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.

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.

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