ARE SPECIAL ASSESSMENTS BEING ABUSED in wisconsin?

Over the past decade, our firm has been deeply involved in fighting illegal and unconstitutional special assessments. Many landowners have a lot of questions when they receive a letter in the mail informing them that they are going to be taxed to pay for a public project. Aren’t public works what the taxes that we already pay supposed to be used for? Isn’t it unconstitutional to make individual landowners bear a greater proportion of the cost of public projects that are for the whole community? The answer is that usually it is unconstitutional to tax individual landowners with special assessments as a way of paying for public projects. However, in very specific situations municipalities can use a certain type of tax called a special assessment to pay for improvements that are built with public resources but only when the primary intention of the project is benefiting specific privately owned property and when other stringent rules and requirements are followed.

Under Wisconsin law, public improvements are usually paid for by the public - from the general fund. However, in some very limited circumstances municipalities are allowed to charge specific landowners an extra tax to pay for projects that the government builds. These extra taxes are called special assessments. Special assessments are unconstitutional in most cases including because they violate the constitutional law against taking private property (money) for public purposes, and because they violate the constitutional law that taxation must be uniform. 

Special assessments are a special exception to the general rule that public improvements have to be paid for from the general fund. Special assessments can be brought under the police power or under the taxing power. In a nutshell, the police power is the government’s power to protect the public from harmful or dangerous conditions. For example, usually the government could not go onto someone’s front yard to cut down a tree. But if the tree is hit by lightning and could fall over into the street creating a dangerous condition to the public, then the government can use the police power to remove the dangerous condition and, in some circumstances, charge the landowner for the cost or removing the tree. 

So in some rare circumstances municipalities can use the police power to issue special assessments, but it should be remembered that special assessments under the police power of a municipality are still unconstitutional unless they pass stringent legal tests. CED Properties, LLC v. City of Oshkosh,  2018 WI 24, ¶ 35, 380 Wis. 2d 399, 909 N.W.2d 136. Municipalities should generally avoid the use of special assessments except in very exceptional cases because in most cases special assessments are a violation of constitutional rights and property rights. It is the government’s responsibility to make sure that the citizens’ property rights and constitutional rights are upheld, and what we have observed is that much of the time special assessments are nothing more than unconstitutional takings in disguise.

In order for a special assessment not to be unconstitutional it must be for a “local” project as the term “local” is specifically defined in Wisconsin law. Normally, public projects are “general” projects because they are meant to benefit the whole community. Under Wisconsin law, “A public improvement is general in character if it ‘confers a substantially equal benefit and advantage on the property of the whole community or benefits the public at large.’” CED Properties,  2018 WI 24, ¶ 36. This sentence, written by the Wisconsin Supreme Court, provides two tests to help determine whether a project is general. The first test for when a project is general is when the project confers a substantially equal benefit and advantage on the property of the whole community. This obviously applies to almost all roads. This is because roads are parts of the interconnected transportation infrastructure that interrelate and work together to provide mobility for the entire community. 

If a one mile stretch of United States Highway 41 was removed, it would impact many people, not just those people who lived in houses abutting the highway. Probably the best argument for special assessing for a road would be in the case of a cul-du-sac, but even a one mile stretch of road ending in a cul-du-sac with one farm on it could benefit the whole community to some extent because it is part of the interconnected system of roads and perhaps the food that feeds the community will come from that farm over the road to feed the rest of the community. However, when a road or recreation path is used by the general public then the project is basically always general. This is because many people in the community use the road and sidewalk to get places and may use the recreational path to exercise. To the extent that roads and recreational trails raise property values, they raise the values of many properties in the community, not just those near the road. In fact homes near busy roads often suffer lower values so that the community as a whole can grow and move around more easily. It is unfair and unconstitutional for municipalities to charge extra taxes to abutting property owners to fix and expand roads that everybody uses when those very same landowners have the headache of living on the busier roads! 

The second part of the sentence written by the Wisconsin Supreme Court explaining the “local” test makes this even clearer. The Wisconsin Supreme Court has ruled as follows: “A public improvement is general in character if it ‘confers a substantially equal benefit and advantage on the property of the whole community or benefits the public at large.’” The use of the word “or” means that it is describing two different tests. The first, which we have already talked about, is when the project “confers a substantially equal benefit and advantage on the property of the whole community” so now we will turn to the second test. The second test states that an improvement is general when it “benefits the public at large” this means that municipal decision makers can ask themselves a simple question when they are trying to decide whether or not special assessments can be used to pay for a public improvement. The question is “Does this improvement benefit the public at large?” For example, if a municipality is considering building a road, they can ask themselves: “Does this road benefit the public at large?” If the answer is “yes” then special assessments cannot be used because it would be unconstitutional. 

A person may ask, when can a special assessment be used? The answer is that a special assessment under the police power can be used when the government is fixing a dangerous condition with the primary intent of benefitting one specific property in a unique way. An example of where a special assessment could be used would be if a municipality decided to replace a lead water pipe that went from the street up to a house. The only user of this pipe is the family that lives in the home, and the family does not have money to pay to replace the lead pipe even though the pipe is dangerous to their health. The municipality could replace the pipe and then charge the homeowners as a special assessment for the cost of replacing the dangerous lead pipe with a safe pipe. This would be constitutional because the public should not usually have to pay to fix the private property of landowners just because they cannot afford to replace the lead pipe between the water main and their house that serves only their own home. A local improvement is an improvement that “is made primarily for the accommodation and convenience of inhabitants of a particular area in the community whose property receives a special benefit from the improvement.” CED Properties, 2018 WI 24, ¶ 36. The lead pipe example is a perfect illustration of this rule. 

In a 2010 case, the Town of Menasha tried to special assess David and Susan Hildebrand's property $33,205.60 for the cost of installing a portion of an asphalt recreational trail which abutted their property. The Town of Menasha’s reason for making the asphalt recreational trail was to have what they called “complete streets” not to help the Hildebrands. The Hildebrands did not want the recreational trail. The court struck down the special assessment because the primary purpose of the asphalt trail was to complete the trail system in Winnebago county which is general because it was intended to benefit the entire community, not specifically the Hildebrand property, and because the benefit to the Hildebrand property was no different than the benefit to the general public. Therefore the special assessment was void. Hildebrand v. Town of Menasha, 2011 WI App 83, 334 Wis. 2d 259, 800 N.W.2d 502. In another case, the City of Rice Lake levied a $44,612.25 special assessment against the property of William and Frances Genrich for paving a street and installing sidewalks, curbs, gutters, and water and storm sewers. Initially the circuit court upheld the assessment but the court of appeals overruled the circuit court because it appeared that the project was general because the intent was not really to help William and Frances Genrich, rather it was to provide access to a City Park, and also because there was an argument that the project did not specially benefit the Genrich property because they already had vehicular access and possibly already had access to water utilities so the benefit differed in degree from the rest of the public but was not unique to the Genrich property. Genrich v. City of Rice Lake, 2003 WI App 255, 268 Wis.2d 233, 673 N.W.2d 361.

Special assessments are often unconstitutional. Therefore, every time that a special assessment is contemplated the municipal decision makers must ask themselves a question: “What is the primary motivation for doing this improvement? Is the primary motivation to benefit the community or is the primary motivation to benefit a specific landowner?” In the case of a road which is not a cul-du-sac, the primary motivation is obviously to benefit the community because many people use roads to move around in the community, to receive services, and even for exercise. Even a cul-du-sac may be a general project depending on the exact circumstances.

If the primary motivation of the project is to benefit a specific landowner then a special assessment might be constitutional. However, it should be noted that this is rarely the case. Usually, if a public improvement is not primarily for the benefit of the community at large then the municipality should not be doing it. The municipality should generally not be doing projects that only benefit one landowner unless it is to mitigate a dangerous condition or a very unusual circumstance.

A special assessment can only be levied against a parcel which receives a special benefit from the improvement. A special benefit is a unique benefit that no other parcel receives. As the Wisconsin Supreme Court has put it: “The test is whether the property upon which the special assessment is levied “has gained a benefit not shared by any other parcel.” CED Properties, 2018 WI 24, ¶ 37. In the case of the City removing the lead pipe that connects a house to the water main, the house gets a benefit that no other property gets: the lead pipe to the house is replaced with a safe pipe. This does not benefit any other parcel, only the one house is benefitted. So in this case the special assessment is constitutional.

There is a simple test to determine whether a special assessment is unconstitutional. Just ask these questions:

1) Does this improvement benefit the public at large? 

2) Is the primary purpose of this improvement to benefit the entire community? 

If the answer to one or both of these questions is “Yes” then the project is basically always general and it would be unconstitutional to use special assessments. 

Two additional questions can also be asked:

1) Is the primary purpose of the improvement to benefit a particular property owner by providing the parcel a special benefit that is different from the benefit to any other parcel? (think the removal of the lead pipe)

2) Does the improvement actually provide a particular private property a special benefit of a type not shared by any other parcel? (again, think removal of the lead pipe)

If the answer to these questions is “Yes” then a special assessment might be constitutional, however if the municipality is not mitigating a safety concern questions may be raised about why municipal resources are being used to benefit a specific private property.

It is important to stress that benefits to a neighborhood are not special benefits. The Wisconsin Supreme Court has ruled “that ‘common advantages to the neighborhood were not chargeable as benefits ... but only such as were peculiar to [the particular parcel].’ The test is whether the property upon which the special assessment is levied ‘has gained a benefit not shared by any other parcel.” CED Properties, 2018 WI 24, ¶¶ 25, 37, 38 (citations omitted). A special benefit is “an uncommon advantage to a property differing in kind, rather than degree, from the benefits enjoyed by the general public” which is “peculiar to” the particular parcel. Id. The parcel must have “gained a benefit not shared by any other parcel” and while the special benefit “could accrue without any actual use of the improvement” the special benefit must be “substantial, certain, and capable of being realized within a reasonable time. Id. As can be seen from this explanation, it is actually very rare for a public improvement project to give special benefits to a parcel. Usually public improvements should be designed to benefit the community, not an individual landowner. 

If it turns out that the public improvement is actually primarily being constructed to benefit a particular landowner, and also that the project does actually provide a special benefit to that landowner, then it may be constitutional to use special assessments, but the municipality should also seriously question why it is doing the project. Public funds and public projects are supposed to benefit the entire public, not just one landowner. If just one landowner is being benefited, then there is probably some hard thinking that needs to go on to decide if the government should even be doing the project at all!

Most of the time, this analysis should be enough to determine that special assessments should not be used because they would be unconstitutional, or that the government should not be doing the project because it only primarily benefits a certain private citizen. If the improvement primarily benefits the public then the improvement is general. As the Wisconsin Supreme Court ruled: “If the improvement is deemed general, the inquiry stops and the special assessment is not permissible.” CED Properties, 2018 WI 24, ¶ 35. 

These are only some of the legal requirements for special assessments to not be unconstitutional. It should be noted that we have observed that many, if not most, of the special assessments being done in the State of Wisconsin are almost certainly illegal and unconstitutional. One may wonder why the practice goes on if it is unconstitutional? The simple answer is that many government workers do not know better. There is a very short window of time to challenge special assessments in court and also that many times the cost of obtaining legal services to dispute a special assessment is more expensive than just paying the unconstitutional special assessment. 

For example if a property owner is taxed $2,500 through a special assessment to fix the street in front of her house, she may have a very good case to prove that the special assessment is illegal and unconstitutional. Obviously, the municipality is not primarily fixing the street to benefit her. The municipality is fixing the street primarily to benefit the traveling public. The woman has an excellent case that the special assessment tax against her is illegal and unconstitutional. However, hiring a lawyer and fighting the case in court (probably over many months) will almost certainly cost more than $2,500. So she swallows hard and pays the tax, even knowing that it is wrong because it is illegal and unconstitutional. When the government knowingly allows this to happen it is wrong. 

Municipalities are urged to pay attention to this dilemma. Because the government is able to exploit a loophole in the law coupled with the cost and inconvenience of going to court to charge illegal and unconstitutional taxes against landowners by calling them special assessments is a low road indeed. Every government official in this country swears an oath to protect and uphold the Constitution of the United States and the Constitution of Wisconsin. That means when that government is presented with an option that appears to be illegal and unconstitutional, the government should refuse to do it even if they think that they might be able to get away with it because the citizens cannot afford to fight it in court. Our freedoms and our way of life depend on government officials taking the high road and doing things the right way even when it isn’t easy or popular. Special assessments are often abused in Wisconsin and it needs to stop.