McGlennen Properties, LLC, Appellant, vs. City of Savage, Respondent.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

STATE OF MINNESOTA IN COURT OF APPEALS

A04-439

 

McGlennen Properties, LLC,

Appellant,

 

vs.

 

City of Savage,

Respondent.

 

Filed October 5, 2004

Affirmed

Gordon W. Shumaker, Judge

 

Scott County District Court

File No. 02-26607

 

 

 

Jeffrey A. Carson, Anna Krause Crabb, Carson, Clelland & Schreder, 6300 Shingle Creek Parkway, Suite 305, Minneapolis, MN 55430 (for appellant)

 

David G. Keller, Grannis & Hauge, P.A., 200 Towne Center Professional Building, 1260 Yankee Doodle Road, Eagan, MN 55121-1201 (for respondent)

 

 

 

            Considered and decided by Lansing, Presiding Judge; Shumaker, Judge; and Forsberg, Judge.*

 

 

 

U N P U B L I S H E D   O P I N I O N

 

GORDON W. SHUMAKER, Judge

 

            On appeal in this special-assessment dispute, appellant landowner argues (1) it introduced competent evidence to show that the assessment levied against it by respondent city exceeded the increase in the value of appellant's land and therefore rebutted the presumption that the assessment was valid; (2) the district court erred in waiving the requirement that the city present additional evidence once appellant met its initial burden to overcome the presumption that the assessment was valid; and (3) the district court erred in admitting the city's appraisal.  Because appellant did not introduce competent evidence to rebut the presumption that the assessment was valid, we affirm the district court and hold that the city was not required to present additional evidence. 

FACTS

 

            Appellant McGlennen Properties owns townhouse units in the Hamilton District of Savage, Minnesota.  In November of 2002, respondent City of Savage approved a levy of special assessments to install sanitary sewer, water main, storm sewer, bituminous street, curb and gutter, and sidewalks in the Hamilton District.  Appellant was assessed $45,000 for the portion of the project involving its property. 

            Appellant appealed to the district court under Minn. Stat. § 429.081 (2002), challenging the assessment.  The only issue before the district court was whether the project increased appellant's property value by at least the amount of the assessment.  Jason Wadell, an engineer for the city, testified that, prior to the improvements in the Hamilton District, the sewer and water main were too shallow for frost protection and water flow, the sewer line had been built with inferior piping that frequently clogged the line, the hydrant on the water main was faulty, and most of the area lacked storm sewers.  Wadell testified that, without the improvements, there was risk of flooding, sewer backups, and breakage of the water main because of pitting. 

            Timothy McGlennen testified that he and his father are partners in appellant McGlennen Properties and that they purchased the property in August of 2001, with full knowledge that the city intended to improve the sewer and streets in the Hamilton
District.  McGlennen testified that he did not see any need for the improvements the city made. 

            McGlennen stated that, prior to the purchase of the property, the townhouse units on appellant's property rented for between $650 and $850 per month.  When appellant purchased the property in 2001, all monthly rents were raised to $935 per month.  Appellant has since updated and remodeled some of the units and has raised the rent to between $950 and $1,175 per month for the updated units.  McGlennen attributed all of the rental increases to the "improvements on the building in the individual units" and has not specifically asked for or received additional rent as a result of the city's Hamilton District improvement project. 

            Calvin Haasken, a licensed real-estate appraiser, testified on behalf of appellant.  He submitted an appraisal report in which he conducted three different studies to determine whether the project had increased the market value of appellant's property. 

Laurence Danich, also a licensed real estate appraiser, testified on behalf of the city and submitted an appraisal report.  Danich based his appraisal report on the sale of four single-family properties in surrounding communities in 1999. 

The district court concluded that appellant did not overcome the presumption that the city's assessment is valid because appellant failed to show that the special assessment was greater than the increase in market values of the property resulting from the city's improvements.  This appeal followed. 

D E C I S I O N

 

            In reviewing the validity of a special assessment,this court carefully examines 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."  Carlson-Lang Realty Co. v. City of Windom, 307 Minn. 368, 373, 240 N.W.2d 517, 521 (1976).  This court's task is to review the district court's findings de novo review, with impartial scrutiny of all evidence.  Ewert v. City of Winthrop, 278 N.W.2d 545, 549 (Minn. 1979).

Appellant argues that it introduced competent evidence at trial to overcome the presumption of validity of the city's special assessment.  Within 30 days after adoption of an assessment, any aggrieved person may appeal to the district court by serving a notice upon the mayor or clerk of the municipality.  Minn. Stat. § 429.081 (2002).  An assessment "is presumed to be lawful and correct and the burden of proof rests upon the objector to demonstrate its invalidity."  Ewert, 278 N.W.2d at 548.  Thus, introduction of the assessment roll into evidence constitutes prima facie proof that the assessment does not exceed special benefit.  Carlson-Lang, 307 Minn. at 370, 240 N.W.2d at 519.  An aggrieved person may, however, overcome the presumption by introducing competent evidence that the assessment is greater than the increase in market value of the property due to the improvement.  Ewert, 278 N.W.2d at 548. 

Here, appellant introduced Haasken's appraisal, which consisted of three individual studies.  In the first study, Haasken researched the average sales of homes that were reported sold in the Hamilton District from 1999 through 2003 and calculated the percentage of change in the average sales price from year to year.  He then compared these statistics to sales within Savage and the greater Twin Cities metropolitan area for the same time period.  Haasken concluded that the project did not increase market value to the subject property because the average sale from 1998 to 2003 in the Hamilton District increased in value by 48.4%, while in all of Savage the increase was 51.3%. 

The study shows that in 1999 sales in the Twin Cities metro area increased in value by 10.81%, sales in Savage increased in value by 13.45%, and sales in the Hamilton District only increased in value by 2.65%.  However, in 2000, the Hamilton District increased by 24% and the other areas increased by 14.55% and 11.22%.  Haasken did not conclude that this significant increase was related to the pending project. 

Haasken's appraisal also shows that in 2002 the average sales price of property in the City of Savage was $250,057, and in the first half of 2003 the average sales price was $257,040.  This is a 2.8% increase.  In 2002, the average sales price of property in the Hamilton District was $156,175 and in the first half of 2003, the average sales price was $167,075.  This is a 7% increase.  Haasken offered no explanation why the Hamilton District experienced a 4.2% higher increase in average sales price than the City of Savage experienced in the first half of 2003.  Thus, the first study in Haasken's appraisal does not provide logical support for Hassken's conclusion that the project did not increase the market value of the subject property.

            The second study in the appraisal was a comparison of sales in the project area before and after the project and in a similar project area in the City of Chaska.  The appraisal shows that the median change in value was zero, but the average increase in value was $1,013 for houses in both areas.  However, the record shows that this part of the appraisal was flawed as well because, for many of the properties, the appraisal stated that the assessment was pending and Haasken was not able to verify whether the seller or the buyer paid the assessment.  In addition, unlike the townhouse units on the subject property, this study was based on the sale of detached single-family homes.

            For the third part of the appraisal, Haasken first determined the value of the subject property based on all 18 units renting for $935 in 2001.  Haasken used this amount to determine the properties' net annual income by subtracting the vacancy factor and the operating costs, and dividing by a standard capitalization rate to determine that the value of the property in December of 2001 was $1,431,700.  Haasken then used the same formula to determine the value of the property in August of 2003.  For this, Haasken used $954 as the rental amount; the operating expenses and capitalization rate remained the same.  Using this formula, Haasken determined that the property was worth $1,477,650 in August of 2003.  Haasken concluded "[a]ll increases in value are a result of improvements that the owner has made to the property and normal appreciation." 

            What this conclusion fails to consider is that the rents prior to appellant's purchase were $650-$850.  Appellant raised all rents in the buildings to $935 after purchasing the property.  It seems that if the original rents were applied to the formula, the increase in value would be far more significant.

            In addition, the appraisal states:

The average rent for a 3 bedroom apartment in the south metro area as reported in the Star Tribune Saturday addition [sic] has increased [from] $1125 to $1148 per month or 2.04% within from the 2nd quarter [of] 2001 to the 2nd quarter [of] 2003.  The average rent in the subject property for the seven units that have not been remodeled and updated has increased $19.00 per month or 2.03%.

 

Again, the $19 increase does not account for the fact that the units were renting for $650 and $850 and now units that have had no updates rent for $935.  That is an average increase of $185, or a 24.5% increase.  It is also important to note that those units that appellant has remodeled and updated are renting for up to $1,175 per month, which would obviously produce an even larger percentage increase.  Like the other studies in Haasken's appraisal, this study was not credible.

The record as a whole shows that appellant did not introduce competent evidence to show that the city's assessment against it exceeded the increase in value of appellant's land.  Thus, the district court did not err in concluding that appellant failed to rebut the presumption that the assessment was valid. 

Appellant argues that the district court erred in admitting the report of the city's appraiser.  Because we hold that appellant did not overcome the presumption ofpropriety of the assessment, we do not reach the issue of admissibility of the city's assessment.  Appellant also argues that the district court was required to make an additional factual determination.  When the presumption of an assessment's validity is overcome, the district court must make an "independent factual determination."  Tri-State Land Co. v. City of Shoreview, 290 N.W.2d 775, 778 (Minn. 1980).  Here, appellant did not overcome the presumption that the city's special assessment was valid.  Thus, the district court was not required to make an independent factual determination. 

            Affirmed.

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.