The battle over whether Molokai Ranch can force Maui County to take over its privately owned water utilities in West Moloka'i has spilled into state court.

Maui County yesterday sued Molokai Ranch, now known as Molokai Properties Ltd., arguing that the ranch is bound to run the water systems under agreements the company or its predecessors made to obtain government approvals to develop homes, resorts and other projects on its property.

Margery Bronster, a former state attorney general hired by Maui County, filed the suit yesterday in Second Circuit Court on Maui, and said numerous contractual agreements signed over the past 30 years are clear that the owner of the ranch's property can't abandon the water systems.

"Their contractual obligations are clear," she said. "The fact that it costs more money (to operate the water utilities) than they expected is not an excuse to avoid their obligations."

Molokai Ranch attorney Dan Orodenker was traveling in California yesterday and had not seen the suit to comment on specific allegations. But he said in general that the company has serious doubt over whether the county can force Molokai Ranch utilities to spend money that the utilities don't have to operate the water systems indefinitely.

The ranch, a subsidiary of Singapore-based conglomerate GuocoLeisure Ltd., had threatened to cease service Aug. 31 after the shutdown of ranch and resort operations in March that resulted in the company laying off more than 120 employees.

Molokai Ranch has maintained that the government has a duty to provide citizens with essential services such as water when the private sector is unable to do so.

The company, which intends to land-bank its property, said its utilities collectively lost around $580,000 in each of the past two fiscal years — a deficit that the ranch was willing to fund only while it had other business operations that needed water.

The ranch had sought to transfer the responsibility for providing water by Aug. 31 to a private or public entity, but was unsuccessful in negotiating for Maui County or any private entity to assume the service.

In an unprecedented move, the state Public Utilities Commission on Aug. 14 approved water rate increases between 90 percent and 178 percent that will go into effect Sept. 1 as a way for Molokai Ranch to continue service without losing or making money.

Molokai Ranch, in an Aug. 27 letter to the PUC, confirmed it would continue service beyond Aug. 31, but not indefinitely. It remains unclear how long the ranch is willing to continue service, which affects roughly 1,200 customers.

Bronster said Maui County may seek an injunction to prevent Molokai Ranch from ceasing service in the future, as long as the company owns the land to which the water service agreements are tied.

The state Department of Health has instructed Maui County to prepare to assume the utilities.

Gov. Linda Lingle also has said that water and wastewater service is a basic responsibility of county government in the absence of a private provider.

But Bronster said those assessments are incorrect in the case of Molokai Ranch because as part of the land entitlement process, the company agreed that the county would be under no obligation to maintain the private water systems.