MI conditional land transfer agreement improperly included contract zoning provisions

by Gary Taylor and Hannah Dankbar

Teridee LLC and Koetje Trust v. Charter Township of Haring and Township of Clam Lake
Michigan Court of Appeals, December 8, 2015

Teridee LLC and the Koetje-Trusts own 140 acres of vacant land in Clam Lake Township. They intended to create a mixed-use development on the land. The land was zoned by Wexford County, but because the County could not provide public water and sewer systems the landowners petitioned for the land to be annexed by the City of Cadillac. Charter Township of Haring and Township of Clam Lake opposed this petition.

For the purpose of economic development projects, two local governments are permitted to transfer property for the purpose of economic development projects by written agreement through a Conditional Land Transfer Agreement (aka a 425 agreement (1984 PA 425, MCL 124.21 Act 425). In 2011 the Townships used a 425 agreement to conditionally transfer several properties to the City of Cadillac, which included all of the plaintiffs’ property. When a 425 agreement is in effect, annexation cannot occur (MCL124.29). The landowners brought an action before circuit court challenging the agreement, but it was dismissed because the State Boundary Commission (SBC) had jurisdiction. SBC determined that the 425 agreement was invalid because it was not executed for economic development purposes, but rather to block Cadillac’s annexation attempt.  For other reasons, the SBC also did not approve of the landowners’ annexation petition.

The Townships entered into a new Act 425 agreement and the landowners submitted a new annexation petition. The landowners also filed this action seeking relief on two counts. The landowners asked a trial court to (1) declare the Act 425 agreement invalid because it was not for economic development purposes; and (2) declare the Act 425 agreement void against public policy because it binds the current and future zoning boards of Haring Charter Township to rezone the transferred area to the rezoning requirements assigned in the agreement, which strips the body of legislative authority.

The first count was dismissed, because SBC had primary jurisdiction. The second count required, (1) the Townships to carry out the agreement in a way that did not divest the township of its legislative zoning authority, and (2) to answer whether the Townships could sever the allegedly invalid rezoning provisions of the agreement to make the balance of the agreement enforceable.

The court found that the agreement did strip Haring of their legislative authority and made the agreement void. The Townships appealed.

On appeal the court concluded that the plain language of the agreement strips Haring’s zoning authority over the undeveloped property by determining in the agreement how the property must be zoned. This is evident in the language of the concurring resolutions the Townships passed.

The Townships argued that Act 425 allows for contract zoning, and therefore the zoning requirements in the 425 agreement were authorized by statute.  This argument did not stand up in court. Act 425 permits a 425 agreement to contain language concerning “the adoption of ordinances and their enforcement by or with the assistance of the participating local units.”  This language is not sufficiently specific to permit an interpretation that would allow for contract zoning.

The lower court decision was affirmed.

Kansas annexation statutes require substantive test for “reasonableness,” but annexation in question met the test

by Gary Taylor

Stueckemann and Cedar Lake Association v. City of Basehor
Kansas Supreme Court, April 24, 2015

In 2008 the city of Basehor initiated the unilateral annexation of the Estates – a platted residential subdivision of approximately 115 acres adjacent to the city and accessible by city streets.  The Estates has been served by city sewer under a contract since 2004.  Residents of the Estates raised several issues to contest the annexation.

Improper notice.  The written legal description in the notice provided to parties erroneously included a parcel that was correctly excluded from the map.  The map incorrectly excluded a different parcel that was correctly included in the resolutions and published area sketch.  The Stueckemanns argued that these errors meant that the city failed to meet the statutory notice obligations found in Kansas Statutes.  The Supreme Court agreed with both lower courts that the city met the obligation of “substantial compliance” as the statutes have been interpreted to require in previous court cases.  “Because even with the initial identification errors and inconsistencies acknowledged by the city, the Stueckemanns seemed to be able to determine what area the city sought to annex as they actually notified the city council of the specific discrepancies….”

Plan for extending municipal services.  The city was required by state law to develop a plan for the extension of municipal services to the annexed land.  The Stueckmanns attacked the plan’s provisions for police services and for street and infrastructure maintenance, asserting the plan contained insufficient detail about Leavenworth County’s current services and how the city would proceed to provide its own services post-annexation.  As with the notice requirements, courts review annexation service plans for “substantial compliance” with state law.  The purpose of the plan is “to inform the affected landowners of the municipality’s decision, what benefits they will receive, and what costs they will incur,” so that affected landowners “may attempt to persuade the city that annexation would not be in the best interest of either party.”  In previous cases the Supreme Court had determined that a “bona fide plan” meets the requirement for substantial compliance, and that a “bona fide plan” is one that is prepared and submitted by the city in accordance with the statute in good faith and with honest intentions on the part of the city to implement the plan as submitted.”  In the present case the court could not conclude that the city’s plan was not being submitted in good faith.  The plan provided estimates of the cost and cost impact of providing police protection and extending street infrastructure and maintenance, states the means by which the Estates received such services prior to the annexation, and demonstrates how the city will finance the extension of services.  A specific timetable is not required, nor would it be feasible considering the facts of the case.

Annexation is unreasonable.  The requirement in state law that an annexation be “reasonable” was interpreted by the Kansas Supreme Court.  Prior to a 2005 statutory amendment, it was interpreted to simply mean that the annexation did not “violate constitutional protections or statutory authority….Courts do not pass on the wisdom, necessity, or advisability of legislative acts delegated to municipalities.”  Under the 2005 amendments, however, the court determined that “reasonableness” now means that a landowner may challenge an annexation on substantive grounds.  Despite this new standard, an annexation is not per se unreasonable when the value of new services does not exceed the new taxes imposed.  A court reviewing a city’s unilateral annexation may consider the inherent benefits residents enjoy by virtue of their proximity to the city.  Under the facts of the case, the city’s annexation met the statutory test for reasonableness.

Judgment for the city.

 

Oklahoma annexation statute requiring notice by certified mail means what it says

by Hannah Dankbar and Gary Taylor

In re: Detachment of Municipal Territory from the City of Ada, Oklahoma
Oklahoma Supreme Court, March 31, 2015

In February 2013 the City of Ada passed Ordinance No. 13-02 to annex property into its corporate limits. Property owners in this area attempted to set aside the ordinance, but were denied by the City. Petitioners were property owners within the annexed territory.  They filed for a Declaratory Judgment asking the court to nullify the annexation or, in the alternative, to detach their properties from the city.  The basis for the claim was that the city did not comply with 11 O.S. 2011 §21-103, which sets forth the notice requirements for a municipal annexation.  The trial court denied their request and this appeal followed.

11 O.S. §21-103(B)(2) states:

A copy of the notice of annexation shall be mailed by first-class mail to all owners of property to be annexed as shown by the current year’s ownership rolls in the office of the county treasurer and to all owners of property abutting any public right-of-way that forms the boundary of the territory proposed to be annexed and to the Sales and Use Tax Division of the Oklahoma Tax Commission; provided that the notice of annexation shall be mailed by certified mail to every person who owns a parcel of land of five (5) acres or more used for agricultural purposes.

Petitioners alleged the City failed to provide notice by certified mail to owners of property of five acres or more used for agricultural purposes, which abuts the boundaries of the annexed territory. Certified mail “return receipt requested” was sent to all owners of property within the territory to be annexed; however, the City provided only first class mail to abutting property owners of 5 or more acres of agricultural land, despite the use of the mandatory language “shall” in the statute.

The statute reads that “every person” owning five acres or more of agricultural land should receive notice by certified mail. The record clearly shows that the City did not send notice by certified mail to all owners of five acres or more of agricultural land abutting the boundaries of the annexed territory; rather the City used first-class mail.  The certified mail requirement is meant to protect the property owners who are affected by the annexation but are not within the territory. One such owner, Mr. Plumlee, who owns more than five acres of agricultural property in section 14, testified that he did not receive any kind of prior notice of the proposed annexation. If the City had utilized notice by certified mail, it would have been obvious whether City had sent notice to Mr. Plumlee.  According to the court, “one property owner without notice is too many.”  The Court found that the legislature intended nothing less than certified mail for the agricultural owners of five acres or more within the annexed territory.  The trial court erred in disregarding the legislative intent to provide a specific level of notice to specific groups of property owners.

Classification of land as “urban,” “suburban,” or “rural” for annexation purposes is question of law

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.

 

Annexation after incorporation satisfied the “rule of reason”

by Rachel Greifenkamp and Gary Taylor

Michael H. Ries v. Village of Bristol
(Wisconsin Court of Appeals, April 17, 2014)

In 2008, the Town of Bristol in Kenosha, WI petitioned to incorporate a portion of the town as a village.  After a failed attempt at incorporating  an area of 18 square miles (a majority of the land area of the Town), a revised petition to incorporate 9.2 square miles was submitted to the Wisconsin board on incorporation, which approved  a referendum after determining that the standards for incorporation were met. The incorporation referendum was held and passed. Soon after, the new Village of Bristol petitioned the circuit court to allow a referendum on whether to annex the entire remainder of the Town to the Village.  The court granted the petition, an annexation referendum was held and passed, and the Village enacted an ordinance annexing the entire remainder of the Town into the Village.

Michael H. Ries, M.D., and Ries Partners, Limited Partnership (Ries) challenged the annexation by referendum of the former Town of Bristol into the Village of Bristol. Ries sought a declaration that the annexation of the Town to the Village was invalid because it did not satisfy the rule of reason. The circuit court concluded that the annexation satisfied the rule of reason and dismissed the complaint. Ries appealed to the Wisconsin Court of Appeals

The rule of reason is a judicially created doctrine that “is applied by the courts to ascertain whether the power delegated to the cities and villages has been abused in a given case.” An annexation satisfies the rule of reason when three requirements are met: (1) exclusions and irregularities in boundary lines are not the result of arbitrariness; (2) there is a reasonable present or demonstrable future need for the annexed territory; and (3) no other factors exist that constitute an abuse of discretion on the part of the annexing municipality. Ries challenged whether the second and third requirements were met. Because the challenger to an annexation bears the burden of showing that the annexation violates the rule of reason, Ries must prove that the second and third requirements have not been met.

Future need for annexed territory.  The Court stated that “as long as the annexing authority shows any reasonable need for the annexation, the courts must respect the legislative decision to annex.”  “Need” may be demonstrated by a need for services the Town cannot provide, or a need to extend police, fire, sewer and other services to a substantial number of residents of adjacent areas.  According to the record from the circuit court, the village provided the annexed territory fire and emergency services, public works. and administrative services.  Ries countered that “the annexation was not necessary to extend services from the Village to the Town because even without the annexation, residents of the Town were receiving all of the same services as residents of the Village.” The Court of Appeals noted the circuit court’s findings that the only reason Town residents were receiving services was because they had contracted with the Village for them.  The Village was under no obligation to continue to provide services to the Town, and without the contract the Town, in fact, would not be able to provide them.  The Court dismissed this line of argument.

Abuse of discretion by annexing municipality.  Ries first argued that the village annexed the Town as a means of circumventing the requirements of the incorporation statutes, essentially making an “end run” around the incorporation requirements.  The Court rejected this argument, stating that there is no provision in the annexation or incorporation statutes that makes it unlawful to follow the process that the Village did; i.e., to incorporate, then annex the territory that would not meet the requirements for incorporation.

Ries’s second argument was that the Wisconsin Constitution prohibits annexation of territory that lacks the essential characteristics of a village.  Noting that the “essential characteristics of a village” is a reference to the court’s “village-in-fact” test established in State ex rel. Town of Holland v. Lammers. The Court dismissed this argument as well because the village-in-fact test applies to incorporations, not annexations.

Ultimately, the Court of Appeals analyzed and systematically dismissed each of Ries’ arguments and concluded that the annexation satisfied the rule of reason and the the court’s evidentiary ruling was not an erroneous exercise of discretion. The Court of Appeals affirmed the Circuit Court’s decision.

LaVista (NE) annexation not purely for revenue raising

by Gary Taylor

US Cold Storage, Inc. v. City of LaVista
(Nebraska Supreme Court, March 29, 2013)

In 1969, the owner of a 210-acre parcel in Sarpy County petitioned the Sarpy County Board of Commissioners to designate the tract as an industrial area and the board complied. Under Nebraska law an industrial area is land “used or reserved for the location of industry.” At the time of the designation, La Vista’s zoning jurisdiction did not reach any part of the parcel; therefore the city’s approval was not required. US Cold Storage acquired four lots in the industrial area in 1971 and has operated its business there since that time. Sanitary and Improvement District (SID) 59 was created in 1971 to provide utilities and services to the industrial area. The area of SID 59 is greater than, but includes, the entire industrial area.  In October 2009 La Vista resolved to annex SID 59. It sent written notices to the property owners within SID 59 of an October 22 city planning commission public hearing on the proposed annexation. On November 3, La Vista sent written notice to the property owners within SID 59 of a November 17 city council hearing also regarding the annexation of SID 59. On December 1, after conducting the public hearings, La Vista approved an ordinance purporting to annex SID 59 in its entirety.

On December 16, 2009, Cold Storage filed a class action complaint against La Vista and SID 59 challenging the validity of ordinance 1107. The complaint alleged that ordinance 1107 was invalid because (1) La Vista failed to comply with statutory notice requirements when adopting it, (2) the annexation was for revenue purposes only, and (3) state law prohibited the annexation of the industrial area in SID 59.

On January 18, 2011, while Cold Storage’s challenge to the validity of ordinance 1107 was pending in district court, La Vista directed its planning commission to consider the annexation of only a portion of SID 59; specifically, that portion that did not include the industrial area. On April 19, after giving proper statutory notice of this proposed annexation, La Vista adopted an ordinance (ordinance 1142) purporting to annex the portion of SID 59 that did not include the industrial area.  SID 59 filed a cross claim in the initial action, and asserted that ordinance 1142 was invalid.  The district court found in favor of La Vista on all claims, and Cold Storage and SID 59 appealed.

Statutory notice claim.  It was undisputed that the notices did not strictly comply with Neb. Rev. Stat. 19-5001 (one was 3 days late, another was 2 days early, along with  minor errors).  It was also undisputed that SID 59 had actual notice of the annexation proceedings.  In siding with La Vista, the court relied on Neb. Rev. Stat. 19-5001(5), which only voids annexation decisions on notice grounds if the errors are “willful or deliberate.”

Annexation for revenue purposes.  Caselaw in Nebraska proscribes annexation for revenue purposes only.  The court rejected the notion that because the SID was completely built out the city would be incurring no liabilities.  The court referred to La Vista’s required annexation plan, which identified the street and sewer improvements the city would become responsible for in the event of annexation, and the the additional police staff needed to patrol the area.  The city’s finance manager testified that the city would also assume all debts and obligations of SID 59, including approximately $2.1 million in net bonded debt.  The court concluded that although revenue was a factor, but other factors included the indebtedness which the city would assume, the city’s objective of orderly growth, and the perception that annexation of SID 59, which was already surrounded by the city, would improve the provision of services by eliminating jurisdictional issues.

Prohibition against annexation of industrial area.  Prior to 1991, Neb. Rev. Stat. 13-1115 only permitted the annexation of an industrial area under two circumstances (neither of which applied in this case); however, in 1991 the law was amended to allow annexation if the industrial area “is located in a county with a population in excess of 100,000 persons and the city did not approve the original designation of the tract as an industrial area.”  The court found that both conditions were met in this case.  Cold Storage contended that because La Vista could not have annexed the area prior to 1991, a vested right existed to continue the operation of SID 59 without annexation.  The court noted that the true nature of the vested right claimed by Cold Storage was the “benefit” of lower taxes accruing from not being subject to taxation by La Vista; however, the court cited numerous cases for the proposition that exemption from taxation is not a vested right.  “We find nothing in the language of the pre-1991 version of Neb. Rev. Stat. 13-1115 which would constitute a pledge by the Legislature that the circumstances under which property in an industrial area could be annexed would never be altered by an amendment to the statute.”

The Nebraska Supreme Court affirmed the ruling of the district court on all issues.

Intermunicipal agreement not a “boundary agreement” exempting Village from payment requirement

by Victoria Heldt

Town of Buchanan v. Village of Kimberly
(Wisconsin Court of Appeals, December 6, 2011)

This case revolves around an agreement made between the Town of Buchanan and the Village of Kimberly regarding annexation.  In 2000 the two municipalities designated a specific area within the Town as a Village growth area.  The Town agreed not to oppose the Village’s annexation of land within the described area and the Village agreed not to try to annex land outside the area.  In 2006 the Village annexed property known as Emons Farm that was situated outside the designated Village growth area.  To settle the matter, the Village and the Town entered into an “intermunicipal agreement” in 2007.  In it, the Village agreed to pay the Town $25,000 and to refrain from attracting property owners to annex additional property in the Town.  On the other hand, it clarified that the Village may not disallow future annexation of property within the Town if a unanimous petition to do so is presented.

In 2009, the Village once again annexed property within the Town.  The Town did not object, but claimed that it was entitled to five annual payments pursuant to Wis. Stat. §66.0217(14)(a)1. This statute states that the annexation of a property cannot take place unless the party petitioning for annexation agrees to pay the Town five annual payments equal to the amount of property taxes the Town would normally collect for the property.  The Village was of the opinion that it was exempt from the payments under subd. 2 of the same statute, which states that, in the existence of a boundary agreement, the payment requirement does not apply.  The Village argued that the intermunicipal agreement made in 2007 constituted a boundary agreement, so the payments were not required.  The Town countered that the agreement was not a “boundary agreement” as defined by statute.  The circuit court ruled in favor of the Town that the agreement was not a “boundary agreement.”  It found it illogical to allow a one-time boundary negotiation for a specific instance to govern all future boundary agreements.  It opined that doing so would “render meaningless the statute.”

On appeal, the Town argued that the 2007-2008 version of Wis. Stat. §66.0301 applied while the Village argued that the 2005-2006 version of the statute applied.  The two versions were identical except that the more recent version contained an additional subsection (6) which addressed agreements “determining all or a portion of the common boundary line between two municipalities.”  The Court noted that it did not need to settle the conflict regarding which version applied since the intermunicipal agreement formed in 2007 did not constituted a boundary agreement per statute.  In order to constitute an agreement under Wis. Stat. §66.0301, it must provide for “the receipt or furnishing of services or the joint exercise of any power or duty required or authorized by law.”  Since the agreement made between the Village and the Town in 2007 contained no such provision, it did not qualify as a boundary agreement under the relevant statute.  Consequently, the payment exception in §66.0217(14)(a)2 did not apply.  The Court affirmed the circuit court’s decision in favor of the Town.

Substantial evidence did not exist to support island annexation

by Victoria Heldt

James Baggett, et al., v. The Board of County Commissioners of Douglas County, Kansas
(Kansas Court of Appeals, September 30, 2011)

A group of business owners (applicants) owned 155 acres of land to the northwest of the city limits of Lawrence, Kansas that was zoned County A (Agricultural.)  In 2008, the applicants petitioned the city of Lawrence for a voluntary annexation of the property by the City of Lawrence.  They intended to develop the property into an industrial area.  Since the property was not next to the existing borders of the city, it would be considered an island annexation.  Mastercraft Corporation, the developer of the property, intervened in the case and pursued the annexation and rezoning on behalf of the business owners.  Baggett Group, the plaintiff, is made up of individual homeowners that are located within ½-mile of the property.

K.S.A. 12-520c governs island annexations.  Among the conditions of approval, the statute states that “the board of county commissioners of the county must find and determine that the annexation of such land will not hinder or prevent the proper growth and development of the area or that of any other incorporated city located within such county.”

Initial findings of the City Planning Commission’s staff recommended that the annexation be deferred until a sector plan could be completed. The staff report pointed out that sanitary sewer services, water services, and private utilities were needed for the property, and that a regional detention plan for each watershed on the property was needed but not yet developed. Finally, the report noted that the property was outside the existing service response districts..  Despite these findings, the Commission recommended  to the Board approval of the annexation.  Pursuant to state law, the City then adopted a resolution requesting the County Board find and determine that the annexation of the described property into the City would not hinder or prevent the proper growth and development of the area or that of any other incorporated city located within the County.  At the Board meeting, representatives for Mastercraft stated that annexation was requested in order to 1) bring the property under the jurisdiction of the City and thereby regulate the development more stringently to protect the neighbors; 2) provide for much needed industrial space for the long-term growth of the County; 3) provide more jobs and more tax revenue.  Representatives for the Baggett Group argued the annexation should be denied because of the lack of adequate water or sewage and the fact that future use of the property was unknown.  Mastercraft said it was unable to describe the intended use because the property will be leased out to business owners.  It was only able to say that all future uses will be those permitted within the industrial zoning classifications.  The Board concluded that the annexation would not “hinder or prevent proper growth and development of the area” and approved it.  The Baggett Group filed in district court which affirmed the Board’s ruling.

On appeal, the Baggett Group argued that the Board’s decision was not supported by substantial evidence and was arbitrary, capricious, and unreasonable.  The Court first looked to the report prepared by the City Planning Commission’s staff.  The report found that the annexation request was not in accordance with the “Horizon 2020” policy, which is the city’s formal planning policy.  The property is outside of the plan’s designated urban growth area.  The Plan also specifies that any development should indicate an intended use in order to mitigate harm to the surrounding area.  The Board received several letters from property owners testifying that they had relied on the Horizon 2020 plan.  One such individual stated he had made an investment in property near the property in question based on the fact that it would not be developed within the next 10 to 15 years.

The Baggett Group also raised issue with the lack of specified uses for the property.  They claimed it was impossible for the Board to consider how the annexation would affect the surrounding area without knowing what the land would be used for.  The only description of future use for the property was that it would include only those that were allowed under the industrial zoning classifications.  This very broad description of uses includes “those that cause continuous, frequent, or repetitive noises; noxious or toxic fumes, odors, and emissions; electrical disturbances; night illumination; explosive storage; and other nuisances that would be disturbing to surrounding residences.”  There were 11 homes directly adjacent to the property and 63 homes located within ¾-mile.

The Court noted that there was no evidence in the record of the case that the Board adequately considered how the development of the property would affect the surrounding area.  Although the specific use was not stated, any kind of industrial use can be concluded to be incompatible with residential areas.  Since there are existing residential areas adjacent to the property, the Board should have realized that industrial development would most certainly hinder or prevent proper development as a matter of logic.  The Court then observed that the Board never explored the possible uses that fall under the industrial zoning classification and how the most harmful ones would affect the surrounding area.  The Court ruled that “where the developer of the land in an island annexation cannot specify the intended uses of the land but provides only a category of potential uses, the Board must examine those potential uses – or at least the most potentially deleterious uses – and determine whether those potential deleterious uses would ‘hinder or prevent the proper growth and development of the area.’” For the above reasons, the Court concluded that substantial evidence to support the Board’s conclusion did not exist.  It reversed the district court’s approval of the annexation.

Annexation/taxation agreement held to be valid by Missouri court

by Melanie Thwing and Gary Taylor

Western Taney County Fire Protection District v. City of Branson, Missouri
(Missouri Court of Appeals, February 10, 2011)

The Western Tansey County Fire Protection District (District) and the City of Branson, MO (City) both hold taxation authority within their boundaries for fire protection. Annexations of property within the District’s boundaries by the City in 1994 resulted in an overlap in taxation.   To avoid this, both entered into an “Agreement Concerning Provision of Fire Protection Services” (Agreement). In paragraph 2 it is stated that if the City’s corporate limits are extended by annexations in the future the City will provide the fire services to the annexed property. Paragraph 7 provided that the District would stop taxing any area within the corporate limits of the City after December 31, 1994. Further, if property is annexed District will maintain the right to tax until the end of that year. Finally paragraph 8 agrees that the City will pay $416,666.66 to District for three years starting in 1995 and ending in 1997. All contractual obligations were met.

Then, after the City annexed further property [the case does not specify when this annexation occured] the District sought more money under § 321.322 RSMo. This statute basically holds that a city will assume fire protection duties for annexed property and pay the district either “an amount mutually agreed upon,” or fees under the statutory formula.  The City refused payment claiming that the requested payments fell within the terms of the Agreement and were satisfied by the payments to District. In trial court it was found that § 321.322 was a consideration when crafting the Agreement and therefore the District was entitled to no further compensation.

The District argued to the Court of Appeals that § 321.322 provides a “sixty days’ statutory mandate” that does not allow agreements to extend to annexations outside of sixty days post-contract. The court disagreed.  Under the statute a compensation scheme would be enacted unless a city would contractually assume responsibility to pay a mutually-agreed consideration.  The statute provides that “nothing contained in this section shall prohibit the ability of a city to negotiate contracts with a fire protection district for mutually agreeable services.” The statute does not forbid agreements. Future obligations can be addressed by contract; parties are permitted by statute to craft terms that address foreseeable future annexations. The District argued that the Agreement does not discuss if it extends to future annexations; it only confirms that double taxation and coverage will not occur. However, paragraph 7 specifically states, “future annexations,” thus clarifying that future annexations were forseeable and meant to fall under the agreement’s terms.

Lastly the District argued that § 321.322 violates Article 10, §§ 1 & 2 of the Missouri Constitution and the common law rule against perpetual contracts. If the sections are read together they prohibit District from “contracting away” taxing power without legislative authority. The court, however, pointed out that the District did not lose their right to tax in the Agreement. It simply stopped duplication of services and wrongful double taxing.  The court also found that a contract for indefinite terms does not make it perpetual. Further the Missouri courts often reject the idea that contracts automatically create perpetual obligations or rights. The judgment of the trial 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.

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