Kadzban v. City of Grandville

Griffin, J.

This case presénts a challenge to the validity of certain special assessments levied against plaintiffs’ properties for street and utility improvements. Following a decision by the Tax Tribunal, which upheld the assessments, the Court of Appeals reversed on the ground that insufficient evidence was offered by the city to establish that the assessments conferred a special benefit upon the properties. Because we conclude that the Tax Tribunal’s decision is supported by substantial evidence on the whole record, we reverse.

i

In 1984, the City of Grandville approved three special assessment rolls for improvements to Canal Avenue between 36th and 44th Streets. As it was before the improvements, Canal Avenue remains a two-lane road that runs north and south through a residentially zoned area. It serves as the sole outlet for a number of dead-end, residential streets.

All parties agree that before the improvements Canal Avenue was in a state of disrepair, replete with potholes and bumps. Since 1971, the residential and retail population in the surrounding area *498had grown significantly, and trafile on the street steadily increased. Despite this increased use, Canal Avenue had not been resurfaced since it was seal-coated in 1969, a method of paving that usually endures for only five or six years. Although plaintiffs contend that without the increased use the deterioration would not have been as extreme, no one disputes that Canal Avenue needed to be refurbished.

Among the improvements approved for Canal Avenue were the installation of a bituminous concrete street surface, curbs and gutters, storm sewers, concrete driveway approaches, water laterals, sewer laterals, and sidewalks. Plaintiffs are twenty-seven owners of twenty-eight parcels of real property abutting Canal Avenue between 36th and 44th Streets. They challenge the special assessment rolls for the street and utility improvements, Special Assessment Rolls 95 and 96; however, they have not challenged the special assessment roll for installation of sidewalks.

Special Assessment Roll 95 was for installation of concrete driveway approaches, water laterals, sewer laterals, and storm drainage improvements. The total expected cost attributable to the Special Assessment Roll 95 improvements was $186,568. Private property owners were assessed seventy-two percent of this amount, or $134,292.

Special Assessment Roll 96 was for installation of a permanent bituminous concrete street. It is undisputed that the typical, improved residential street in Grandville is thirty-two feet wide. The challenged assessment roll provided for the widening of Canal Avenue from twenty-two feet to approximately thirty-six feet, except at intersections, where it was widened to approximately forty feet. No one questions that the extra width was necessary to accommodate a greater traffic flow on *499Canal Avenue. The total expected cost attributable to the Canal Avenue improvements was $187,529; however, the assessments imposed upon the abutting property owners did not exceed the cost required to widen the street to thirty-two feet. Accordingly, the abutting private property owners were assessed forty-three percent of the total cost, or $80,760.

The basis of plaintiffs’ challenge is a claimed absence of any special benefit to their properties as a result of the improvements to Canal Avenue. In particular, they contend that the improvements resulted in no increase in the value of their properties, and that the improvements actually have decreased the value of their properties because of increases in traffic and traffic speeds.

After a two-day hearing, the tax hearing officer disagreed. He determined that plaintiffs failed to prove that they had not received special benefits as a result of the improvements. In making this determination, the hearing officer did not apply this Court’s decision in Dixon Rd Group v Novi, 426 Mich 390; 395 NW2d 211 (1986), which was issued after the hearing, but before the officer’s proposed judgment. The Tax Tribunal adopted the hearing officer’s findings of fact in its opinion and judgment, but disagreed with the officer that the Dixon Rd decision should not be applied. However, the tribunal found that, even applying Dixon Rd, plaintiffs failed to show that the special assessments were invalid.

On appeal, the Court of Appeals reversed. The Court applied Dixon Rd, and concluded that little more than a "scintilla” of evidence had been presented by the city to justify the special assessments.1

*500We granted the city’s application for leave to appeal to this Court, 440 Mich 889 (1992), and now reverse.

ii

A special assessment is a levy upon property within a specified district. Although it resembles a tax, a special assessment is not a tax. Knott v City of Flint, 363 Mich 483, 497; 109 NW2d 908 (1961). In contrast to a tax, a special assessment is imposed to defray the costs of specific local improvements, rather than to raise revenue for general governmental purposes. As the Court explained in Knott:

"There is a clear distinction between what are termed general taxes and special assessments. The former are burdens imposed generally upon property owners for governmental purposes without regard to any special benefit which will inure to the taxpayer. The latter are sustained upon the theory that the value of the property in the special assessment district is enhanced by the improvement for which the assessment is made.” [Id. at 499, citing In re Petition of Auditor General, 226 Mich 170, 173; 197 NW 552 (1924). See also Cooper, Wells & Co v City of St Joseph, 232 Mich 255, 260; 205 NW 86 (1925).]

In other words, a special assessment can be seen as remunerative; it is a specific levy designed to recover the costs of improvements that confer local and peculiar benefits upon property within a defined area. Kuick v Grand Rapids, 200 Mich 582, 588; 166 NW 979 (1918); seé also Knott, supra.

Street and utility improvements are common bases for special assessments. In numerous instances, abutting property has been specially assessed the costs of paving a road or installing a *501sewer system. See, e.g., Kuick, supra; Foren v Royal Oak, 342 Mich 451; 70 NW2d 692 (1955); Axtell v City of Portage, 32 Mich App 491; 189 NW2d 99 (1971). However, not every street improvement primarily benefits the property that abuts the street. Indeed, in some instances, an "improved” street, e.g., one that is widened from a two-lane residential street to a four-lane thoroughfare, may be a detriment to abutting property. Fluckey v Plymouth, 358 Mich 447; 100 NW2d 486 (1960). In such instances, we have invalidated special assessments because the assessed property received no special benefit in addition to the benefit that was conferred upon the community as a whole. Id.; see also, Knott, supra; Brill v Grand Rapids, 383 Mich 216; 174 NW2d 832 (1970).

Recently, we again considered the validity of certain special assessments in our decision in Dixon Rd, and we clarified the test for determining the validity of special assessments. An earlier Court of Appeals opinion suggested that there were three alternative bases that would support a finding of special benefits sufficient to justify a special assessment: 1) an increase in the land’s value, 2) relief from some burden to the land, or 3) the creation of a special adaptability of the land. Soncoff v Inkster, 22 Mich App 358, 361; 177 NW2d 243 (1970). Rejecting that approach, this Court said that special assessments are permissible only when the improvements result in an increase in the value of the land specially assessed. Dixon Rd, supra at 400.

In addition, we emphasized in Dixon Rd that municipalities are not free to levy special assessments without regard for the amount of benefit that inures to the assessed property. For a special assessment to be valid, "there must be some proportionality between the amount of the special *502assessment and the benefits derived therefrom.” Id. at 401. In the absence of such a relationship, the special assessment would be "akin to the taking of property without due process of law.” Id. at 403.

Despite this requirement, our decision in Dixon Rd did not modify the well-settled principle that municipal decisions regarding special assessments are presumed to be valid. See In re Petition of Macomb Co Drain Comm’r, 369 Mich 641, 649; 120 NW2d 789 (1963); Crampton v Royal Oak, 362 Mich 503, 514-516; 108 NW2d 16 (1961). We said in Dixon Rd, and we reiterate here, that the decisions of municipal officers regarding special assessments "generally should be upheld.” Id. at 403.

Moreover, our decision did not alter the degree of deference that courts afford municipal decisions. When reviewing the validity of special assessments, it is not the task of courts to determine whether there is "a rigid dollar-for-dollar balance between the amount of the special assessment and the amount of the benefit . . . .” Id. at 402-403. Rather, a special assessment will be declared invalid only when the party challenging the assessment demonstrates that "there is a substantial or unreasonable disproportionality between the amount assessed and the value which accrues to the land as a result of the improvements.” Id. at 403.

Of course, the question whether and how much the value of land has increased as the result of certain improvements is factual, to be determined on the basis of evidence presented by the parties. As such, it is to be resolved by the trier of fact — in this case, the Tax Tribunal. On review, this Court will reverse a decision of the Tax Tribunal only if its decision is not supported by competent, material, and substantial evidence on the whole rec*503ord. Const 1963, art 6, § 28; 426 Mich 398; see also Bates v Genesee Rd Comm, 133 Mich App 738, 743; 351 NW2d 248 (1984).2 We turn now to a review of the evidence presented in this case.

in

In its decision, the Court of Appeals held that the city did not present sufficient evidence to support the special assessments. The Court said:

[W]e find that the proofs in the present case are insufficient to support an increase in market value as required. Defendant offered absolutely no tangible proof of a proportional direct enhancement of the abutting property values. Defendant’s proofs were limited to a critique of the Frederick sales ratio study. The evidence on the record before us to support a special benefit as determined by the Dixon test is closer to a scintilla than it is to substantial evidence. [Unpublished opinion per curiam, decided August 7, 1991 (Docket No. 114503), P 3.]

We disagree.

Here, the primary evidence presented by plaintiffs to show that the value of their properties had not increased was the expert testimony of Edward Frederick, a local real estate broker. He described the residential and commercial growth that occurred in Grandville during the past two decades and testified that this growth had transformed Canal Avenue from a rural, residential street to a "major collector” street. It was his opinion that because Canal Avenue is a major collector street, *504the improvements were primarily for the benefit of the surrounding community, not for the benefit of the properties abutting the street.

To support his opinion, Mr. Frederick conducted a sales ratio study,3 attempting to show that the improvements had no positive effect on the value of the property abutting Canal Avenue. His study included properties abutting Canal Avenue and properties in nearby neighborhoods. Although his findings purported to support plaintiffs’ position, the city effectively and completely discredited the study. As noted in the findings of fact, the hearing officer found the study

suspect as to sample sizes and silent as to permissible margin of error; deficient as to a proper foundation for its believability; questionable as the assumptions upon which its credibility rested; challengeable as to the reliability, and arbitrary in the selection of sales used; disproportional and dissimilar in the comparison data available on and off Canal Avenue; and short of the import necessary to overrule the assessments.

The other evidence presented by plaintiffs was similarly unpersuasive. Typical was the testimony of plaintiff Jean Allen. She testified that the resurfaced street was a detriment to the value of her property because cars were driven at faster speeds. The faster speeds made it more difficult for her to exit her driveway, to turn safely, or to cross the street. She further testified that cars could not be driven at those speeds before the improvements because of the condition of the street: "You could take some pretty good licks on the front-end of your car. There were some pretty good holes and *505bumps.” In effect, plaintiff Allen contended that the deteriorated road, as a hazard to vehicles and thus a deterrent to speed, would be more appealing to potential buyers than the improved road.4 The hearing officer rejected such assertions. He found that the record

simply does not reflect genuineness in petitioners’ protestations; their testimony in regard to Canal’s reconstruction having been too uniformly and completely at loggerheads with any notion of an improved environment to be wholly believable.

As noted above, special assessments are presumed to be valid. Thus, to effectively challenge special assessments, plaintiffs, at a minimum, must present credible evidence to rebut the presumption that the assessments are valid.5 Without such evidence, a tax tribunal has no basis to strike down special assessments. Axtell v City of Portage, supra at 497; see also Johnson v Secretary of State, 406 Mich 420, 441; 280 NW2d 9 (1979). In this case, the hearing officer found that the presumption had not been rebutted; "No proofs were presented which would directly controvert the reasonableness of the costs proportioned to petitioners.” On this basis alone, the decision of the Tax Tribunal was correct and should be upheld.

Moreover, contrary to the assertion of the Court *506of Appeals, the city did present substantial evidence of increases in the values of plaintiffs’ properties. The city presented expert testimony by a local real estate appraiser that three factors critical to property value — appearance, convenience and safety, and maintenance of the improvements —all were enhanced by the improvements to Canal Avenue. Voluminous photographic evidence was presented to show that after completion of the improvements Canal Avenue properties were more aesthetically appealing to potential buyers. Evidence was presented that the improvements led to a decrease in the number of traffic accidents on Canal Avenue, even though accidents had increased elsewhere in the city. Evidence was presented that the street was safer for children traveling to and from school, that it was safer for motorists, and that it was easier to plcw and to keep the street clear in the winter. Although specific dollar amounts were not attached to each of these benefits, taken together they certainly make up more than a "scintilla” of evidence in support of the city’s position.

In addition, the improvements were shown to be directly linked to significant increases in the marketability and the selling prices of plaintiffs’ properties. For example, plaintiff Allen testified that for two years before work began on Canal Avenue, she had been unable to sell her house; however, she immediately sold it after the improvements were completed. More important, she sold her house at a substantially higher price than she had listed it before the improvements, and the sale price included the amount of the special assessments. Another plaintiff testified that he had had similar difficulty selling his house before the improvements, but sold it quickly after the improvements were finished.

*507On the basis of this evidence, as well as the other evidence presented by the city, the Tax Tribunal determined that the value of plaintiffs’ properties increased as a result of the improvements to Canal Avenue. Further, the Tax Tribunal found that the increases "substantially exceeded” the amounts of the special assessments. Because the record, taken as a whole, contains substantial, material, and competent evidence to support this finding, the Tax Tribunal’s decision must be upheld.6

iv

For the foregoing reasons, the decision of the Court of Appeals is reversed.7

*508Brickley and Boyle, JJ., concurred with Griffin, J. Cavanagh, C.J., concurred in the result only.

Unpublished opinion per curiam of the Court of Appeals, decided August 7, 1991 (Docket No. 114503).

It should be noted that in Dixon Rd we did not disturb the findings of fact of the Tax Tribunal. In that case, we accepted its determination that the assessments were 2.6 times higher than the increase in value to the land. As a matter of law, we held that this difference was disproportionate.

According to plaintiffs’ expert, a sales ratio study is a "determination of the sales prices of a group of properties divided into the total assessed values of those same properties . . . .”

It should be noted that the speed limit on Canal Avenue was lowered from thirty-five miles per.hour to thirty miles per hour after the improvements were completed. Kenneth J. Madejczyk, Grand-ville’s Chief of Police, testified that, after the improvements, the bulk of the traffic on Canal Avenue proceeded about five miles an hour in excess of the posted speed, as is the case on most streets.

Of course, after plaintiffs present evidence effectively rebutting the presumption of validity, the burden of going forward with evidence shifts to the city. See in re Wood Estate, 374 Mich 278, 289-290; 132 NW2d 35 (1965). At that point, the city must, under Dixon Rd, present evidence proving that the assessments are reasonably proportionate in order to sustain the assessments.

As an alternative basis for invalidating the assessments, plaintiffs argue that this Court’s decision in Johnson v Inkster, 401 Mich 263; 258 NW2d 24 (1977), should be applied in this case. In Johnson, we struck down special assessments in part because the plaintiffs were required "to defray the cost of rectifying conditions mainly brought about by the public at large and not 'specially and peculiarly’ related to the use or needs of persons residing in the assessment district.” Id. at 271. Johnson is inapplicable here. In contrast to this case, Johnson involved nonabutting property owners, and it involved the transformation of a two-lane street into a five-lane "major thoroughfare.” Id. at 270. Further, although Canal Avenue’s deterioration was intensified by the increased use of many others besides plaintiffs, the evidence here showed that a seal-coated road needs to be resurfaced every five or six years, even when traffic is less intense than it was on Canal Avenue. This evidence supports the conclusion that, with or without the growth in the surrounding area, Canal Avenue would have deteriorated and required resurfacing. Finally, the city did not assess the entire cost of the road improvements on plaintiffs’ properties; it assessed only the costs of a typically improved residential street.

Because we conclude that the record supports a finding of a proportionate increase in the values of plaintiffs’ properties, it is unnecessary to address defendant’s contention that our decision in Dixon Ed should not be applied retroactively in this case. We note, however, that the Court of Appeals mischaracterized the Tax Tribunal’s decision regarding this point. The Court of Appeals found that "it was error [for the Tax Tribunal] not to apply the holding in Dixon [Rd].” (Slip op, p 3.) However, in its opinion and judgment, the Tax Tribunal stated that it did consider Dixon Ed to be applicable in this case, and that it did apply Dixon Ed.