Manchester Water Works will continue paying the same tax rate this year after a case against the town of Auburn filed by the city department has been dismissed by a Superior Court judge.

Last year, Manchester Water Works filed a petition in Rockingham County Superior Court seeking abatement and a refund of the 2007 payment made in lieu of taxes to Auburn because the land had been placed into a conservation easement.

Manchester Water Works argued that Auburn imposed an “unlawful, excessive, inequitable, disproportionate and unjust payment in lieu of taxes” upon the property, “ignoring” the conservation easement, according to the court decision.

The town had denied the request for abatement and refund, arguing that the conservation easement is not valid and should not be taken into consideration in assessing property values for tax-related purposes.

One issue raised was that the easement was not placed in perpetuity, but allows the department to withdraw with 30 years’ notice.

Auburn Town Manager Bill Herman said the statute is very clear that a public entity, including a public water supply entity that holds land in another community is not entitled to the same abatement a typical property owner would be.

Tom Bowen, director of Manchester Water Works said that is true with regard to current use, but not with regard to a regular conservation easement, Justice John M. Lewis concluded that the town acted within proper bounds in not considering the easement in determining the value of the property for tax-related purposes and in arriving at its calculation of the due payment in lieu of taxes and dismissed the case.

“...certainly in connection with allowable ‘current use’ status, the Legislature has evinced a definite unwillingness to permit a water works entity like Manchester Water Works to at all avail itself of the use of a ‘conservation restriction’ to reduce its payment in lieu of taxes,” Lewis wrote in his decision.

Bowen said the department was not seeking current use status. “The values are set quite a bit lower in current use than what we were requesting,” Bowen said.

Bowen said they are disappointed in the decision.

“We thought that based on advice from our attorney that we were on strong legal ground. We were actually surprised that the case was dismissed,” Bowen said.

Bowen said the intent of the easement was to protect the watershed property.

“The property is not protected for the long term. We thought that by placing it into a conservation easement, it would help protect our customers,” Bowen said. “There are obviously some tax implications to it which is also beneficial to our customers.”

Manchester Water Works services about 160,000 people in the city and five surrounding towns. It is the largest landowner in Auburn, with about 4,000 acres of property around Lake Massabesic, the source of the water supply.

Herman said their payment in lieu of taxes is about $705,000.

“In total, the Manchester Water Works’ payment in lieu of taxes represents close to 16 (percent) of the total revenue the Town of Auburn receives in a year. A reduction in that revenue would have a significant impact on the property taxpayers of Auburn,” Herman said.

Bowen said he just received the decision on March 18 and has not yet had a meeting with legal counsel about whether they will appeal the decision or what other alternatives there may be.

He clarified that the motion to dismiss was based on the law itself, not the merits of the case.