defendant to pay the plaintiff’s legal fees and to submit to an injunction.[271] Finally, since a special district under the state action doctrine must have some form of state approval to engage in any activity that might be construed to be anticompetitive, state legislatures and special districts must direct valuable resources to lobby for and draft specific directives.[272] While these are the primary ways economic efficiency is depleted by holding special districts subject to federal antitrust laws, they are not inclusive. Litigation, for example, may “adversely affect[] municipal bond ratings,” while project delays due to the pending disposition of a lawsuit may increase costs.[273]

C. Government Efficiency

A state’s ability to delegate its power to its political subdivisions “allows a state legislature to devote more time to statewide problems without being burdened with purely local matters [while at the same time] allow[ing] municipalities to deal quickly and flexibly with local problems.”[274] Smaller governments, after all, advance “democratic government, effective place based political initiatives, and civic interaction and identification with the public sphere” while larger governments are “more distant, more bureaucratic, and less responsive.”[275] By subjecting special districts to antitrust liability, municipalities and special districts may be “compelled to seek passage of a state statute requiring it to engage in any activity which might be considered anticompetitive.”[276] This prevents special districts from responding to local needs in a timely manner. Rather than enabling special districts to respond quickly and efficiently to local concerns, antitrust liability requires them instead to seek permission from the “more bureaucratic, and less responsive” state legislature.[277] This has the effect of needlessly slowing down a special district’s response time in dealing with local concerns.

In addition, one of the important policies behind federalism is local experimentation.[278] Dean Choper stated:

[A] single, remote national government would more likely possess neither the systematic knowledge of local conditions nor the flexibility required for wise administration, whereas heterogeneous state government institutions would not only function on a more manageable scale but would encourage political experimentation and innovative response to arising social needs.[279]

While Choper’s statement opines that state governments are on a sufficiently small scale, others have “posited that there is ‘greater efficiency [in] having collective decisions made in the smallest feasible political units.’”[280] Typically, a special district is a smaller governmental unit, or at least shares boundaries with the local general-purpose government.[281] The smaller size of special districts in conjunction with the specialized service they provide suggests that special districts possess greater knowledge of local conditions affecting the district’s constituency. In addition, the relatively low political visibility of special districts gives them a greater degree of efficiency in solving local concerns.[282] This local knowledge and greater efficiency gives special districts free reign to engage in local experimentation. Subjecting special districts to costly antitrust liability unfortunately stifles local experimentation. Granting special district immunity from antitrust claims, on the other hand, would likely produce more innovative solutions to local problems which would in turn benefit local governments throughout the nation.

VI. Conclusion

Given the recent failings of infrastructure in the United States, the country needs to re-examine its financial priorities. State and local governments face debt limitations and resistance by taxpayers to tax increases which provides special districts the opportunity to play a large role in modernizing outdated infrastructure. However, courts have recently been more than willing to hold special districts liable for any conduct that could be considered anticompetitive. This has the effect of taking badly needed financial resources away from needed infrastructure projects. In order to remedy this situation, Congress should pass legislation explicitly outlining a special district’s liability under federal antitrust law. This new legislation should be highly deferential to the decisions made by special districts so that needed capital may be expended for modernizing infrastructure rather than defending needless litigation. This will help to ensure that more lives are not needlessly lost due to infrastructure failures.


*. J.D. candidate, Gonzaga University School of Law, 2008; B.M. Music Performance, Weber State University, 2002. I would like to thank Professor Cheryl Beckett for her comments and suggestions and my parents Marilyn and Blaine Carlton for helping me become the writer I am today. I would especially like to thank my wife, Jayni, for her ever-present love, support, and encouragement.

[1]. See James Barron, Steam Pipe Explosion Unnerves Mid-Manhattan, N.Y. Times, July 19, 2007, at A1.

[2]. See id.

[3]. Id.

[4]. Id.

[5]. Id.

[6]. See id.

[7]. Id.

[8]. Id.

[9]. Ron Scherer, Bridge Collapse Spotlights American’s Deferred Maintenance, Christian Sci. Monitor, Aug. 3, 2007, at 1, 1.

[10]. See, e.g., id.; see also Hereward Bradley, Nation in Need of Repair: More than Bridges Need Attention as the Nation’s Infrastructure Gets Older, Denv. Rocky Mtn. News, Aug. 18, 2007, at 28; Ellis Henican, Bridge Disaster, Newsday, Aug. 3, 2007, at A06; James D. Wolf Jr., Bridge Failure Not An Isolated Incident, Merrillville Post-Trib., Aug. 4, 2007, at A3.

[11]. Bradley, supra note 10, at 28.

[12]. Id.

[13]. See id.

[14]. Id.

[15]. See id.

[16]. See Scherer, supra note 9, at 1.

[17]. Id.

[18]. See Bradley, supra note 10, at 28.

[19]. See Douglas R. Porter et al., Special Districts: A Useful Technique for Financing Infrastructure, at vii fig.1 (2d ed. 1992) (showing the large difference in investments between local and federal expenditures for infrastructure).

[20]. Id.

[21]. See id. at vi.

[22]. Id.

[23]. See George W. Liebmann, The New American Local Government, 34 Urb. Law. 93, 111 (2002).

[24]. See Edward J. Bierhanzl & Paul B. Downing, User Charges and Special Districts, in Management Policies in Local Government Finance 315, 315 (J. Richard Aronson & Eli Schwartz eds., 5th ed. 2004).

[25]. See Brent S. Kinkade, Note, Municipal Antitrust Immunity After City of Columbia v. Omni Outdoor Advertising, Inc., 111 S. Ct. 1344 (1991), 67 Wash. L. Rev. 479, 485 (1992).

[26]. 317 U.S. 341 (1943).

[27]. See 15 U.S.C. §§ 1-7 (2000).

[28]. See id.

[29]. Id. § 1.

[30]. See Steven Semeraro, Demystifying Antitrust State Action Doctrine, 24 Harv. J.L. & Pub. Pol’y 203, 209 (2000).

[31]. See John E. Lopatka, State Action and Municipal Antitrust Immunity: An Economic Approach, 53 Fordham L. Rev. 23, 23 (1984).

[32]. See Semararo, supra note 30, at 209-10.

[33]. Supplemental Brief for Appellants at 11, Parker v. Brown, 317 U.S. 341 (1942) (No. 46), available at 1942 WL 53739.

[34]. Parker v. Brown, 317 U.S. 341, 346-47 (1943).

[35]. United States v. Topco Assoc., 405 U.S. 596, 610 (1972).

[36]. Parker, 317 U.S. at 350-51.

[37]. See id. at 353.

[38]. See Semeraro, supra note 30, at 210.

[39]. See generally Goldfarb v. Va. State Bar, 421 U.S. 773 (2004); Cantor v. Detroit Edison Co., 428 U.S. 579 (1976).

[40]. Goldfarb, 421 U.S. at 775.

[41]. Id. at 776.

[42]. Id. at 776-77.

[43]. Id. at 790.

[44]. Cantor, 428 U.S. at 593-94.

[45]. City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 431 (1978) (Stewart, J., dissenting).

[46]. Id. at 391-92 (majority opinion).

[47]. Id. at 391.

[48]. Id. at 391-92.

[49]. Id. at 392.

[50]. Id.

[51]. Id. at 411-13 (Brennan, J., plurality opinion).

[52]. Id. at 403 (majority opinion).

[53]. Id. at 413 (Brennan, J., plurality opinion).

[54]. Id. at 415.

[55]. See 15 U.S.C. §§ 1-7 (2000).

[56]. Parker v. Brown, 317 U.S. 341, 350-51 (1943).

[57]. Id. at 351.

[58]. Id. at 351-52.

[59]. Id. at 346.

[60]. See City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 411-13 (1978) (Brennan, J., plurality opinion).

[61]. Id. at 394 (majority opinion).

[62]. Id.

[63]. Id. at 412 (Brennan, J., plurality opinion).

[64]. Id.

[65]. See generally Cmty. Commc’n Co. v. City of Boulder, 455 U.S. 40 (1982).

[66]. Id. at 43-44.

[67]. Id. at 44-45.

[68]. Id. at 45.

[69]. Id. at 45-46.

[70]. Id. at 46.

[71]. Id. at 43. The Colorado Legislature had granted to municipalities at the time of the City of Boulder case imperio home rule by granting to the people of Boulder “power to make, amend, add to or replace the [Boulder City] charter,” and by providing that “[s]uch charter and the ordinances made pursuant thereto in such matters shall supersede within the territorial limits and other jurisdiction of [Boulder] any law of the state in conflict therewith.” See Colo. Const. art. XX, § 6. Imperio home rule generally involves two powers: the power to “undertake actions over a range of important issues without having to run to the state for specific authorization,” and the power “to protect local government decisions concerning local actions from displacement by state law.” Richard Briffault & Laurie Reynolds, Cases and Materials on State and Local Government Law 281 (6th ed. 2004).

[72]. City of Boulder, 455 U.S. at 52.

[73]. See id. at 54-55 (quoting City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 414 (1978) (Brennan, J., plurality opinion)).

[74]. Id. at 55.

[75]. Id.

[76]. Lopatka, supra note 31, at 23.

[77]. See Clayton Act, ch. 323. 38 stat. 730 (1914) (codified as amended at 15 U.S.C. §§ 12-27 (2000)); see also Note, “Substantially to Lessen Competition . . .”: Current Problems of Horizontal Mergers, 68 Yale L.J. 1627, 1627 (1959).

[78]. See 15 U.S.C. § 12(a) (2000).

[79]. Id. § 15(a).

[80]. E.g., Mark R. Lee, Local Government Practices and the Antitrust Merits, 10 S. Ill. U. L.J. 455, 456 (1985).

[81]. Lopatka, supra note 31, at 24 (quoting House Judiciary Committee Reviews Legislative Options in Light of Boulder, 46 Antitrust & Trade Reg. Rep. (BNA) No. 1167, at 1062 (May 31, 1984) (statement of Fred L. Foreman, State’s Attorney of Lake County, Illinois)).

[82]. Id. (quoting House Judiciary Committee Reviews Legislative Options in Light of Boulder, 46 Antitrust & Trade Reg. Rep. (BNA) No. 1167, at 1062 (May 31, 1984) (statement of Kenneth A. Gibson, Mayor of Newark, New Jersey)).

[83]. See Pub. L. No. 98-544, 98 Stat. 2750 (1984) (codified at 15 U.S.C. §§ 34-36 (2000)).

[84]. 15 U.S.C. § 35(a). The Act defines “local government” as either any “general function governmental unit established by State law, or . . . any . . . special function governmental unit established by State law.” Id. § 34(1).

[85]. See Lee, supra note 80, at 457.

[86]. 445 U.S. 97, 105 (1980).

[87]. Id. at 99.

[88]. Id.

[89]. See id. at 100.

[90]. See id. at 103.

[91]. Id. at 105 (quoting City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 410 (1978) (Brennan, J., plurality opinion).

[92]. See Town of Hallie v. City of Eau Claire, 471 U.S. 34, 46-47 (1985).

[93]. Id. at 36-37.

[94]. Town of Hallie v. City of Eau Claire, No. 80-C-527 (W.D. Wisc. Apr. 5, 1982).

[95]. Id.

[96]. Town of Hallie v. City of Eau Claire, 700 F.2d 376, 378 (7th Cir. 1983).

[97]. See Town of Hallie, 471 U.S. at 46-47.

[98]. Id. at 46.

[99]. Id. at 47.

[100]. Id.

[101]. Id. at 46.

[102]. Id. at 42.

[103]. Id. at 43.

[104]. See City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 370-73 (1991).

[105]. Id. at 367-68.

[106]. Id.

[107]. Id. at 368.

[108]. Id. at 369.

[109]. Id. at 370-71.

[110]. Id. at 372-73.

[111]. Id. at 373.

[112]. See Einer Richard Elhauge, The Scope of Antitrust Process, 104 Harv. L. Rev. 667, 673 (1991).

[113]. See id.

[114]. Id.

[115]. See City of Columbia, 499 U.S. at 372-73; City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 413-14 (1978) (Brennan, J., plurality opinion).

[116]. Elhauge, supra note 112, at 673.

[117]. See Porter et al., supra note 19, at 11.

[118]. 1 U.S. Census Bureau, U.S. Dep’t of Commerce, 2002 Census of Governments No. 2: Individual state descriptions: 2002, at vii (2005) [hereinafter Individual State Descriptions].

[119]. 4 U.S. Census Bureau, U.S. Dep’t of Commerce, 2002 Census of Governments No. 2: Finances of Special District Governments: 2002, at v (2005) [hereinafter Finances of Special District Governments].

[120]. See Individual State Descriptions, supra note 118, at vi.

[121]. See id. at viii. Existence as an organized entity involves “some form of organization and the possession of some corporate powers, such as perpetual succession, the right to sue and be sued, have a name, make contracts, acquire and dispose of property, and the like.” Id. A city’s designation as a “municipal corporation” indicates that it is an organized entity. See id. Although not apparent from its designation, a special district, in general, acquires its existence as an organized entity from state statute. See id.

[122]. Id. An entity takes on a governmental character when “officers of the entity are popularly elected or are appointed by public officials.” Id. In addition, “[g]overnmental character is attributed to any entities having power to levy property taxes, power to issue debt paying interest exempt from federal taxation, or responsibility for performing a function commonly regarded as governmental in nature.” Id.

[123]. Id. A special district is said to have “substantial autonomy” when, “subject to statutory limitations and any supervision of local governments by the state, an entity has considerable fiscal and administrative independence.” Id.

[124]. Porter et al., supra note 19, at v.

[125]. See, e.g., Liebmann, supra note 23, at 111 (stating that special districts “allow [for] evasion of local debt limits; allow independent governments to cooperate in rendering the few functions, such as water and sewer, that have significant economies of scale; allow revenue bond financing, and provide insulation from politics, the benefit of ‘expert’ or market-oriented administration, and the ability to function as pure provision units and compete for municipal custom”).

[126]. See Porter et al., supra note 19, at 41-42.

[127]. See id. at 41.

[128]. See Gerald E. Frug, Beyond Regional Government, 115 Harv. L. Rev. 1763, 1782 (2002).

[129]. Id.

[130]. See Bierhanzl & Downing, supra note 24, at 340.

[131]. Kathryn A. Foster, The Political Economy of Special-Purpose Government 97 (1997).

[132]. See id. at 97-98.

[133]. See Bierhanzl & Downing, supra note 24, at 343.

[134]. See id. at 315.

[135]. Nancy Burns, The Formation of American Local Governments: Private Values in Public Institutions 29 (1994).

[136]. Id.

[137]. Id.

[138]. Id.

[139]. Id.

[140]. See Porter et al., supra note 19, at 41-42.

[141]. See id. at 42.

[142]. See Bierhanzl & Downing, supra note 24, at 315.

[143]. Id.

[144]. Id.

[145]. Id.

[146]. Id.

[147]. See, e.g., State ex rel. Angel Fire Home & Land Owners Ass’n v. S. Cent. Colfax County Special Hosp. Dist., 797 P.2d 285, 289 (N.M. Ct. App. 1990).

[148]. See Clayton P. Gillette & Thomas D. Hopkins, Federal User Fees: A Legal and Economic Analysis, 67 B.U. L. Rev. 795, 800 (1987).

[149]. See Bierhanzl & Downing, supra note 24, at 316.

[150]. Id. at 339.

[151]. Id. at 340.

[152]. See Porter et al., supra note 19, at 42.

[153]. See Individual State Descriptions, supra note 118, at vi. The U.S. Census Bureau reported, for instance, that 91% of the special district governments in existence in 2002 performed a single function. U.S. Census Bureau, U.S. Dep’t of Commerce, The 2002 Census of Governments: Preliminary Report No. 1, at 3 (2002).

[154]. Finances of Special District Governments, supra note 119, at vi.

[155]. Porter et al., supra note 19, at 42.

[156]. Bierhanzl & Downing, supra note 24, at 316.

[157]. Id.

[158]. See Porter et al., supra note 19, at 42.

[159]. See id.

[160]. See Bierhanzl & Downing, supra note 24, at 316.

[161]. Individual State Descriptions, supra note 118, at vi.

[162]. Porter et al., supra note 19, at 42.

[163]. See id.

[164]. Id.

[165]. Id.

[166]. See id.

[167]. Foster, supra note 131, at 98.

[168]. See id.

[169]. Mountain Regional Water District, A History of Mountain Regional Water Special Service District 3 (2005), http://mtregional.org/Upload%20Files/MRWSSD%20History% 202005.pdf.

[170]. See id.

[171]. See id. at 1-2.

[172]. See id at 1.

[173]. Id at 3.

[174]. See id. at 2-3.

[175]. See id. at 2.

[176]. Id.

[177]. Id. at 4.

[178]. See id. at 1.

[179]. Id.

[180]. Id.

[181]. Summit Water Distrib. Co. v. Summit County, 123 P.3d 437, 439 (Utah 2005).

[182]. See Brief of Appellees at 3, Summit Water Distrib. Co. v. Summit County, No 20040033-SC (Utah Ct. App. Sept. 28, 2004).

[183]. See Summit Water Distrib. Co., 123 P.3d at 439.

[184]. Brief of Appellees, supra note 182, at 3.

[185]. See id. at 5.

[186]. Id. at 4.

[187]. See id.

[188]. Summit Water Distrib. Co., 123 P.3d at 439.

[189]. See Brief of Appellees, supra note 182, at 5-6.

[190]. Summit Water Distrib. Co., 123 P.3d at 440.

[191]. Utah Code Ann. § 76-10-915(1)(f) (2003).

[192]. See Brief of Appellees, supra note 182, at 6.

[193]. See id.

[194]. See id. at 6-8.

[195]. Summit Water Distrib. Co., 123 P.3d at 440.

[196]. Id.

[197]. See Brief of Appellees, supra note 182, at 9.

[198]. Id.

[199]. Summit Water Distrib. Co., 123 P.3d at 440-41.

[200]. Id. at 441.

[201]. Utah Code Ann. § 76-10-915(1)(f) (2003).

[202]. Summit Water Distrib. Co., 123 P.3d at 441.

[203]. See id. at 441.

[204]. Id. at 442-46.

[205]. Id. at 443 (quoting Utah Code Ann. § 76-10-926).

[206]. Id. at 446.

[207]. Id. at 446-51.

[208]. See id. at 450. These statutes provided that “counties [could] enact all ordinances, resolutions, and rules and may enter into other forms of land use controls and development agreements that they consider necessary or appropriate for the use and development of land within the unincorporated area of the county, including ordinances, resolutions, rules, restrictive covenants, easements, and development agreements governing uses, density, open spaces, structures, buildings, energy-efficiency, light and air, air quality, transportation and public or alternative transportation, infrastructure, street and building orientation and width requirements, public facilities, and height and location of vegetation, trees, and landscaping, unless expressly prohibited by law.” Utah Code Ann. § 17-27a-102(1)(b) (2005). The statutes also required every county to “prepare and adopt a comprehensive, long-range general plan . . . [that] may provide for . . . the efficient and economical use, conservation, and production of the supply of . . . water.” Id. § 17-27a-401(1), (2)(c)(i).

[209]. See Utah Code Ann. §§ 17A-2-1301 to -1332 (2004). The authority granted to special service districts in these statutes includes: the power to exercise eminent domain as possessed by the county which established the district, the power to enter into contracts to carry out the district’s functions, and the power to acquire or construct facilities, among other things. Id. § 17A-2-1314.

[210]. Summit Water Distrib. Co., 123 P.3d at 448.

[211]. Id. at 450.

[212]. Id.

[213]. Id. at 451.

[214]. See id. at 446.

[215]. Id. at 444.

[216]. Id. at 446.

[217]. See generally City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 408-17 (1978) (Brennan, J., plurality opinion).

[218]. Id. at 413 (emphasis added).

[219]. Id. at 415 (emphasis added).

[220]. See Brief of Appellees, supra note 182, at 46-48.

[221]. Utah Const. art. II, § 8.

[222]. See City of Lafayette, 435 U.S. at 415 (Brennan, J., plurality opinion).

[223]. Id. at 403 (majority opinion).

[224]. Id. at 412 (Brennan, J., plurality opinion).

[225]. Id. (citation omitted).

[226]. Summit Water Distrib. Co. v. Summit County, 123 P.3d 437, 446 (2005).

[227]. Id. at 451.

[228]. Id.

[229]. See Utah Code Ann. § 17A-2-1304(1)(a)(i) (2004).

[230]. See Mountain Regional Water District, supra note 169, at 1.

[231]. Utah Code Ann. § 17-27a-401(1)-(2)(c)(i).

[232]. Id. § 17-27a-102(1)(b) (Supp. 2005).

[233]. Summit Water Distrib. Co., 123 P.3d at 439.

[234]. Id. at 450.

[235]. Utah Code Ann. § 17-27a-102(1)(b) (emphasis added).

[236]. See id.

[237]. Id.

[238]. Id. § 17-27a-102(1)(a).

[239]. See id. § 17-27a-102(1)(b).

[240]. Summit County, Utah, Ordinance No. 400 (Nov. 13, 2000).

[241]. Id. The ordinance defines “system infrastructure capacity” as “the capacity of the pipelines, pumping and treating facilities, storage tanks and other related facilities to deliver the required source capacity to the end customer service connection or meter.” See id.

[242]. See Summit Water Distrib. Co. v. Summit County, 123 P.3d 437, 451 (2005).

[243]. Utah Code Ann. § 17A-2-1314(1)(b)-(c) (Supp. 2007).

[244]. Black’s Law Dictionary 562 (8th ed. 2004).

[245]. City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 370 n.3 (1991).

[246]. See id. at 373.

[247]. Id.

[248]. See generally Surgical Care Ctr. of Hammond, L.C. v. Hosp. Serv. Dist. No. 1 of Tangipahoa Parish, 171 F.3d 231 (5th Cir. 1999). In the Surgical Care Center case, the hospital service district, created by the state, was “authorized to ‘contract with or engage in a joint venture with a person, corporation, partnership, or group of persons to offer, provide, promote, establish, or sell any hospital health service.’” Id. at 233. As a result, the hospital service district entered into anticompetitive contracts with five large managed care plans. Id. at 232. Nevertheless, the Fifth Circuit Court of Appeals held that because “[n]ot all joint ventures are anticompetitive . . . it is not the foreseeable result of allowing a hospital service district to form joint ventures that it will engage in anticompetitive conduct.” Id. at 235.

[249]. See generally Summit Water Distrib. Co. v. Summit County, 123 P.3d 437 (2005); Surgical Care Ctr., 171 F.3d 231.

[250]. See City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 411-13 (1978) (Brennan, J., plurality opinion).

[251]. Id. at 412.

[252]. See, e.g., Thomas M. Jorde, Antitrust and the New State Action Doctrine: A Return to Deferential Economic Federalism, 75 Cal. L. Rev. 227, 230-31 (1987).

[253]. See, e.g., Kinkade, supra note 25, at 484-86.

[254]. John T. Delacourt & Todd J. Zywicki, The FTC and State Action: Evolving Views on the Proper Role of Government, 72 Antitrust L.J. 1075, 1075 (2005).

[255]. Frank H. Easterbrook, Antitrust and the Economics of Federalism, 26 J.L. & Econ. 23, 27 (1983).

[256]. Delacourt & Zywicki, supra note 254, at 1082.

[257]. City of Lafayette v. La. Power & Light Co., 435 U.S.389, 403 (1978) (majority opinion).

[258]. Easterbrook, supra note 255, at 33.

[259]. See id. at 28.

[260]. See id. at 34.

[261]. See Bierhanzl & Downing, supra note 24, at 339.

[262]. See id. at 341.

[263]. Kinkade, supra note 25, at 484.

[264]. See Porter et al., supra note 19, at 22.

[265]. See id.

[266]. Utah Code Ann. § 17A-2-1329(2)(a) (Supp. 2007).

[267]. See Kinkade, supra note 25, at 484-85.

[268]. See id. at 485.

[269]. Susan M. Stevens, Antitrust Immunity for Local Governments: Maryland’s Response in the Wake of Boulder, 45 Md. L. Rev. 1045, 1064 (1986).

[270]. See id.

[271]. See Kinkade, supra note 25, at 485.

[272]. See id.

[273]. See Stevens, supra note 269, at 1064.

[274]. City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 435 (1978) (Stewart, J., dissenting).

[275]. Richard Thompson Ford, Beyond Borders: A Partial Response to Richard Briffault, 48 Stan. L. Rev. 1173, 1184 (1996).

[276]. City of Lafayette, 435 U.S. at 438 (Stewart, J., dissenting).

[277]. See Ford, supra note 275, at 1184.

[278]. See Kinkade, supra note 25, at 485-86.

[279]. Jesse H. Choper, Judicial Review and the National Political Process: A Functional Reconsideration of the Role of the Supreme Court 248 (1980).

[280]. Jorde, supra note 252, at 232 (quoting J. Buchanan & G. Tullock, The Calculus of Consent 113-15 (1962)).

[281]. See Finances of Special District Governments, supra note 119, at vi.

[282]. See Foster, supra note 131, at 98.

Comments are closed.