## Facts

- Grand Strand Water and Sewer Authority (Grand Strand) is a special purpose district created in 1971 to provide water and sewer services in designated parts of Horry County, with authority to sell water to municipalities.
- In 1975, Horry County expanded Grand Strand’s service area to include territory within three miles of the City of Conway’s limits.
- After litigation over service rights, the City and Grand Strand entered agreements (1982, 1985, 1989) allocating services in parts of Grand Strand’s territory; in the plaintiffs’ area, Grand Strand provided sewer service and the City provided water service to nonresidents.
- In 1996, the City enacted an ordinance increasing water rates for all nonresident customers, producing a substantial differential between resident and nonresident rates.
- Nonresident water customers filed a putative class action challenging the ordinance as unlawful and unreasonable, alleging the rate increase was arbitrary and improperly used water charges to raise revenue for purposes not tied to water service.

## Issues

1. Whether the City’s 1996 ordinance setting higher nonresident water rates was invalid because the rates were unreasonable, arbitrary, discriminatory, or confiscatory.
2. Whether the City exceeded its authority by setting nonresident water rates in a way not strictly tied to the cost of providing water service, including to address other fiscal needs.

## Decision

- The South Carolina Supreme Court affirmed summary judgment for the City and Grand Strand.
- The Court held the ordinance was presumptively valid and that municipal utility rate-setting is a legislative function reviewed deferentially.
- The nonresident customers failed to present evidence creating a genuine issue of material fact that the rates were unreasonable or unlawful.
- The Court upheld the City’s ability to charge nonresidents more than residents where the differential was not shown to be arbitrary, discriminatory, or confiscatory.

## Legal Principles

- Municipal rate-making for utilities is a legislative act; courts will not interfere absent a clear showing the rates are unreasonable, arbitrary, discriminatory, or confiscatory.
- Ordinances are presumed valid, and the burden is on challengers to prove unreasonableness or illegality.
- A municipality may charge nonresident utility customers higher rates than residents, reflecting differences such as residents’ tax contributions and municipal obligations.
- Utility rates need not mirror cost-of-service with precision; revenue considerations may be considered so long as the resulting rates remain within bounds of reasonableness.

## Conclusion

The court sustained Conway’s increased nonresident water rates because the challengers did not meet their burden to show the ordinance produced unlawful or unreasonable charges, and because municipal utility rate-setting receives strong judicial deference.


Sloan v. City of Conway, 555 S.E.2d 684 (S.C. 2001)