The Use of Special Assessments to Collect Unpaid Water Bills

Wendy Kowalski is a member of the city council in Zimmerman, Minnesota, which is a town of 5,000 persons about forty miles north of Minneapolis. Her issue is the improper use of special assessments to force rental property owners to pay delinquent water bills which were properly the responsibility of tenants. Many cities and towns find it convenient to collect their debts this way even though the law forbids it. Apparently, the Minnesota League of Cities coaches it members on how to do it. Kowalski offers a legal argument aimed at a bill in the Minnesota legislature.

Why are some municipalities holding landlords of separate metered units responsible for their tenants water bills when landlords are not required to contract or pay them? MINNESOTA STATUTE 504B.215 subv. 2 establishes that, "This subdivision may not be waived by contract or otherwise. This subdivision does not require a landlord to contract and pay for utility service provided to each residential unit through a separate meter which accurately measures that units use only."

It appears that some municipalities are making resolutions to have the county auditors collect delinquent water bills as other taxes are collected. The unfortunate part is that this procedure is creating invalid special assessments out of delinquent water bills. Delinquent water bills are clearly not special assessments.

Delinquent water bills do not qualify under Minn. Stat. Chap. 429 as special assessments because they do not benefit the land, they are not apportioned, and they do not increase the market value of the property as they must to be valid. Invalid special assessments still have the power to encumber real property just the same, but unjustly so. Though not required by law to contract or pay, a landlord is forced by the threat of tax forfeiture to pay someone else's debt to keep his real property or take up a costly civil action to prove he is not liable for a debt he is not required by law to pay. The landlord has no statutory authority to discontinue water service for nonpayment. Landlord's real property is inequitably used by the municipality as collateral for security for another's debt without his permission.

Charges in Minn. Stat. Sec. 444.075 must be just and equitable. Charges must be applied equally on similarly situated property. A charge imposed on a person who is not the party receiving the commodity would be unjust and inequitable by virtue of the fact that they were not the customer in receipt of goods or services, and no contract exists without the landlord's pledge of real property as security for another's debt. Consumers with delinquent water bills are not similarly situated by a reasonable classification of types of premises as to qualify as equitable, as the amounts so certified have no nexus to the value of real property commensurate with the charges if the water is used for personal and household purposes.

Delinquent debt of a municipality would be equitably applied if imposed on all taxpayers equally. Debt would not be equally shared between all taxpayers by imposing tax burdens of debt on some and not others. The landlord who is not required to contract or pay may not justifiably be burdened more than all other taxpayers.

Municipalities have a responsibility to the taxpayers to collect payment for the commodities they sell from the actual consumer who consumes them. If municipalities choose not to discontinue service for nonpayment, then this is a matter for the taxpayers to address.

Delinquent water bills were alluded to by the League of Minnesota Cities, Ann Higgins, as having the power to back bonds and that is why they believe delinquent water bills can be collected as a tax. This was in a 2005 legislative session committee hearing.
It would be a disservice to municipal bond holders to back a debt with a debt. Under Minn. Stat. Sec. 444.075, bonds may be secured by taxes or special assessments or revenues or two or more. Delinquent water bills are a debt, not a revenue. Water and sewer obligations constitute "debts" for the purpose of the Fair Debt Collection Practices Act, but the tax obligations do not. See Pollice, 59 F. Supp. 2d at 485.

Delinquent water and sewer bills used for personal and household purposes are a private, not public, consumer debt and have no legal standing to attach to real estate by the power of taxation as a tax lien. "Likewise, if the homeowner desires to object to such charges certified 'for collection as other taxes are collected,'then his objections thereto are to comply with M.S. 1967, Chapter 278, "Real Estate Taxes; Objections; Defenses." See Attorney General Opinion dated September 8, 1969 Minn. Stat. Sec. 278.01(2004) specifically excludes objections to special assessments. "Special assessments are generally secured by a lien on the property benefited by the improvement by virtue of statute or municipal charter, and such laws are constitutional. But the municipality as such has no lien for special assessments levied upon property within its corporate limits.

Taxes are not a lien unless expressly made so by statute. Special assessments stand on the same footing. Municipal corporations have no power to create liens by ordinance or otherwise unless such power has been expressly conferred on them. The lien must be measured as to its commencement, duration, limitation, and priority by the law of its origin. The lien cannot arise by implication from the power to tax, but it must be expressly created by law. When a lien is expressly created it cannot be enlarged by construction.," Municipal Corporations, McQuillen Section 38.161.

Creation and existence. "The remedy by lien given by statute may be modified at any time before rights have become vested, or when such changes does not impair the contract, or substantially deprive a party of adequate means of enforcing his or her right." Buettner v. City of St. Cloud, 227 N.W. 2d 199, 202 (Minn. 1979) (citation omitted) Therefore, introduction of the municipality's assessment roll generally "constitutes prima facie proof that the assessment does not exceed special benefit." Carlson-Lang, 307 Minn. at 370, 240 N.W. 2d at 519. But an assessment is "void on its face" if it fails to even "approximate a market value analysis." Continental Sales & Equip v. Town of Stuntz, 257 N.W. 2d 546, 551 (Minn. 1977).

If a real property owner questions the legality or propriety of a utility connection or service charge imposed by a municipality, he has recourse to the Minnesota courts for a remedy. This has been made clear by the Minnesota Supreme Court in Nordgren v. City of Maplewood, 326 N.W. 640 (Minn. 1982), where the Court stated that property owners have "the right under the statute [section 444.075, subdivision 3] to a hearing on whether the [charge in question] is just and equitable."
"Liability for debt of another cannot be imposed in absence of special agreement or statutory authorization for a lien on property." See Cascade Motor Hotel v. City of Duluth, 348 N.W. 2d 84 (Minn. 1984). No statutory authority in 1984 for such a lien, nor is there now.

If municipalities require by ordinance that certain private sewer pipes discharge into the public sewer there remains no room for a contract for which a property owner might or might not enter. This type of requirement does not leave it optional with the landlord-taxpayer to avail himself of such privileges or not.

The same is true for both a landlord of a separate metered unit and his tenant. Once the property owner has paid all applicable properly certified taxes and special assessments there remains only the commodity left for a tenant to pay based on the amount he chooses to use.

A municipality is a creature of the state and as such has no inherent power of it's own to create a lien on a property without statutory authority. A commodity is not in the nature of a tax or special assessment. Delinquent water bills are simply a debt of the actual consumer. A landlord with a separate meter to each residential unit which accurately measures that units use only is not required to contract or pay for utility service of another. See Minn. Stat. 504B.215.subv. 2.

MINNESOTA BILL FOR AN ACT Senate File 1009 and House File 1367 (2005) will prevent the recovery or attempt to recover a debt from the wrong party. Thank you so much for your consideration.

Respectfully submitted,
Wendy Kowalski

Note the special water and sewer legislative committee voted to make no recommendation on this house and senate file, but a landlord minority report was filed and is available on line under sewer and water study group.

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