Right-of-way method for calculating special assessments did not treat similarly-situated properties similarly

by Kaitlin Heinen

Peller Investments, LLC v. City of Lake Geneva
(Wisconsin Court of Appeals, January 31, 2013)

In the City of Lake Geneva, Edwards Boulevard runs north and south, with its northern-most end intersecting Sheridan Springs Road. Prior to 2010, Edwards Boulevard was not a through street to Sheridan Springs Road; it ended at the northern edge of a Target store property. In 2010, the City undertook a project to extend Edwards Boulevard to Sheridan Springs Road. This project included the construction of other structures such as storm water detention ponds. The Peller Investments, LLC property is located to the north of the Target property and has frontage on Edwards Boulevard as extended. The Peller property was originally 16.63 acres in size, but on May 3, 2010, Peller executed a quit-claim deed to the City for a 3.61-acre portion of the Peller property.  The City had planned to place a storm water detention pond via an easement on the 3.61-acre parcel, as part of the project.

On September 27, 2010, the City’s Common Council adopted a resolution that directed the City’s engineer (from Crispell-Snyder, Inc.) to prepare a report consisting of plans and costs for the improvements, a schedule of assessments, and the properties to be benefited. Kurt Davidsen drafted the assessment report. Under the straight-line method, Davidsen calculated assessments based on the length of each property running parallel to Edwards Boulevard. The report listed the Peller property as a benefited property, assessing it for 916.52 feet running parallel to Edwards Boulevard at a rate of $377.36 per foot for an assessment total of $345,857.99. The City’s Public Works Director, Dan Winkler, and the City Administrator, Dennis Jordan, consulted with Sue Barker, another engineer with Crispell-Snyder. Winkler and Jordan believed that the straight-line method did not adequately reflect the benefits received by the properties. They believed that the Peller property received a “unique special benefit” because it was the only property that became develop-able as a result. So the City asked Crispell-Snyder to draft a second report applying a different assessment method called the right-of-way method, which calculates assessments based on the length of the road right-of-way abutting each property. On October 25, 2010, the City’s Common Council held a public hearing on the assessment. The City adopted a resolution that approved the second report, using the right-of-way method. The second report increased the project cost from $2,629,981.50 to $2,746,359.60. The City issued an assessment on the Peller property for 1,142.01 feet of right-of-way frontage, having measured Peller’s curb frontage on Edwards Boulevard (657.03 feet) plus the boundary line between the Peller property and the 3.61-acre parcel (484.98 feet). The City treated the 3.61-acre parcel as part of the road right-of-way, so while the parcel borders only 379.36 feet of Edwards Boulevard, the City considered the boundary between the Peller property and the parcel to be the road right-of-way.

The City sent a letter on October 28, 2010, notifying Peller that the City had adopted the final resolution. The letter included the assessment schedule, which reflected a special assessment levy of $521, 5333.13 against the Peller property. Peller filed a complaint against the City under Wis. Stat. § 66.0703(12)(a), which authorizes property owners to challenge special assessments in circuit court. Peller argued that the City’s special assessment method was unreasonable because:  (1) the City did not treat uniformly the City’s parcel 4 and Peller’s 3.61-acre parcel because, unlike parcel 4, the City did not assess the road frontage of the 3.61-acre parcel, but treated it as part of the road right-of-way, and (2) it resulted in Peller paying a disproportionate share of the project cost.  Peller also argued that the City unreasonably allocated a portion of the Ryan Companies’ (another benefited property) $600,000 payment to cover part of the assessments for which the City was responsible. However, the City argued that Peller was the only property that became develop-able as a result of the Edwards Boulevard extension, and because of the “unique benefit” it imposed, the right-of-way assessment was reasonable. On January 11, 2012, the circuit court held a hearing and granted Peller’s motion against the City, so the City appealed to the Wisconsin Court of Appeals.

The court stated that when a municipality imposes special assessments by exercise of its police powers, it is required that the property be benefited and the assessment be made upon a reasonable basis. The Edwards Boulevard extension project benefited all properties in the assessment district. So the Wisconsin Court of Appeals then examined the reasonableness of the assessment. There is no single methodology for apportioning assessments, and the law presumes that the municipality proceeded reasonably in making the assessment. Challengers to the assessment must show evidence that the assessment was unreasonable. Since “reasonable basis” is not defined by law, the facts of each situation must determine the reasonableness of the assessment. Past cases have established that “an assessment is unfair when property owners in comparable positions face a marked disparity in cost for the receipt of equal benefits when an alternate, more equitable, method of assessment is feasible.” Wisconsin appellate courts have also established a two-part test to determine reasonableness: 1) the assessment must be uniform, fairly and equitably apportioned among property owners in comparable situations, and 2) the assessment must not affect a unique property disproportionate to the benefit  conferred.

Peller challenged whether the right-of-way method treated comparable properties uniformly. Peller argued that the City treated parcel 4 as an assess-able lot, but did not treat the similarly-situated 3.61-acre parcel as an assess-able lot. Instead, the City assessed the 3.61-acre parcel as part of the road right-of-way, thus increasing the Peller property frontage. The Court of Appeals agreed. Uniformity is required among comparable properties, and although the right-of-way method is uniform in its calculations, the application of the method by the City resulted in disparate treatment of similarly-situated properties. Parcel 4 and the 3.61-acre parcel were characterized differently, even though both abutted Edwards Boulevard and contained storm water detention ponds, which was therefore unreasonable. Since Peller showed evidence that the assessment was unreasonable, the City then must show otherwise. The City argued that under the right-of-way method, all properties were treated the same. However, this does not explain the disparate treatment of parcel 4 and the 3.61-acre parcel. The City stated that the pond on the 3.61-acre parcel abutted private property whereas the pond on parcel 4 did not, so there was no reason to make the parcel 4 pond part of the right-of-way. Because the City does not explain why this difference should matter, the court concluded that the City did not show that the assessment was reasonable. Because the assessment failed the first prong pf the two-part test, the court did not need to examine the second prong.

The Wisconsin Court of Appeals affirmed the circuit court’s judgment in regards to the City not treating comparable properties uniformly and that the special assessment against Peller was unreasonable. The total cost of the project was $2,746,359.60, which involved a total of 5,741.05 feet in the special assessment district.  Dividing the $2,746,359.60 project cost by 5,741.05 feet provides an assessment rate of $478.37 per foot.  The Peller property had 657.03 feet of assess-able frontage, so the proper levy against the Peller property was determined by the court to be $314,303.44.

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