Court Opinion

ID: 3211250
Source: CourtListenerOpinion
Date Created: 2016-06-09 06:07:31.009062+00
Date Added: 2024-06-11T14:03:40.603299
License: Public Domain

This opinion will be unpublished and
                          may not be cited except as provided by
                          Minn. Stat. § 480A.08, subd. 3 (2014).

                               STATE OF MINNESOTA
                               IN COURT OF APPEALS
                                     A15-0965

                                 Fred E. Friedrichs, et al.,
                                       Appellants,

                                             vs.

                            Lake Washington Sanitary District,
                                     Respondent.

                                    Filed April 4, 2016
                                         Affirmed
                                     Stauber, Judge

                             Blue Earth County District Court
                                 File No. 07-CV13-4757

Karl O. Friedrichs, Friedrichs Law Office, P.A., Mankato, Minnesota (for appellants)

Benjamin D. McAninch, Paul R. Shneider, Blethon, Gage & Krause, PPLP, Mankato,
Minnesota (for respondent)

       Considered and decided by Connolly, Presiding Judge; Stauber, Judge; and

Bjorkman, Judge.

                         UNPUBLISHED OPINION

STAUBER, Judge

       Appellant-property owners challenge a district court decision upholding a special

assessment following annexation of the property into respondent sanitary-sewer district

and construction of a sanitary sewer on the property. We affirm because the district court

did not err by ruling that appellants failed to rebut the presumption that the sanitary sewer
specially benefitted appellants’ property and because the evidence as a whole fairly

supports the assessment method used by respondent.

                                          FACTS

        The Tri-Lakes area “is a regional recreational resource” that is used by adjacent

landowners and the public. It encompasses properties located around Ballantyne Lake,

Duck Lake, and Madison Lake near Mankato. In 2008, respondent Lake Washington

Sanitary District (District) was approached by a group of landowners from the Tri-Lakes

area who knew that their lakes had water-quality issues related to the use of antiquated

septic systems on surrounding residential properties and that the lakes were not compliant

with Minnesota Pollution Control Agency (MPCA) regulations.1 They wanted the

MPCA to annex 380 property parcels for inclusion in the District in order to address

those issues. Despite the objections of appellants Fred E. Friedrichs and Kari L.

Friedrichs and a small minority of other property owners, the District decided to petition

the MPCA for annexation of the Tri-Lakes properties into the District in order to

undertake a sanitary-sewer-improvement project. Following a public hearing, the District

board voted to approve the petition after concluding that the sanitary-sewer project would

be a permanent solution to the Tri-Lakes water-quality problems.

        Appellants challenged the petition before an administrative law judge (ALJ), and

then before the MPCA, which ultimately approved the petition. The ALJ considered

whether annexation of the Tri-Lakes properties was administratively feasible, would

1
    Madison and Duck Lakes were deemed “impaired” by the MPCA.

                                              2
promote “public health, safety and welfare,” and could be “effectively accomplished on

an equitable basis.” In comprehensive findings, the ALJ noted that nearly half of the

properties were noncompliant or likely noncompliant with environmental standards, or

did not have records identifying the types of wastewater systems in current use. The ALJ

found that “[a] significant number of the parcels within the proposed annexation area

have wastewater systems that were installed prior to 1996.” The ALJ also fully

addressed alternatives for wastewater treatment in the Tri-Lakes properties, including

“(1) holding tanks for seasonal cabins; (2) individual septic systems (with and without

pre-treatment); (3) cluster systems; and (4) the establishment of a sanitary sewer system.”

After examining each alternative, including environmental considerations as well as cost,

the ALJ concluded that a pressure-based sanitary-sewer system with grinder stations

would be optimal for the Tri-Lakes properties.

       Following annexation of the properties into the District, the District determined

the special assessments to be levied on each Tri-Lakes property for the sanitary-sewer

project (project) after holding a public hearing on November 25, 2013. The total amount

of the special assessments for the project was $7,694,233.23; the individual assessment

for appellants’ property was $26,459.55. This sum included a private service charge and

ring charge, regionalization, interim and long-term financing costs, and design and

construction services.

       Appellants challenged the tax levy for the special assessment in district court,

arguing that the special assessment exceeded the benefit to their property from the

project. In a bench trial held on March 5, 2015, the district court heard testimony from

                                             3
appellant Fred E. Friedrichs and others on the assessment costs and property valuation

differences associated with the project. Friedrichs testified that he built a house on his

0.8 acre parcel in 1997 and installed a septic system that, at that time, was compliant with

all regulations, that the septic system was compliant in 2011 when last inspected, and that

his enjoyment of his property was negatively affected by the noise from the grinder pump

installed on his property. He further testified that the improvement did not increase the

value of his property.

       The district court also heard testimony from real-estate specialists and others

regarding whether the project affected the value of the Friedrichs’ property. The

Friedrichs called Jim Pfau, a residential realtor, who testified that buyers are not

generally concerned about whether septic systems are compliant and that the increase in

the market value of the Friedrichs’ property from the project was $5,000. Pfau

admittedly does not specialize in lake-area real estate and has never sold property in the

Tri-Lakes area.

       The Friedrichses also called Timothy McPartland, a property appraiser, who

appraised Friedrichs’ property and concluded that there was no difference in the value of

their property due to the improvement.

       For the District, the district court heard valuation testimony from four witnesses.

Lawrence Maruska, the District chair who became a board member in 2002, stated that

the project was the most cost-effective method of obtaining a permanent solution to

environmental issues associated with wastewater in the Tri-Lakes area. Maruska also

testified that, over time, the value of the Tri-Lakes properties would increase by at least

                                              4
the amount of the special assessments, “and in some cases even more.” He further

testified that the administration of the special assessments for the project was fair. He

noted that the Friedrichs’ opposition to the project had added over $150,000 to its overall

cost.

        Chuck Vermeersch, an engineer who worked as a project manager and calculated

the individual assessments for the project, testified that the new sewer system was the

most cost-effective method of treating wastewater for the Tri-Lake properties. He also

explained each charge for individual properties and how they were calculated to be fair to

each property owner. Vermeersch further testified that the placement of the grinder

pump on the Friedrichs’ property was done with their consent.

        Finally, Richard Draheim, an area real-estate broker who specializes in lake

property sales, testified. He stated that the value of the Friedrichs’ property would

increase $26,459.55 because of the sewer-improvement project, enumerating the factors

he considered in arriving at this figure.2 Draheim conceded that he is not a licensed real-

estate appraiser.

        The district court also considered the deposition testimony of Peter Otterness, a

former county employee who worked as an environmental-health specialist in septic-

system compliance. He stated that two properties on the street where the Friedrichs live

failed compliance inspections and have septic systems that predate 1996 regulations.

2
  Although appellants characterized Draheim’s testimony as stating that the value of the
improvement to the parcel would be realized in 10 to 30 years, what he actually said was
that he would “be surprised” if the value was not realized sooner.

                                              5
       In reaching its decision to uphold the special assessment, the district court

specifically credited Draheim’s experience and testimony and noted that “[a]ll three real

estate experts agreed that bringing a failing septic system into compliance and cleaning

up improper wastewater discharge would increase the value of a property,” that the

sanitary-sewer system installed would provide a long-term cost-effective solution in the

Tri-Lakes area, and that the Friedrichs’ property was specially benefited by the

improvement. The district court affirmed the levy of $26,459.55 against the Friedrichs’

property for the special assessment. The Friedrichs appealed.

                                     DECISION

       “A special assessment is a tax, intended to offset the cost of local improvements

such as sewer, water and streets, which is selectively imposed upon the beneficiaries.”

Dosedel v. City of Ham Lake, 414 N.W.2d 751, 755 (Minn. App. 1987); see Minn.

Stat. § 429.051 (2014) (“The cost of any improvement . . . may be assessed upon property

benefited by the improvement . . . .”). Minn. Stat. § 429.081 (2014), permits any person

aggrieved by adoption of an assessment to appeal the levy of the assessment to the

district court.

       A limitation on a municipality’s power to levy a special assessment is that “(1) the

land must receive a special benefit from the improvement being constructed; (2) the

assessment must be uniform upon the same class of property; and (3) the assessment may

not exceed the special benefit.” David E. McNally Dev. Corp. v. City of Winona, 686

N.W.2d 553, 558 (Minn. App. 2004). A “[s]pecial benefit is measured by the increase in

the market value of the land owing to the improvement.” Carlson-Lang Realty Co. v.

                                             6
City of Windom, 307 Minn. 368, 369, 240 N.W.2d 517, 519 (1976). Market value is

typically proved by having an “appraiser determine[] what a willing buyer would pay a

willing seller for the property before, and then after, the improvement has been

constructed.” Carlson-Lang Realty Co., 370 N.W.2d at 369, 240 N.W.2d at 519. “Until

it is proven to the contrary, [the municipality] is presumed to have set the assessment

legally, and thus introduction of the assessment roll into evidence constitutes prima facie

proof that the assessment does not exceed [the] special benefit.” Id. The presumption of

a special assessment’s legality may be overcome by “introducing competent evidence

that the assessment is greater than the increase in market value of the property due to the

improvement.” Tri-State Land Co. v. City of Shoreview, 290 N.W.2d 775, 777 (Minn.

1980). “If the assessment is set higher than the special benefit conferred, it is a taking

without compensation to the extent of the excess.” Carlson-Lang Realty Co., 307 Minn.

at 370, 240 N.W.2d at 519.

       Our scope of review of a district court decision addressing a challenge to the

validity of a municipal assessment, “is a careful examination of the record to ascertain

whether the evidence as a whole fairly supports the findings of the district court and

whether these in turn supports its conclusions of law and judgment.” Id. at 373, 240

N.W.2d at 521. This court must affirm the district court’s findings of fact unless they are

clearly erroneous. Nelson v. City of St. Paul, 256 N.W.2d 639, 640 (Minn. 1977).

I.     Assessment’s presumption of legality

       Appellants argue that the district court erred by relying on the testimony of

respondent’s valuation witnesses because their testimony lacked the specificity required

                                              7
for the district court to conclude that appellants’ property would benefit from the

sanitary-sewer improvement. Given that the special assessment is presumed by law to be

valid, the first question is not whether the special assessment was supported by sufficient

evidence, but whether appellants overcame the presumption of validity with competent

evidence showing that the property did not benefit from the improvement. See Buettner

v. City of St. Cloud, 277 N.W.2d 199, 204 (Minn. 1979) (stating with regard to the

special-benefit presumption, “[a] presumption makes a prima facie case which is

dispositive in the absence of evidence; it disappears when adverse evidence on the

question of value is introduced”); see also American Bank of St. Paul v. City of

Minneapolis, 802 N.W.2d 781, 789 (Minn. App. 2011) ( “For the purpose of establishing

a prima facie case that an assessment is valid, a calculation based on the cost of the

improvement is deemed reasonably related to the value of special benefits.” (quotation

omitted)).

       To challenge the prima facie legality of the assessment, appellants testified that the

improvement did not increase the value of their parcel, and they offered testimony from

Pfau that the increase in market value was only $5,000, and from McPartland that there

was no difference in the parcel’s market value due to the improvement. Respondent

argues that this testimony was insufficient to rebut the presumption of legality. As

respondent points out, Fred E. Friedrichs has no experience from which to form a

competent opinion on the difference in his property’s value due to the sanitary sewer

improvement. Contrast E.H. Wilmmus Prop., Inc. v. Vill. of New Brighton, 293 Minn.

356, 359, 199 N.W.2d 435, 437 (1972) (crediting the testimony of an assessed property

                                             8
owner who “had an extensive background in real estate and industrial development”). In

addition, Pfau has no experience selling or valuing lake property and did not sell property

in the Tri-Lakes area. For this reason, the district court did not err by declining to rely on

Pfau’s testimony in determining the change in market value to appellants’ property from

the sanitary sewer improvement project.

       Moreover, the district court did not credit the testimony of McPartland. While the

district court noted that McPartland conducted “before and after appraisals” of

appellants’ parcel, the district court rejected McPartland’s use of comparable properties

because he admitted that there were too few properties from which to form a valid

comparison, the comparables did not include the 2014 selling-season sales, and the

comparables “did not consider soil maps or septic compliance in the neighborhood.” “As

fact finder, the [district] court was not bound by the testimony of an expert. Further, the

trial court is in the best position to assess the credibility of witnesses . . . .” Dosedel, 414

N.W.2d at 756; see DeSutter v. Twp. of Helena, 489 N.W.2d 236, 240 (Minn. App. 1992)

(stating that for special-benefit determination, the “weight and credibility of . . .

testimony, including that of . . . expert witnesses, [is] for the trier of fact” (quotation

omitted)), review denied (Minn. Sept. 30, 1992). In his testimony, Draheim challenged

both the validity of the comparables chosen by McPartland and some of the figures he

used to calculate market value. The district court’s conclusion that appellants did not

overcome the presumption of the assessment’s validity is supported by the evidence and

by its findings.

II.    Property-value increase

                                                9
       Appellants next argue that the District applied an assessment method that is void

on its face because it simply allocated costs among the Tri-Lakes parcels rather than

specifically considering the market-value increase to appellants’ parcel due to the

sanitary-sewer improvement. Under Minnesota law, “The cost of any improvement, or

any part thereof, may be assessed upon property benefited by the improvement, based

upon the benefits received, whether or not the property abuts on the improvement . . . .”

Minn. Stat. § 429.051 (2014). Once an assessment is approved, the procedure for

calculating the portion to be paid by individual property owners is the following: “the

clerk, with the assistance of the engineer or other qualified person selected by the council,

shall calculate the proper amount to be specially assessed for the improvement against

every assessable lot, piece or parcel of land, without regard to cash valuation, in

accordance with the provisions of section 429.051.” Minn. Stat. § 429.061, subd. 1

(2014).

                     It is well established . . . that the relative benefits from
              an improvement are calculated on the market value of the land
              before and after the improvement and that the market value
              may be calculated on the highest and best use of the land. . . .
              [A]ny method resulting in a fair approximation of the increase
              in market value for each benefited parcel may be used. Thus,
              as long as a valuation method fairly approximates the increase
              in a parcel's market value, it may be used in an assessment
              proceeding.

DeSutter, 489 N.W.2d at 238 (citations and quotations omitted). The four typical

valuation methods used to calculate market value include, “(1) the market-data approach

based on comparable sales; (2) the income-capitalization approach; (3) the reproduction-

cost, less depreciation, approach; and (4) the development-cost approach.” Eagle Creek

                                              10
Townhomes, LLP v. City of Shakopee, 614 N.W.2d 246, 251 (Minn. App. 2000), review

denied (Minn. Sept. 13, 2000).

       Respondent did not offer an appraisal to establish the change in market value to

appellants’ property from installation of the sanitary sewer, but Draheim explained the

basis for his opinion that the property would increase in value at least $26,459.55, or the

amount of the special assessment. He testified that he used a software program that

produced an “RPR report” that applied data from “overall county information” and “sales

comparables” to calculate a market value for appellants’ parcel. He also offered further

testimony supportive of a determination that appellants’ property benefited from the

improvement, including that: (1) sanitary-sewer systems are more preferable to septic

systems because lenders now require septic-system compliance before approving home

financing; (2) compliance systems for septic systems are constantly changing;

(3) property values are negatively affected by the presence of septic systems because of

their need for drain fields and mounds; (4) septic systems require ongoing maintenance;

(5) septic systems tend to freeze in the winter; and (6) homes that use sewer systems sell

more quickly than those that use septic systems. Ultimately, Draheim compared the

market value of appellants’ property before the improvement to the market value of the

property after the improvement to arrive at the figure representing the property’s

increased value from the improvement, which is the traditional approach used by

appraisers. See id. (“Characteristically, an appraiser in a special-assessment case is to

give two values to the property: the first is the value of the property before the public

improvement is in place and the second is the value of the property after the improvement

                                             11
is in place.”). Finally, Draheim challenged the validity of the comparables used by

McPartland to support his appraisal. In its findings, the district court specifically

“credit[ed] Mr. Draheim’s experience and testimony.”

       Given our deferential standard of review, we conclude that Draheim’s testimony

was sufficient to support the $26,459.55 increase in market value of appellants’ property

due to the improvement. The law does not require application of a specific method to

prove market value; it requires only the use of “any method resulting in a fair

approximation of the increase in market value for each benefited parcel[;] . . . as long as a

valuation method fairly approximates the increase in a parcel’s market value, it may be

used in an assessment proceeding.” DeSutter, 489 N.W.2d at 238 (citation omitted). In

Eagle Creek Townhomes, LLP, this court affirmed a special assessment that used a

valuation method that had not been previously recognized, but “yield[ed] fair

approximations of both the before and after values of the [subject] property.” 614

N.W.2d at 251-52. Likewise, Draheim’s testimony is sufficient to prove the market value

of appellants’ property.

       In Special Assessment for Maplewood Public Project No. 78-10 by Oxford v. City

of Maplewood, this court reversed a special assessment of over $24,000 to a property for

a storm sewer improvement when “[t]here was no credible evidence to support the

[district] court’s finding” that the value of the subject property increased by at least that

amount from the improvement. 358 N.W.2d 106, 108 (Minn. App. 1984). Appellants

argue that this case is controlling here. We disagree. Respondent offered credible

evidence to support an increase in the value of appellants’ property due to the

                                              12
improvement, and the evidence is sufficient to support the district court’s decision to

uphold the special assessment. See DeSutter, 489 N.W.2d at 239 (“The scope of

[appellate] review is a careful examination of the record to ascertain whether the

evidence as a whole fairly supports the findings of the district court and whether these in

turn support its conclusions of law and judgment. The evidence must be against the

findings to justify a reversal.” (quotations omitted)); Twin City Hide v. Transamerica Ins.

Co., 358 N.W.2d 90, 92 (Minn. App. 1984) (stating that in evaluating a district court

determination of market value, it is not this court’s role “to weigh the evidence as if

trying the matter de novo, but rather to determine if the evidence as a whole sustains the

[district] court’s findings”).

III.   Evidence considered at trial

       Appellants argue that the district court improperly considered evidence that was

irrelevant to the special-assessment proceeding. They cite to several factual findings

made by the district court that set forth historical facts from earlier proceedings, as well

as four exhibits and testimony related to them. It is unclear how appellants conclude that

this information is not relevant to the issues presented, nor do appellants cite to any legal

authority or ask for specific relief due to this assertion. Under these circumstances,

appellants have not established proper grounds for relief. See Louden v. Louden, 221

Minn. 338, 339, 22 N.W.2d 164, 166 (1946) (“An assignment of error based on mere

assertion and not supported by any argument or authorities in appellant’s brief is waived

and will not be considered on appeal unless prejudicial error is obvious on mere

                                             13
inspection.”); In re Estate of Grote, 766 N.W.2d 82, 88 (Minn. App. 2009) (“This court

declines to address allegations unsupported by legal analysis or citation.”).

       Affirmed.

                                             14