HomeMy WebLinkAboutCity Council Packet 07-25-1994 Special 2rp)City of
Plymouth
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Adding Quality to Life
Materials for City Council Meeting
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3400 Plymouth Blvd • Plymouth, Minnesota 55447-1482 • Tel: 763-509-5000 • www.plymouthmn.gov ,1,,
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CITY OF PLYMOUTH
3400 PLYMOUTH BOULEVARD, PLYMOUTH, MN 55447
DATE: July 25, 1994
TO: Mayor and City Council
FROM: Dwight D. Johnson, City Manager
SUBJECT: Summary of Events
Freeman Special Assessment Case. Attached is a ruling from District Court striking
down City assessments for a street renovation project on Nathan Lane in southeast
Plymouth. The project was a part of the City's 1991 program. The judge ruled that
the properties in question (condominiums, day care, and shopping) were not shown to
be benefited by the project as required by law. The City adopted an assessment policy
in the late 1980's that was based upon average costs Citywide over a 20 year time
period. The judge is suggesting that the City needs to show specific benefit to
properties in a specific neighborhood in a specific year from a specific project. While
the finding that there is no benefit to the properties in this case seems clearly wrong,
our generalized assessment procedure also seems to be lacking. If we appeal and lose
again, we could set a much larger precedent for both ourselves and other cities.
Therefore, staff has a preliminary opinion that we should not appeal this case. We have
90 days to appeal and we will be discussing this with the City Attorney in more detail
and getting his opinion. The amount the City would need to refund is $35,491.20 plus
interest. This amount will not materially affect the City's operations or 1995 budget.
For the future, staff will propose a different assessment policy. We also may need to
hire an appraiser prior to assessing property to find out about any problems in advance.
We do not necessarily need to consider changing estimated assessments for projects
now underway, since the case above did not relate directly to single family residential
property and much unnecessary confusion might result with many citizens. In the
coming years, we may need to consider adding more City funding to the Infrastructure
Reserve Fund to allow for less than 30 % of total revenue to come from assessments.
Travel Plans. As per our new policies, I am to inform you in advance of any plans to
travel on City business. I plan to attend the International City Management Conference
in Chicago from Saturday, September 17 through Wednesday, September 21, 1994.
This will cause me to miss the September 19 regular Council meeting, which I am sure
Kathy can handle very well. The overall cost to the City should be about $1,200,
including travel, registration, and hotel costs. Also, I am planning to be on vacation
from August 2 through August 7, 1994. I will attend both the August 1 council
meeting and the August 8 council budget session.
94 JUL r;;:. 3• STATE OF MINNESOTA " 'v'.'.:
A>.:.. DISTRICCOURT
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COUNTY OF HENNEPINV JNh FOURTH JUDf XiD YSTRICT
Wallace Freeman; Elaine
Freeman; Judith Freeman;
WCF Theatre Associates Limited
Partnership, a Minnesota limited
partnership; Freeman Building
Company, a Minnesota corporation;
and Willow Grove Partners, a
general partnership;
v.
The City of Plymouth,
Plaintiffs/Appellants,
Defendant/Respondent.
FINDINGS OF FACT,
CONCLUSIONS OF LAW
AND ORDER
File No. 92-21168
The above -entitled matter came on for trial before the
undersigned Judge of District Court on March 16, 17 and 18, 1994, in
the Hennepin County Government Center, 330 South Sixth Street,
Minneapolis, Minnesota. Plaintiffs were represented by Nancy B. Smith,
Esq. Defendant was represented by Keith J. Nelsen, Esq. After the
conclusion of the testimony, the parties submitted post trial
memoranda. Based upon the evidence produced at trial and the memoranda
and arguments of counsel, the Court makes the following:
FINDINGS OF FACT
1. The Plaintiffs are the owners of the following properties
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located on Nathan Lane in the City of Plymouth (the "City"), County of
Hennepin, and identified as follows:
PID #3611822430019 (a daycare center);
PID #3611822430020 (a shopping center);
PID #3611822440009 (a theatre);
PID #3611822330010 (an unimproved lot);
PID #3611822430024 (a condominium unit);
PID #3611822430025 (a condominium unit);
PID #3611822430041 (a condominium unit);
PID #3611822430071 (a condominium unit);
PID #3611822430093 (a condominium unit); and
condominium unit 109 of the Willow Grove Condominiums.
2. In 1986 and 1987, the City of Plymouth began evaluating
its entire street system to formulate a plan to keep streets
functional.
3. It hired the engineering firm of Short, Elliott
Hendrickson, Inc. ("SEH") to evaluate the condition of the City's
streets.
4. SEH issued conclusions and recommendations to the City
regarding the necessity and advantages of a street maintenance program.
Exhibit 4). Under the proposed program, SEH divided the City into
maintenance districts, and each of the City's streets was rated based
on a visual inspection for general street condition, surface wear,
weathering, skid resistance, uniformity, crack condition and other
problems. (Exhibits 6 and 82). The ratings, which are performed every
two years under the program, then are used to determine a priority
ranking for the districts and the type of improvement needed for the
streets in those districts.
5. After reviewing and considering the SEH study, the City's
Special Assessment Committee (the "Assessment Committee") offered a
draft policy to the City Council, dated June 20, 1988, for the funding
and implementation of a Street Reconstruction Program. (Exhibit 5).
2.
The draft policy contemplated a $32,000,000.00 financial commitment
from the City and its residents over a 20 -year period for the program.
The Assessment Committee recommended that the City Council adopt a
policy to assess 30% of the annual program costs to the benefitting
property owners,.with the City paying the remaining 70% out of a
Permanent Improvement Revolving Fund.
6. On June 27, 1988, the City Council adopted Resolution No.
88-381 establishing the draft special assessment policy contained in
the June 20, 1988, recommendation. (Exhibit 76).
7. The first year of the Street Reconstruction Program was
1989, based upon 1987 ratings. In 1989, SEH prepared its bi-annual
update to the City's management program wherein it re -rated each of the
City's streets and recommended certain streets to be included in the
1990 and 1991 Street Reconstruction Programs. (Exhibit 84). SEH then
prepared a Pre-liminary Engineering Report, ordered by the City
Council, for the specific work to be done in the 1991 Street
Reconstruction Program. By Resolution No. 91-14, dated January 7,
1991, the City Council referred the Preliminary Engineering Report to
the Assessment Committee for its review and recommendations prior to
ordering the project. (Exhibit 76).
8. By Resolution No. 91-184, dated April 1, 1991, after a
public hearing on the proposed improvements, the City Council adopted
the 1991 Street Reconstruction Program, labelled City Project No. 102.
Phase I of Project No. 102 involved the reconstruction of streets in
maintenance Districts 4, 7 and 11. Phase II of the project involved
the
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reconstruction of streets in maintenance District 3.
9. District 3 is comprised of Nathan Lane, on which
Plaintiff's properties are located, four residential streets (Quaker
Lane, Saratoga Lane, Trenton Lane and Union Terrace Lane) and a
frontage road to Highway 55. It is in the southeastern corner of the
City.
10. Nathan Lane, which is a major collector street, already
had curbs, gutters and storm sewer drainage at the time the road
construction project was undertaken. Other than a frontage road
located in this district, the remaining streets in District 3 were all
residential streets which were approximately 30 years old, in
substandard condition, and lacked curb, gutter and sewer and needed
widening.
11. Nathan Lane was originally built by Plaintiff Wallace
Freeman in or about 1978, to City standards and specifications, at his
expense, in conjunction with a development proposal to the City. Mr.
Freeman then donated the completed road to the City.
12. The 1989 program consisted of single family residences.
The City, through its Special Assessment Committee had developed a•
uiform single family lot assessment rate. This rate was allegedly
based upon thirty percent of the cost of the annual program. Following
this April 1, 1991, directive for the 1991 Program, the City Council
approved a Special Assessment Committee Report (See Report, March 15,
1991, Memo attached to Exhibit 20) describing the methods for assessing
properties in the 1990 program and adopted the actual assessments for
that program. In arriving at the 1990 assessments, the Assessment
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Committee reviewed the entire program based on the actual cost of the
1989 and 1990 program, and the proposed 1991 program, and devised a
uniform rate for assessing the properties included in the 1990 program
based on the overall projected cost of the entire twenty-year program
as opposed to the yearly program. The Committee projected the cost of
the twenty-year program and developed an assessment rate that would
result in revenues that totalled thirty percent of the cost of the
total program. This Report included methods to assess commercial and
multi -family properties. The recommendations in the March 15, 1991,
Report were considered by the City Council and the assessments for the
1990 program, were adopted by the Council. (See July 5, 1991 Memo,
Exhibit 20).
13. In the July 5, 1991 memorandum (Exhibit 20), Fred Moore,
on behalf of the Assessment Committee, recommended that the same method
of assessment employed by the 1990 program be used for the 1991 program
and attached the March 15, 1991, memorandum which explained the
Assessment Committee's rationale. The Assessment Committee recommended
a uniform rate for a single family lot with a construction rate
increase of 2.4%. Thus, the single family lot rate was $796 in 1989,
815 in 1990 and $832 in 1991. For commercial/retail, the total square
footage of each parcel was divided by 18,500 square feet (the minimum
residential lot size permitted by city zoning ordinances) to determine
a number of equivalent units which was then multiplied by the per unit
lot rate) figure. Multiple -family units were assessed by using a
similar formula, adjusted by the square footage minimum for dwelling
units and reduced by a traffic factor. This resulted'in an assessment
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of $425.60 per condominium or apartment.
14. In 1987 Nathan Lane was originally rated as good and
scheduled for routine maintenance. In 1989 it was rerated for
resurfacing and partial reconstruction. At the time of the 1989
rating, the residential streets in District 3 were in poor condition
and were rated for total reconstruction. Nathan Lane was in generally
good condition but was experiencing some longitudinal transverse
cracking. Moreover, there was a small amount of map and alligator
cracking and a small hole in the southern one-third of Nathan Lane.
There was no frost heave found and no curb settlement. (Exhibit 6).
Most of the problems were at the south end of Nathan Lane, where it
joins Shelard Parkway (Exhibit 89A-891). At trial, Dick Moore of SEH,
the Project Engineering Manager, reviewed the photographs and the 1989
Rating of Nathan Lane (Exhibit 6) and testified that the longitudinal
transverse cracking found on Nathan Lane eventually deteriorates to map
cracking, alligator cracking and, ultimately, complete breakup of the
road. Mr. Moore testified that the cost of repairing streets with
advanced distress increases exponentially in a very short time and that
the purpose of a street maintenance program is to identify and correct
problems before complete breakup of the pavement occurs. See Graph,
Exhibit 81.
15. Two-thirds of Nathan Lane was resurfaced; the southern
one-third was partially reconstructed. The reconstruction performed on
the southern one-third of Nathan Lane was the same as the reconstruc-
tion performed on the residential streets in District 3, except that
concrete curb and gutter was installed on the residential areas.
16. The road work done in District 3 was completed in the
fall of 1992. The total cost of the work done in District 3 was
1,295,985.00.
17. The City Council passed the appropriate resolution and
held a public hearing regarding the assessments for the District 3
improvements in September and October of 1992. The total amount
specially assessed for the Project to property owners in District 3 was
560,363.20; $287,123.20 of this was for street reconstruction and
resurfacing and $253,926.40 was for new construction of curb and gutter
which was assessed only to those properties that received those
improvements.
18. On November 2, 1992, the assessments were again
considered by the Council and by Resolution Nos. 92-713 and 92-714, the
Council adopted the assessments. (Exhibit 76). Each of the
residential properties was assessed $832.00. Each of the Condominium
Units on Nathan Lane was assessed $425.60, and each commercial property
was assessed an amount equal to its equivalent units multiplied by
832.00.
19. On November 4, 1992", Plaintiffs were specially assessed
as follows:
2,579.20
9,568.00
9,984.00
11,232.00
425.60
425.60
425.60
425.60
425.60
Total Special Assessments:
PID #3611822430019
PID #3611822430020
PID #3611822440009
PID #3611822440010
PID #3611822430024
PID #6311822430025
PID #3611822430041
PID #6311822430071
PID #6311822430093
35,491.20
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20. The total cost of the work done to Nathan Lane was
88,020.87.
21. The total amount specially assessed against all Nathan
Lane property owners was $166,150.40.
22. Plaintiffs have properly perfected their appeal of the
special assessments listed in Paragraph 18, above, to the district
court within 30 days after the adoption of the assessment as required
by Minnesota Statute 429.081.
23. Plaintiffs also properly appealed the special assessment
to Condominium Unit 109 of the Willow Grove Condominiums; although
untimely, Plaintiffs were not owners of the property at the time of the
assessment and appealed the assessment as soon as they acquired the
property in March of 1994.
24. Nathan Lane, as a major collector street, was a
thoroughfare used by all of the City's residents, including the
residential property owners in District 3, as an access road to several
highways and as a commuting street to other parts of the city and to
office parks in the area.
25. The City had determined with respect to the twenty-year
program that it would pay 70% of the cost of the program and would have
property owners pay the remaining 30% of the cost. The City did not
pass a resolution altering its "70/30" plan prior to levying the
special assessments upon Plaintiffs' properties, but did change the
70/30 split to apply to the entire twenty-year street program as
opposed to each annual program.
26. In adopting the asessments, the City did not take into
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consideration the increase in market value, if any, to the properties
being assessed. No appraisals of property were done prior to the
adoption of the assessments by the City Council.
27. In preparation for trial of this matter the City hired
Brad Bjorklund to do an appraisal of Plaintiffs' properties, including
a before and after market analysis of the alleged benefit to the
Freeman properties. Mr. Bjorklund did use comparable sales for his
analysis. He concluded that the special benefit to the Freeman
properties were as follows:
Property
Shopping Center
Daycare Center
Theatre
Outlot
Condo Unit
Special Benefit
24,500.00
17,100.00
24,800.00
83,900.00
341.00 per unit
Based upon the above opinion the City has stipulated to reduce the
assessments on Freeman's condominiums to $341 per unit.
28. The analysis by Mr. Bjorklund was not persuasive since it
was very subjective. His determination to increase or decrease factors
in the comparables by certain percentages was based upon his subjective
opinion and not any recognized mathematical formula.
His entire opinion was based upon the premise that improvement
in street condition will increase abutting land values an average of
12.5%. He did not perform a before and after valuation on a particular
piece of property that had had roadwork but merely guessed on valuation
adjustments and assumed that road improvement would cause increase in
market value. (Exhibit 85).
29. Property owners on Nathan Lane testified that the work on
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Nathan Lane only cosmetically improved the street and maintained the
street but did not functionally improve the street because there was so
little wrong with the street. Moreover, they testified that the road
work did not result in any increase in property values of abutting
property.
30. Craig Johnson, an appraiser hired by Plaintiffs did an
appraisal of the Nathan Lane properties and testified at trial. He
found no increase in the market values of the Plaintiff's properties
due to the reconstruction and resurfacing of Nathan Lane. Mr. Johnson
was familiar with Nathan Lane prior to the roadwork and had previously
appraised two of Plaintiffs' properties. He concluded that "the impact
of the reconstruction project was one of routine street maintenance
rather than one creating a discernible improvement" and that "no
measurable Special Benefits accrue to the assessed properties."
Exhibit 73).
31. This Court agrees with the conclusion of the property
owners and Mr. Johnson herein and finds that Plaintiffs herein did not
receive any special benefit or increase in market value of their
property due to the 1991 road program, Project No. 102.
32. There is insufficient evidence to find that this lawsuit
resulted in a special benefit to a large class of persons.
Therefore, the Court makes the following:
CONCLUSIONS OF LAW
1. This Court has jurisdiction over this action pursuant to
Minnesota Statute 429.081.
2. All relevant, substantive and procedural requirements of
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law or rule have been fulfilled or have been corrected and no party has
been prejudiced by any technical procedural defect.
3. Generally, a city may levy a special assessment if: (1)
the land receives a special benefit from the improvement being
constructed; (2) the assessment is uniform upon the same class of
property; (3) the assessment does not exceed the special benefit.
Carlson -Lang Realty Co. v. City of Windom, 307 Minn. at 368, 369, 240
N.W.2d 517, 519 (1976); Minnesota Statute 429.051.
4. A special assessment may not be made unless the property
assessed receives a special benefit from the improvement being
constructed. See, e.g., Lunderberg v. City of St. Peter, 398 N.W.2d
579, 583 (Minn. App. 1986).
5. A special assessment which exceeds the benefit to the
property, as measured by the difference in market value before and
after the improvements, is an unconstitutional taking of property in
violation of the Fourteenth Amendment of the United States
Constitution. Dosedel v. City of Ham Lake, 414 N.W.2d 751, 755 (Minn.
App. 1987).
6. Where, as here, no appraisal is done by the City prior to
assessment and no before and after market valuation is done prior to
the assessment, de novo review of the amount of the assessment and
benefit to the landowner must be undertaken by the trial court.
Buettner v. City of St. Cloud, 277 N.W.2d 199, 203-4 (Minn. 1979);
Dosedel v. City of Ham Lake, 414 N.W.2d 751, 755 (Minn. Ct. App. 1987).
7. Where, as here, the Court has made a de novo review of
all of the evidence and determined that Plaintiffs' land did not
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receive a special benefit from Project No. 102, there can be no special
assessment of Plaintiffs' property.
8. The test for determining whether a special assessment
exceeds the special benefit is whether the assessment exceeds the
increase in market value to the specific property assessed after the
improvement is made. Joint Ind. Sch. Dist., 256 N.W.2d at 516; Matter
of Nicollet County Ditch 86A, 488 N.W.2d 482, 485 (Minn. App. 1992).
The formula to calculate the amount that the market value of the
property has increased is determined based upon what a willing buyer
would pay a willing seller for the property before and after the
improvement has been made.
9. Where, as here, the Court has determined that Plaintiffs'
property did not increase in market value due to the road work done to
Nathan Lane in Project No. 102, the assessment exceeds the benefit to
the property and is invalid.
10. Where, as here, the amount of the special assessments to
Plaintiffs' property greatly exceeds the actual cost of the construc-
tion to the City, the special assessment must exceed any special
benefit conferred.
11. Under the law, the City's special assessments levied
against Plaintiffs' properties were unconstitutional and are invalid.
12. Where a city bases an assessment on several projects
together rather than on a project -by -project basis, the assessment is
arbitrary and invalid. Quality Homes, Inc. v. Village of New Brighton,
289 Minn. 274, 286, 183 N.W.2d 555, 563 (1971).
13. Where properties are assessed on a per -lot basis, using a
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cost formula based upon a twenty-year program rather than upon the cost
of that year's program or the cost to the particular street or
district, the assessment is arbitrary and capricious and has no
relationship to land benefitted.
14. Generally, attorneys fees are not to be awarded in a
special assessment case. Preserve Ass'n. v. City of Eden Prairie, 421
N.W.2d 419, 422 (Minn. App. 1988).
15. Plaintiffs have failed to establish that this action has
resulted in a special benefit to a large class of person. Therefore,
there is no basis upon which to award attorney's fees.
Therefore, the Court makes the following:
ORDER FOR JUDGMENT
1. Defendant shall reimburse Plaintiffs for any and all
portions which have been paid of the special assessments levied against
Plaintiffs' properties in November 1992.
2. Plaintiffs shall have judgment against Defendant for any
assessments paid as the result of the 1992 assessment plus interest
from the date of payment, plus costs and disbursements herein.
3. Defendant shall cause any unpaid assessments on
Plaintiffs' properties, including'Condominium Unit 109, resulting from
the November 1992 assessments to be abated and removed from such
properties.
LET JUDGMENT BE ENTERED ACCORDINGLY.
BY THE COURT:
Dated: July 1, 1994.
Beryl A Nord .
Judge o istrict Court
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