Paul Anderson, et al., Respondents, vs. City of Buffalo, Appellant.

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480 A. 08, subd. 3 (1998).

Paul Anderson, et al.,
Respondents,

vs.

City of Buffalo,
Appellant.

Wright County District Court
File No. C8971758

Michael C. Couri, Couri & MacArthur Law Office, 705 Central Avenue East, P.O. Box 369, St. Michael, MN 55376; and Jeffrey A. Carson, Carson, Clelland & Schreder, Suite 305, 6300 Shingle Creek Parkway, Minneapolis, MN 55430 (for respondents)

Gordon H. Hansmeier, Rajkowski Hansmeier, Ltd., 11 Seventh Avenue North, P.O. Box 1433, St. Cloud, MN 56302 (for appellant)

Considered and decided by Short, Presiding Judge, Willis, Judge, and Anderson, Judge.

The district court remanded to the City of Buffalo its special assessment against respondents' properties, and the City appeals. We affirm.

In 1996, appellant City of Buffalo began an improvement project to extend city sewer and water services to a development known as Pulaski Lake Shores. The City also widened, paved, and curbed the roadways and addressed drainage problems in the development. In June 1997, the City levied special assessments against the properties in Pulaski Lake Shores, including those owned by respondents.

Respondents appealed their assessments to the district court in July 1997. Respondents hired an expert to determine the effect of the improvements on the market values of their properties, and, while both the City's and respondents' experts estimated the market value of the properties before and after the improvements, the methodology used by the experts differed greatly.

The City's expert, Julie Jeffrey-Schwartz, estimated the pre- and post-improvement values of the subject properties by comparing them with other properties in Minnesota where similar improvements had been made. From these comparables Schwartz determined an average base price for the subject properties for use in her before-and-after analysis. Schwartz then made adjustments to the base values of individual subject properties to reflect differences between the subject properties and the comparables in characteristics that influence values, such as whether properties were lakeshore or not and whether they were served by asphalt or dirt roads. Schwartz did not take into account the values of residential structures on the properties but instead estimated the pre- and post-improvement values of only land to determine special benefits.

Respondents' appraiser, William Waytas, used a different approach. To determine pre-improvement values, Waytas compared a subject property with three comparable properties with wells and septic systems. To determine post-improvement values, Waytas compared a subject property with three comparable properties served by city water and sewer, and he included the value of residential structures in his pre- and post-improvement calculations. Waytas also adjusted the values of the comparable properties and their structures to attempt to make the comparables' value-influencing characteristics similar to those of the subject properties.

The district court found that Waytas's methodology was more likely to reflect accurately the special benefits of the improvements to the subject properties, and it adopted the respondents' appraisals submitted by Waytas as the court's findings. The district court ordered the City to reassess the properties in a manner consistent with those findings. The City appeals.

The City of Buffalo argues that the district court failed to give appropriate deference to the City's special assessment as levied. A city may invoke its power of special assessment only where (a) the land receives a special benefit from the improvement, (b) the assessment is uniform on the same class of property, and (c) the assessment does not exceed the special benefit. Carlson-Lang Realty Co. v. City of Windom, 307 Minn. 368, 369, 240 N.W.2d 517, 519 (1976). "Special benefit" is determined by measuring the increase in the market value of a property resulting from the improvement. Id. A district court's standard of review of an assessment depends on the ground for the challenge to the special assessment. Buettner v. City of St. Cloud, 277 N.W.2d 199, 202-03 (Minn. 1979).

Respondents alleged in the district court that the City's assessments exceeded the special benefits to their properties. This is, in essence, an allegation that the City took property without fair compensation in violation of the Fourteenth Amendment. See Buettner, 277 N.W.2d at 202. While a special assessment by a municipality is entitled to a presumption of validity, this presumption "disappears when adverse evidence on the question of value is introduced." Id. at 204; Tri-State Land Co. v. City of Shoreview, 290 N.W.2d 775, 778 (Minn. 1980). Thus, after the respondents introduced competent evidence that challenged the City's assessment valuation, the district court could not simply defer to the City's judgment. See Buettner, 277 N.W.2d at 203. Cf. Buzick v. City of Blaine, 505 N.W.2d 51, 54 (Minn. 1993) (upholding presumption of validity where petitioner was unable to present any evidence that directly challenged the assessment valuation). The district court was under no obligation to rely on the City's pre-assessment estimates, and the court appropriately determined that its decision must be based on an independent consideration of all evidence. See Buettner, 277 N.W.2d at 203; Dosedel v. City of Ham Lake, 414 N.W.2d 751, 755 (Minn. App. 1987).

The City next argues that the district court erred by accepting respondents' expert's appraisal because the expert included residential structures on the subject properties in his valuations. Any valuation method that fairly approximates the increase in a subject property's market value after an improvement may be used in an assessment proceeding. DeSutter v. Township of Helena, 489 N.W.2d 236, 238 (Minn. App. 1992), review denied (Minn. Sept. 30, 1992). Where both parties agree that a property's highest and best use is residential, the value of residential structures on the subject property may be considered when determining the specific benefit to a property. Id. at 239. The City attempts to distinguish this dispute from DeSutter by asserting that inclusion of residential structures is inappropriate here because the parties' experts do not agree on whether some of the properties could be subdivided. But the experts do agree that the highest and best use of the subject properties is residential. Disagreement on the divisibility of a property whose agreed-on best use is residential is immaterial to the relevance of the value of residential structures because such structures facilitate the best use of properties regardless of whether the properties remain their original sizes or are subdivided. The district court did not err by including the value of residential structures in its pre- and post-improvement valuations.

The City also alleges that the evidence does not support the findings of the district court. The weight and credibility of expert-witness testimony is for the trier of fact to determine, and this court will not reassess the experts' opinions on appeal. DeSutter, 489 N.W.2d at 240. This court reviews the record as a whole to determine whether the evidence supports the district court's findings. Carlson-Lang Realty Co., 307 Minn. at 373, 240 N.W.2d at 521. The evidence must be against the findings to justify a reversal. Dosedel, 414 N.W.2d at 756.

The City claims that by accepting the appraisals of respondents' expert, the district court failed to recognize the impact of existing private wells and septic systems in determining the value of the special benefits. The City claims that respondents' expert "never factored the existing systems into his report." But the City's claim is without basis because, as his report makes clear, respondents' expert adjusted the values of comparable properties to reflect the condition of their wells and septic systems relative to a subject property's well and septic system.

The City next claims that the district court erred by refusing to accept the City's proposed findings on whether subject properties in their pre-improvement state could be subdivided into lots that would accommodate wells and septic systems. The district court found that an analysis that includes a determination of the possible installation of future wells and septic systems "is too fraught with uncertainty to have a definite and predictable effect" on the subject properties' pre-improvement value. This uncertainty itself would likely impact the market value of a property, and the district court determined that the use of comparable properties with wells and septic systems would reflect the impact of such uncertainty and would more likely "elicit a proper calculation of enhanced value."

The City also alleges that the district court erred by not accepting the City's analysis of the impact of Wright County's point-of-sale certification ordinance for on-site septic systems. This ordinance requires that a property's sewage-treatment system be certified as "in compliance with Minnesota Rules Section 7080" at the time of sale of the property. Wright County, Minn., Point of Sale Certification Ordinance for On-Site Septic Systems § 1.00 (B) (Mar. 14, 1995). An existing system is in compliance if it is not an imminent threat to public health or safety; does not discharge sewage to a "seepage pit, cesspool, drywell, or leaching pit"; and has more than three feet of soil or sand between the distribution medium and the saturated soil level. Minn. R. 7080.0060, Subp. 3 (A) (1997); Minn. R. 7080.0020, Subp. 16a (1997). But a newly installed system is subject to numerous additional requirements. Minn. R. 7080.0060, Subp. 3 (B) (1997). The City claims here that "most of the septics on [r]espondents' properties were not conforming." The City made no on-site inspections to determine whether existing systems were in compliance with the ordinance, and yet its expert adjusted pre-improvement valuations by assuming the expected life of such systems, even though a number of property owners did not know how old their systems were. The market value of comparable properties reflects the potential need for future septic systems. Additionally, the market values of respondents' comparables, which are all located in Wright County, also reflect the risk of future costs associated with compliance with the Wright County ordinance.

Lastly, the City claims that the appraisals submitted by respondents' expert contain too many subjective adjustments, arguing that the City's expert's adjustments are fewer in number and less subjective because they are based only on the values of land. But the City's expert also made numerous subjective adjustments. Additionally, these adjustments were not nearly as transparent as respondents' expert's appraisal methodology. And, as discussed above, using the value of the residential structures in determining special benefits to the subject properties is appropriate where the parties have agreed that the highest and best use of the properties is residential.

The City cites the sale of two properties after the appraisals were made as evidence that its expert's appraisals did not exceed the special benefits to the subject properties because the properties sold for higher prices than the values the City's expert estimated. But these two sales only represent the post-improvement values of the properties and have no bearing on their pre-improvement values. The fact that a post-improvement sale is at a price higher than the value estimated by the City's expert does not serve to legitimize the expert's overall special-benefit determination. Additionally, the post-improvement values of these properties were more accurately determined by respondents' expert than by the City's. We note that this might show that the methodology consistently used by respondents' expert resulted in appraisals that reflected the actual values of the subject properties more accurately than did the methodology used by the City's expert.

The district court clearly described how it weighed the credibility of the experts' appraisals, and we will not reassess the credibility of that evidence here. Reviewing the record as a whole, we conclude that the evidence is not against the findings of the district court.