Fink v. Municipality of Anchorage , 424 P.3d 338 ( 2018 )

Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@akcourts.us.
THE SUPREME COURT OF THE STATE OF ALASKA
MATTHEW FINK, WILLIAM )
COMPTON, PATRICIA LEFEVRE, ) Supreme Court No. S-16451
CORBETT MOTHE, CLARK C. )
RUSH, ELIZABETH MORGAN, ) Superior Court No. 3AN-15-06925 CI
NANNIE SCHLEUSNER, CHUCK )
SPINELLI, DIANE WILKE, JASON
) OPINION
DORRIS, KARLA GRUMMAN, )
JAMES NIGH, and NICOLAS ) No. 7258 – July 20, 2018
WIEDER, )
)
Appellants, )
)
v. )
)
MUNICIPALITY OF ANCHORAGE, )
)
Appellee. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Eric A. Aarseth, Judge.
Appearances: James N. Reeves, Holmes Weddle & Barcott,
P.C., Anchorage, for Appellants. Robert P. Owens, Assistant
Municipal Attorney, and William D. Falsey, Municipal
Attorney, Anchorage, for Appellee.
Before: Stowers, Chief Justice, Winfree, Maassen, Bolger,
and Carney, Justices.
BOLGER, Justice.
I. INTRODUCTION
Owners of real property (Property Owners) appeal special assessments that
the Anchorage Municipal Assembly levied on their lots to pay for recently constructed
road, water, and sewer improvement projects benefiting the lots. The Property Owners
claim that the special assessments improperly include nearly $1 million in costs from
another municipal utility project unrelated to the improvements built for the benefit of
their lots. They also claim that the special assessments exceed limits set by ordinance
and that the assessed costs are disproportionate to the benefits provided by the
improvements, violating municipal ordinance, charter, and state law.
We conclude that the Assembly’s allocation of costs among these projects
was supported by substantial evidence and that the ordinance limit the Property Owners
rely on does not apply to these assessments. We also conclude that the Property Owners
have not rebutted the presumption of correctness that attached to the Assembly’s
proportionality decisions. We therefore affirm the superior court’s decision affirming
the Assembly’s special assessment determinations.
II. FACTS AND PROCEEDINGS
The present appeal concerns lots located in an Anchorage residential
neighborhood called Turnagain Heights. This neighborhood was destroyed by the
1964 earthquake and remained undeveloped decades later. In 2002 some Turnagain
Heights lot owners petitioned the Municipality of Anchorage to establish road, water,
and sewer improvement districts. The Municipality produced cost estimates for the
projects, and a majority of the property owners in the proposed improvement districts
approved the estimates. The Assembly consequently enacted ordinances in 2004
creating three special assessment districts: a road improvement district (RID), a water
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improvement district (WID), and a sewer improvement district (referred to as a “lateral
improvement district” or LID).1
The Municipality hired an engineering consulting firm to do the design
work for the three projects. Based on a geotechnical analysis of the area, the firm
recommended that subdrains be incorporated in the projects’ designs to remove
groundwater and ensure soil stability during seismic activity.2 These subdrains were to
be placed in “the sewer utility trenches[,] . . . the deepest utility trench[es] that [are]
graded to drain.” The proposed subdrainage system significantly increased the cost
estimates for the RID, WID, and LID projects, and the Municipality issued revised
estimates in 2006. A majority of the property owners in the improvement districts
approved the revised estimates. The Assembly amended the 2004 ordinances
accordingly.3
The Municipality consolidated the RID, WID, and LID projects with an
unrelated project by the Anchorage Water and Wastewater Utility (AWWU) to replace
Pump Station 10, an aging sewer pump station in the area that had needed to be replaced
for years. The contract manager for the RID, WID, LID, and Pump Station 10 projects
1
Municipality of Anchorage, Ordinances 2004-2, 2004-19, 2004-20
(Apr. 20, 2004).
2
Each of the ordinances that established the improvement districts expressly
required that “[t]he design of [the] public improvements . . . be routed through the
Geotechnical Advisory Commission for review and recommendations.” Ordinance
2004-2 § 8; Ordinance 2004-19 § 6; Ordinance 2004-20 § 6. The Commission approved
the RID, WID, and LID projects. According to the minutes of a June 29, 2006 meeting
between improvement district property owners and municipal officials, the Commission
would likely not have approved the projects if the designs had not included a
subdrainage system.
3
Municipality of Anchorage, Ordinances 2007-51, 2007-52, 2007-53
(Apr. 17, 2007).
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characterized the Pump Station 10 project as “a basic infrastructure upgrade” that
benefited users outside the improvement district area as well as within it. The
Municipality believed consolidating the projects would “allow maximum cost and
schedule efficiencies.”
The Municipality created six work schedules for the consolidated projects,
lettered A-F. Schedules A-C included all the work necessary for the Pump Station 10
project, as well as some work needed for the RID, WID, and LID projects. Schedules
D-F included the balance of the work needed for the RID, WID, and LID projects. The
Municipality invited contractors to submit a “base bid” comprising work identified in
Schedules A-C and bid on “deductive alternates” comprising work identified in
Schedules D-F. The Municipality divided the work and solicited bids in this manner so
that the Pump Station 10 project could go forward without the improvement district
projects in the event that none of the bids was compatible with the cost estimates that the
district property owners had approved.
The Municipality received an acceptable bid for the entire contract
(Schedules A-F), and all four projects were built. In November 2011 the Municipality
submitted proposed resolutions to the Assembly to levy special assessments on the
improvement district properties to pay for the completed work. The Assembly held a
two-day public hearing, and in February 2012 it issued resolutions levying the
assessments.4 The RID, WID, and LID assessments included not only costs from
Schedules D-F but also some costs from Schedules A-C.
Some affected property owners — including most of the Property Owners
in the present appeal — were unsatisfied with the assessments and the process afforded
4
Municipality of Anchorage, Resolutions 2011-321, 2011-322, 2011-323
(Feb. 28, 2012).
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them by the Assembly; they filed an appeal in superior court. The superior court
remanded the matter to the Assembly, ruling that the Assembly needed to conduct an
adjudicatory hearing and decide disputed issues of fact in accordance with Anchorage
Municipal Code (AMC) Chapter 3.60.5
A panel composed of three Assembly members conducted such a hearing
over three days in December 2014. Following the hearing, the panel issued findings of
fact and conclusions of law rejecting most of the aggrieved property owners’ objections
to the assessments.6 The Assembly approved the hearing panel’s findings of fact and
conclusions of law and issued new resolutions confirming and levying assessments on
the improvement district property owners.7
A group of property owners — the Property Owners — remained
unsatisfied and filed a renewed appeal in superior court. The Property Owners argued,
among other things, that “[a]ll items of work set forth on Schedules A-C were necessary
components of [Pump Station] 10” and that it was thus “improper and unlawful [for the
Assembly] to pass those costs to the improvement districts.” The Property Owners also
argued the assessments exceeded “120% of contract construction costs,” in violation of
AMC 19.30.040(A)(1). And they argued the special assessments were not proportional
5
Fink v. Municipality of Anchorage, No. 3AN-12-06917 CI (Alaska Super.,
Sept. 6, 2013). Chapter 3.60 sets out procedures to be followed in “quasi-judicial
proceedings and administrative hearings.”
6
The hearing panel found that two properties in the improvement districts
received no net benefit from the improvements. See infra note 44. The hearing panel
otherwise rejected all challenges to the assessments.
7
Municipality of Anchorage, Resolutions 2014-193, 2014-194, 2014-195
(Apr. 14, 2015).
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to the benefit conferred by the improvements. The superior court rejected all arguments;
the Property Owners appeal to this court.
III. STANDARD OF REVIEW
We review a municipal assembly’s decision directly.8 We apply the
substantial evidence standard of review to the assembly’s findings of fact.9 “Substantial
evidence is ‘such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.’ ”10
Interpretation of an ordinance or municipal charter provision presents a
question of law.11 We generally review such questions using our independent judgment,
adopting “the rule of law that is most persuasive in light of precedent, reason, and
policy.”12 But “when reviewing questions of law that involve the [Assembly’s] expertise
. . . [or] fundamental policy determinations,” we apply the rational basis standard,
deferring “to the [Assembly’s] determination as long as it is supported by the facts and
has a reasonable basis in law.”13
8
Luper v. City of Wasilla, 215 P.3d 342, 345 (Alaska 2009); Miller v.
Matanuska-Susitna Borough, 54 P.3d 285, 288 (Alaska 2002).
9
S. Anchorage Concerned Coal., Inc. v. Municipality of Anchorage Bd. of
Adjustment, 172 P.3d 774, 780 (Alaska 2007).
10
Id. (quoting Leigh v. Seekins Ford, 136 P.3d 214, 216 (Alaska 2006)).
11
See Cent. Recycling Servs., Inc. v. Municipality of Anchorage, 389 P.3d 54,
57 (Alaska 2017); Municipality of Anchorage v. Repasky, 34 P.3d 302, 305 (Alaska
2001).
12
Alaska Miners Ass’n v. Holman, 397 P.3d 312, 315 (Alaska 2017) (quoting
Alaska Conservation Found. v. Pebble Ltd. P’ship, 350 P.3d 273, 279 (Alaska 2015)).
13
Miller, 54 P.3d at 288-89.
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Our review of a municipal assembly’s special assessment decision is also
constrained by the “presumption of correctness.”14 This presumption attaches whenever
a municipal assembly acting in its legislative capacity levies special assessments.15
When the presumption has attached, we will reverse the assembly’s decision “only upon
proof of ‘fraud or conduct so arbitrary as to be the equivalent of fraud, or [where a
decision is] so manifestly arbitrary and unreasonable as to be palpably unjust and
oppressive.’ ”16
IV. DISCUSSION
A. Allocation Of Costs Between The Improvement Districts And The
Pump Station 10 Project
The Property Owners first claim that the Municipality improperly “shifted”
about $1 million in costs from the installation of a subsurface drainage system needed
by Pump Station 10 to the RID, WID, and LID projects. As a result, the Property
Owners argue, “a small group of property owners” has been forced to “hold[] the bag
for” expenses related to AWWU’s maintenance of its sewer system — expenses that
ordinarily would have been passed on to the utility’s systemwide customer base.
1. Additional background
As explained above, the Municipality divided the construction work for the
RID, WID, LID, and Pump Station 10 projects into six different schedules: Schedules
A-F. Schedules D-F included work necessary for the RID, WID, and LID projects but
14
Prop. Owners Ass’n of the Highland Subdivision v. City of Ketchikan,
781 P.2d 567, 572-73 (Alaska 1989).
15
Id.16
Weber v. Kenai Peninsula Borough, 990 P.2d 611, 614 (Alaska 1999)
(alteration in original) (quoting City of Wasilla v. Wilsonoff, 698 P.2d 656, 658 (Alaska
1985)).
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not for the Pump Station 10 project. The Municipality charged the expenses associated
with Schedules D-F to the improvement districts and included them in the special
assessments.
Schedules A-C included all the work needed for the Pump Station 10
project and some work needed for the RID, WID, and LID projects. The Municipality
charged nearly $1 million in expenses associated with Schedules A-C to the
improvement districts and thus included them in the special assessments.17 A significant
portion of this nearly $1 million — namely, $834,542 from Schedule B — resulted from
construction of a subdrainage system.18 As explained above, the firm that designed the
RID, WID, and LID projects recommended construction of this subdrainage system in
order to remove groundwater and make the soil more stable in the event of an
earthquake. Ensuring stability was essential because it was expected that the
improvement districts would be developed for residential use.
Pump Station 10 also needed the subdrainage system. But the Assembly
hearing panel heard testimony that a subdrainage system that served only Pump
Station 10 would have been more limited than the shared system actually constructed.
The projects’ contract manager explained that “maintaining the stability” of the
17
Specifically, for Schedule A, the Municipality charged $94,998 to the LID
and $3,223,269 to Pump Station 10. For Schedule B, the Municipality charged $834,542
to the RID and $56,760 to Pump Station 10. And for Schedule C, the Municipality
charged $60,821 to the WID and $159,329 to Pump Station 10.
18
The rest of the nearly $1 million resulted from construction of sewer and
water lines shared by the improvement districts and Pump Station 10. See supra note 17.
The Property Owners do not specifically argue that these expenses were improperly
shifted to the improvement districts. Such an argument would lack merit in any case.
Substantial evidence in the Assembly hearing record supports a conclusion that the
improvement district properties benefited significantly from the sewer and water lines
and were charged only a fraction of the cost for these lines.
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improvement districts was “more important than dewatering the pump station.” The
primary author of the geotechnical report for the projects further explained, “If a pump
station slides down the hill, the consequences are far less than a lot of houses.” The
Municipality charged the vast majority of the expenses associated with constructing the
subdrainage system to the RID project.
The hearing panel heard testimony on the accounting practices used to
ensure that costs were properly allocated among the projects. In particular, AWWU’s
capital program manager testified that expenses for the different projects were “tracked
separately” and that multiple individuals reviewed the pertinent records as the projects
progressed. A project administrator acknowledged discrepancies of around $10,000 total
in the accounting records. She testified that the errors had been corrected and that “the
total project costs that were calculated and allocated [were] accurate.”
The Assembly hearing panel found that the subdrainage system was
“necessary” for the improvement district projects. The panel found that the Municipality
“properly shifted approximately $1 million . . . back into the Special Improvement
Districts so that [they] would pay for that part of the construction work essential to and
directly benefiting the Improvement Districts.” And the panel found that the
Municipality “used proper accounting procedures to separately track the costs of each
project individually, and that none of the costs for [Pump Station] 10 were improperly
assessed against the property owner taxpayers.” The Assembly approved these findings.
2. Analysis
In arguing that the Municipality erroneously shifted about $1 million from
the Pump Station 10 project to the improvement district projects, the Property Owners
rely on Anchorage Municipal Charter section 9.02(e). This provision states: “An
account or accounts for each special assessment district shall be created and kept separate
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from all other municipal accounts. Revenues collected within a special assessment
district may be applied only to costs incurred with respect to that assessment district.”
The Property Owners fail to show that the Municipality violated this
provision. The Assembly hearing panel’s findings set forth above establish that the
Municipality complied with section 9.02(e) by maintaining separate accounts. The
findings also establish that the Assembly complied with section 9.02(e) because the
special assessments did not include any costs other than those “incurred with respect to
the assessment district[s].” The Property Owners do not challenge these findings, let
alone show that they are not supported by substantial evidence.19
The Property Owners point to hearing panel testimony by an “engineer
engaged by AWWU and the [Municipality] . . . that all of the items on Schedules A, B
and C were necessary for Pump Station 10, regardless of whether the Improvement
District[s] were built.” But the Property Owners ignore contrary testimony that the
subdrainage system included in Schedule B would have been more limited had the
improvement districts not been built. In any case, the fact that items in Schedules A-C
were required by the Pump Station 10 project is consistent with these items also being
required by the RID, WID, and LID projects. Or to use the language of section 9.02(e),
the mere fact that costs were “incurred with respect” to the Pump Station 10 project does
not mean that the same costs were not also “incurred with respect to the assessment
district[s].”
19
The superior court required the Assembly hearing panel to decide this issue
using the adjudicatory procedures of AMC Chapter 3.60. The Municipality does not
appeal this interim ruling. We thus assume, without deciding, that the Municipality’s
characterization of these costs is a factual issue and that we should affirm the Assembly
on this issue only if its determination is supported by substantial evidence.
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In the alternative, the Property Owners argue that even if the subdrainage
system benefited the improvement district properties in addition to Pump Station 10, the
Municipality failed to “ ‘fairly allocate’ the costs” and improperly “forc[ed] the
[improvement district properties] to pay for the entirety of them.” However, the Property
Owners do not cite any authority other than section 9.02(e). This provision does not
impose a “fair allocation” requirement over and above its requirements that expenses be
properly segregated and accounted for and that assessments “be applied only to costs
incurred with respect to th[e] assessment district.” To the extent the Charter and other
sources of law do not fully dictate how expenses should be divided once the
requirements of section 9.02(e) are satisfied — as they are in this case — such division
is a policy matter that is legislative in nature. The Assembly may accordingly exercise
its discretion in dividing the expenses within the bounds of the controlling law.20
If the Property Owners could show that the Municipality or Assembly acted
arbitrarily or with bias or malice in dividing the costs — and thus rebut the presumption
of correctness — then perhaps it would be appropriate for this court to intervene. But
the Property Owners fail to do so. We thus reject the Property Owners’ claim that the
Municipality did not properly divide the expenses among the RID, WID, LID, and
Pump Station 10 projects.
B. AMC 19.30.040(A)(1) Assessment Limit
The Property Owners next claim that the special assessments levied by the
20
See 14 EUGENE MCQUILLIN, THE LAW OF MUNICIPAL CORPORATIONS
§ 38:61, at 287 (3d ed. 2008) (“In the establishment of improvement districts and levying
assessments on property benefited, within the restrictions of the applicable law, broad
discretion is vested in the municipal authorities.”).
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Assembly violate AMC 19.30.040(A)(1).21 AMC 19.30.040(A) states:
Generally. Except as provided in subsection B of this section
or elsewhere in this title, the project costs assessed against
benefited parcels shall be the least of the following:
1. Construction contract costs plus 20 percent for
noncontract costs, including but not limited to engineering
and design, surveys, soil investigations, right-of-way
negotiations, inspection and contract supervision, and net
interest, plus actual property acquisition costs;
2. The last approved estimate plus ten percent; or
3. The total cost of the improvement less the amount
of any grant the municipality uses to defray the cost of the
project.
The Property Owners argue that the special assessments exceed the cap in
subsection .040(A)(1) because the assessed project costs exceed the “construction
contract costs” of the RID, WID, and LID projects by more than 20 percent. For
instance, the Property Owners assert that the construction contract costs for the RID
project were $2,371,707.22 Yet in calculating the RID assessments, the Municipality
used an adjusted project cost of $4,860,838, a figure which far exceeds 120% of the
21
The Municipality argues that we should apply the rational basis standard
on this issue because the interpretation of this ordinance involves the Assembly’s special
expertise. But because we reach the same result when we apply the independent
judgment standard advocated by the Property Owners, we do not need to decide which
is appropriate. See Cent. Recycling Servs., Inc. v. Municipality of Anchorage, 389 P.3d
54, 57 (Alaska 2017).
22
The Property Owners do not include expenses associated with Schedule B
in this figure. If these expenses are included — as they should be, see supra Part IV.A
— then the construction costs come to $3,206,249.
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construction contract costs.23 Similar discrepancies between the construction cost and
the assessed project cost purportedly exist for the WID and LID projects.
The Property Owners’ claim that the assessments violate the
subsection .040(A)(1) cap is undermined by the exception clause at the beginning of
subsection .040(A). By its express terms, the caps in subsection .040(A) apply “[e]xcept
as provided . . . elsewhere in” AMC Title 19. Because there are provisions elsewhere in
AMC Title 19 that independently determine the assessable project costs for road, water,
and sewer improvements, the subsection .040(A) caps do not apply.
First, AMC 19.40.100(A), which governs assessments for “upgrade” road
improvement districts like the RID in this case,24 provides that “[a]ssessable costs for
upgrade RIDs shall be seventy percent (70%) of the total project costs.” The term “total
project costs” is defined in AMC 19.40.010 as “all costs, direct and indirect, incurred
during development of the project.” Moreover, AMC 19.30.030(A) provides:
The costs of an improvement or service shall be its actual cost
including acquisition of real property and interests therein,
appraisal, design, engineering, and surveying for an
improvement, and administration, overhead, collections, legal
and other professional services, net interest (interest paid less
interest earned)[,] anticipated reserve or guarantee fund costs,
the cost of notice, and all other costs resulting from the
formation of the district and the construction of the
improvement or providing the service, including costs
described in [AMC] 19.30.040 and 19.30.080.
23
This $4,860,938 figure, which is below the $4,898,550 total project cost,
is equal to 110% of the cost estimate approved by the district property owners. See
AMC 19.40.130. The RID properties were assessed only about half of the $4,860,938
amount for the RID portion of the improvements. See infra note 36 and accompanying
text.
24
The Assembly treated the road improvements in this case as upgrade road
improvements.
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Together, these three provisions define the “assessable costs” for upgrade road
improvements as 70% of the total actual costs of the improvement, including
construction expenses and all other direct and indirect expenses. This definition
overrides subsection .040(A)’s definition of “project costs assessed.” The 120% cap in
subsection .040(A)(1) thus does not apply to the RID in this case.25
Next, assessments for water improvements are governed by
AMC 19.55.010. This ordinance provides that “[t]he cost of capital improvements to
provide water service shall be allocated in the manner and according to the criteria
provided in the approved tariff of the municipal water utility.” The water utility tariff in
effect during the relevant time period states that “[t]he assessed project cost shall equal
the total cost of the water main improvement less the amount of any funds contributed
to defray the cost of the improvement.”26 The tariff’s definition of “assessed project
25
Furthermore, the Assembly enacted subsection .040(A)’s exception clause
and AMC 19.40.100, the provision for calculating RID assessments, in the same
ordinance. See Municipality of Anchorage, Ordinance 2002-186 (Jan. 28, 2003). The
Mayor’s assembly memorandum accompanying this ordinance states that the purpose of
subsection .040(A)’s exception clause is to “allow the assessment cost issues related to
street improvements to be addressed in the code section related to street improvement.”
Mayor, Municipality of Anchorage Assembly Memorandum 2002-1067, at 2 (Dec. 17,
2002). The Mayor’s contemporaneous interpretation of subsection .040(A)’s exception
clause provides additional support for our conclusion that the subsection .040(A)(1) cap
does not apply to the RID in this case. See Cent. Recycling Servs., 389 P.3d at 57
(explaining that in interpreting an ordinance, as in interpreting a statute, we consider the
ordinance’s language and legislative history); Flisock v. State, Div. of Ret. & Benefits,
818 P.2d 640, 645 (Alaska 1991) (“The interpretation of legislation by . . . the agency
that sponsored the bill is entitled to be given weight by the court in construing the intent
of the statute.”).
26
Anchorage Water Utility, Tariff for Water Service, Regulatory Comm’n of
Alaska Certificate No. 122, Sheet No. 118 (Apr. 12, 2010). The Municipality provided
the Assembly hearing panel with a copy of this tariff. The Property Owners do not
(continued...)
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cost” clearly overrides subsection .040(A)’s definition of “project costs assessed.” And
by defining the “assessed project cost” as the “total cost of the water main improvement,”
the tariff tracks the expansive “costs of an improvement” language in
AMC 19.30.030(A), not the more limited concept of “construction contract costs” in
subsection .040(A)(1). Thus, AMC 19.30.030(A), AMC 19.55.010, and the applicable
tariff together provide for the assessment of the total actual costs of the water
improvement. The cap in subsection .040(A)(1) does not apply to the WID assessment
in this case.27
Finally, AMC 19.70.010 governs assessments for sewer improvements.
Identical in form to AMC 19.55.010, discussed in the preceding paragraph,
AMC 19.70.010 states that “[t]he cost of capital improvements to provide sewer service
shall be allocated in the manner and according to the criteria provided in the approved
tariff of the municipal sewer utility.” The pertinent sewer tariff states that “[t]he assessed
project cost shall equal the total cost of the improvement less the amount of any grant
that the Utility uses to defray the cost of the improvement.”28 Like the water tariff, this
sewer tariff supplants subsection .040(A) for improvements within its scope and provides
26
(...continued)
dispute that this is the applicable tariff, and we therefore assume that this is the case.
27
AMC 19.30.090 reinforces our conclusion that the subsection .040(A)(1)
cap does not apply to the WID assessment in this case. This provision supplements
subsection .040(A)’s exception clause, stating: “This chapter” — which includes
subsection .040(A) — “does not apply to water improvements constructed pursuant to
tariffs filed with the state public utilities commission by the municipal water utility.”
28
Anchorage Wastewater Utility, Tariff for Wastewater Service, Regulatory
Comm’n of Alaska Certificate No. 126, Sheet No. 84 (July 29, 2010). The Municipality
provided a copy of this tariff to the Assembly hearing panel, and the Property Owners
do not dispute that this is the applicable tariff. See also supra note 26.
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for the assessment of the total actual costs of the improvement. The cap in
subsection .040(A)(1) therefore does not apply to the LID assessment.
The Property Owners advance several arguments against interpreting
AMC 19.40.100(A), 19.55.010, and 19.70.010 as overriding the subsection .040(A) caps.
None is persuasive.
The Property Owners first contend that subsection .040(A) “determin[es]
the amount that can be recovered by assessing the properties” and that
AMC 19.40.100(A), 19.55.010, and 19.70.010 merely “determin[e] how that amount is
to be allocated among the properties in the improvement district.” In support of this
argument, the Property Owners note that the title of AMC Chapter 19.30 is “Calculation
of Improvement Costs” and that the title of AMC Chapter 19.40 is “Allocation of Street
Improvement Costs.” (Emphases added.) They also point out that AMC 19.55.010 and
19.70.010 expressly refer to “allocat[ion]” — not “calculation” — of costs.
Even if the words “allocation” and “calculation” are read in
contradistinction as suggested by the Property Owners, it does not follow that
assessments under AMC 19.40.100(A), 19.55.010, and 19.70.010 are subject to the cap
in subsection .040(A)(1). AMC 19.40.100(A) expressly states that “[a]ssessable costs
for upgrade RIDs shall be seventy percent (70%) of the total project costs.” (Emphasis
added.) Similarly, the tariffs invoked by AMC 19.55.010 and 19.70.010 provide that the
“assessed project cost shall equal the total cost of the improvement.”29 Accordingly, the
quantity allocated is the “total project costs” or the “total cost of the improvement,” not
the capped “[c]ontract construction costs plus 20 percent” amount in
subsection .040(A)(1).
29
Tariff for Wastewater Service, Sheet No. 84 (emphasis added); see also
Tariff for Water Service, Sheet No. 118.
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The Property Owners next argue that the subsection .040(A)(1) cap is
needed to protect the interests of property owners who oppose a special assessment.
Under Anchorage ordinance, a special assessment district “may be created or extended
. . . with the approval of the property owners who would bear more than 50 percent of
the estimated cost.”30 Both the owners who supported and those who opposed the
assessment district are assessed when the project is completed.31 The Property Owners
assert that owners who supported the assessment are protected from ballooning project
costs by ordinances that limit assessable costs to 110% of the cost estimate approved by
these property owners.32 So long as the assessed costs are within this limit, the approving
owners arguably have a weak basis to complain even if the assessed costs are inflated by
excessive design, administrative, and other non-construction expenses. The dissenting
property owners, however, did not approve the cost estimate. If these owners complain
of excessive non-construction costs, it is no answer to them to say that the costs are
consistent with (or no more than 110% of) the approved estimate. Thus, the Property
Owners argue, subsection .040(A)(1)’s cap of 120% of the construction contract costs
is needed to protect the dissenting property owners from inflated non-construction costs.
The problem with the Property Owners’ policy argument is that the
exception clause in subsection .040(A) shows that the Assembly anticipated that the
subsection .040(A)(1) cap would not apply in all cases. It therefore does not appear that
the Assembly viewed subsection .040(A)(1)’s cap of 120% of the construction contract
30
AMC 19.20.010(B).
31
See AMC 19.20.190 (“The assembly may assess for an improvement or
service any real property or interest in real property specially benefitted and such
property may include abutting, adjoining, adjacent, contiguous, non-contiguous or other
property specially benefitted directly or indirectly by the improvement . . . .”).
32
See AMC 19.30.040(A)(2), 19.40.130.
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costs as essential protection for property owners who oppose a special assessment. In
the absence of any indication that the policy advanced by the Property Owners was in
fact the Assembly’s — the legislature’s — policy, we follow the plain language of the
pertinent ordinances.33 And as explained above, this language indicates that the RID,
WID, and LID assessments in this case are not subject to the subsection .040(A)(1) cap.
The Property Owners’ final argument is that if AMC 19.40.100(A),
19.55.010, and 19.70.010 “trump the ‘120%-of-contract-construction-costs’ limit” of
subsection .040(A)(1), this limit will “never apply to any road, water [or] sewer project”
and “[t]he alleged exceptions . . . [thus] nearly swallow the rule.” This, the Property
Owners argue, violates the “general rule” of statutory interpretation that a “statute should
be construed so that effect is given to all its provisions, so that no part will be inoperative
or superfluous, void or insignificant.”34
This argument lacks merit. We do not apply the presumption against
superfluity “mechanistically” or in such a manner as to defeat the intent of the
legislature.35 Here, the text of AMC 19.40.100(A), 19.55.010, and 19.70.010 clearly
favors reading these provisions as overriding subsection .040(A)(1) for assessment
districts within their scope. Moreover, AMC 19.40.100(A), 19.55.010, and 19.70.010
do not “swallow the rule.” The Municipality’s counsel provided several examples during
33
See Homer Elec. Ass’n v. Towsley, 841 P.2d 1042, 1043-44 (Alaska 1992);
see also Attorneys Liab. Prot. Soc’y, Inc., v. Ingaldson Fitzgerald, P.C., 370 P.3d 1101,
1105 (Alaska 2016) (“We ‘use a sliding scale approach to statutory interpretation, in
which “the plainer the statutory language is, the more convincing the evidence of
contrary legislative purpose or intent must be.” ’ ” (quoting Municipality of Anchorage
v. Stenseth, 361 P.3d 898, 905 (Alaska 2015))).
34
Homer Elec. Ass’n, 841 P.2d at 1045 (quoting Alascom, Inc. v. N. Slope
Borough, Bd. of Equalization, 659 P.2d 1175, 1178 n.5 (Alaska 1983)).
35
Id. at 1045-46.
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oral argument of improvement districts that do not fall within those three ordinances and
thus are subject to the subsection .040(A)(1) cap: extension of a gas line, construction
of a parking facility, and construction of drainage facilities.
We therefore reject the Property Owners’ claim that the Assembly violated
AMC 19.30.040(A)(1) by failing to cap the RID, WID, and LID assessments at 120%
of the construction contract costs.
C. Proportionality Between Costs Assessed And Benefit Conferred
The Property Owners claim that some of the special assessments levied are
illegal because they “exceed the value that [the improvements] add[ed] to the
propert[ies].” They contend that the assessments on certain properties in the
improvement districts “exceed[] . . . the value of the benefit . . . , as measured by . . .
change in market value, by approximately 400%.”
1. Additional background
In determining the assessments to be levied on the improvement district
lots, the Assembly applied provisions in the Anchorage Municipal Code for apportioning
road, water, and sewer special assessments. For the RID, the Assembly apportioned
$2,538,137 (representing the total RID project cost of $4,898,550 minus the “Municipal
Contribution”)36 among the properties based on “parcel access, parcel area, and parcel
frontage,” in accordance with the formula in AMC 19.40.090.37
36
Mayor, Municipality of Anchorage Assembly Memorandum 2014-411
(Apr. 14, 2014) (detailing the calculations that produced the assessment amounts
approved in Municipality of Anchorage, Resolution 2014-193 (Apr. 14, 2015)). The
Municipal Contribution included deductions required by AMC 19.40.100(A) and
19.40.130, assessments for properties owned by the Municipality, and various other
“equitable adjustment[s].” Id. at 2.
37
Municipality of Anchorage, Ordinance 2004-2 § 5 (Apr. 20, 2004).
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The Assembly apportioned the WID assessment according to the “equal
assessment methodology as delineated in the Anchorage Water Utility Tariff.”38 The
equal assessment methodology is one of two methods set forth in the water utility tariff
for distributing a special assessment39 and was the method selected by the district
property owners who approved the WID.40 In accordance with this method, each lot in
the WID was assessed an amount equal to the total assessed project cost of $1,030,741
divided by the total number of lots.41
The Assembly likewise apportioned the LID assessment (totaling
$1,326,810) according to the sewer utility tariff’s equal assessment methodology.42 The
38
Municipality of Anchorage, Ordinance 2007-51 § 3 (Apr. 17, 2007).
39
Anchorage Water Utility, Tariff for Water Service, Regulatory Comm’n of
Alaska Certificate No. 122, Sheet No. 118 (Apr. 12, 2010).
40
See Municipality of Anchorage, Ordinance 2004-19 ¶ E (Apr. 20, 2004);
Mayor, Municipality of Anchorage Assembly Memorandum 2004-55 (Jan. 20, 2004).
41
Tariff for Water Service, Sheet No. 118. To be entirely accurate, each lot
was assessed an equal “mainline charge” of $29,554, but the lots’ “service connect”
charges were not all identical: Two lots’ charges were $2,000, others’ were $3,000, and
those for lots owned by the Municipality were $0. Municipality of Anchorage,
Resolution 2014-194 Exh. A (Apr. 14, 2015).
42
All lots were charged an equal “lateral mainline charge” of $43,062, and
all but the Municipality-owned lots were charged a $3,000 “lateral service connect”
charge. See Municipality of Anchorage, Resolution 2014-195 Exh. A (Apr. 14, 2015);
Municipality of Anchorage, Ordinance 2007-52 § 3 (Apr. 17, 2007); see also Anchorage
Wastewater Utility, Tariff for Wastewater Service, Regulatory Comm’n of Alaska
Certificate No. 126, Sheet No. 85 (July 29, 2010).
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district property owners who approved the LID selected this method over the alternative
provided for in the tariff.43
Various district property owners (including most of the Property Owners
in this appeal) argued to the Assembly hearing panel that some of the assessments
calculated in the manner just described are illegal because they “exceed[] the benefit that
[the improvements] confer[] upon the propert[ies].” They contended (and the Property
Owners continue to contend) that the assessment imposed on a lot should not exceed the
amount by which the lot increased in value as a result of the improvement.
The Assembly hearing panel discussed this issue in its findings of fact and
conclusions of law and ultimately rejected the argument for all but two properties. The
panel first noted that “the annual [property tax] assessments for the vast majority of the
properties affected by the Improvement Districts ha[d] risen since the improvement
districts [had been] completed.” The panel cited two examples. First, “one of the low-
end lots[] was assessed at $34,800.00 in 2007; $36,600.00 in 2008; $36,600 in 2009;
$80,200.00 in 2010; $97,800.00 in 2011; $94,200.00 in 2012; and $94,000.00 in both
2013 and 2014.” Second, “a higher-end lot . . . was assessed at $71,600.00 in 2007;
$60,200.00 in 2008; $60,200.00 in 2009; $237,600.00 in 2010; $246,600 in 2011;
$246,600.00 in 2012, 2013 and 2014.”
The hearing panel next examined the “sale activities of some of the lots in
question following completion of the improvements.” In December 2012 a lot “assessed
at approximately $60,000.00 before the Special Improvements were built . . . sold for
$200,000.00 with the buyer assuming the assessments ‘for any and all subdivision
improvements (LID/RID/WID).’ ” Similarly, in an April 2014 sale, the buyer assumed
43
Municipality of Anchorage, Ordinance 2004-20 ¶ E (Apr. 20, 2004);
Mayor, Municipality of Anchorage Assembly Memorandum 2004-56 (Jan. 20, 2004).
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“the obligation of the Special Assessments as part of the sale — ‘regardless of the final
assessment value.’ ” In other sales the buyer likewise agreed to “assume[] liability to pay
for the assessments associated with the lot.” The panel found these sales were “evidence
that most properties received substantial benefit in the form of an increase in fair market
value.”
Next, the hearing panel noted that two district property owners — both of
whom are parties to this appeal — acknowledged in their testimony that they had
received some benefit from the improvement districts. The panel also found that “with
[one] exception . . . , no [property owners] submitted any evidence . . . sufficient to show
that their property values decreased as a result of the construction of the Special
Improvements.” The panel concluded that “with the exception of [two] properties[,] . . .
the assessments do not exceed the value conferred upon the lot owners.”44 The Assembly
approved these findings.
2. Analysis
In arguing that certain assessments exceed the benefits from the projects
and are thus illegal, the Property Owners rely on two municipal provisions setting forth
a “proportiona[lity]” requirement. First, Anchorage Municipal Charter section 9.02(a)
provides that an “assessment or levy shall be proportionate to the benefit received from
and the burden imposed upon the improvement.” Second, AMC 19.20.010(A) states that
44
The Assembly hearing panel made a number of findings on the two
properties that did not benefit, one of which purportedly decreased in value. The
Municipality had erroneously included these two properties in the improvement districts
even though the properties had already been “fully developed with water, sewer, road
access and homes built on the lots.” The Municipality had previously provided an
equitable adjustment for one of the two properties, and the panel recommended that the
Municipality provide an equitable adjustment for the other property. Ultimately, an
adjustment was provided.
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“[a]s required by the Charter, assessments for capital improvements . . . within an
assessment district shall be proportionate to the benefit received from and the burden
imposed upon the improvement.”45
When a municipal assembly, acting in its legislative capacity, chooses and
applies a method for ensuring proportionality, a presumption of correctness attaches to
its proportionality determination.46 This presumption “places a heavy burden of proof”
on a party challenging the determination.47 Such a party must show “gross[]
disproportiona[lity]”48 or otherwise show that the determination was the product of fraud
or “so manifestly arbitrary and unreasonable as to be palpably unjust and oppressive.”49
We conclude that the Property Owners have failed to show that the
assessments were disproportionate. First, it is clear that the Assembly chose and applied
methods for calculating proportionality. It apportioned the RID assessment in
accordance with AMC 19.40.090, which expressly states that its “intent . . . is to establish
a method for determining an assessment share for each parcel that is proportionate to the
45
The Property Owners also cite AS 29.46.060(a), which states that “[t]he
governing body shall assess the authorized percentage of the cost against property in the
[special assessment] district . . . in proportion to the benefit received.” As the
Municipality points out, this statute does not apply because the Assembly has exercised
the authority granted under AS 29.46.020 to adopt ordinances governing the special
assessment process — namely, the ordinances codified at AMC Title 19. See
AS 29.46.020(c); Miller v. Matanuska-Susitna Borough, 54 P.3d 285, 290 (Alaska
2002).
46
See Weber v. Kenai Peninsula Borough, 990 P.2d 611, 614 (Alaska 1999)
(“We presume that a municipal legislative assessment decision is valid.”).
47
City of Wasilla v. Wilsonoff, 698 P.2d 656, 658 (Alaska 1985).
48
Miller, 54 P.3d at 290.
49
Weber, 990 P.2d at 614 (quoting Wilsonoff, 698 P.2d at 658).
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benefit received.”50 The Assembly apportioned the LID and WID assessments in
accordance with the equal assessment methodology set forth in the water and sewer
tariffs. Pursuant to AMC 19.55.010 and 19.70.010, the Assembly was required to
comply with the tariffs. The district property owners who approved the improvement
districts chose the equal assessment methodology over an alternative method set forth
in the tariffs, and we have previously approved the use of this methodology.51
The Assembly next concluded that under the chosen methodologies, the
total costs assessed against the improvement district properties did not exceed the total
benefits conferred on those properties. Evidence and findings in the Assembly hearing
record support this assertion. The hearing panel considered two representative properties
50
AMC 19.40.090 provides for assessment based on “parcel access,” “parcel
area,” and “parcel frontage.” The assembly memorandum for the ordinance that enacted
AMC 19.40.090 explains why the Municipality believed consideration of these three
factors would provide for an equitable division of road and street special assessments:
Parcel access: Improved parcel access to the public
roadway system is considered the primary benefit of a street
improvement . . . .
Parcel area: Increased property value and enhanced
land use are considered the next significant benefits of street
improvements. Parcel area is a practical method of allocating
these benefits since both property value and land use are
functions of the parcel size. . . .
Parcel frontage: Improved parking and direct access
to a parcel is another benefit of street improvements. Parcel
frontage is the most practical method of allocating these
benefits.
Mayor, Municipality of Anchorage Assembly Memorandum 2002-1067, at 3 (Dec. 17,
2002) (proposing Municipality of Anchorage, Ordinance 2002-186 (Jan. 28, 2003)).
51
See Miller, 54 P.3d at 289-92.
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(a “low-end” lot and a “higher-end” lot) and found that they had substantially increased
in value as a result of improvements. The panel also examined evidence of property
sales in the improvement districts. This evidence showed that properties had been sold
at prices higher than their pre-improvement values and with the buyer assuming
responsibility for paying the assessments. Finally, the panel considered affected property
owners’ testimony to the effect that they had benefited from the improvements. Based
on this evidence, the Assembly hearing panel found that “property values have increased
substantially with the completed Special Improvement District construction.” This
general finding, adopted by the whole Assembly, is legislative, rather than adjudicative,
in character because it pertains to a large group of taxpayers in the aggregate.52
In sum, the Assembly divided the assessments among the properties in
accordance with methods required by ordinance and tariff, and it made a legislative
determination that the assessments and benefits were proportionate. A presumption of
correctness accordingly attaches to the assessments imposed on the improvement district
properties.
The Property Owners fail to overcome this presumption. They do not
dispute that the total costs assessed against the improvement district properties do not
substantially exceed the total benefits conferred on those properties. Instead, they argue
that consideration of proportionality in aggregate was not sufficient because the
Assembly was required to make “a separate comparison of cost to benefit for each lot on
a stand-alone basis” to discharge the proportionality requirements in AMC 19.20.010(A)
52
See Prop. Owners Ass’n of the Highland Subdivision v. City of Ketchikan,
781 P.2d 567, 571-72 (Alaska 1989) (holding that a city council’s decision was
legislative because it “affected a large development and a group of similarly situated
taxpayers”).
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and section 9.02(a) of the Charter. But these two provisions do not require the Assembly
to engage in a lot-by-lot inquiry.
Most importantly, increase in fair market value is not the only relevant
measure of benefit. “[S]pecial benefits cannot always be translated into dollar terms”;53
they can “take various forms,” including “a relief from a burden, the creation of a special
adaptability in the land, or an improvement which allows the land to continue being
used.”54 Furthermore, when conducting proportionality inquiries in similar cases, we
have consistently held that “benefit to property is not limited to the immediate increase
in property value to the landowner.”55 For example, in Weber v. Kenai Peninsula
Borough, we affirmed a gas line assessment even though the property owner offered
evidence that the value of his property had declined and argued that he did not want to
access the line.56 In City of Wasilla v. Wilsonoff, we recognized the benefit of a water
main installation, even though the landowner testified that it would be very difficult to
hoist a fire hose from the water main to her house and that her insurance rates were
unlikely to decrease for many years.57 Similarly, in Kissane v. City of Anchorage, the
53
MCQUILLIN, supra note 20, § 38:37, at 188.
54
Id. § 38:38, at 202-04; see Miller, 54 P.3d at 291 (approving finding that
property benefited from construction of a paved road because, among other things, the
road provided “reduced vehicle wear and tear and health benefits from reduced dust”).
55
Miller, 54 P.3d at 290; see also Weber v. Kenai Peninsula Borough, 990
P.2d 611, 615-16 (Alaska 1999); City of Wasilla v. Wilsonoff, 698 P.2d 656, 657-58
(Alaska 1985).
56
990 P.2d at 615-16.
57
698 P.2d at 658.
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territorial court held that a landowner could be assessed for the costs of public parking,
even though his property was used for residential purposes.58
Here, the special assessments provided the district properties with road
access and basic utilities, necessary steps for residential development.59 We therefore
cannot conclude that the discrepancy between the special assessments and increase in
appraised property value for some district properties shows gross disproportionality; nor
can we conclude that the Assembly acted fraudulently or arbitrarily in determining the
assessment amounts.
V. CONCLUSION
We AFFIRM the judgment of the superior court affirming the Assembly’s
special assessment determinations.
58
159 F. Supp. 733, 738 (D. Alaska 1958).
59
This is so notwithstanding the Property Owners’ assertion that “the
subdivision improvements did not include gas, electric and other shallow utilities, which
would all need to be added if a lot owner wanted to construct a home on the lot.”
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