The city of Annapolis is battling with one of its grandest institutions, the Naval Academy, which is balking at paying more than a half-million dollars in utility bills.
The Navy has refused to pay an increased sewer rate levied last spring on all city residents, businesses and institutions, including the state government and St. John's College. Instead, the academy is clinging to an old rate in an aging contract with the state capital that is less than half the current rate.
Tensions are escalating, and a flurry of letters and e-mails reveals a stalemate and a significant difference of opinion.
The city sees its laws as the rule of the land within its borders - and the rates for handling waste are its call. But the Navy is flexing its size and federal might - and plans to decide what it thinks is a "reasonable" rate, regardless of what others in the city pay.
"For them to allege their contract supercedes the law of Annapolis and the charges for everyone else is for them to play the Big Gorilla," said Mayor Dean L. Johnson. "In the wording in their contract and the back and forth, [they] seem to think of us as just another contractor, providing chairs, desks or light bulbs."
The Naval Academy's public works officer, Capt. Phil Dalby, compares the city to just that - another contractor who might sell the academy a door.
"We will not pay an arbitrary figure to put the door on," Dalby said, noting that the city's law would be merely "a data point" and not the basis for the Navy's negotiations with the city.
Johnson and his staff have been exchanging correspondence with the Navy since the city sewer rates were significantly raised in March 2000. They have been asking the Navy to work with them to renegotiate the contract.
But in each response, the Navy has requested more information. In an October letter, a Navy contract specialist demanded to know what laws gave the city the right to raise utility rates.
"The city certainly has the right to raise rates as it sees fit," said Public Works Director David L. Smith, who noted that the city had not raised its rates in a decade. "I don't see why they question that it is our authority to do so."
In January, after the city submitted the requested information, including its new sewer rate law, the Navy "determined that the proposed rates cannot be justified," according to a letter from a Navy contract officer.
Smith then described the Navy's position as "adversarial" in a letter to the city attorney.
So, on Jan. 24, the city sent the academy a bill for the difference between the rate it continued to pay and the new rate - $426,050.
"They haven't been forthcoming as far as coming to the table and talking about it, so we took matters into our own hands and began charging the new rate," said Kathleen Sulick, city finance director.
The Navy returned the bill unpaid.
Since then, the city has billed the Navy separately for its contractual rate - which it has paid - and the difference from the new rate - an additional $88,393.
"Certainly the Navy is willing to pay its fair share of costs," said John Peters, public affairs officer for Naval Facilities Engineering Command, Atlantic Division, which is responsible for negotiating the academy's rate with the city.
But the Navy will determine what is fair, its officials say.
Dalby said the Navy will evaluate the city's plan, its costs to process sewage and determine what a "fair and reasonable rate would be." It will present that rate to the city this month.
But that move may be superceded by a city council resolution sponsored by one of the Navy's own.
Alderman Herbert H. McMillan, a an academy graduate, has introduced a resolution "expressing the city's strong commitment to a renegotiated rate ... not lower than the rate paid by city residents."
"The federal government is simply not entitled to a better sewage treatment rate than our residents pay," states the resolution, which the council will vote on Monday.
Peters insists that the Navy is "not trying to pick on Annapolis."
"It's just the way we do business," he said, noting that the academy is a "big customer" and that the Navy negotiates similarly with other cities where it has bases.
"We are saving the taxpayers money - we are trying to get the best deal we can," he said.
But Johnson notes that the Navy's efforts to save federal tax dollars could cost city taxpayers.
"If they don't pay, then the residents of the city of Annapolis pay," Johnson said. "That would be ridiculous for the city of Annapolis to be subsidizing Naval Academy operations."