The Tacoma City Council met in closed session August 23, 2017 to discuss the city’s proposed Broadway Local Improvement District (“LID”) assessments, but ultimately concluded they needed more information before making a decision. They decided to table the discussion until next week’s regular City Council meeting.
In light of the pendency of the Council’s decision, it seems like a good time to review a recent case involving an LID in the City of Napavine, which refers to another illustrative case from 2014.
Last Tuesday, August 22, 2017, Division 2 of the Washington Court of Appeals handed down an LID decision in a case called Hamilton Corner I, LLC v. City of Napavine. The dispute in that case arose from an LID created to expand the City of Napavine’s water system to the Rush Road area to promote development. The scope of work consisted of constructing water mains, installing fire hydrants, and equipping the recently drilled Well 6 with the connective infrastructure necessary to provide potable water to the people living in the LID. As explained here, in order for an LID to be valid, the work must benefit the properties paying the assessments, the assessments must be proportional to the benefits to each property, and an assessment cannot exceed the benefit.
As might be expected, some of the property owners in the Rush Road LID opposed their assessments, raising arguments about how much benefit their respective properties would enjoy as a result of the new water mains and, particularly, how much benefit they would receive as a result of the temporary dysfunction of Well 6.
Division 2 upheld the LID assessments in Hamilton Corner, finding that the property owners had adequate opportunity to present their objections and that each enjoyed a benefit to his or her property as a result of the expanded water service, including dysfunctional Well 6, whose water could be used for fire suppression.
However, in its analysis, the court referenced two other cases that might be of interest to folks attempting to challenge assessments of their own, and which might shed some light on the task before the Tacoma City Council.
In its deliberations in the Hamilton Corner case, Division 2 referenced its 2014 decision, Hasit, LLC v. City of Edgewood, in which the court held that failure to allow sufficient time for assessed property owners to obtain appraisals of their own could constitute a violation of their due process rights. While Hasit is distinguishable in some ways from the Broadway LID and the issues before the Tacoma City Council this week, there are notable similarities, specifically the difference in the preliminary assessments and final assessments, and the feeling among property owners that they did not have time to sufficiently rebut the City’s appraisal with appraisals of their own.
The Hasit case involved an LID formed by the City of Edgewood in October 2008 to finance construction of a $21 million sewer system, imposing the entire cost on 161 property owners. A year later, in October 2009, the city hired a professional appraisal firm to estimate the increase in value, or the “special benefit,” to each property owner resulting from the expanded sewer system, in order to asses each property owner’s share of the cost. The appraiser completed its report on May 10, 2011, almost three years after the LID was formed, and the city manager sent property owners their assessment letters around April 20, 2011. The letter also notified them of a hearing on the assessments set for June 1, 2011.
Predictably, several of the property owners objected to their assessments, but felt they did not have sufficient time to hire appraisers of their own to rebut the city’s appraiser. Ultimately, the hearing examiner and the City Council approved the assessments.
Property owners appealed, and Division 2 took up the issue of whether the City of Edgewood’s notice and hearing process comported with constitutional due process. In addition to the notice being misleading, which is not relevant here, the court found that the hearing “did not allow the owners sufficient time to obtain the type of evidence necessary to successfully challenge an LID assessment,” and concluded that the “City denied the owners’ due process right to a meaningful opportunity to be heard.”
The court found it particularly persuasive that the final assessments were, in some cases, three times higher than the preliminary assessments. Moreover, the court found that the City’s technical compliance with the law was unavailing: “[D]ue process at least required the City to allow sufficient time for the owners to obtain an expert appraisal and analysis of the assessment roll. … Instead, they received notice of large assessments against their property less than three weeks before the hearing. At least one assessment far exceeded the initial estimate and the time until the hearing did not reasonably suffice to obtain the type of evidence demanded at the hearing and necessary to mount a successful challenge in the courts. … These procedures denied respondents the fair hearing to which due process entitles them.”
Another notable case referenced by the Hamilton Corner court was Doolittle v. City of Everett, which involved a dispute arising from the creation of an LID in Everett to widen and improve Evergreen Way. The facts of Doolittle are distinguishable from the LID here, and revolve around whether it was correct for the city’s appraiser to assess a property owner’s four separate lots as a single lot for purposes of determining “highest and best use.”
But our Supreme Court in Doolittle articulated the basic principle that an assessment should be based on the actual use of the property:
An owner who is assessed for LID improvements based upon potential highest and best use is forced to pay an assessment on valuation which may or may not become a reality. Many factors, other than the market, influence the actual and potential use of any parcel of real estate. Not the least of those nonmarket factors are personal considerations and familial relationships, plus the ever-present tax consequences. When the government unit assesses its LID charges on a theoretical, compared to existing use, it is forcing the owner to pay on the basis of what an expert says the owner should do with his property.
Although the Court acknowledged that an owner’s present use cannot dictate entirely the calculation of special benefits, it remanded the case to the trial court with directions to remand the assessment to the Everett City Council for further work.
State law assumes that cities are correct in their assessments, and places the burden on property owners to prove a city’s LID appraisal process was incorrect or improper. A city’s final assessment roll will be upheld unless property owners can show it stands on a “fundamentally wrong basis” or that the assessing body acts “arbitrarily and capriciously.”
The City of Tacoma’s Broadway LID assessment roll is presumed to be correct under the law. But several property owners, whose final assessments are considerably higher than those presented in 2007, have raised questions about the methodology used by the appraiser, and have claimed they did not have adequate time to rebut their assessments.
The Tacoma City Council will take up the question, and is scheduled to vote, on the Broadway LID next week.
If you need assistance understanding or objecting to an LID assessment, please contact me to schedule a consultation. I can be reached by email at Erica@EricaDoctorLaw.com.