a research memo for city officials INFORMATION 515a1a.3 October 2000 Local Improvement Guide League of Minnesota Cities

Transcription

1 a research memo for city officials INFORMATION 515a1a.3 October 2000 Local Improvement Guide League of Minnesota Cities

2 The League of Minnesota Cities provides this publication as a general informational memo. It is not intended to provide legal advice and should not be used as a substitute for competent legal guidance. Readers should consult with an attorney for advice concerning specific situations League of Minnesota Cities Research Foundation All rights reserved Printed in the United States of America League of Minnesota Cities 145 University Avenue West St. Paul, MN (651) (800) Fax (651)

3 Table of Contents Special Assessments Highlights..7 Part I. Introduction 13 Part II. Special assessments.13 A. Authorization for improvements 14 B. Relation to city charters 14 C. Use of the code by counties and towns 15 D Improvements cities may finance with special assessments 15 E. Summary of steps in a special assessment proceeding.18 F. Use of municipal funds to pay part of cost and postponing assessments 20 G. Relation of special assessments to market value.21 H. Interest limits on special assessments 24 I. Use of special assessments to collect current service charges 25 J. Apportionment of assessments upon subdivision of land 27 K. Abandonment of improvement. 27 L. Deferral of assessments.28 M. Computation of time 32 N. Marketing bonds and bond counsel 32 O. Skyway and fire protection systems 33 P. Pros and cons of special assessments.. 33 Part III. Alternatives to special assessments. 35 A. Special service districts 35 B. Housing improvement areas 37 C. Other programs: storm water and sidewalk improvements 38 D. Local improvement policy. 40 Part IV. Forms for local improvements A. Forms for Commencing Improvements (Forms 1-8) Petition for Local Improvement (100 percent of property owners) Agreement of Assessment and Waiver of Irregularity and Appeal Petition for Local Improvement (more than 35 percent of property owners) Resolution Declaring Adequacy of Petition and Ordering Preparation of Report..45 Local Improvement Guide 3

4 4A. Alternate Resolution Ordering Preparation of Report on Improvement Resolution Receiving Report and Calling Hearing on Improvement Notice of Hearing on Improvement Resolution Ordering Improvement and Preparation of Plans 50 7A. Alternate Resolution Ordering Improvement and Preparation of Plans Resolution Ordering Installation of Branch Sewer and Water Pipes in Advance of Street Paving. 54 B. Forms of Contracting and Work Under Contract (Forms 9-21) Resolution Approving Plans and Specifications, and Ordering Advertisement for Bids Advertisement for Bids Proposal for Local Improvement Resolution Accepting Bid Contract Contractor's Performance and Payment Bonds 65 14A. Performance Bond.65 14B. Payment Bond Engineer's Estimate for Partial Payment Order to Suspend Work Engineer's Recommendation for Final Acceptance Resolution Accepting Work Resolution Approving Plans and Specifications, and Ordering Work Done by Day Labor A. Resolution Ordering Improvement by Day Labor Report on Cost of Work Done by Day Labor Special Forms for Street Graveling, Grading, and Bituminous Surfacing Done by Day Labor 78 a. Resolution Making Estimates of Materials and Equipment, and Ordering Advertisement for Bids.78 b. Advertisement for Bids 80 C. Forms Assessing Cost (Forms 22-29A) Resolution Declaring Cost to be Assessed, and Ordering Preparation of Proposed Assessment The Assessment Roll Resolution for Hearing on Proposed Assessment Notice of Hearing on Proposed Assessment 85 25A. Affidavit of Mailing Assessment Hearing Notice Resolution Adopting Assessment Appeals to District Court 94 27A. Notice of Final Assessment 95 4 League of Minnesota Cities

5 28. Certificate to County Auditor 96 28A. Certificate to County Auditor (Alternate for annual certification plan) Notice of Assessment Against Public Corporation 98 29A. Certificate to County Recorder of Deferred Assessments 100 Part V. Financing Public Improvements 101 A. Working through a bond sale Planning Authorizing the sale Sale of bonds Preparing to deliver the bonds Closing and delivery 104 B. Home rule charter cities 105 C. Conclusion 105 Part VI. Part VII. Part VIII. Part IX. Improvement Checklist 106 Current Services Charges 108 Model ordinance for current services 110 Model ordinance for deferred assessments 116 Local Improvement Guide 5

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7 Special Assessments Highlights 1. What are special assessments? Special assessments are an indirect form of taxation. They are a way for cities to charge certain properties for the cost of making a local improvement, or to collect certain charges that will benefit those properties. 2. What improvements can be paid for with special assessments?? Special assessments can be used to finance many different types of local improvements, including the following: Street and sidewalk improvements. Storm and sanitary sewer systems. Steam heating mains. Street lighting systems. Waterworks systems. Parks, playgrounds, and recreational facilities. Planting, maintenance, and trimming of street trees. Nuisance abatement. Dikes and flood control works. Retaining walls and area walls. Highway noise barriers. Pedestrian skyway systems. Underground pedestrian concourses. Public malls, plazas, and courtyards. Local Improvement Guide 7

8 District heating systems. Some fire protection systems. Highway sound barriers. Gas and electric distribution facilities. Parking facilities. Enhanced 911 markers. Internet access facilities under certain circumstances. 3. Can special assessments be used to collect service charges? Cities may use special assessments to recover the cost of the following service charges if the city has adopted an ordinance to provide for it: Snow, ice, and rubbish removal from sidewalks. Weed elimination from streets and private property. Elimination of public health hazards from private property. Installation or repair of water service lines. Street sprinkling and dust treatment. Treatment and removal of insect-infested or diseased trees on private property. Trimming and care of trees and removal of unsound trees. Repair of sidewalks and alleys. Operation of street lighting systems. Operation and maintenance of a fire protection system. 8 League of Minnesota Cities

9 $ 4. Is there any limit to the amount of a special assessment? The amount that is charged to a particular property must be based upon the benefits that the property will receive from the improvement. Cities cannot charge an amount greater than the amount the benefit will increase the value of the property.? 5. What is the procedure to use special assessments? The process to use special assessments is fairly involved. See the Local Improvement Guide (LMC 515A1A.3) for sample forms and a detailed discussion of the special assessment procedure. The following is a summary of the procedure: Initiation of proceedings. The proceedings may be initiated by the council OR by a petition of affected property owners. Preparation of a feasibility report on the improvement. The city engineer (or other competent person) must prepare a report on the proposed improvement, and whether it is necessary, cost-effective, and feasible. Notice of the public hearing on the improvement. A public hearing must be held on the proposed improvement. The city must publish notice of the public hearing to consider the proposed improvement. It must be published twice with the notices appearing at least one week apart. At least three days must elapse between the last publication and the date of the hearing. The city must also mail notice to each property owner in the proposed assessment area at least 10 days prior to the hearing. The notice must contain a statement that a reasonable estimate of the impact of the assessment will be available at the hearing. Public hearing on the improvement. At the hearing, the council should give interested people a chance to voice their concerns, whether or not they are in the proposed assessment area. A reasonable estimate of the total amount to be assessed and a description of the methodology used to calculate individual assessments for affected parcels must be available at the hearing. When a petition signed by 100 percent of the landowners requests the improvement, the council may order the improvement without a hearing. Local Improvement Guide 9

10 Ordering the improvement and the preparation of plans. If the council began the proceedings because of a petition signed by the owners of at least 35 percent of the property abutting the improvement, the council can pass a resolution to order the improvement with a majority vote. However, if the council initiated the proceedings, a four-fifths majority vote of the council is needed to pass the resolution. After the resolution is passed, the city engineer should prepare the necessary plans and specifications. The council should decide how the improvement will be done and, if necessary, issue a call for bids. Preparation of the proposed assessment roll. The city clerk and the engineer (or other qualified person) must calculate the proper amount to be specially assessed against each property that will benefit from the improvement. The proposed assessment roll must be available for public inspection in the city clerk s office. Notice of the public hearing on the proposed assessment. The city must publish notice of the hearing in the city s official newspaper. The publication must occur at least once, not less than two weeks prior to the hearing. The notice must include the following information: Place, time, and date of the hearing. Overall project description. Total cost of the improvement. Area to be assessed. Description of appeals procedure. Any deferment options. The city must also mail notice of the hearing to each property owner at least two weeks prior to the hearing date. The mailed notice must contain the following: The right of the property owner to appeal the amount. Amount of the assessment for the individual parcels. Possible pre-payment provisions. Interest rate on the assessments. 10 League of Minnesota Cities

11 Public hearing on the proposed assessment. This hearing is for the following two purposes: To provide an opportunity for the city to present evidence showing that the market value of each parcel will increase as a result of the improvement. The increase must be equal to or in excess of the amount of the special assessment. To give affected property owners an opportunity to express their concerns about the actual special assessment levy. Approval and certification of assessment rolls. After the public hearing, the council must approve the assessment rolls in their final form so the clerk can certify them to the county auditor. If the adopted assessment differs from the proposed assessment, the clerk must mail the property owner notice of the new amount. Issuance of obligations to finance the improvement. Most cities use one of three types of bonds to finance special assessments: improvement bonds, improvement warrants, or temporary improvement bonds. See the Local Improvement Guide (LMC 515A1A.3) and Chapter 25 of the Handbook for Minnesota Cities for further discussion of these types of obligations. Levying and collecting assessments. The clerk must certify the assessments to the county auditor. This may be done either by certifying the entire assessment roll all at once, or by certifying each yearly amount annually. 6. What happens if the city doesn t follow the required procedure? If the city doesn t follow the proper procedure, a special assessment can be challenged in court by the property owner. The cost of defending such a lawsuit can be expensive for the city, even if the city is successful. If the city loses the case, it will be stopped from making the special assessment and ordered to go though a reassessment process. Local Improvement Guide 11

12 7. Are there any other costs that can be assessed to a person s property? Some unpaid bills can be put on a person s property taxes, but only under limited circumstances if the city has an ordinance that allows it. Some common bills that are levied with property taxes this way include: Garbage collection (statutory cities and fourth class charter cities). Unpaid sewer and water bills. 8. Where can cities get further information? The League of Minnesota Cities has several publications available that discuss issues related to local improvements in more detail including The Local Improvement Guide (LMC 515a1a.3). Call the League s Research and Information Services Department at (651) or (800) for further information. 12 League of Minnesota Cities

13 Minnesota Constitution in Art. Sec. 1 Part I. Introduction As political subdivisions of the state, cities share in the responsibility vested in government to provide for the security, benefit, and protection of the people. One of the ways cities promote this goal is to make improvements to streets, sewers, and water systems. State law authorizes both statutory and home rule charter cities to make a variety of public improvements, and to finance the cost of the improvements in several ways -- most notably by imposing special assessments against the properties benefited by the improvements. This guide is intended to provide city officials with general advice and assistance, but the League strongly urges the city s legal and fiscal advisors review the procedures and forms used for each project in order to ensure compliance with state law. The League thanks David Kennedy and Daniel Greensweig of the Kennedy & Graven law firm for their review and update of the 1999 version of this document, especially the model forms included in Part IV. Thanks also to Thomas J. Radio, Esq., of the Hinshaw & Culbertson law firm for his previous revision of the 1996 version of the Local Improvement Guide, upon which this document is based. Part II. Special assessments Special assessments are an indirect form of taxation. They are a compulsory charge on selected properties for a particular improvement or service that benefits the owners of the selected property. Special assessments have three distinct characteristics: They are a compulsory levy a city uses to finance a particular public improvement program; The city levies the charge only against those particular parcels of property that receive some special benefit from the program; and The amount of the charge bears a direct relationship to the value of the benefits the property receives. Special assessments apply only to real estate. Cities may not levy special assessments against personal or movable property. Special assessments are often thought of as more equitable than property taxes because those individuals who pay them obtain direct benefits from the improvements. Local Improvement Guide 13

14 A. Authorization for improvements Minn. Stat Minn. Stat , subd. 3 Minn. Stat The forms and suggestions comprising this memorandum have been prepared by the League of Minnesota Cities as a guide to local improvement proceedings under the uniform special assessment statutes. These sections, which are commonly referred to as the local improvement code, prescribe the procedure to be followed by a city in making improvements financed fully or partly with special assessments. Thus, a city may put in street lights, build a water tank, or plant trees without complying with this procedure if the project is to be financed entirely from general funds or non-special assessment sources. The act expressly repeals all prior statutes under which projects could be financed by special assessments in municipalities. Consequently, when any portion of the cost of an improvement is defrayed by special assessments, the procedure prescribed in the statutes must be followed. The only exception is for charter cities. B. Relation to city charters Minn. Stat Minn. Stat , subd. 3 Any charter city may use the local improvement code or an alternative procedure specified in its charter unless a home rule charter or amendment adopted after April 17, 1953, makes either the statutory or charter system exclusive. If the council proceeds under charter provisions, they must still send notices of proposed assessments and inform property owners of the procedures they must follow under the charter to appeal the assessments to district court. The notices must also inform property owners of the state law provisions regarding possible deferments and whether any deferment procedure has been established within the city. When the charter city council decides to make any improvement, it must let the contract for all or part of the work, or order all or part of the work done by day labor or otherwise as may be authorized by the charter, no later than one year after the adoption of the resolution ordering the improvement--unless a different time limit is specifically stated in the resolution ordering the improvement. 14 League of Minnesota Cities

15 A.G. Op. 707-A-4, Sept. 15, 1960 If the statute is used for any improvement in a charter city, it should be used throughout the proceedings. The use of part of the procedure of the statute, and part of the local improvement procedure provided by charter, may result in an invalid assessment. However, where the local improvement code is silent, such as with regard to the procedures for adopting resolutions and ordinances, a city must use both its charter and the improvement code. C. Use of the code by counties and towns See Minn. Stats , subd. 2 (a) and , subd. 3 Minn. Stat , subds. 2 and 2b Counties may utilize the provisions of Chapter 429 in connection with the construction, reconstruction, or improvement of a county state-aid highway, including curbs, gutters, storm sewers and, except in metropolitan area counties, waterworks and sewer systems as described in Minn. Stat , subd. 1. (This authority is limited to areas located outside the corporate limits of cities.) Counties may also use Chapter 429 in connection with enhanced 911 services for certain expenses that are not paid under other statutes. Any town with urban powers under Minn. Stat may use special assessments to the same extent as statutory cities. Other towns may use special assessments for the construction, reconstruction, or improvement of a town road -- including curbs, gutters, and storm sewers -- and for the local improvements numbered 1, 2, 4, 5, 6, 7, 8, and 10 in the following section. In cases where the local improvement code is used by a town or county, the phrase town board or county board should be substituted for council where appropriate in the various notices and resolutions. D. Improvements cities may finance with special assessments As a general rule, cities may use special assessments to finance public improvements but not private improvements such as private driveways. However, cities may use assessments to finance certain current services and other programs as authorized by statute. Also, the Legislature seems to be broadening the use of special assessments for projects that primarily benefit a particular parcel of property. Minn. Stat , subd. 1 Public improvements that cities may finance through special assessment levies include the following: Local Improvement Guide 15

16 Minn. Stat , subd. 1(1) Minn. Stat , subd. 1(2) and Minn. Stat , subd. 1(3) Minn. Stat , subd. 1(4) Minn. Stat , subd. 1(5) Minn. Stat , subd. 1(6) Minn. Stat , subd. 1(7) Minn. Stat , subd. 1(8) Street and sidewalk improvements. Acquisition, opening, and widening of any street and improvement of streets and sidewalks by constructing, reconstructing, and maintaining sidewalks, pavement, gutters, curbs, and vehicle parking strips of any material or by grading, graveling, oiling, or otherwise improving them. Included are charges for beautification, storm sewers, or other street drainage systems, and installation of connections from sewer, water, or similar mains to curb lines. Storm and sanitary sewer systems. Acquisition, development, construction, reconstruction, extension, and maintenance of storm and sanitary sewer systems. Cities may include outlets, holding areas and ponds, treatment plants, pumps, lift stations, service connections, and other appurtenances of a sewer system within and outside the corporate limits. (Special storm sewer improvement districts within cities are authorized for storm sewer systems and related facilities within the district, including storm water holding areas and ponds, financed by a district-wide tax. See later discussion of Alternatives to Special Assessments.) Steam heating mains. Construction, reconstruction, extension, and maintenance of steam heating mains. Street lighting systems. Installation, replacement, extension, and maintenance of street lights, street lighting systems, and special lighting systems. Waterworks systems. Construction, reconstruction, extension, and maintenance of waterworks systems. This includes all appurtenances of a waterworks system, even the treatment plant, whether inside or outside the city. Parks, open space areas playgrounds, and recreational facilities. Acquisition and improvement of land, and purchase of equipment and facilities, either within or outside the corporate limits. Street trees. Planting, trimming, care, and removal. Nuisance abatement. Includes, but not limited to, draining and filling swamps, marshes, and ponds on public or private property. 16 League of Minnesota Cities

17 Minn. Stat , subd. 1(9) Minn. Stat , subd. 1(10) Minn. Stat , subd. 1(11) Minn. Stat , subd. 1(12) Minn. Stat , subd. 1(13) Minn. Stat , subd. 1(14) Minn. Stat , subd. 1(15) Minn. Stat , subd. 1(16) Minn. Stat , subd. 1(17) Minn. Stat , subd. 1(18) Dikes and other flood control works. Construction, reconstruction, extension, and maintenance. Retaining and area walls, including highway noise barriers. Construction, reconstruction, extension, and maintenance. Pedestrian skyway systems. Construction, reconstruction, improvement, alteration, extension, operation, maintenance, and promotion of bridges, overpasses, hallways, plazas, elevators, and escalators. (Such improvement may be made upon a petition pursuant to section , subd. 3.) Underground pedestrian concourses. Construction, reconstruction, maintenance, and promotion of tunnels, arcades, plazas, elevators, and escalators. Malls, plazas, or courtyards. Acquisition, construction, improvement, alteration, extension, operation, maintenance, and promotion of public malls, plazas, and courtyards. District heating systems. Construction, reconstruction, extension, and improvement of district heating systems. Fire protection systems. Construction of fire protection systems in existing buildings, but only upon petition of the owners. Highway sound barriers. Acquisition, construction, reconstruction, improvement alteration, extension, and maintenance. Gas and electric distribution facilities. Improving, constructing, reconstructing, extending, and maintaining gas and electric distribution facilities owned by a municipal gas or electric utility. Enhanced 911 markers. Purchasing, installing, and maintaining signs, posts, and other markers for addressing related to the operation of enhanced 911 telephone service. Local Improvement Guide 17

18 Minn. Stat , subd. 1(19) Internet access. To improve, construct, extend, and maintain facilities for Internet access and other communications purposes. In order to use this authority, the council must find: That the facilities are necessary to make available Internet access or other communications services that are not and will not be available through other providers or the private market in the reasonably foreseeable future, AND That service to be provided by the facilities will not compete with service provided by private entities. Minn. Stat Parking lots. Cities may also use special assessments for acquiring or constructing parking facilities. Cities must use the procedures specified in the local improvement code in making the assessments for those projects. In re Village of Burnsville, 245 N.W. 2d 445 (Minn. 1976); Joint Indep, School Dist. No. 287 v. City of Brooklyn Park, 256 N.W. 2d 512 (Minn. 1977) A number of projects that the local improvement code defines as local improvements may benefit the entire city, such as a sewage disposal plant, interceptor sewer or a water treatment plant. The constitutional provision authorizing special assessments for local improvements may allow these kinds of projects as long as the projects confer a special benefit on assessed property that the improvements do not confer upon the city as a whole. E. Summary of steps in a special assessment proceeding There are several steps that must be followed in order to use special assessments. The following is a summary of these steps: Forms 1-3 Initiation of proceedings, either by the council or by petition of affected property owners (fire protection system improvements may only be initiated by petition). Forms 4-5 Preparation of a report on the proposed improvements. 18 League of Minnesota Cities

19 Form 6 Form 4 Minn. Stat , subd. 1 Public hearing held on proposed improvement. When a petition signed by 100 percent of the landowners requests the improvement, the council may order the improvement without a hearing. The validity of the resolution may not be questioned unless an action for that purpose is commenced within 30 days; however, the amount of validity of the special assessment may still be questioned pursuant to Section NOTE: Cities should note that new notice requirements are now needed when mailing notice to affected property owners. The mailed notice must now contain a statement that a reasonable estimate of the impact of the assessment will be available at the hearing. Forms 7-8 Ordering of improvement and preparation of plans. Forms 22-29A Levy of special assessments after public hearing on proposed assessment. Forms 9-18 Forms Performance of work under contract or, in certain cases, by day labor. See Part V Issuance of obligations to finance the improvement. The law permits the council to carry out, in advance of the improvement hearing, all of the detailed steps prior to, but short of, the actual letting of a contract for the improvement. Thus, if the council wishes to expedite matters or provide firm estimates to costs at the hearing, it may, in addition to the required preliminary report, prepare completed plans and specifications prepared, advertise for bids, and open and tabulate them before the hearing. Improvements of different kinds anywhere in the municipality may be included in one proceeding and conducted as one improvement. Thus, a single proceeding may encompass sidewalk, curb and gutter, and water and sewer mains installed anywhere in the municipality. Village of Excelsior v. F.W. Pearce Corporation, 226 N.W.2d 316 (Minn. 1975) Improvements made through a cooperative agreement with the state or other political subdivision by which the state or other subdivision is made the agent for the municipality do not need to comply with bid and contract requirements of the improvement code if, in letting the contract or performing the work, the law applicable to the state or other political subdivision with which the agreement is made is complied with. Local Improvement Guide 19

20 It is necessary, however, to hold the hearing on the improvement and follow other procedural requirements if an assessment is to be levied for the municipal share of the cost. The cooperative agreement should be made before the party letting the improvement contract advertises for bids. In some cases, the desired cooperative improvement may be tacked on to a unit price contract. The courts construe assessment proceedings strictly in order to give full protection to the property owner. In order to provide a valid assessment, therefore, procedural requirements should be carefully complied with. Accordingly, city councils might have the proceedings handled by the city attorney or an outside consultant. If construction of the improvement requires the public sale of obligations to secure money in advance of collection of the assessments, many councils will find it difficult--if not impossible-- to secure a market for the obligations unless they have secured or can promise an opinion of a firm concluding that the proposed issue is valid. Prospective purchasers of municipal obligations ordinarily insist on an opinion to protect their investment. F. Use of municipal funds to pay part of cost and postponing assessments The city may pay a portion of the cost of a local improvement from general ad valorem levies or from other available general funds. It is not limited to paying merely for the municipal share of the cost due to street intersections or to municipal ownership of abutting property. However, the city may not issue full faith and credit improvement bonds without an election unless at least 20 percent of the total cost of the improvements to the municipality is defrayed by special assessments. If a waterworks or sanitary or storm sewer improvement benefits property abutting on, but not initially assessed for the improvement, the code permits the municipality to reimburse itself for all or any portion of the cost originally advanced from its own funds by levying additional assessments against such property upon notice and hearing as provided for the initial assessments. 20 League of Minnesota Cities

21 Moreover, to the extent that a waterworks or a sanitary or storm sewer improvement may benefit non-abutting property not initially assessed for it, but used when extensions or other improvements are made, the code permits all or any portion of the cost advanced originally by the municipality from its own funds to be included in the amounts assessed for the later improvement. Notice to that effect must be included in the notice of hearing on the matter of undertaking the later extension or improvement. G. Relation of special assessments to market value Special assessments reflect the influence of a specific local improvement on the value of specific property. No matter what method the city uses to establish the amount of the assessment, the real measure of benefits is the increase in the market value of the land as a result of the improvement. Special assessments are presumptively valid if the following criteria are met: The land assessed receives a special benefit from the improvement. The assessment is uniform as applied to the same class of property. The assessment does not exceed the special benefit (the special benefit is measured by the increase in the market value of the land due to the improvement). Buettner v. City of St. Cloud, 277 N.W.2d 199 (Minn. 1979); Ewert v. City of Winthrop, 278 N.W.2d 545 (Minn. 1979); Tri-State Land Co. v. City of Shoreview, 290 N.W.2d 775 (Minn. 1980); Buzick v. City of Blaine, 505 N.W.2d 51 (Minn. 1993); Schumacher v. City of Excelsior, 427 N.W.2d 235 (Minn. 1988) Gullard v. City of Lake Park, C (Minn. App. Unpublished Aug. 12, 1997) The assessment roll contains prima facia proof that an assessment does not exceed a special benefit. If this amount is challenged, the party contesting the assessment must introduce evidence sufficient to overcome this presumption. If the evidence is conflicting, the district court must determine whether the assessment exceeds the market value increase and, if so, by what amount. Local Improvement Guide 21

22 It is thus advisable that the city present direct evidence at the assessment hearing on the benefit in the form of expert testimony by a person qualified to appraise real estate and determine the increase in market value as a result of the improvement, especially if controversy is expected over the assessment or the benefit. The evidence presented by the city must fairly support a finding that the market value will increase at least as much as the amount of the proposed assessment. Village of Edina v. Joseph, 264 Minn. 84, 119 N.W.2d 809 (Minn. 1962); Anderson v. City of Bemidji, 295 N.W.2d 555 (Minn. 1980). Johnson v. City of Eagan, 584 N.W.2d 770 (Minn. 1998); In re: Village of Burnsville, 245 N.W.2d 445 (1976) In determining whether the evidence defeats the presumption that the benefit exceeds the assessment amount, the city is not required to show that the special assessment corresponds exactly to the benefits received. But the assessments must be roughly proportionate to the benefits accruing to each property as a result of the improvement. When a court disallows a portion of an assessment where the disallowed portion was in excess of the benefit to the property assessed, the city may not try to recoup the disallowed amount through another method, such as by imposing an utility lateral benefit charge on only that property and not on the other properties involved in the assessment. When the cost of an improvement exceeds the benefit, the difference must not be borne by a particular property but by the city as a whole. The Johnson case at least implies that the amount of a connection charge levied under Minn. Stat , subd. 3 cannot exceed the increase in market value of the property as a result of the improvement. Thus, the owner should be notified of the amount of the connection charge, and given the opportunity to object and present evidence that the amount exceeds the benefit to the property. Cities financing local improvements by special assessments must use extreme care in conducting proceedings. Before ordering an improvement, the council should gather as much evidence as possible on whether the benefits of a particular improvement are sufficient to justify the cost. The council must also determine the increases in market value. If voters have petitioned for an improvement and the benefit does not substantially exceed the cost, a council might use different strategies depending on its objectives and what it sees as the potential for appeals. 22 League of Minnesota Cities

23 The council could, under certain circumstances, obtain waivers of rights to appeal before entering into the contract and ordering the improvement. This plan may be feasible only if the assessable area is small. For larger projects, the council might consider making the improvement contract conditional on the absence of objections being filed within 30 days after the assessment hearing. Under this plan, the council would not enter into a binding contract, nor would any improvement work start until after both the improvement and assessment hearings and the period of time for appeals had elapsed. While this plan may cost more, a council might decide that avoiding litigation costs would be worth that chance. Another way to reduce the number of special assessment appeals is for the city to pay a substantial portion of the cost of all improvements out of general funds. The larger the portion of cost the city assumes, the smaller the chances that any individual assessment would exceed the benefit from the improvement as measured by the increased market value. Minn. Stat , subd. 1 and 2 Under the local improvement code, in order to appeal a special assessment a property owner needs to file a signed, written objection with the city clerk prior to the assessment hearing or with the presiding officer at the hearing. If there is an objection, the council may consider it at an adjourned hearing after giving the property owners notice. At the adjourned hearing, the council or a council committee may hear further written or oral testimony from the property owners, and from city officials and other witnesses, as to the assessment amount. The council must prepare a record of the proceedings at the adjourned hearing and written findings as to the amount of the assessment roll. Tri-State Land Co. v. City of Shoreview, 290 N.W.2d 775 (Minn. 1980) A property owner effectively waives any objection not received by the city council at the assessment hearing, unless the failure to object at the hearing is due to a reasonable cause -- a phrase that is not defined in the statutes and which has not received in-depth judicial analysis. The court decisions hint that the court, on appeal of an assessment, should give deference to the city council s determination of the assessment amount if the underlying decision-making process is designed to effectively produce a correct or just result or if the decision is informed by considerable expertise. Local Improvement Guide 23

24 Whether the proceeding at the adjourned hearing will bring the assessment determination within the quoted phrase, without the use of an impartial reviewing officer or body, remains to be seen. The procedure will at least save the council from the need for a more expert determination until a property owner objects at the original assessment proceeding. Minn. Stat , subd. 2 Another possibility is available under the local improvement code. The law has provided that the city could not calculate the total expense of the improvement until after the city had let a contract or ordered the work done by day labor. Only then could the city propose the assessment roll. Under an amendment, the city may now calculate the expense at any time, and the council may determine the assessment amount and prepare the assessment roll. It is now possible to advertise bids and allow sufficient time after the closing date to permit the city to prepare the assessment roll on the basis of the bid, and hold a hearing on that basis. Alternatively, the council might, when the financial situation warrants, proceed with the proposed assessment on the basis of estimates, with a reserve fund from general taxes and other uncommitted sources of revenue making up any difference between the assessments and the project cost. This method may be particularly attractive if the city follows the policy of paying some substantial part of improvement costs from tax revenues. Either method avoids the danger of proceeding on estimates, and having to make a substantial reassessment when actual costs turn out to be in excess of the estimates. If a reserve fund from general revenues is available, no reassessment will be necessary unless the cost is less than estimates, and no one is likely to object when that process results in lower special assessments. H. Interest limits on special assessments Minn. Stat The statutes no longer impose limits on the interest rates cities may charge on special assessments. This is true both for local improvement projects where the city uses the assessments to repay the bonds it issued for the project, and for special assessment projects the city finances with general fund moneys without using bonds. The 1987 Legislature gave city councils authority to set the interest rate on special assessments in the resolution making the assessment. Some charter cities may still be subject to a charter assessment limit, however. 24 League of Minnesota Cities

25 Minn. Stat This same 1987 law also removed all limits on the interest cities may pay on bonds and other obligations. The law now specifies that interest on obligations issued after April 1, 1986, is not subject to any limitation on rate or amount. In effect, the market, rather than a statutory limit, determines the interest rate cities will pay on bonds. However, cities are free to set the interest rate on special assessments at whatever rate the council deems appropriate. The Legislature was obviously comfortable that city councils would act reasonably and responsibly in setting interest rates, and decided that no statutory restrictions would be needed. It seems equally clear that if the Legislature were to perceive that cities are abusing this discretion, it would not hesitate to reinstate limits. In setting interest rates on assessments, the council should make sure there is a reasonable relationship between the assessment interest rate and the bond interest rate if the city issued bonds to finance the project. If the city finances the project with funds on hand without using bonds, the council will want to look at the interest rate the city would otherwise have earned on the funds. In either case, the council may reasonably set the assessment interest rate somewhat higher in order to offset the additional bookkeeping and other costs involved in carrying the assessments. However, if the spread between the interest cost to the city and the assessment interest rate becomes too great, the Legislature may be convinced assessment interest rates need to once again be regulated by statute. I. Use of special assessments to collect current service charges Minn. Stat Minn. Stat , subd. 1(a) Minn. Stat , subd. 1(b) Minn. Stat , subd. 1(c) The code also authorizes the council to provide for the collection of certain enumerated special charges as a special assessment against the property benefited. Special charges that may be assessed include those for: Snow, ice, or rubbish removal from sidewalks. Weed elimination from streets and private property. Removal or elimination of public health or safety hazards from private property, except hazardous buildings as defined by Minn. Stat to Local Improvement Guide 25

26 Minn. Stat , subd. 1(d) Minn. Stat , subd. 1(d) Minn. Stat , subd. 1(e) Minn. Stat , subd. 1(f) Minn. Stat , subd. 1(f) Minn. Stat , subd. 1(g) Minn. Stat , subd. 1(h) Minn. Stat , subd. 1(h) A sample ordinance on this subject is included in Part VIII of this guide. Minn. Stat , subd. 4 Installation or repair of water service lines. Street sprinkling or other dust treatment of streets. Trimming and care of trees, and the removal of unsound trees from any street. Treatment and removal of insect-infested or diseased trees on private property. The repair of sidewalks and alleys. The operation of a street lighting system. The operation and maintenance of a fire protection system. The operation and maintenance of a pedestrian skyway system. A general ordinance to make this authority effective is required before it may be used in a municipality. Provisions for the levy and collection of the assessment are the same as for other improvements except that any special assessment levied under this authority is payable in no more than 10 annual installments -- the number determined by the council. The ordinance adopted under authority of this section of the improvement code may, at the option of the council, include provisions for placing primary responsibility on the property owner or occupant to do the work (except in the case of street sprinkling or other dust treatment; alley repair; tree trimming, care and removal; or the operation of a street lighting system where this procedure is impractical), for notice before the work is undertaken, and for collection from the property owner or other person served of unpaid charges before they are attached to the tax bill. When tax-forfeited land is returned to private ownership and is benefited by an improvement for which special assessments were canceled because of the forfeiture, the city may make a reassessment or a new assessment against the land for the amount unpaid on the original assessment. Notice and hearing are required as for the original assessment. 26 League of Minnesota Cities

27 A.G. Op. 425-c-15, July 15, 1977; Minn. Stat Johnson v. City of Eagan, 584 N.W.2d 770 (Minn. 1998) These provisions do not apply, however, to formerly tax-forfeited land returned to assessable ownership prior to April 14, the effective date of these two provisions. Although state statute permits a connection fee as an alternative means of paying for costs in instances where an assessment is canceled because of tax forfeiture, the fee cannot be imposed until the land returns to private ownership. However, the Minnesota Supreme Court recently found that a city could not impose a connection charge to a property for an assessment amount that was set aside by another court. J. Apportionment of assessments upon subdivision of land If a special assessment is levied against a tract of land that is later subdivided, the remaining unpaid installments can be apportioned among the various lots and parcels in the tract upon a finding that such apportionment will not materially impair collection of the balance due. This may be done upon application of the property owner or by the council acting upon its own motion. Notice of such apportionment and of the right to appeal must be mailed to or personally served upon all owners of any part of the tract. The council may, and if the assessment has been pledged toward payment of improvement warrants the council must, require the owner or owners to furnish surety bonds. K. Abandonment of improvement In re: Assessment for Channel Lane, 444 N.W.2d 602 (Minn. App. 1989) Minn. Stat and Minn. Stat Where a municipality has previously rejected an improvement project to be done by special assessment, the municipality must thereafter provide new notice before reconsidering the project. If a local improvement is abandoned after construction begins, but is so incomplete that special assessments already levied are in excess of the benefits received, a law separate from the improvement code provides for cancellation of the assessment and refunds of assessments already collected, subject to the right to make a reassessment for the amount of the special benefits actually accruing. Another section of the same law provides for transfer to the general funds of any surplus in the improvement fund remaining after all costs of the improvement have been met and all claims and obligations satisfied, subject to the council s right to refund all or part of this money to those who paid the assessment. Local Improvement Guide 27

28 Minn. Stat In the case of fire protection systems or skyway systems only, the council must abandon the improvement if so requested by the developer prior to awarding contracts for construction. The petitioner must then reimburse the city for any and all expenses incurred by the city. L. Deferred and delayed assessments The laws permit cities to let a property owner defer paying an assessment until a later date, provided the property owner or the property meets certain criteria. There is also a statute under which cities can delay making an assessment against some properties until a later date. 1. Senior citizen and disability deferrals Minn. Stat A city council (or a county or town board) making a special assessment is authorized in its discretion to defer the payment of an assessment for any homestead property owned by a person for whom it would be a hardship to make the payment if the owner is one of the following: A person who is 65 years of age or older. A person who is retired by virtue of a permanent and total disability. In this type of deferral, the city makes the assessment but allows the payment of the assessment to be deferred. This deferral applies only to assessments against an individual s homestead property. It does not allow deferral of assessments for improvements made to other real property the senior citizen or disabled person may own. Minn. Stat , subd. 1. See Form 25 See Part IX, which contains a model ordinance for deferred assessments. The city has the choice of whether or not to allow these deferrals. If the city chooses to allow this type of deferral, it must notify property owners that these deferrals are available in both the mailed and published assessment notices. If the city doesn t permit the deferrals, it must still notify property owners that the statutes permit cities to offer such deferrals. If the city decides to allow these deferrals, the council must pass an ordinance or resolution establishing the criteria for determining whether paying the assessments would present a hardship. Cities have used the following criteria to determine hardship: 28 League of Minnesota Cities

29 The dollar amount of the assessment. The applicant s income. The applicant s total assets. The ratio of an annual installment of the assessment to the applicant s income. The applicant must use forms provided by the county auditor to apply for the deferral. Cities may need to supplement the county auditor s forms with their own form in order to get all the information needed to determine hardship under the city s own criteria. The deferment is terminated and all accumulated amounts plus applicable interest become due upon ANY of the following events: The death of the owner (if the spouse is not otherwise eligible for the deferment). The sale, transfer, or subdivision of any part of the property. Loss of homestead status of the property. Determination by the council that requiring immediate or partial payment would impose no hardship. A model ordinance is provided in Part IX of this Guide. If payment of special assessments is deferred under this law, the council may determine, by ordinance or resolution, the amount of interest, if any, on the deferred assessment. If this is done by a general policy applying to all such assessments, the rate provision may be included in the ordinance or resolution setting standards and guidelines. 2. Undeveloped property Minn. Stat , subd. 2 The statutes allow cities to defer special assessments against unimproved property. It is up to the city whether or not to permit such deferrals and under what terms and conditions. In this type of deferral, the city makes the assessment but allows the payment of the assessment to be deferred. The city will need to decide how long the deferral will continue. The statute gives the city the following options: Local Improvement Guide 29