MUNICIPAL UTILITY EASEMENTS AND PUBLIC OWNERSHIP
by
Stewart Diamond
Paul Keller

When we prepared that "question" for inclusion in the Illinois Municipal Review, we did not realize that the Review would publish the "answer" in that same issue. That article follows, but we wanted to include some additional information about governmental utility lines which did not appear in the article in the Illinois Municipal Review. We hope that you will return to our web site on a regular basis to see our answer to the question we have posed in our IML Review advertisement, as well as many other questions and answers and recent publications.

Municipalities generally assume that, since they are given by statute the right to provide roads, sidewalks, drainage facilities, and sewer and water service to their residents, they can simply do so anywhere within the municipality. Unless the municipality has an easement or an equivalent ownership interest in land, or some permission from a private property owner, it cannot exercise any of these power. Perhaps the most dramatic surprise to a municipality will be the fact that, especially in developing areas, principally farm land, it may not actually have an ownership interest in what it believes to be public roads. While the public record may show that in 1873 a farmer consented to a road being laid out across his property, the rights which the government acquired over 100 years ago may be limited to the narrow traffic lanes which existed first as a dirt road, then as a gravel road, and finally as a paved road for many years. The municipality may have no right whatever to install sidewalks, street lights or utility lines, including drainage swales, without getting the approval of the property owner. It may come as an enormous surprise to the municipality, but the property owner may well own the land to the center line of the road.

While the municipality has the right to maintain the existing road, it may not be able to widen or modernize it without gaining greater ownership authority. In addition, a municipality might be surprised to discover that, in general, its ability to condemn property for roadway purposes outside of its boundaries is limited to land which is adjacent and contiguous to the municipality. 65 ILCS 5/11-61-1. What a municipality should learn from the items mentioned above and in the article below is that great care needs to be taken in making certain that a community truly possesses the adequate interest in land and in facilities such as underground pipes to fully operate and expand its transportation and utility systems.

Unlike a private utility company, an Illinois municipality does not need any authority from the Illinois Commerce Commission to create utilities or to extend utility lines. However, like all other utility companies, a municipality must obtain the right to use private property for utility purposes, before undertaking any new construction. This article offers a brief look at municipal utility easements. It will also discuss what a municipality must do to protect its rights in utility lines constructed by private developers.

Easements

Except where the municipality owns the property where the utility will be located, or there has been a statutory dedication of a street, the municipality must seek an easement from the property owner in order to extend utility lines. This includes along State highways or county roads, where the right of the State or county to maintain a road is based on what is called a common law dedication. Such dedications are generally based on oral or written permission by property owners allowing a road to be laid across their property. A common law dedication is limited to the purpose for which it was granted; if for a roadway, permission to install utilities is not included. In many of these situations, the owners of the property adjacent to the road actually own to the center line of the road, subject to use of the land as a public roadway. In contrast, when land is developed and subdivided in accordance with statute, the law requires the owners to grant a statutory dedication of rights-of-way to the State, county, township or municipality, after which that governmental body, in effect, owns the right-of-way and can install its own utility lines or grant permission to other entities to install utility lines.

If a municipality wishes to extend a utility line along a road which is only subject to a common law dedication, it will need to negotiate or condemn an easement, generally alongside the pavement area, to permit the installation of the needed utilities within the easement. The municipality will attempt to gain a general easement for utilities, so that it is not necessary to go back if there is a need to install other utilities. Ordinarily, the municipality has the ability to use its condemnation power in the event that it cannot reach an agreement to acquire the easement. Sometimes, adjacent property owners are happy to give this easement because they anticipate eventually connecting to the utility lines. But sometimes the property owner can be very difficult and the process of procuring the easement can take some time. Obviously, a governmental body would be well advised to begin the process of gaining easements well in advance of the need to begin construction. In increasingly rare cases, the Illinois legislature has been known to give municipalities the right to acquire easements by the Aquick take@ process, which requires the municipality to deposit the reasonably estimated value of the easement in advance of trial, and permits the transfer of the property to take place immediately. This right is granted only to a few municipalities each legislative session and no community should rely on this method to delay the acquisition of easements.

If a municipality makes a mistake and constructs a utility line in a location where it has no easement, there exists a special lawsuit, called Ainverse condemnation,@ by which the property owner can recover the value of an easement going back to the date that the utility was first installed. Some years ago, municipalities might have been tempted to install utility lines without easements and wait for the property owner to discover that the land had been used without permission. During the last 20 years, however, the law has changed so that such an abused property owner might be able to file a Federal civil rights lawsuit seeking damages for the invasion of the property in addition to recovering the value of the land along with the payment of attorneys= fees.

Communities constructing utility line additions should be very careful to respect the rights of private property owners. To do otherwise may be very costly. In some cases, a court might even order the utility line to be abandoned until the proper land rights are procured. This can create enormous problems for a municipality and its citizens in the event that the utility line is an important part of the municipality=s infrastructure.

Bill of Sale

Acquiring an easement is only one part of protecting the public rights in a utility system. Very often, municipalities leave the actual construction of extended utility lines to developers. Where the utility lines are constructed by private parties, with the intent that they become part of the municipal utility system, it is important to make sure that the entire process takes place. Even where utility lines are constructed by developers within statutorily granted public utility easements, the ownership in the lines remains that of the developer until a bill of sale is granted to the municipality. Under Illinois law, utility lines are treated as personal property rather than real property. Therefore, from at least a technical standpoint, even if a developer were to run utility lines across a municipally owned park, for example, the actual title to the underground lines would remain with the developer until a bill of sale was provided. Many subdivision ordinances require bills of sale from the developers in these situations.

Often, a municipality will accept a bill of sale along with maintenance obligations of the line only after the utility system has been installed and fully tested. Normally, the municipality requires the developer to guarantee the materials and labor in the installation for a period of one year after acceptance. A municipality frequently requires a developer to post a surety subdivision bond or other guarantee in an amount equal to 5 or 10 percent of the cost of construction for the one year guarantee period.

Also, language similar to the subdivision code is often included in annexation agreements. Such agreements can deal with the time at which the developer is obligated to transfer and the municipality is obligated to accept ownership of the underground utilities, for the security obligations and also financial devices such as irrevocable letters of credit, which are intended to guarantee that the utility lines will be installed in the first place.

Consequences

There are two principal reasons why a municipality should pay great attention to the process of acquiring the right to install or have others install underground utilities and the eventual acquisition of ownership of those lines. The first reason relates to the financial security of the municipality=s utility systems. It can be an emotional and financial shock for a community to discover that it actually has no right to install a utility line extension in an area always believed to be within the corporate boundaries of the community. Perhaps a worst-case situation is one where a municipality promises to a developer that it will furnish all rights necessary for the installation of utility lines and then discovers that there are gaps in its right to install fully connecting segments of the system.

The main reason for having a file of all of the bills of sale is that a municipality, when it issues revenue bonds, is generally obligated to sign a pledge that it owns its entire utility system and has the right to continue to operate it. If the purchasers of the bonds discover that the municipality=s system has been constructed somewhat irregularly and that there is no way to guarantee that the community actually owns all of its underground sewer or water lines, the validity of the bonds, and the municipality=s credit rating, can be adversely affected.

In summary, municipalities which maintain utility systems need to pay close attention to acquiring all needed rights to extend new lines. In addition to the right to construct these lines, the municipality needs to have a file containing the bills of sale for lines which have been placed in the ground by private developers. Where bills of sale have not been acquired, an effort should be made to get these developers to bring all of their transfer obligations up to date.