Wednesday, January 10, 2007

River Walk Apartments, LLC v. Twigg (Ct. of Appeals)

Decided January 10, 2007--Opinion by Judge Lynne A. Battaglia, with Judges Dale R. Cathell and Glenn T. Harrell, Jr. joining in the judgment only.

In November 2000, the Mayor of the City of Frederick entered into an agreement ("November Agreement") with Property Owners wherein the Property Owners would dedicate to the City for no charge "any and all rights-of-way needed for the upgrade and widening of Gas House Pike along the frontage of the Property," which was to be made "free and clear of all liens and/or encumbrances." It is unclear from the Agreement whether the conveyance was fee-simple or merely encumbered the land with a thoroughfare for the use of the public. The Property Owners also agreed to give their consent and sign all necessary documents to subject the properties to a "Tax Increment Financing District" (TIF) to enable the City to finance the completion of Monocacy Boulevard, with the caveat that the Property Owners shall have no additional tax assessment or liability as a result of the TIF.

In consideration for the Property Owners’ dedications and agreement to the TIF, the contract provided that the Properties and Property Owners would be subject to a "deferred contribution special assessment" of $1.00 per square foot of each building to be constructed to be paid once to the City "upon application to the City for the Shell Construction Permit for such building." The contract was signed by a representative of each of the Property Owners and by Mayor James Grimes for the City of Frederick.

In October 2002, the City of Frederick passed Ordinance G-02-19, §1, which titled Chapter 11 of the City Code, a reserved chapter, "Fees," and levied impact fees for the first time in the City for the purpose of requiring that new residential, commercial, institutional and industrial development pay for its appropriate share of capital improvements to the city’s water and sewer treatment and distribution systems through the imposition of water and sewer impact fees which will be used to finance, defray and reimburse the city for all or a portion of the costs of capital improvements to the city’s water and sewer treatment and distribution systems. Another fee imposed by the new chapter was the "Park Facilities development impact fee," which states in relevant part, "Any person who undertakes a residential development project shall pay a park facilities development impact fee and shall not receive a building permit until such park facilities development impact fee is paid."

In June 2004, then Mayor Jennifer Dougherty and the Property Owners entered into a second agreement entitled "Agreement to Defer Public Improvements" ("Deferral Agreement"), granting the Property Owners an exception to the Subdivision Regulations of the City of Frederick which required installation and acceptance of necessary public improvements prior to the final approval of subdivision plats.

In October 2004 and again in March 2005, applications were submitted for shell construction permits along with payment of the $1.00 per square foot for each proposed structure, as required by both the November and the Deferral Agreements. The City denied the applications, stating that "in addition to the $1.00 per square foot fee, all impact fees must be paid prior to the issuance of any of the aforementioned building permits," to include payment of water, sewer and park fees. Consequently, a complaint for a writ of mandamus and specific performance was filed against the City requesting they be directed to issue shell construction permits based on the municipality being bound by its contracts. The City responded, in part, that the Agreements only exempted the property from regulatory fees, not water, sewer and park facility impact fees, and that even if the Agreements did exempt the Property Owners from those fees, because they constitute taxes, they can only be waived by the Maryland General Assembly and therefore, without such authorization, the waiver was ultra vires and not enforceable.

Upon timely appeal of a finding for the Property Owners, the City maintained that the legislative body of the municipality must enact ordinances in order to establish impact fees and that the two Agreements were not legislatively authorized, but instead constituted private agreements between the Property Owners and the two mayors. The Court of Special Appeals reversed the Circuit Court holding that Section 2 of Article 23A and Section 7 of Article II of the City of Frederick Charter mandate that all fees imposed by the City, and any waiver thereof, must be authorized by ordinance, and because no ordinance authorizing either the November or the Deferral Agreement was enacted, both contracts were ultra vires and therefore void ab initio.

Before the Court of Appeals, the Property Owners contended that the Mayor possesses the executive power to purchase or condemn property, such as the rights-of-way at issue in this case, and as an executive act, no ordinance or legislative act was required in order for the City to enter into the Agreements. The Agreements represented nothing more than the implementation of an already authorized and existing public project and, as such, constituted executive, not legislative, actions, which the Mayor, as the chief executive officer of the City, possessed the requisite authority to do on behalf of the City. Conversely, the City maintained, in part, that before any fee can be imposed by the municipality, it must be legislatively authorized. The waiver of fees is a corollary to the imposition of fees, so it, too, would require legislative authorization.

The Court held that neither the Mayor who signed the November Agreement, nor the Mayor who signed the Deferral Agreement, possessed the requisite authority to create a special fee or to waive impact fees; those actions required legislative authority, which was never obtained. A municipality is not bound by those actions which transcend its authority and the authority of those allegedly acting on its behalf; those actions are ultra vires and unenforceable.

Judges Cathell and Harrell join in the judgment only consistent with their position in J.P. Delphey L.P. v. Mayor and City of Frederick.

The full opinion is available in PDF.

No comments: