HomeMy WebLinkAbout06-08-18 Protest - Gallatin County Commission - Creation of Special Improvement District No. 745 County Commission
GALLATIN COUNTY R. Stephen White
Joe P. Skinner
i 311 West Main,Rm. 306 • Bozeman,MT 59715 Donald F. Seifert
commission@gallatin.mt.gov
Phone (406) 582-3000
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June 8, 2018
Bozeman City Commission
c/o Bozeman City Clerk
Bozeman City Hall
121 North Rouse Avenue, Suite 202
Bozeman,Montana 59771
Re: Written Protest against the Creation of Special Improvement
District No. 745
Dear City Commissioners:
Gallatin County,through its Board of County Commissioners,and as the landowner of the property
known as the Gallatin County Regional Park,hereby submits its written protest against the creation
of Special Improvement District No. 745.
This proposed district relates to already existing improvements to North Ferguson Avenue and
West Oak Street, as well as to financing those improvements. Gallatin County submits this protest
pursuant to § 7-12-4110, MCA.
On April 3, 2017, the County submitted a written protest against the creation of Special
Improvement District No. 740 ("SID 740"). The creation of SID 740, and the assessments made
under SID 740, were unlawful. Contrary to the City's representations, the City failed to bill the
County for the first installment purportedly due under SID 740.Although the City has no authority
simply to dissolve an SID on its own,the County will not protest the dissolution of SID 740.
In place of SID 740, the City proposes creation of Special Improvement District No. 745 ("SID
745"). The creation of SID 745 does not cure the inherent defects in the soon-to-be dissolved SID
740: the City's unlawful failure to seek competitive bids for the improvements;the arbitrary nature
of the apportionment of the County's share of the improvements; and the failure of the City to
offer objective,verifiable data regarding the benefit purportedly bestowed upon the Regional Park
by way of the improvement.
Bozeman City Commission
June 8,2018
Page 2
Further, the City seeks to create SID 745 to finance improvements already in existence. Montana
law does not allow creation of an SID to finance already completed infrastructure. The City called
the financing of the improvements a"loan" in the documentation pertaining to SID 740—now the
City describes the financing as a"purchase" of the improvements.
The County Commission requests that the Bozeman City Commission and its staff respect the
statutory restrictions for creation of SIDs set forth in Title 7,Chapter 12, Parts 41 and 42,Montana
Code Annotated (MCA). The County does not owe any "fair share" for infrastructure
improvements and monetary assessments made through unlawful means. Gallatin County
therefore protests the creation of SID 745.
Creation of SID 745
Gallatin County protests the creation of SID 745. Contrary to the assertions made in the City
Attorney's Memorandum, the new special improvement district does not "address the County's
concerns related to the manner in which the City created SID 740." The attempted creation of a
new special improvement district does not cure the City's failure to protect the County's taxpayers
by adherence to the laws governing the competitive bidding process. Nor does the County agree
with the City's new calculation of costs.
As explained in prior public comment,the County has not waived its right to protest improvements
to Ferguson Avenue and Oak Street. A landowner cannot waive the right to protest an SID that is
void ab initio (from the beginning). In a case against the City,the Montana Supreme Court stated:
"[A] property owner cannot ordinarily waive or become estopped to urge the invalidity of an
assessment which is void by reason of an inherent defect, either of jurisdiction or of procedure."
Smith v. City of Bozeman, 144 Mont. 528, 541-542, 398 P.2d 462, 469 (1965). Both the method
and manner of SID 745's assessment are unlawful. Further, the waiver of right to protest entered
by the previous landowner did not include any waiver for the payment of existing improvements.
Gallatin County's protest is valid. The only property located within the special improvement
district is the Regional Park, owned wholly by the County. The City Commission must accept this
protest and find that it is made by the owners of more than 50% of the area to be assessed. The
City must then refrain from taking any further proceedings regarding SID 745 for at least 6 months
pursuant to § 7-12-4113, MCA.
The County's protest against SID 745 is based on the following:
a. The City must follow State law governing budgeting, financing or borrowing of money.
As a local government with self-government powers,the City is subject to "any law regulating the
budget, finance, or borrowing procedures and powers of local governments." §7-1-114(1)(g),
MCA. Such laws "are a prohibition on the self-government unit acting other than as provided." §
7-1-114(2), MCA.
Bozeman City Commission
June 8,2018
Page 3
b. The City failed to seek competitive bids for the project.
Section 7-5-4302, MCA provides:
[A] contract for the purchase of. . . materials or supplies or for construction, repair, or
maintenance in excess of$80,000 must be let to the lowest responsible bidder after
advertisement for bids.
Further, § 7-12-4143, MCA, requires the City to:
[A]ward the contract for the work or improvement to the lowest responsible bidder at the
prices named in the bid and shall reject all proposals or bids other than the lowest regular
proposal or bid of a responsible bidder.
The City contracted directly with Flanders Mill, LLC for the construction of the improvements to
Oak Street and Ferguson Avenue. The City incorporated estimates from Sime Construction into
its contract with Flanders Mill, The City did not seek bids for the work that Sime performed in
2017.
Taxpayers recently learned that the City attempted to charge the County $160,713.85 more than
it actually cost to make the improvements. The original assessment (now termed an "estimate")
was 15% higher than the final improvement costs. This discrepancy demonstrates the importance
of the competitive bidding process and is evidence that the City's failure to conform to the law
has harmed the County taxpayers.
c. The City failed to give the County the opportunity to make the improvements at a lower
cost to the taxpayers.
Due to its failure to seek competitive bids, the City deprived the County of the ability to make
the improvements at its own expense and for a lower cost. Section 7-12-4147, MCA states:
The owners of three-fourths of the fiontage of lots and lands liable to be assessed
or their agents . . . may, within 3 days after the award pursuant to 7-12-4143, elect
to take such work and enter into a written contract to do the whole work at a price
at least 5% less than the price at which the same has been awarded.
Interestingly, the public now knows that the City's original amount, as set forth in SID 740, was
an excessive and unlawful charge against the County. The County lost the opportunity to save
even more taxpayer money by taking an independent review of the City's project and its costs.
The Montana Attorney General has recognized that"the procedures for the letting of contracts
form an integral part of the budget and finance functions of local government." 37 Mont. Op.
Atty. Gen. 735, 37 Mont. Op. Atty. Gen. No. 175, 1978 WL 33588, at *3 (Dec. 7, 1978).
Accordingly, the "requirements for competitive bidding . . . are mandatory provisions applicable
to local government units with self-government powers." Id.
Bozeman City Commission
June 8,2018
Page 4
d. SID 745 would unlawfully assess the Gallatin County Regional Park for existing
improvements.
Similar to the methods used to create SID 740, the City seeks to unlawfully assess the County via
SID 745. Both SIDS are void ab initio. According to the City's Engineer,the SID's purpose is "to
raise funds from adjacent property owners to pay for a portion of the existing improvements."
These "existing improvements" are the construction of North Ferguson Avenue and the widening
of Oak Street.
The City cannot create an improvement district to recover payment for existing improvements.
The relevant statutes in Title 7, Chapter 12, Parts 41, MCA contemplate the construction of
proposed improvements, not payment for improvements already in existence. No authority
supports the creation of a special improvement district solely as a financing mechanism for
improvements after they are completed.
For example, under § 7-12-4102, MCA, the City can create a special improvement district and
then "order work to be done that is considered necessary to improve the whole or a portion of the
streets . . . ." (Emphasis added.) Similarly, § 7-12-4104 requires a resolution of intent to state "the
general character of the improvement or improvements which are to be made . . . ." (Emphasis
added.) Finally, § 7-12-4114, MCA requires the City to pass a resolution creating the special
improvement district"[b]efore ordering any of the proposed improvements . . . ."
As with SID 740, the City again seeks to unlawfully force the County to repay a loan for the
improvements to Oak Street and Ferguson Avenue. According to Resolution 4892,the "District's
Share of the Improvements"are "payable over a three-year term, in equal semiannual installments
of principal, plus interest, or equal semi-annual payments of principal and interest, as this
Commission shall prescribe . . . ." The County must then repay "principal and interest" toward
the total "obligation" of$903,424.65.
SID 745's sole purpose is to require the County to fund completed infrastructure through a loan.
The City has no legal authority to require the County to finance the existing improvements.
e. The City maypurchase" the improvements and then charge the County for those
improvements.
The City may not purchase the improvements to Oak Street and Ferguson Avenue for the County.
Resolution 4892 is titled, in part, "A Resolution . . . Declaring It to Be the Intention of the City
Commission to Create the District for the Purpose of Purchasing Certain Local Improvements and
Financing the Costs Thereof. . . ." The Resolution then states the City"proposes to purchase, on
behalf of a special improvement district to be created, upon such terms as the Commission deems
just, certain local improvements . . . ."
The"purchases"basis for creating SID 745 is unlawful. There is no statutory authority for the City
to purchase public improvements for another local government. Such purchase would violate the
Bozeman City Commission
June 8,2018
Page 5
specific procedures in Title 7,Chapter 8,MCA through which the County can purchase and acquire
property. Further,the purported purchase of the improvements would not cure the City's failure to
competitively bid the construction of the improvements, as required by Title 7, Chapter 12, Part
41, MCA. Regardless of how the City seeks to fund the improvements, any related assessment
remains invalid and unlawful.
f. SID 745's proposed assessments are arbitrary and unlawful. The assessments are not
proportionate to any benefit bestowed on the Regional Park.
The City maintains the County will be assessed its "proportionate share of the costs" for the
improvements to Oak Street and Ferguson Avenue. According to Resolution 4892, these costs
allegedly are "equitable and in proportion to and not exceeding the special benefits derived from
the Improvements"by the Regional Park. The City offers no proof, however,that the new amount
of$903,424.65 equals the benefit conferred on the County, if any.
Rather, the dissolution of SID 740 and the creation of SID 745 demonstrate the arbitrary and
capricious manner in which the City calculated the improvements' costs. The City's Engineer
admits to the City Commission that the"final costs of construction are significantly lower than the
estimated costs when SID 740 was created." According to Mr. Hixon's memorandum, this
"significant difference in costs"now compels the City to create"a new SID that accurately reflects
the costs to be assessed."
The City calculates that the original assessment provided by SID 740 of $1,062,138.50 is 15%
higher than it should have been. The County's share of the improvements is now$160,713.85 less
than the City originally sought through SID 740. If the County had not protested the creation of
SID 740 and sought a judicial determination that SID 740 was void,the County's taxpayers would
have been significantly overcharged for the improvements.
The City's new calculations are as specious as the calculations for SID 740. The City derived the
new amount of $903,424.65 by taking the "Final Construction Costs" for the improvements to
Ferguson Avenue and West Oak Street and, again, splitting them among the City, the proposed
District, and the Flanders Mill Subdivision, and then adding $1,000 for "incidental costs." The
City has produced no documentation supporting the final costs. Nor has the City produced any
documentation supporting the City's determination that the County is benefitted by exactly one-
third for the improvements to Ferguson Avenue and by exactly one-half for the improvements to
West Oak. In deciding how to apportion the costs among the County, the City, and Flanders Mill,
the City followed the same arbitrary process it used to apportion the costs under SID 740.
The Montana Supreme Court has specifically disallowed such arbitrary assessments. As stated in
Tocci v. City of Three Forks,216 Mont. 159, 163-64, 700 P.2d 171, 174(1985): "It is fundamental
to assessments for special improvements that the assessment be in proportion to the benefits
Bozeman City Commission
June 8,2018
Page 6
conferred by the improvement." Through SID 745, the City again seeks to unlawfully impose an
assessment on the Regional Park,this time for$903,424.65.
In conclusion, the City should accept the County's written protest and deny the creation of 745.
At a minimum,the City is required by § 7-12-4113,MCA to take no further action on this item for
a period of 6 months.
Dissolution of SID 740
Finally, the County notes that the City seeks to dissolve SID 740 based on the admission that the
"final costs of construction are significantly lower than the estimated costs when SID 740 was
created."In fact, the actual costs of the improvements to Ferguson Avenue and Oak Street were
15% less than anticipated. According to the City Attorney,this"significance difference in costs"
supposedly necessitates the dissolution of SID 740 to "accurately assess the property."The City
has no authority to dissolve a special improvement district. There is no authorization in Title 7,
Chapter 12, Parts 41 or 42, MCA, either express or implied, allowing the City to dissolve a
special improvement district by following the process for creation of a district.
Notwithstanding the lack of authority to dissolve an SID, the County will not protest the City's
dissolution of SID 740. The decision not to protest the dissolution of SID 740 does not constitute
a waiver of any County claim, defense, or cause of action regarding the illegal formation of SID
740, the illegal nature of the assessments made under SID 740, and the resulting illegalities
inherent in SID 740's successor, SID 745.
Sincerely,
GALLATIN COUNTY COMMISSION
R. Stephen White, Chair
Joe V. Skinner, Commissioner
Donald F. Seifert, CoInmissioner