## Facts

- The City of Perrysburg operated a municipally owned water and sewer system and, by contract with Wood County, provided service to some unincorporated areas, including the Willowbend subdivision in Perrysburg Township.
- A developer obtained city water and sewer availability for Willowbend through an arrangement funding line extensions; the service was to be provided subject to the city’s rules and regulations.
- Richard Smith built in Willowbend (1978) and received city water and sewer service at extraterritorial rates; he asserted he signed no written agreement requiring annexation.
- In 1983, the city enacted an ordinance requiring new extraterritorial utility customers to agree to petition for annexation immediately or when their property became contiguous to the city, with termination of service as the consequence for refusal.
- In 1988, the city announced an intent to annex adjacent urbanized and developing areas to control growth and service delivery.
- In the late 1990s and early 2000s, the city sought to enforce annexation-related conditions; Gregory and Karen Bakies and Smith refused to sign annexation petitions, and the city threatened to terminate their water and sewer service.
- The homeowners sued to enjoin termination and to challenge the legality of conditioning extraterritorial service on annexation; the trial court ruled for the city, and the court of appeals affirmed.

## Issues

1. Whether a municipality may condition extraterritorial water and sewer service, by ordinance or contract, on the customer’s agreement to petition for annexation or face termination of service.
2. Whether, absent a contract, a municipality has a legal duty to continue providing water and sewer service to extraterritorial customers.
3. Whether annexation-condition service arrangements exceed municipal authority or violate constitutional or statutory limits governing annexation and utility service.

## Decision

- The Ohio Supreme Court affirmed.
- The court held that a contract requiring an extraterritorial water and sewer customer to agree to annex (or petition for annexation when eligible) or face termination of service is valid and enforceable.
- The court held that, absent a contract to provide service, a municipality has no duty to supply water or sewer service to extraterritorial customers.
- The court held that when a municipally owned utility sells surplus service outside city limits, the municipality may set the terms of sale, limited only by applicable constitutional and statutory constraints.

## Legal Principles

- A municipality generally owes no continuing obligation to provide water or sewer service beyond its borders unless it has contractually assumed that obligation.
- Extraterritorial utility service is treated as the sale and delivery of surplus municipal utility product; the municipality may decide whether to sell and on what terms, subject to constitutional and statutory restrictions.
- An annexation-condition term in an extraterritorial utility contract is enforceable when it requires the customer to petition for annexation through the statutory process once prerequisites (such as contiguity) are met, and permits termination for noncompliance.
- Conditioning continued extraterritorial service on annexation is not unlawful coercion where the municipality is not otherwise required to provide the service.

## Conclusion

The Ohio Supreme Court upheld Perrysburg’s authority to condition extraterritorial water and sewer service on an agreement to petition for annexation and confirmed that, without a contract, a municipality has no duty to continue providing utility service to customers outside its corporate limits.


Bakies v. City of Perrysburg, 108 Ohio St. 3d 361, 843 N.E.2d 1182 (Ohio 2006)