Fargo’s method for determining special assessments was appropriate

by Kaitlin Heinen

D & P Terminal v. City of Fargo
(North Dakota Supreme Court, July 18, 2012)

D&P Terminal (D&P) and others appealed to the North Dakota Supreme Court after the district court upheld the decision of the Board of City Commissioners of Fargo to approve special assessments against their properties along 12th Ave. N, where the North Dakota Department of Transportation and City of Fargo planned reconstruction. The district court held that the Board did not violate D&P’s due process rights, nor had the Board been shown to be arbitrary, capricious, or unreasonable in its decision.

North Dakota Supreme Court addressed the standard of review applied to special assessments decisions: the Courts cannot try special assessment cases anew; the Court begins with the presumption that the assessments are valid; and the burden lies with the challenging party to demonstrate that the assessments are invalid. As a result, the Court must affirm the decision of the local governing body unless it acted arbitrarily, capriciously, or unreasonably, or if there is not enough evidence to support its decision. Arbitrary, capricious, or unreasonable conduct consists of incorrect interpretation and application of the controlling law at the time of the decision.

The Commission is governed by N.D.C.C. §40-23-07 to determine the amount assessed to each property in an improvement district.  The Board adopted Fargo’s Infrastructure Funding Policy to make assessments uniform across varying improvements projects. This Policy uses “caps,” that is, maximums, of the amount of listed items assessed based on front footage or square footage of the property. The suggested benefit amount is usually less than the actual cost of improvements, which is then sent to the Commission as a recommendation for its final decision in the final assessments. D&P argued that the use of a “formula” – like the use of front footage or square footage to determine the benefits to property – is barred by the North Dakota Supreme Court’s previous decision in Robertson. The North Dakota Supreme Court rejected D&P’s arguments that the front footage or square footage used in this policy constitutes a “formula.” The Court previously rejected similar arguments in Hector, so the Commission did not fail to properly determine the benefits to each of their properties based on this precedent. The Supreme Court reiterated its rationale, first expressed in Hector:

A municipality has broad discretion to choose the method used to decide what benefits a property receives from an improvement and to apportion the costs to individual properties. A municipality may adopt any method to apportion benefits that is fair and legal and secures an assessment that is in proportion to the benefits as nearly as possible when no rule of apportionment prescribed by statute or charter exists. The process of quantifying benefits accruing to each lot inevitably rests on the judgment and discretion of the special assessment commission. There simply is no precise formula for quantifying benefits. Assessments may be apportioned according to frontage, area, value of, or estimated benefits to, the property assessed, or according to districts or zones, or on any other reasonable basis that is fair, just, and equitable. However, the method used to apportion the assessment cannot be arbitrary and must have some relation to the benefits. [citations omitted]

D&P’s arguments based on Robertson were lacking because they failed to acknowledge the Court’s multiple decisions after Robertson that have previously upheld the use of “formulas,” including front footage, area, and even value to determine benefits to assessed property. In addition, §2801 of the 1905 Revised Codes, which was the primary statute in question in Robertson, required the Commission to personally inspect each lot in the improvement district. That has since been amended by the legislature (1999 N.D. Sess. Laws ch. 366), which has effectively eliminated this requirement of personal inspections, which would be “wholly impractical and unmanageable” today, as compared to the year 1914 when Robertson was decided. The Court concluded then that Robertson is no longer precedent, having been decided nearly 100 years ago. The evolved case law on special assessments in North Dakota since Robertson has changed enough to include a much more limited standard of review such as the use of front footage or square footage to determine the benefits to assessed property.

The North Dakota Supreme Court affirmed, concluding that the Commission did not use an inappropriate method to determine the benefits to D&P Terminal, Inc. and Potter Enterprises’ properties included in the improvement district. “Formulas” in use by special assessment Commission are permissible.

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