US Cold Storage, Inc. v. City of LaVista
(Nebraska Supreme Court, March 29, 2013)

In 1969, the owner of a 210-acre parcel in Sarpy County petitioned the Sarpy County Board of Commissioners to designate the tract as an industrial area and the board complied. Under Nebraska law an industrial area is land “used or reserved for the location of industry.” At the time of the designation, La Vista’s zoning jurisdiction did not reach any part of the parcel; therefore the city’s approval was not required. US Cold Storage acquired four lots in the industrial area in 1971 and has operated its business there since that time. Sanitary and Improvement District (SID) 59 was created in 1971 to provide utilities and services to the industrial area. The area of SID 59 is greater than, but includes, the entire industrial area.  In October 2009 La Vista resolved to annex SID 59. It sent written notices to the property owners within SID 59 of an October 22 city planning commission public hearing on the proposed annexation. On November 3, La Vista sent written notice to the property owners within SID 59 of a November 17 city council hearing also regarding the annexation of SID 59. On December 1, after conducting the public hearings, La Vista approved an ordinance purporting to annex SID 59 in its entirety.

On December 16, 2009, Cold Storage filed a class action complaint against La Vista and SID 59 challenging the validity of ordinance 1107. The complaint alleged that ordinance 1107 was invalid because (1) La Vista failed to comply with statutory notice requirements when adopting it, (2) the annexation was for revenue purposes only, and (3) state law prohibited the annexation of the industrial area in SID 59.

On January 18, 2011, while Cold Storage’s challenge to the validity of ordinance 1107 was pending in district court, La Vista directed its planning commission to consider the annexation of only a portion of SID 59; specifically, that portion that did not include the industrial area. On April 19, after giving proper statutory notice of this proposed annexation, La Vista adopted an ordinance (ordinance 1142) purporting to annex the portion of SID 59 that did not include the industrial area.  SID 59 filed a cross claim in the initial action, and asserted that ordinance 1142 was invalid.  The district court found in favor of La Vista on all claims, and Cold Storage and SID 59 appealed.

Statutory notice claim.  It was undisputed that the notices did not strictly comply with Neb. Rev. Stat. 19-5001 (one was 3 days late, another was 2 days early, along with  minor errors).  It was also undisputed that SID 59 had actual notice of the annexation proceedings.  In siding with La Vista, the court relied on Neb. Rev. Stat. 19-5001(5), which only voids annexation decisions on notice grounds if the errors are “willful or deliberate.”

Annexation for revenue purposes.  Caselaw in Nebraska proscribes annexation for revenue purposes only.  The court rejected the notion that because the SID was completely built out the city would be incurring no liabilities.  The court referred to La Vista’s required annexation plan, which identified the street and sewer improvements the city would become responsible for in the event of annexation, and the the additional police staff needed to patrol the area.  The city’s finance manager testified that the city would also assume all debts and obligations of SID 59, including approximately $2.1 million in net bonded debt.  The court concluded that although revenue was a factor, but other factors included the indebtedness which the city would assume, the city’s objective of orderly growth, and the perception that annexation of SID 59, which was already surrounded by the city, would improve the provision of services by eliminating jurisdictional issues.

Prohibition against annexation of industrial area.  Prior to 1991, Neb. Rev. Stat. 13-1115 only permitted the annexation of an industrial area under two circumstances (neither of which applied in this case); however, in 1991 the law was amended to allow annexation if the industrial area “is located in a county with a population in excess of 100,000 persons and the city did not approve the original designation of the tract as an industrial area.”  The court found that both conditions were met in this case.  Cold Storage contended that because La Vista could not have annexed the area prior to 1991, a vested right existed to continue the operation of SID 59 without annexation.  The court noted that the true nature of the vested right claimed by Cold Storage was the “benefit” of lower taxes accruing from not being subject to taxation by La Vista; however, the court cited numerous cases for the proposition that exemption from taxation is not a vested right.  “We find nothing in the language of the pre-1991 version of Neb. Rev. Stat. 13-1115 which would constitute a pledge by the Legislature that the circumstances under which property in an industrial area could be annexed would never be altered by an amendment to the statute.”

The Nebraska Supreme Court affirmed the ruling of the district court on all issues.

Town of Buchanan v. Village of Kimberly
(Wisconsin Court of Appeals, December 6, 2011)

This case revolves around an agreement made between the Town of Buchanan and the Village of Kimberly regarding annexation.  In 2000 the two municipalities designated a specific area within the Town as a Village growth area.  The Town agreed not to oppose the Village’s annexation of land within the described area and the Village agreed not to try to annex land outside the area.  In 2006 the Village annexed property known as Emons Farm that was situated outside the designated Village growth area.  To settle the matter, the Village and the Town entered into an “intermunicipal agreement” in 2007.  In it, the Village agreed to pay the Town $25,000 and to refrain from attracting property owners to annex additional property in the Town.  On the other hand, it clarified that the Village may not disallow future annexation of property within the Town if a unanimous petition to do so is presented.

In 2009, the Village once again annexed property within the Town.  The Town did not object, but claimed that it was entitled to five annual payments pursuant to Wis. Stat. §66.0217(14)(a)1. This statute states that the annexation of a property cannot take place unless the party petitioning for annexation agrees to pay the Town five annual payments equal to the amount of property taxes the Town would normally collect for the property.  The Village was of the opinion that it was exempt from the payments under subd. 2 of the same statute, which states that, in the existence of a boundary agreement, the payment requirement does not apply.  The Village argued that the intermunicipal agreement made in 2007 constituted a boundary agreement, so the payments were not required.  The Town countered that the agreement was not a “boundary agreement” as defined by statute.  The circuit court ruled in favor of the Town that the agreement was not a “boundary agreement.”  It found it illogical to allow a one-time boundary negotiation for a specific instance to govern all future boundary agreements.  It opined that doing so would “render meaningless the statute.”

On appeal, the Town argued that the 2007-2008 version of Wis. Stat. §66.0301 applied while the Village argued that the 2005-2006 version of the statute applied.  The two versions were identical except that the more recent version contained an additional subsection (6) which addressed agreements “determining all or a portion of the common boundary line between two municipalities.”  The Court noted that it did not need to settle the conflict regarding which version applied since the intermunicipal agreement formed in 2007 did not constituted a boundary agreement per statute.  In order to constitute an agreement under Wis. Stat. §66.0301, it must provide for “the receipt or furnishing of services or the joint exercise of any power or duty required or authorized by law.”  Since the agreement made between the Village and the Town in 2007 contained no such provision, it did not qualify as a boundary agreement under the relevant statute.  Consequently, the payment exception in §66.0217(14)(a)2 did not apply.  The Court affirmed the circuit court’s decision in favor of the Town.

James Baggett, et al., v. The Board of County Commissioners of Douglas County, Kansas
(Kansas Court of Appeals, September 30, 2011)

A group of business owners (applicants) owned 155 acres of land to the northwest of the city limits of Lawrence, Kansas that was zoned County A (Agricultural.)  In 2008, the applicants petitioned the city of Lawrence for a voluntary annexation of the property by the City of Lawrence.  They intended to develop the property into an industrial area.  Since the property was not next to the existing borders of the city, it would be considered an island annexation.  Mastercraft Corporation, the developer of the property, intervened in the case and pursued the annexation and rezoning on behalf of the business owners.  Baggett Group, the plaintiff, is made up of individual homeowners that are located within ½-mile of the property.

K.S.A. 12-520c governs island annexations.  Among the conditions of approval, the statute states that “the board of county commissioners of the county must find and determine that the annexation of such land will not hinder or prevent the proper growth and development of the area or that of any other incorporated city located within such county.”

Initial findings of the City Planning Commission’s staff recommended that the annexation be deferred until a sector plan could be completed. The staff report pointed out that sanitary sewer services, water services, and private utilities were needed for the property, and that a regional detention plan for each watershed on the property was needed but not yet developed. Finally, the report noted that the property was outside the existing service response districts..  Despite these findings, the Commission recommended  to the Board approval of the annexation.  Pursuant to state law, the City then adopted a resolution requesting the County Board find and determine that the annexation of the described property into the City would not hinder or prevent the proper growth and development of the area or that of any other incorporated city located within the County.  At the Board meeting, representatives for Mastercraft stated that annexation was requested in order to 1) bring the property under the jurisdiction of the City and thereby regulate the development more stringently to protect the neighbors; 2) provide for much needed industrial space for the long-term growth of the County; 3) provide more jobs and more tax revenue.  Representatives for the Baggett Group argued the annexation should be denied because of the lack of adequate water or sewage and the fact that future use of the property was unknown.  Mastercraft said it was unable to describe the intended use because the property will be leased out to business owners.  It was only able to say that all future uses will be those permitted within the industrial zoning classifications.  The Board concluded that the annexation would not “hinder or prevent proper growth and development of the area” and approved it.  The Baggett Group filed in district court which affirmed the Board’s ruling.

On appeal, the Baggett Group argued that the Board’s decision was not supported by substantial evidence and was arbitrary, capricious, and unreasonable.  The Court first looked to the report prepared by the City Planning Commission’s staff.  The report found that the annexation request was not in accordance with the “Horizon 2020” policy, which is the city’s formal planning policy.  The property is outside of the plan’s designated urban growth area.  The Plan also specifies that any development should indicate an intended use in order to mitigate harm to the surrounding area.  The Board received several letters from property owners testifying that they had relied on the Horizon 2020 plan.  One such individual stated he had made an investment in property near the property in question based on the fact that it would not be developed within the next 10 to 15 years.

The Baggett Group also raised issue with the lack of specified uses for the property.  They claimed it was impossible for the Board to consider how the annexation would affect the surrounding area without knowing what the land would be used for.  The only description of future use for the property was that it would include only those that were allowed under the industrial zoning classifications.  This very broad description of uses includes “those that cause continuous, frequent, or repetitive noises; noxious or toxic fumes, odors, and emissions; electrical disturbances; night illumination; explosive storage; and other nuisances that would be disturbing to surrounding residences.”  There were 11 homes directly adjacent to the property and 63 homes located within ¾-mile.

The Court noted that there was no evidence in the record of the case that the Board adequately considered how the development of the property would affect the surrounding area.  Although the specific use was not stated, any kind of industrial use can be concluded to be incompatible with residential areas.  Since there are existing residential areas adjacent to the property, the Board should have realized that industrial development would most certainly hinder or prevent proper development as a matter of logic.  The Court then observed that the Board never explored the possible uses that fall under the industrial zoning classification and how the most harmful ones would affect the surrounding area.  The Court ruled that “where the developer of the land in an island annexation cannot specify the intended uses of the land but provides only a category of potential uses, the Board must examine those potential uses – or at least the most potentially deleterious uses – and determine whether those potential deleterious uses would ‘hinder or prevent the proper growth and development of the area.’” For the above reasons, the Court concluded that substantial evidence to support the Board’s conclusion did not exist.  It reversed the district court’s approval of the annexation.

The Iowa City Press-Citizen report about the meetings can be found here.  Annexation moratorium agreements are permitted by Iowa Code sec. 368.4.

Western Taney County Fire Protection District v. City of Branson, Missouri
(Missouri Court of Appeals, February 10, 2011)

The Western Tansey County Fire Protection District (District) and the City of Branson, MO (City) both hold taxation authority within their boundaries for fire protection. Annexations of property within the District’s boundaries by the City in 1994 resulted in an overlap in taxation.   To avoid this, both entered into an “Agreement Concerning Provision of Fire Protection Services” (Agreement). In paragraph 2 it is stated that if the City’s corporate limits are extended by annexations in the future the City will provide the fire services to the annexed property. Paragraph 7 provided that the District would stop taxing any area within the corporate limits of the City after December 31, 1994. Further, if property is annexed District will maintain the right to tax until the end of that year. Finally paragraph 8 agrees that the City will pay $416,666.66 to District for three years starting in 1995 and ending in 1997. All contractual obligations were met.

Then, after the City annexed further property [the case does not specify when this annexation occured] the District sought more money under § 321.322 RSMo. This statute basically holds that a city will assume fire protection duties for annexed property and pay the district either “an amount mutually agreed upon,” or fees under the statutory formula.  The City refused payment claiming that the requested payments fell within the terms of the Agreement and were satisfied by the payments to District. In trial court it was found that § 321.322 was a consideration when crafting the Agreement and therefore the District was entitled to no further compensation.

The District argued to the Court of Appeals that § 321.322 provides a “sixty days’ statutory mandate” that does not allow agreements to extend to annexations outside of sixty days post-contract. The court disagreed.  Under the statute a compensation scheme would be enacted unless a city would contractually assume responsibility to pay a mutually-agreed consideration.  The statute provides that “nothing contained in this section shall prohibit the ability of a city to negotiate contracts with a fire protection district for mutually agreeable services.” The statute does not forbid agreements. Future obligations can be addressed by contract; parties are permitted by statute to craft terms that address foreseeable future annexations. The District argued that the Agreement does not discuss if it extends to future annexations; it only confirms that double taxation and coverage will not occur. However, paragraph 7 specifically states, “future annexations,” thus clarifying that future annexations were forseeable and meant to fall under the agreement’s terms.

Lastly the District argued that § 321.322 violates Article 10, §§ 1 & 2 of the Missouri Constitution and the common law rule against perpetual contracts. If the sections are read together they prohibit District from “contracting away” taxing power without legislative authority. The court, however, pointed out that the District did not lose their right to tax in the Agreement. It simply stopped duplication of services and wrongful double taxing.  The court also found that a contract for indefinite terms does not make it perpetual. Further the Missouri courts often reject the idea that contracts automatically create perpetual obligations or rights. The judgment of the trial court was affirmed.

Town of Somerset v. Wisconsin Department of Natural Resources
(Wisconsin Court of Appeals, March 29, 2011)

J. Peterson owned property in the Town of Somerset, Wisconsin. In 1987 he enrolled the property in the Department of Natural Resources’ managed forest land (MFL) program. The program encourages, “management of private forest lands for the production of future forest crops for commercial use through sound forestry practices.” By enrolling the property the landowner commits to the program for either twenty-five or fifty years.  In return the landowner receives reduced property taxes. If the property is withdrawn from the program the landowner must pay the Department a withdrawal tax pursuant to Wis. Stat. § 77.82(2)(h).  Under Wis. Stat. § 77.89(1) the Department is then required to pay the withdrawal tax to “each municipality in which is located the land to which the payment applies.”

When Peterson’s property was first enrolled in the MFL it was located within the Town of Somerset. In November 2007 the property was purchased by the Village of Somerset and annexed to the Village.  In August 2008 the Village withdrew the property from the program. A withdrawl tax of $43,597.28 was paid to the Department by the Village, but that money was then refunded back to the Village because the property was in the Village at the time of withdrawl.

The Town filed for judicial review of the Department’s decision. They argued that the Department did not interpret Wis. Stat.  § 77.89(1) correctly, or alternatively that the statute is “unconstitutional on its face in that it deprives [the Town] of a protected property interest, contrary to [the] Wisconsin Constitution.” The town argues the withdrawal tax payment should have been split between the municipalities where the land was located while the tax burden was lessened.

The Department moved to dismiss this claim and the circuit court granted the motion. They found (1) the Town lacked standing to challenge the Department’s decision, (2) the Department’s interpretation of the statute was entitled to deference, and  (3) the Town lacked standing to challenge constitutionality of § 77.89(1).

The Town then appealed to the Wisconsin Court of Appeals who finds that the circuit court was correct in dismissing the Town’s petition. Wis. Stat. § 77.89(1) requires the Department to pay “100 percent of each withdrawal tax payment received under 77.88(7) to the treasurer of each municipality in which is located the land to which the payment applies.” The present tense of the statute indicated that the payment should be made to where the property is located currently. The Town claims the statute is ambiguous because the statute states, “each municipality.”  The Court of Appeals did not consider this argument to be reasonable because it again ignores the present tense of the statute. The language “each municipality” simply directs the payment in cases where the land is presently located in more than one municipality.

Finally, the court concluded that municipalities do not generally have standing to challenge the constitutionality of statutes. The only exception to this is if the issue is of great public concern. However this exception only applies “to cases where a private litigant and a creature of the state are involved, and not to suits limited to creatures of the state.” No private litigants are present here and it involves a state agency and two municipalities. Because of this the great public concern exception cannot be applied. The decision of the circuit court was affirmed.

Schauer v. Grooms
(Nebraska Supreme Court, August 6, 2010)

Curt and Susan Schauer live just outside of Ord in Valley County, Nebraska. In 2005 the City decided to recruit a developer to build and operate an ethanol plant on undeveloped land. Eventually, Redevelopment Area #3 (located 4 miles outside of the City’s border, and 1/8th of a mile from the Schauer’s farm) was chosen as a potential plant site.  Redevelopment Area #3 was declared blighted, then the city annexed the land to make TIF financing available for the project. 

After Val-E Ethanol was selected to construct and operate the plant numerous city council meetings were held. These meetings spanned from February to November 2005, from the time the land was blighted, a plan adopted, a financing agreement was decided and the land annexed.  These meetings were publicly noticed, consistent with Nebraska’s Open Meetings Act; however, on June 1, 2005 a dinner and tour of a similar ethanol facility were hosted by the Valley County Economic Development Board hosted without public notice.  Invitations were sent to numerous county residents including Schauers (who did not attend). Three of five city council members, and the mayor, were in attendance. (The city council consists of five people, overseen by the mayor who provides the deciding vote if there is a tie). The council members and the mayor were split into separate groups to tour – one group watched a video explaining the ethanol-making process while the other toured the plant. At the dinner the members of the council and the mayor discussed no information relating to the proposal.

Four months after the city council approved the annexation, the Schauers filed an action to void the annexation and to claim a violation of Nebraska’s Open Meetings Act. Summary judgment for the City was granted, and the Schauers appealed. 

The Nebraska Supreme Court first investigated whether the Schauers had standing to challenge the annexation.  The Court reviewed previous caselaw on the rights of landowners to challenge municipal annexations.  “This Court has never held that a neighboring landowner, who neither owns a property interest in the annexed territory nor will be subjected to new zoning regulations as a result of annexation has standing to challenge the annexation of someone else’s land….” Further, the Court noted that standing has never been conferred in an annexation challenge “simply because of proximity.”  The Court concluded that the Schauers did not have standing to challenge the annexation.

The Court did find the Schauers, as citizens of Valley County, had standing to bring a claim for violation of the Open Meetings Act.  The Schaurs first argued that because the City described Redevelopment Area #3 as “within the City” in various documents prior to annexation of the land it was misleading to the public. The Court disagreed, finding the contents of the notice reasonable.  The notices described the exact location of the property and included a map of the vicinity.

Next, the Schauers contended that the minutes of the city council meetings failed to identify an established method of notice, which they claim violated the Open Meeting Act. The Court also dismissed this claim.  It had been the long standing history to post agendas at the township library, the County courthouse, and city hall, as well as being made available at the city clerk’s office. The Open Meetings Act simply requires the public body to choose a method of notice, and that the method chosen be recorded in the minutes. In this case, the city clerk was able to establish through testimony that a consistent method of notification had been utilized.

The Schauers finally alleged that the tour and dinner on June 1, 2005 constituted a meeting, that public notice of the meeting was not provided, and it therefore violated the Open Meetings Act.  The Court again disagreed.  Under §84-1410 of the Open Meetings Act no informal meetings can be used for the purpose of circumventing meeting requirements. This however, does not apply to any chance meetings, or travel of members of the public body where no action is taken on matters they supervise.  The Court found that no policy decisions were made or discussed during the tour and dinner.  The separation of city council members into smaller groups was not done to circumvent the Open Meetings Act; rather, the small groups were acquiring information that was later commented on by the public in an officially-recognized meeting of the council. The Court stated that the Open Meetings Act, “does not require policymakers to remain ignorant of the issues they must decide until the moment the public is invited to comment on a proposed policy.” One purpose of the Open Meetings Act is to balance the public’s right to be heard and the public’s “need for information to conduct business.”

The Court then observed that there were never more than two city council members together at the same time during the evening.  The Court noted that the presence of the mayor was immaterial, as the mayor is not a member of the city council.  “The fact that a statute gives a certain official the right to cast the deciding vote in case of a tie…does not, of itself, make that official a member of that body for the purposes of ascertaining a quorum or majority….”  

The decision of the district court was affirmed.

Oglesby, et al v. City Of Coralville
(Iowa Court of Appeals, November 25, 2009)

Scanlon Properties submitted an application to the City of Coralville for annexation of property it owned, including a half mile of the right-of-way for North Liberty Road that connects the city to the Scalon property.  The property is in the two-mile extraterritorial area of the city of North Liberty.  Owners of adjacent property to the proposed annexed land filed a petition seeking a write of certiorari, a declaratory judgment and injunctive relief. The petition alleged that the city had not complied with Iowa Code section 368.7 (1)(b) and (d) when it failed to provide required notice of the annexation. Additionally the plaintiffs argued that although Iowa Code chapter 368 allows the annexation of adjoining land, this particular annexation involved a “shoestring” or “umbilical cord” annexation in which the annexation included noncontiguous land that was only connected to the city through the proposed annexation of one half-mile of a right-of-way. Despite the petition, the City Council voted to approve the annexation application.

At the district court hearing, the city moved to dismiss the petition arguing that the plaintiff’s failed to exhaust all administrative remedies with a state agency and that because they did not own property within the territory of the proposed annexation, the plaintiffs lacked standing .The district court denied their dismissal and enacted a temporary injunction which prevented the city, “from taking further action on the proposed Scanlon property annexation until such time as it complies with all statutory notice requirements.”

The city, in its appeal, first argued that the plaintiffs failed in exhausting all administrative remedies specifically because the City Development Board had not yet approved the annexation, and therefore a judiciary decision on the annexation violated the very principle of exhaustion remedies. The court responds by noting that it is, “well established that a party must exhaust any available administrative remedy before seeking relief in the courts.”  “The exhaustion doctrine applies when (1) an adequate administrative remedy exists and (2) the governing statute requires the remedy to be exhausted before allowing judicial review.”  The court found that there was not an adequate administrative remedy available, because the City Development Board’s review of annexations within the extraterritorial area of another city does not include review to ensure compliance with the landowner notification requirements.  The CDB would not have had information about the extent to which landowners were notified before the city acted, and therefore concluded that, “a resort to the Board to rectify a failure by the city to give notice is permissive only, not exclusive of the judicial remedy.”

In response to the city’s claim that the plaintiffs lacked standing because they did not own property within the territory of the proposed annexation, the court noted that Iowa Code section 368.7 provides that, “Any approval must occur at a public hearing.  At least fourteen days before that hearing, the city must provide written notice to certain entities and landowners, including any non-consenting owners of property in the territory to be annexed and any owners of property adjoining the territory to be annexed.”   The court concluded that plaintiffs were entitled to notice, and thus had standing as owners of land adjacent to the road.  The district court’s decision was affirmed.

SF 2265, the Smart Planning bill, passed out of the House Local Government Committee by a vote of 11-10, with all Republicans and one Democrat voting “no.” It now moves on to consideration by the full House.

The Governor signed the severance/annexation bill (HF 2376) into law yesterday.

HF 2318 that eliminates the term limits for City Development Board members, but changes the length of each term from six to four years, passed the Senate 30-19.  Since it already passed the House 88-7 on February 23 it will be sent on to the Governor for his signature.

SF 2316 relating to floodplain management (discussed here) has been referred to the House Rebuild Iowa standing committee.  The subcommittee assigned to the bill is Schueller (D-Maquoketa), Berry (D-Waterloo), Pettengill (R-Mt. Auburn), Running-Marquardt (D-Cedar Rapids), and Sands (R-Wapello).

SF 2265, the Smart Planning bill, has been the subject of significant activity in the House.  It was assigned to the Local Government standing committee.  The  subcommittee assigned to the bill was D. Olson, (D-Boone), Schueller (D-Maquoketa), Huser (D-Altoona), Grassley (R-New Hartford), and Wagner (R-Marion).  Kressig (D-Cedar Falls) was recently substituted for Huser.  A subcommittee meeting was held last Thursday, and the full Local Government committee has met yesterday and today to discuss this bill.  Several changes have been floating around, but so far the main three sections of the bill (Smart Planning goals, comprehensive planning elements, Smart Planning Task Force) remain in place.  Proposed changes have included changes to the makeup of the task force, the drop-dead date of the task force, changing “shall consider” to “may consider” in reference to the role of the Smart Planning goals in developing local comprehensive plans and development regulations. 

All bills must pass out of their respective committees prior to March 10 to be considered by the full body this session.