Town properly used its police powers to build roads and levy special assessments after developer failed obligations

First State Bank v Town of Omro
Wisconsin Court of Appeals, November 11, 2015

Barony subdivision is a 74 lot subdivision that received plat approval in 2004. Only 9 lots were developed over the course of the next 5 years, and in 2009 First State Bank took control of the remaining 65 lots in lieu of foreclosure. At the time of foreclosure, sections of the roads in the subdivision were not paved. In 2013 Omro authorized the roads to be finished and specially assessed all the lots within the subdivision for the cost of completing the roads, which was $219,641.60. The Bank challenged Omro’s authority to levy the special assessments.  The issue on appeal was whether a municipality may use its police powers to build roads and levy special assessments against the land after a developer fails their obligation to build the roads.

The Bank claimed that the assessment was improper because: (1)the development agreement required the developer to pay for the roads; (2) the Ordinance prohibited the road work because 70% of the subdivision was not developed; (3) at the time the special assessments were imposed the subdivision’s roads were privately owned; (4) three lots were not specially benefited because they do not abut Omro’s roads; and (5) the wording of the preliminary and final resolutions did not conform with § 66.0703. The circuit court provided summary judgment to Omro.

The first two arguments asked whether Omro acted outside of their authority granted by the legislature. The Bank argued that the Ordinance says that the money for paving roads “will come directly from the developer, from a special assessment on the development, or another method approved by the Town Board” and that “the development agreement will dictate the method of payment for the paving.” The Bank argues that the developer is the only recourse for payment based on this language in the Ordinance and in the developer agreement. However, the language in these documents does not limit Omro’s power to levy special assessments. Just because the agreed upon payment did not work out does not mean alternatives are not allowed as long as Omro follows the appropriate procedures in state law permitting special assessments.

The Bank argued that because 70% of the subdivision was not developed the special assessment could not be levied.  The court pointed out, however, that there is language in the Ordinance that allows for a different schedule if Town Engineer and the Town Board recommend a different action, which they did.

The last three arguments asked whether Omro failed to follow the requirements of Wis. Stat. §66.0703.  The Bank argued that because the lots were privately owned, the special assessment was not for public improvement.  This argument missed the point that the roads within the subdivision were public property.  State law provides that all roads or streets shown on a final plat are dedicated to the public unless clearly marked as private, which these were not.  Therefore, the assessments were clearly for a public improvement.

Next, the Bank argued that three of the lots do not receive “special benefits” from the project because they do not abut the newly paved roads and should not be specially assessed because of this. The Bank demonstrated a genuine issue of fact. The circuit court erred in granting summary judgment on this issue.

The court affirmed the decision ratifying the special assessment of the lots that benefit from the road project, but reverse the decision that found that the lots that do not abut the roads received special benefits and remanded that issue to the lower court.

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