by Gary Taylor
SID No. 196 of Douglas County v. City of Valley
Nebraska Supreme Court, February 6, 2015
Valley, Nebraska is a city of the second class located between Omaha and Fremont. Cities of the second class are permitted by state law to annex contiguous or adjacent lands that are urban or suburban in character and not agricultural lands that are rural in character.
In November 2010 the Valley City Council passed three ordinances to annex three different areas near Valley. The subject of this litigation was Ordinance No. 611, which annexed six different areas near the city. One of these areas, commonly known as Ginger Cove subdivision, contained Sanitary Improvement District (SID) 196. The area is almost completely developed, with 155 residential homes surrounding a sandpit lake. At the time Ordinance 611 was adopted it did not share any common borders with Valley, but did share borders with two other areas being annexed under Ordinance 611. The other areas subject to Ordinance 611 contained residential developments, and operating and exhausted sand and gravel mines (owned by Lyman-Richey (L-R)), and were developed to varying degrees.
In 2006 SID 196 and L-R entered into an agreement with Valley, agreeing to pay the city for the cost to construct a lift station and force main to route wastewater from the properties to the regional pumping station in the city. SID 196 and L-R reserved the capacity for 233 residential lots to use the wastewater system, in contemplation of the development of a residential community. Valley took out $4.5 million in bonds to finance regional pumping stations and the force main to move wastewater to the treatment facility in Fremont, and charges the subdivision residences a fee for use of the sewer system.
Prior to Ordinance 611, the area to be annexed was served by fire and paramedic services from Valley. The Douglas County Sheriff provided police services with Valley Police Department as secondary responder. Snow removal was conducted by Douglas County. Valley would assume all provision of services after the annexation.
SID 196 challenged Ordinance 611, alleging that (1) some land within the subdivision (where SID 196 operates) is not urban or suburban in character; (2) it fails to meet the contiguous or adjacent requirement, and (3) the area was annexed for an improper purpose.
Character of area. In the trial court, the experts for the two sides agreed on the physical nature of the land, how it is being used, the number of residences, and all other facts regarding the area; however, they came to different conclusions about how the land should be classified under the statute. The Nebraska Supreme Court noted that the issue of how the land should be classified is a question of law. The question of law is one for the court to decide. The fact that the experts came to two different legal conclusions based on the same set of facts does not create “a material issue of fact” which would be required to defeat summary judgment.
SID 196’s expert determined that the property was not urban or suburban because the property was being used for mining operations, and because the property was zoned transitional agriculture. The Court disagreed. Mining has traditionally never been considered an agricultural use of property. L-R’s actions prior to Ordinance 611 indicated that the properties would eventually be used for residential development. Furthermore, zoning does not dictate the ability to annex. The Court found no merit to the claim that the land in question was agricultural and rural in character.
Contiguous or adjacent. Generally, a municipality may annex several tracts as long as one tract is substantially adjacent to the municipality and the other tracts are substantially adjacent to each other. SID 196 argued that the present circumstance was a case of “strip annexation” – annexing a strip of land in order to reach a larger parcel – which the Nebraska courts have disfavored. The focus of strip annexation court cases is on the extent to which the city shared a border with the land to be annexed; it is not solely on the shape of the tract to be annexed.
SID 196 argued that the annexation of a large, largely undeveloped parcel, to connect a large, developed parcel was strip annexation, but the Supreme Court found no authority to impose a “community of interest” requirement on an annexation. The annexation as a whole – looking at all parcels together – met the contiguous or adjacent requirement of the statute.
Purpose of annexation. Case law in Nebraska is clear that it is improper for an annexation to be solely motivated by an increase in tax revenue. SID 196 argued that Valley was motivated by SID 196’s extremely low debt, and pointed out that another SID was not chosen because it had a much higher level of debt. The Supreme Court said that debt level has no relation to raising tax revenues. Valley was motivated, at least in part, to equalize the burden among city residents and SID 196 in financing the recent sewer system improvements. It would be “fiscally irresponsible” for the city not to at least take debt levels into consideration before annexing territory.