Annexation/taxation agreement held to be valid by Missouri court

by Melanie Thwing and Gary Taylor

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.

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