In Dalton Enterprises v. Dalton Township, Michigan Court of Appeals, No. 291789, July 22, 2010 a township's special property assessment that was levied against a taxpayer's property to defray the cost of a sanitary sewer improvement project was ruled valid, but the Michigan Tax Tribunal (MTT) should have ordered the township to correct the REU (Residential Equivalency Unit) assessment for the property on the assessment roll and recalculate the special assessment and connection charge because the taxpayer's property was incorrectly classified as retail space rather than as a warehouse. The REU Schedule established a special assessment cost per REU and a connection charge per REU for properties within the special assessment district.
The taxpayer contended that the special assessment should have been invalidated because the sewer improvement project was primarily intended to benefit an amusement park and the township's new industrial park. Further, the taxpayer claimed that the amount of the special assessment was not reasonably proportionate to the benefit to the taxpayer's property because the property already had a water and septic system that met its needs. The taxpayer also argued that the special assessment constituted a tax and, therefore, violated the Headlee Amendment to the Michigan Constitution (Art. 9, §31). In addition, the taxpayer alleged that the township did not follow the statutory and procedural requirements to implement the special assessment.
The Michigan Court of Appeals held that the MTT properly determined that the special assessment was valid because the taxpayer failed to present sufficient evidence to overcome the presumption of validity. Without such evidence, the MTT had no basis to strike down the special assessment. The only evidence submitted by the taxpayer regarding whether the amount of the special assessment was proportionate to the increased value of its property was the property owner's lay opinion testimony that the value of the property was less because of the sewer assessment. However, the property owner's lay opinion was not sufficient to overcome the presumption of proportionality, especially when coupled with the opinion expressed by the township's expert that the property's special assessment was proportional. The township's expert also noted that an enhancement typically resulted from the installation of a public sewer system.
The appellate court also rejected the taxpayer's argument that the special assessment violated the Headlee Amendment, which prohibited a local government unit from levying a tax without voter approval, because the special assessment was not a tax. Rather, a special assessment was a specific levy designed to recover the costs of improvements that confer local and peculiar benefits upon property within a defined area. Likewise, the connection charge in this case was a fee and not a tax because the charge served a regulatory purpose rather than a revenue-raising purpose. The special assessment district was created to fund the sanitary improvement project. Such a project was an exercise of the township's power to regulate the public health, safety, and welfare. The connection fee was also proportionate to the necessary cost of the service.
The taxpayer's statutory argument that the county, not the township, was required to enter into the contract with the general contractor was also rejected. The appellate court noted that the taxpayer cited no authority for its conclusion that the township's special assessment was void if the county did not contract with the general contractor. Even if the contract were successfully challenged, this would not affect the validity of the special assessment district and the special assessment.