Wisconsin village entitled to entire tax payment under MFL program

by Melanie Thwing

Town of Somerset v. Wisconsin Department of Natural Resources
(Wisconsin Court of Appeals, March 29, 2011)

J. Peterson owned property in the Town of Somerset, Wisconsin. In 1987 he enrolled the property in the Department of Natural Resources’ managed forest land (MFL) program. The program encourages, “management of private forest lands for the production of future forest crops for commercial use through sound forestry practices.” By enrolling the property the landowner commits to the program for either twenty-five or fifty years.  In return the landowner receives reduced property taxes. If the property is withdrawn from the program the landowner must pay the Department a withdrawal tax pursuant to Wis. Stat. § 77.82(2)(h).  Under Wis. Stat. § 77.89(1) the Department is then required to pay the withdrawal tax to “each municipality in which is located the land to which the payment applies.”

When Peterson’s property was first enrolled in the MFL it was located within the Town of Somerset. In November 2007 the property was purchased by the Village of Somerset and annexed to the Village.  In August 2008 the Village withdrew the property from the program. A withdrawl tax of $43,597.28 was paid to the Department by the Village, but that money was then refunded back to the Village because the property was in the Village at the time of withdrawl.

The Town filed for judicial review of the Department’s decision. They argued that the Department did not interpret Wis. Stat.  § 77.89(1) correctly, or alternatively that the statute is “unconstitutional on its face in that it deprives [the Town] of a protected property interest, contrary to [the] Wisconsin Constitution.” The town argues the withdrawal tax payment should have been split between the municipalities where the land was located while the tax burden was lessened.

The Department moved to dismiss this claim and the circuit court granted the motion. They found (1) the Town lacked standing to challenge the Department’s decision, (2) the Department’s interpretation of the statute was entitled to deference, and  (3) the Town lacked standing to challenge constitutionality of § 77.89(1).

The Town then appealed to the Wisconsin Court of Appeals who finds that the circuit court was correct in dismissing the Town’s petition. Wis. Stat. § 77.89(1) requires the Department to pay “100 percent of each withdrawal tax payment received under 77.88(7) to the treasurer of each municipality in which is located the land to which the payment applies.” The present tense of the statute indicated that the payment should be made to where the property is located currently. The Town claims the statute is ambiguous because the statute states, “each municipality.”  The Court of Appeals did not consider this argument to be reasonable because it again ignores the present tense of the statute. The language “each municipality” simply directs the payment in cases where the land is presently located in more than one municipality.

Finally, the court concluded that municipalities do not generally have standing to challenge the constitutionality of statutes. The only exception to this is if the issue is of great public concern. However this exception only applies “to cases where a private litigant and a creature of the state are involved, and not to suits limited to creatures of the state.” No private litigants are present here and it involves a state agency and two municipalities. Because of this the great public concern exception cannot be applied. The decision of the circuit court was affirmed.

Nebraska Supreme Court addresses standing to challenge annexation, and Open Meetings Act issues

by Melanie Thwing

Schauer v. Grooms
(Nebraska Supreme Court, August 6, 2010)

Curt and Susan Schauer live just outside of Ord in Valley County, Nebraska. In 2005 the City decided to recruit a developer to build and operate an ethanol plant on undeveloped land. Eventually, Redevelopment Area #3 (located 4 miles outside of the City’s border, and 1/8th of a mile from the Schauer’s farm) was chosen as a potential plant site.  Redevelopment Area #3 was declared blighted, then the city annexed the land to make TIF financing available for the project. 

After Val-E Ethanol was selected to construct and operate the plant numerous city council meetings were held. These meetings spanned from February to November 2005, from the time the land was blighted, a plan adopted, a financing agreement was decided and the land annexed.  These meetings were publicly noticed, consistent with Nebraska’s Open Meetings Act; however, on June 1, 2005 a dinner and tour of a similar ethanol facility were hosted by the Valley County Economic Development Board hosted without public notice.  Invitations were sent to numerous county residents including Schauers (who did not attend). Three of five city council members, and the mayor, were in attendance. (The city council consists of five people, overseen by the mayor who provides the deciding vote if there is a tie). The council members and the mayor were split into separate groups to tour – one group watched a video explaining the ethanol-making process while the other toured the plant. At the dinner the members of the council and the mayor discussed no information relating to the proposal.

Four months after the city council approved the annexation, the Schauers filed an action to void the annexation and to claim a violation of Nebraska’s Open Meetings Act. Summary judgment for the City was granted, and the Schauers appealed. 

The Nebraska Supreme Court first investigated whether the Schauers had standing to challenge the annexation.  The Court reviewed previous caselaw on the rights of landowners to challenge municipal annexations.  “This Court has never held that a neighboring landowner, who neither owns a property interest in the annexed territory nor will be subjected to new zoning regulations as a result of annexation has standing to challenge the annexation of someone else’s land….” Further, the Court noted that standing has never been conferred in an annexation challenge “simply because of proximity.”  The Court concluded that the Schauers did not have standing to challenge the annexation.

The Court did find the Schauers, as citizens of Valley County, had standing to bring a claim for violation of the Open Meetings Act.  The Schaurs first argued that because the City described Redevelopment Area #3 as “within the City” in various documents prior to annexation of the land it was misleading to the public. The Court disagreed, finding the contents of the notice reasonable.  The notices described the exact location of the property and included a map of the vicinity.

Next, the Schauers contended that the minutes of the city council meetings failed to identify an established method of notice, which they claim violated the Open Meeting Act. The Court also dismissed this claim.  It had been the long standing history to post agendas at the township library, the County courthouse, and city hall, as well as being made available at the city clerk’s office. The Open Meetings Act simply requires the public body to choose a method of notice, and that the method chosen be recorded in the minutes. In this case, the city clerk was able to establish through testimony that a consistent method of notification had been utilized.

The Schauers finally alleged that the tour and dinner on June 1, 2005 constituted a meeting, that public notice of the meeting was not provided, and it therefore violated the Open Meetings Act.  The Court again disagreed.  Under §84-1410 of the Open Meetings Act no informal meetings can be used for the purpose of circumventing meeting requirements. This however, does not apply to any chance meetings, or travel of members of the public body where no action is taken on matters they supervise.  The Court found that no policy decisions were made or discussed during the tour and dinner.  The separation of city council members into smaller groups was not done to circumvent the Open Meetings Act; rather, the small groups were acquiring information that was later commented on by the public in an officially-recognized meeting of the council. The Court stated that the Open Meetings Act, “does not require policymakers to remain ignorant of the issues they must decide until the moment the public is invited to comment on a proposed policy.” One purpose of the Open Meetings Act is to balance the public’s right to be heard and the public’s “need for information to conduct business.”

The Court then observed that there were never more than two city council members together at the same time during the evening.  The Court noted that the presence of the mayor was immaterial, as the mayor is not a member of the city council.  “The fact that a statute gives a certain official the right to cast the deciding vote in case of a tie…does not, of itself, make that official a member of that body for the purposes of ascertaining a quorum or majority….”  

The decision of the district court was affirmed.

Need not exhaust administrative remedies at City Development Board before bringing suit on notice issue

by Allison Arends

Oglesby, et al v. City Of Coralville
(Iowa Court of Appeals, November 25, 2009)

Scanlon Properties submitted an application to the City of Coralville for annexation of property it owned, including a half mile of the right-of-way for North Liberty Road that connects the city to the Scalon property.  The property is in the two-mile extraterritorial area of the city of North Liberty.  Owners of adjacent property to the proposed annexed land filed a petition seeking a write of certiorari, a declaratory judgment and injunctive relief. The petition alleged that the city had not complied with Iowa Code section 368.7 (1)(b) and (d) when it failed to provide required notice of the annexation. Additionally the plaintiffs argued that although Iowa Code chapter 368 allows the annexation of adjoining land, this particular annexation involved a “shoestring” or “umbilical cord” annexation in which the annexation included noncontiguous land that was only connected to the city through the proposed annexation of one half-mile of a right-of-way. Despite the petition, the City Council voted to approve the annexation application.

At the district court hearing, the city moved to dismiss the petition arguing that the plaintiff’s failed to exhaust all administrative remedies with a state agency and that because they did not own property within the territory of the proposed annexation, the plaintiffs lacked standing .The district court denied their dismissal and enacted a temporary injunction which prevented the city, “from taking further action on the proposed Scanlon property annexation until such time as it complies with all statutory notice requirements.”

The city, in its appeal, first argued that the plaintiffs failed in exhausting all administrative remedies specifically because the City Development Board had not yet approved the annexation, and therefore a judiciary decision on the annexation violated the very principle of exhaustion remedies. The court responds by noting that it is, “well established that a party must exhaust any available administrative remedy before seeking relief in the courts.”  “The exhaustion doctrine applies when (1) an adequate administrative remedy exists and (2) the governing statute requires the remedy to be exhausted before allowing judicial review.”  The court found that there was not an adequate administrative remedy available, because the City Development Board’s review of annexations within the extraterritorial area of another city does not include review to ensure compliance with the landowner notification requirements.  The CDB would not have had information about the extent to which landowners were notified before the city acted, and therefore concluded that, “a resort to the Board to rectify a failure by the city to give notice is permissive only, not exclusive of the judicial remedy.”

In response to the city’s claim that the plaintiffs lacked standing because they did not own property within the territory of the proposed annexation, the court noted that Iowa Code section 368.7 provides that, “Any approval must occur at a public hearing.  At least fourteen days before that hearing, the city must provide written notice to certain entities and landowners, including any non-consenting owners of property in the territory to be annexed and any owners of property adjoining the territory to be annexed.”   The court concluded that plaintiffs were entitled to notice, and thus had standing as owners of land adjacent to the road.  The district court’s decision was affirmed.

Smart Planning moves on; Severance/annexation now law

by Gary Taylor

SF 2265, the Smart Planning bill, passed out of the House Local Government Committee by a vote of 11-10, with all Republicans and one Democrat voting “no.” It now moves on to consideration by the full House.

The Governor signed the severance/annexation bill (HF 2376) into law yesterday.

Legislative update: March 3

by Gary Taylor

HF 2318 that eliminates the term limits for City Development Board members, but changes the length of each term from six to four years, passed the Senate 30-19.  Since it already passed the House 88-7 on February 23 it will be sent on to the Governor for his signature.

SF 2316 relating to floodplain management (discussed here) has been referred to the House Rebuild Iowa standing committee.  The subcommittee assigned to the bill is Schueller (D-Maquoketa), Berry (D-Waterloo), Pettengill (R-Mt. Auburn), Running-Marquardt (D-Cedar Rapids), and Sands (R-Wapello).

SF 2265, the Smart Planning bill, has been the subject of significant activity in the House.  It was assigned to the Local Government standing committee.  The  subcommittee assigned to the bill was D. Olson, (D-Boone), Schueller (D-Maquoketa), Huser (D-Altoona), Grassley (R-New Hartford), and Wagner (R-Marion).  Kressig (D-Cedar Falls) was recently substituted for Huser.  A subcommittee meeting was held last Thursday, and the full Local Government committee has met yesterday and today to discuss this bill.  Several changes have been floating around, but so far the main three sections of the bill (Smart Planning goals, comprehensive planning elements, Smart Planning Task Force) remain in place.  Proposed changes have included changes to the makeup of the task force, the drop-dead date of the task force, changing “shall consider” to “may consider” in reference to the role of the Smart Planning goals in developing local comprehensive plans and development regulations. 

All bills must pass out of their respective committees prior to March 10 to be considered by the full body this session.

More on HF 2376 severance/annexation bill

by Gary Taylor

HF 2376 arises out of a very specific situation in Black Hawk County, concerning land around the Highway 58/Highway 20 interchange.  The land was annexed into Hudson a number of years ago, but as Cedar Falls has grown toward the interchange several of the landowners have had second thoughts and want to go to Cedar Falls for access to infrastructure for development.  My understanding is that this has been a VERY longstanding contentious issue.  A petition is before the City Development Board currently. 

The bill allows a landowner or (contiguous) landowners within the boundaries of one city to file a petition for severance with the city council if the landowner’s property would be eligible for annexation by a different city if severed (presumably this means if the property in question borders the other city).  The landowner must also file a petition for annexation with the other city.  The proposed severance/annexation must not create an island.  If both cities approve, the petition goes to the City Development Board for a hearing.  As part of the severance/annexation, the cities may negotiate an agreement to share property tax revenues for a period not to exceed forty years, and to transition zoning regulations within ten years.  The City Development Board must approve both the severance/annexation and any tax-base sharing/zoning agreement that has been negotiated.  The City Development Board is not allowed to modify the terms of the severance/annexation.  The City Development Board’s approval is not subject to election. 

The section concerning the tax-base sharing agreement contains this interesting provision:

An agreement may include additional transition provisions relating to the transfer or sharing of property tax revenues for property outside the boundaries of the territory described in the petition and any other provisions deemed by the cities to be in the public interest if such actions are within the authority of the cities.

This provision would seem to open the door to some interesting agreements authored by creative municipal attorneys.  A few years ago I wrote a paper with two colleagues at Michigan State about Michigan’s annexation/tax base sharing law (PA 425), and the problems it has caused from a planning perspective.  Like HF 2376, Michigan’s PA 425 was written with a very specific object in mind: to allow the city of Flint and the neighboring township to negotiate for land and infrastructure to accommodate a General Motors auto assembly plant.   Granted, the Michigan law differs from HF 2376 in many ways, but no one at the time (1984) foresaw all the creative ways PA 425 would be utilized beyond the Flint agreement. In the case of HF 2376 it would take a severance/annexation situation to trigger the cities’ agreement-making authority, but if such a situation were to occur (or be manufactured) the range of possibilities is intriguing.

Updates on severance/annexation bill, horizontal property regime review

by Gary Taylor

HF 2376 concerning the simultaneous severance and annexation of territory passed the House by a 99-0 vote and has been sent to the Senate.  Since it looks like it has momentum I will provide a more thorough description of the bill in the next day or two.

SF 2264 which gives cities the authority to review and approve horizontal property regimes proposed in their 2-mile extraterritorial area (in the same manner as subdivisions are reviewed), passed the Senate on a 42-6 vote, and was sent to the House.

Adjoining landowners in annexation case need not exhaust administrative remedies before going to court

by Gary Taylor

William and Sharon Oglesby, et. al. v. City of Coralville
(Iowa Court of Appeals, November 25, 2009)

District court had jurisdiction to review claim of inadequate notice of city action on annexation.

Scanlon Properties submitted an annexation request to the City of Coralville for property it owns along North Liberty Road, as well as a half mile of the right-of-way of North Liberty Road that connects the city to the Scanlon property.  The property is in the two-mile extraterritorial area of North Liberty.  On the same day the city council voted to approve the annexation, several owners of property adjacent to the half mile stretch of North Liberty Road (the plaintiffs in this case) filed a petition in district court contending the city had failed to provide them the notice of annexation required under Iowa Code 368.7(1)(b) and (d).  At a district court hearing held two weeks later the city asserted the plaintiffs did not have standing to bring their claims and had failed to exhaust administrative remedies.  The district court found that the city was required to give plaintiffs notice before taking action to annex the land, and issued a temporary injunction to prevent the city from taking further action on the annexation “until such time as [the city] complies with all statutory notice requirements.” 

After two years of procedural wrangling the plaintiffs moved for summary judgment to obtain a final resolution of the case, stating that the city council action approving the annexation was void since the statutorily-required notice was not provided.  The city cross-moved for summary judgment asserting the plaintiffs were not entitled to notice, did not have standing, and had not yet exhausted all available administrative remedies.   The district court agreed with the plaintiffs, and further determined that since the city council action was void, there was no decision to be reviewed by the City Development Board (CDB) and thus there were no administrative remedies to exhaust.

The Court of Appeals affirmed the ruling of the district court, granting summary judgment in favor of the plaintiffs which voided the annexation.  After noting that the annexation required CDB review under Iowa Code 368.7(3) because of its proximity to North Liberty, the court reviewed the purposes of CDB review.  It noted that the CDB is not “an all-purpose enforced of chapter 368’s requirements.”  The CDB’s review of annexations within the extraterritorial area of another city does not include review to ensure compliance with the landowner notification requirements.  Thus, in the ordinary course of events the CDB will not even have information about the extent to which landowners were notified before the city acted.  The court concluded that resort to the CDB to rectify a failure by the city to give notice is “permissive only, and not exclusive of the judicial remedy.”  This being the case, there is no requirement that the administrative remedy of CDB review be exhausted before resort to the judicial system for resolution.  It did not help the city’s case that “in a classic Catch-22” the city argued simultaneously (1) before the district court that plaintiffs had not exhausted their administrative remedies, and (2) before the CDB that the plaintiffs did not have standing to appear in the CDB proceedings.   “An administrative remedy would hardly be adequate for the plaintiffs if it expressly disallowed them from appealing the administrative decision.”

Finally the court dismissed the city’s claim that the plaintiffs were not entitled to notice because they do not “own” North Liberty Road (although the city did concede the plaintiffs held legal title to the land over which the road passes, they argued that legal title was immaterial because plaintiffs did not “control” the land).  Regardless of the resolution of this technicality, the court concluded that plaintiffs would be entitled to notice as owners of land adjacent to the road if they, in fact did not “own” the road.

Iowa C.A. assumes validity of pre-annexation agreement

by Allison Arends and Gary Taylor

NT Home Builders v. City of Buffalo
(Iowa Court of Appeals, April 8, 2009)

Provisions of pre-annexation agreement did not bind city council to rezone property to particular district classification. 

NT Home Builders and the City of Buffalo entered into a pre-annexation agreement when NT purchased real estate in the City with the intent of developing approximately 80 family units. The pre-annexation agreement, which was approved by the Buffalo City Council, required NT to, “request that the property be zoned for single family residences” and that NT “shall be subject to and comply with all other ordinances of the Buffalo Municipal Code.”  Buffalo’s zoning code states that newly annexed land shall come into the city zoned  “A- Country Home.”  This designation would allow NT to develop only about 60 units.    NT requested that Buffalo re-zone the property to B-1 Residential which would allow development of 82 units. The city denied NT’s request. NT filed suit against the City of Buffalo arguing that the pre-annexation agreement required Buffalo to zone the property B-1. The district court affirmed the City of Buffalo’s refusal to re-zone. NT appealed. 

As a preliminary matter the court addressed the question of the validity of pre-annexation agreements, stating:

“In recent years, there has been considerable controversy over whether a municipality may enter into an agreement with a private party binding the municipality to specific zoning in the future. We will assume, without deciding, that Buffalo’s city council could enter into an agreement obligating it to take certain zoning actions.  After all, the city council is Buffalo’s final zoning authority.”

NT first contended that the reference in the pre-annexation agreement to “single family residence” zoning required the city to rezone to B-1 Residential.  The Court of Appeals disagreed, determining that the reference did not require rezoning to B-1 because single family residential development could be accomplished either with A- Country Home or B-1 Residential.

The court also found that both parties were acting in “good faith” and both were oblivious to the inability of NT to construct 80 homes on A- Country Home land until after the pre-annexation agreement was signed. 

NT also argued that it had the legal right to whatever zoning was needed to erect 80 homes on the property. In light of the previous two findings, the court found that this would put an unfair burden on the municipality, because it would require them to assess the developer’s plans in detail and see to it that the developer’s interests were adequately protected under the contract. The court recognizes that this burden should lie with the developer, and that it is the developer who should be obligated to contract expressly for the zoning it needs. Therefore the court did not grant NT damages, “the district court’s finding of good faith on the part of both parties would appear to foreclose liability on this basis.”





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