Opinion ID: 2026679
Heading Depth: 2
Heading Rank: 3

Heading: Common Law Requirements

Text: ¶ 13 We have held that the power of a municipality to levy special assessments against private owners is statutory, and therefore the statutory provisions must be followed if the assessment is to be upheld. See Green Tree Estates, Inc. v. Furstenberg, 21 Wis.2d 193, 124 N.W.2d 90 (1963). Special assessments may be based on the taxing power or on the police power. Berkvam v. City of Glendale, 79 Wis.2d 279, 282-83, 255 N.W.2d 521 (1977). If an assessment is made under the taxing power, the municipality must show that the amount charged to the property does not exceed the value of the benefits received. Id. at 282, 255 N.W.2d 521. However, when an assessment is made under the police power, it is not limited to the value of the benefits received by the property owner. Id. at 283, 255 N.W.2d 521 (citation omitted). Rather, when the police power is used, the assessment must be made on a reasonable basis. Id. at 287, 255 N.W.2d 521. It is the police power that the District employed here. ¶ 14 In Berkvam, we addressed the statutory requirements under Wis. Stat. § 66.60, the predecessor to Wis. Stat. § 66.0703. [9] Berkvam involved a challenge of an assessment for improvements, including storm sewers, concrete curbs, gutters, pavement, and sidewalks, made by the city. Berkvam claimed that the increased traffic volume in the area that would result from the city's planned improvement would decrease the value of the residential property in the area and therefore the assessment was an inequitable and invalid exercise of police power. Id. at 282, 255 N.W.2d 521. ¶ 15 We held that while the legislature did not prescribe a particular method for assessing properties under the police power, it required two things: (1) that the property assessed be benefited and (2) that the assessment be reasonable. Id. at 287, 255 N.W.2d 521. We utilized another state's precedent to elaborate: As one state supreme court has stated, referring to an assessment statute: [T]he statute does [not] prescribe a specific method for apportioning costs. Where such is the case, the municipality may adopt any plan that is fair and equitable and such that will bring about an assessment in proportion to the benefits accruing. Id. at 287, 255 N.W.2d 521 (citing Mullins v. City of El Dorado, 200 Kan. 336, 436 P.2d 837, 844 (1968)).
¶ 16 The Petitioners first assert that the benefit requirement for special assessments was not met. They argue that the extension of sewer services to their property provided no benefit to them because the property had no need. At the time that the District made its expansion plans, the condominiums were adequately serviced by a holding tank that was in good working order and was expected to service the condominiums for years to come. They dispute that a sewer connection is a per se benefit. They also contend that while it may be a benefit to some properties covered by the expansion plan, their own specific parcels did not benefit and may have been harmed because of the potential negative effect the added expense of the assessment might have on property values. ¶ 17 The District points out that private holding tanks do not provide the benefits afforded by public sewers, and it cites the circuit court's observation that the 14-year-old holding tank on the Petitioners' property could function now but fail in the near future. The circuit court recognized that future benefits may be considered in sustaining the validity of a special assessment. Wm. H. Heinemann Creameries, Inc. v. Village of Kewaskum, 275 Wis. 636, 641, 82 N.W.2d 902 (1957); CIT Group/Equip. Fin., Inc. v. Village of Germantown, 163 Wis.2d 426, 436, 471 N.W.2d 610 (Ct.App.1991). ¶ 18 To support its position, the District notes the dangers of disease and pollution when a holding tank fails, the impracticality of excluding select properties from an extended sewer system area, and the way that sewer systems have been shown to increase property values. It also points out that Wisconsin courts have consistently recognized the benefits of sanitary sewers, even when the property is already served by a functioning system. See Fort Howard Paper Co. v. Fox River Heights Sanitary Dist., 250 Wis. 145, 153, 156, 26 N.W.2d 661 (1947); Town of Sugar Creek v. City of Elkhorn, 231 Wis.2d 473, 484, 605 N.W.2d 274 (Ct.App.1999). ¶ 19 Whether a benefit exists is a question of fact. Preloznik v. City of Madison, 113 Wis.2d 112, 118, 334 N.W.2d 580 (Ct.App.1983). In this regard, the circuit court agreed with the District's position and found that the sewer system benefited the Petitioners' property. That finding is not clearly erroneous.
¶ 20 The analysis for whether a special assessment is reasonable has been articulated in a number of ways, depending on the facts of the particular case. For example, while it is true that a property must be benefited by the project for whose costs a special assessment was made, Berkvam, 79 Wis.2d at 287, 255 N.W.2d 521, an assessment need not be limited to the actual benefit to an individual property. Gelhaus & Brost, Inc. v. City of Medford, 144 Wis.2d 48, 50, 423 N.W.2d 180 (Ct.App.1988). Rather, the assessment of an individual property must be in proportion to the benefits accruing to it when compared with the benefits accruing to all benefited properties. Id. at 52, 423 N.W.2d 180; see also Peterson, 154 Wis.2d at 372-73, 453 N.W.2d 177. ¶ 21 In Gelhaus, the court of appeals rejected property owners' challenge to a city's special assessments, which contended that the assessments exceeded the benefits to their properties from the public improvement. Gelhaus, 144 Wis.2d at 52, 423 N.W.2d 180. The court held that assessments made under the police power are not limited to the value of the benefits conferred on each individual property; but rather, the reasonableness of a special assessment will be upheld when properties are benefited and assessments are based on an equitable distribution of costs for the benefits gained. Id. The court explained: [I]nherent in the requirement that the assessment be made on a reasonable basis is that it must be reasonable and apportioned fairly and equitably among the property owners. For example, in making an assessment, the municipality may not assess one group of property owners by a method that is completely different from the method used to assess another group of property owners, resulting in an entirely disproportionate distribution of costs among various taxpayers. Id. (citing Schulenberg v. City of Reading, 196 Kan. 43, 410 P.2d 324, 329 (1966)). Because the municipality had presented unrebutted affidavits that outlined logical and formulaic cost assessments, and demonstrated that the burden had been fairly and equitably distributed among the individual property owners who benefited, the court concluded that the assessments were reasonable. Gelhaus, 144 Wis.2d. at 53, 423 N.W.2d 180. ¶ 22 Furthermore, although a uniform method of assessment will usually produce a reasonable assessment, that is not necessarily so. In Lac La Belle, a golf course protested its special assessment for the construction of a sanitary sewer collection system. Lac La Belle, 187 Wis.2d at 279, 522 N.W.2d 277. There, the Village selected an assessment method where each Residential Equivalent Unit (REU), a term defined in the resolution, would be assessed $6,900. Id. at 278, 522 N.W.2d 277. Two portions of the golf club were affected by the sewer project, one of which was the 14th hole that under the Village's definition was comprised of ten REU's. Id. at 280, 522 N.W.2d 277. The golf club contended that in order to realize on the benefit conferred, it would have to subdivide the 14th hole and expend an amount of money that was not economically feasible. Id. at 279, 522 N.W.2d 277. In concluding that the uniform method chosen by the Village did not produce a reasonable assessment, the court explained that in levying an assessment the municipality must take into account the uniqueness, not only the similarity, of the subject property, as its characteristics are compared to other assessed properties. Id. at 286, 522 N.W.2d 277. ¶ 23 This uniformity/uniqueness assessment also figured prominently in the court of appeals' decision in Genrich v. City of Rice Lake, 2003 WI App 255, 268 Wis.2d 233, 673 N.W.2d 361. There, the court used a uniformity/uniqueness analysis to examine whether the special assessments were reasonable. Id., ¶¶ 20-21, 673 N.W.2d 361 (citing Lac La Belle, 187 Wis.2d at 285-86, 522 N.W.2d 277 and Peterson, 154 Wis.2d at 373, 453 N.W.2d 177). As currently articulated, this analysis has two steps. First, uniformity is examined to determine whether the assessment is fairly and equitably apportioned among property owners in comparable positions. Genrich, 268 Wis.2d 233, ¶¶ 20-21, 673 N.W.2d 361. To pass the uniformity requirement, a municipality must use a method of assessment that yields a uniform and equal value for all affected properties. Genrich, 268 Wis.2d 233, ¶ 21, 673 N.W.2d 361 (citing Lac La Belle, 187 Wis.2d at 285, 522 N.W.2d 277). Second, in addition to providing uniformity, assessments must not affect unique properties in a disproportionate way. Genrich, 268 Wis.2d 233, ¶ 20, 673 N.W.2d 361. To determine whether a unique property is assessed in proportion to the benefit conferred, courts have considered the degree, effect, and consequences of the special benefits. Id., ¶ 22, 673 N.W.2d 361; see also Lac La Belle, 187 Wis.2d at 284-88, 522 N.W.2d 277.
¶ 24 The District's Resolution at issue here required that the availability charge of the special assessment be levied upon each lot, regardless of size, accessibility by public or private road or easement, corner location or other characteristics to which service is made available. [10] A lot is defined as either a lot of record or a parcel of record. [11] Accordingly, because each condominium is a parcel of record, even though all stand upon one lot of record, the condominiums were assessed 18 times an individual availability charge, even though their lot received only one four-inch stub. ¶ 25 The Petitioners contend that the District did not appropriately exercise its police power because it did not levy the assessments fairly and equitably among the property owners. The District responds that the assessment was levied uniformly against all single-family residential property owners of record. The Petitioners counter that the District applied the availability charge to each individual condominium owner, yet with other single-lot properties that contain multiple residences, the District levied the availability charge only once. For example, the District applied the availability charge only once to the Southshore Terrace Association, [12] a mobile home park, rather than levying an availability charge against each of its home sites. And, the Pilgrim Center Camp was levied only one availability charge, even though there are many structures on its lot. The District counters that because each condominium unit created by the condominium declaration and plat is a separate parcel of record, the assessment was reasonably applied. ¶ 26 We do not agree with the District for at least three reasons. First, there is no nexus between the charge to an owner of a parcel of record who shares access to the sewer main through one four-inch stub and the District's cost to provide that access. Second, other lots that have multiple habitable units and were provided access to the sewer main through one four-inch stub to the lot were charged only one availability charge. Yet the Petitioners' lot was assessed an availability charge 18 times higher for the same, single four-inch stub. Third, there is no showing that each condominium owner received a greater benefit than was provided to other properties that were affected by the sewer extension. Accordingly, we conclude that the Petitioners have provided prima facie evidence that the availability assessment was not levied uniformly. [13] Therefore, we also conclude that because the costs of extending the sewer were placed disproportionately on the Petitioners, the burden of proving that the assessment was reasonable shifted to the District. See Lac La Belle, 187 Wis.2d at 281, 522 N.W.2d 277. ¶ 27 However, the District's explanation that the condominium units are separate tax parcels does not explain why the purpose of the availability charge under Section III of the Resolution, which specifically refers to the cost for one stub to connect each lot to the sewer main, should not have been uniformly applied to all lots that received one access-stub. The Petitioners' lot received only one stub for all of the condominium units. Further, as we noted above, other single lots that have multiple habitable dwellings that were provided with a single stub, were assessed only a single availability charge. The District has not presented any argument as to why this disparate treatment is a fair or equitable distribution of the costs of making the sewer available, except to assert it applied the same method of assessment to every-one. However, as part of the District's method of assessment, it created a definition for the term, lot, that caused the method of assessment to have dissimilar effects on the properties within the District. ¶ 28 The District also contends that its method was reasonable because it employed the lump sum method, which was upheld in Village of Egg Harbor v. Mariner Group, Inc., 156 Wis.2d 568, 457 N.W.2d 519 (Ct.App.1990). In Village of Egg Harbor, the court of appeals determined that the Village's use of the lump sum method to levy assessments, which divided the cost of a waste water treatment plant and collection system among property owners without regard to use, was reasonable because: (1) all property owners were assessed in the same way and (2) while use is relevant in other types of assessments, it is not in determining the base rate of implementing the system. Id. at 573, 457 N.W.2d 519. However, the assessment at issue here has a use component, the connection charge, that has not been contested. Also in Village of Egg Harbor, shopping mall owners were no more burdened than any other owner. In contrast, the condominium owners who were provided with one four-inch stub to make the sewer available to their lot are burdened much more than are the inhabitants of Southshore Terrace, that also were provided with one four-inch stub to make the sewer available to their lot. ¶ 29 Wisconsin courts have established that the reasonableness of a particular assessment method depends on the application of its factual consequences to those properties assessed. The court in Peterson concluded that no method is per se reasonable, and that neither procedural fairness nor prolonged use can alone assure reasonableness. Peterson, 154 Wis.2d at 372-73, 453 N.W.2d 177. A particular method of assessment is neither reasonable nor unreasonable as a matter of law, but rather, the facts of the particular situation govern its reasonableness. Id. at 373, 453 N.W.2d 177; see also Dittberner v. Windsor Sanitary Dist. No. 1, 209 Wis.2d 478, 496, 564 N.W.2d 341 (Ct. App.1997). ¶ 30 While it is true that methods of assessment may involve many different alternatives, the requirement that the method fairly apportions the costs of the improvement and does not arbitrarily or capriciously burden any group of property owners remains a constant for any method chosen. See CIT Group, 163 Wis.2d at 436-37, 471 N.W.2d 610; see also Lac La Belle, 187 Wis.2d at 282, 522 N.W.2d 277. An assessment is unreasonable if it has an entirely disproportionate distribution on a group of property owners that can be avoided by the municipality's use of another assessment methodology. Peterson, 154 Wis.2d at 373, 453 N.W.2d 177. We conclude that is what occurred here. This assessment was unreasonable because the assessment charge required the Petitioners to bear a disproportionate amount of the costs of the sewer as compared with the benefit they received. Accordingly, we reverse the decision of the court of appeals, and remand to the circuit court for the reinstatement of the circuit court order that was reversed by the court of appeals' decision. [14]