Curb Appeal In South Dakota: No Special Benefit To Property Means That Special Assessment Is A Taking

A rule of law set out over 100 years ago and which remains (as we say) good law qualifies as "well-established" by any standard. Village of Norwood v. Baker, 172 U.S. 269 (1898) set forth the rule that a special assessment for municipal improvements is only constitutional if the improvements result in the property being assessed enjoying special benefits, and then only to the extent of the benefit. If the benefits are merely those which inure to the public at large, or if the assessment exceeds the benefit conferred, the assessment is invalid.

Think of it as an "anti-givings" requirement: the cost of public benefits get absorbed by the public as a whole, but if property gets some benefit over and beyond those public benefits, it is fair to ask the property owner to pay. Otherwise, it's a no-go.

In Hubbard v. City of Pierre, No. 25312-a-JKM (June 30, 2010), the South Dakota Supreme Court applied the well-established rule of Village of Norwood to invalidate a special assessment as a taking under the U.S. and S.D. constitutions.

The city replaced water mains, resurfaced streets, and replaced portions of curbs, gutters, and driveways. The city proposed levying a special assessment to cover the cost of the curb, gutter, and driveway work. Owners whose properties were on the streets objected, arguing that the assessment was a taking since the assessment exceeded the benefits received.

After the city completed the project and assessed the property owners for "the per linear foot cost for curb and gutter replacement and per square foot for driveway replacement," slip op. at 2, the property owners sought a declaratory and injunctive relief in state court. The court prohibited the city from collecting the assessment, and the city appealed.

The South Dakota Supreme Court noted that municipalities have the authority to assess property owners for local improvements pursuant to two state statutes. One statute allows a "front footage" method, and another based on "accrued benefits." The front footage statue does not require a showing of benefits, while the accrued benefits statute does. The city "primarily used the front foot method of apportionment." Slip op. at 5. The court rejected the city's claim that the statute's silence regarding special benefits meant that no showing of benefit was required because the benefit requirement is based in the constitution.

The court held that the property owners met their burden of showing by "strong, clear and positive" evidence, slip op. at 10, that their properties were not benefited by the curb work. Even though the city's findings were presumed correct, the court concluded that the property owners overcame the presumption of validity. One owner testified that the curb work added no value to his property because his existing curbs and gutters were in good condition and would last another 3 years. Slip op. at 13. The county assessor testified that replacing the existing curbs and gutters did not increase the assessed value of the properties. Id. A real estate agent and an appraiser similarly testified.

The remainder of the opinion is devoted to an evaluation of the other evidence of benefit and value, with the court affirming the trial court's conclusion "that, based on the evidence, the Petitioners had shown that replacement curb and gutter did not provide a measurable benefit to abutting property." Slip op. at 17. The court refused to reweigh the trial court's factual determinations on appeal:

The City claims the circuit court incorrectly weighed the evidence and should have given more weight to the City’s testimony and evidence. It is not our role on appeal to retry this case or substitute our judgment as to credibility and weight of the evidence. This Court defers to the circuit court because of its ability to observe the witnesses. The circuit court was persuaded by the credibility and weight of the Petitioners’ evidence. The circuit court was unable to conclude from the evidence that the replaced curb, gutter, and driveways provided “actual, physical, material and quantifiable special benefits” to the property assessed. The most that could be determined from the City’s evidence was that replacing the curb and gutter extended its useful life by varying estimates and in some cases may have improved the flow of water away from the property. The City’s quantification of the benefits, however, was ambiguous and conclusory in that the City assumed the benefits equaled the cost. The circuit court determined that the Petitioners’ evidence demonstrated that the replaced curb, gutter, and driveway did not provide a benefit above and beyond or differing from the benefit enjoyed by the rest of the community. Because the circuit court’s findings of fact are based on the evidence and not clearly erroneous, we decline to substitute our judgment as to the weight and credibility of the evidence, as urged by the City. The circuit court applied the correct law regarding the question whether the special assessments were constitutional.

Slip op. at 19.

Background on the case in Supreme Court rules for homeowners in curb and gutter case from the Pierre Capital Journal.