New 555 Commercial LLC v. City of Birmingham ( 2024 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
NEW 555 COMMERCIAL, LCC, NEW 555 UNPUBLISHED
RESIDENTIAL, LCC, MANORWOOD August 22, 2024
PROPERTIES, LCC, and ASSOCIATES OF 555,
LP,
Petitioners-Appellants,
v No. 364563
Tax Tribunal
CITY OF BIRMINGHAM, LC No. 22-000772-TT
Respondent-Appellee.
Before: REDFORD, P.J., and GADOLA, C.J., and RIORDAN, J.
PER CURIAM.
This litigation involves a special assessment levied by respondent, City of Birmingham
(the city), on properties owned by petitioners, New 555 Commercial, LLC, New 555 Residential,
LLC, Manorwood Properties, LLC, and Associates of 555, LP. Petitioners appeal an order issued
by the Michigan Tax Tribunal (the Tribunal) denying their motion for summary disposition
brought under MCR 2.116(C)(10). After this Court denied petitioners’ application for leave to
appeal,1 our Supreme Court, in lieu of granting leave, remanded the case to this Court for
consideration as on leave granted.2 The Tribunal, applying a common-law presumption that the
special assessment was valid, ruled that a genuine issue of material fact existed regarding whether
petitioners’ real estate was benefited by the city’s construction project and the extent of any benefit.
The Tribunal rejected arguments that the city’s legislative body—the city commission—was
required to conduct a specific benefits analysis or make findings supporting its determination that
the properties were benefited before confirming the special assessment. On appeal, petitioners
argue that the Tribunal erred in its ruling because, as a matter of law, the city commission failed
1
New 555 Commercial, LLC v City of Birmingham, unpublished order of the Court of Appeals,
entered July 7, 2023 (Docket No. 364563).
2
New 555 Commercial, LLC v City of Birmingham, 513 Mich 898 (2023).
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to comply with the city’s own ordinances by not making a pre-assessment determination that the
properties were benefited by an increase in market value reasonably proportionate to the amount
of the special assessment. Petitioners further contend that a benefits analysis does not entail a
mere apportionment of the project’s costs and that the Tribunal failed to even consider the relevant
ordinances, let alone analyze them in any serious manner. For the reasons set forth in this opinion,
we affirm.
I. BACKGROUND
Petitioners are related entities, and this matter concerns commercial properties owned by
petitioners that are comprised of two buildings and a vacant lot on three contiguous parcels located
in the city (hereafter the “555 Complex”). The city commission confirmed a special assessment
roll to fund a sidewalk and streetscape reconstruction project bordering the 555 Complex.3
Petitioners received a notice from the city informing them that the city commission had assessed
a total amount of $453,832.83 against the 555 Complex for the sidewalk and streetscape
improvements. We note that the project entailed eliminating 11 out of the 30 parking spaces
adjoining the 555 Complex.
Petitioners filed a petition in the Tribunal, alleging that the special assessment was invalid
because the sidewalk and streetscape project did not confer any financial benefit on the 555
Complex. Petitioners moved for summary disposition under MCR 2.116(C)(10), contending that,
in violation of its ordinances, the city commission made no determination before confirming the
special assessment roll that the project would confer a special benefit on the 555 Complex by
increasing its market value in reasonable proportion to the amount of the special assessment. In
response, the city maintained that it had complied with its ordinances and state law in confirming
the special assessment roll and that petitioners failed to submit any evidence rebutting the
presumption of validity; therefore, under MCR 2.116(I)(2), the city rather than petitioners was
entitled to summary disposition.
The Tribunal denied petitioners’ motion for summary disposition because they failed to
meet their burden of proof by providing evidence rebutting the common-law presumption that the
special assessment was valid. The Tribunal concluded that the city commission had no obligation
to conduct a specific benefits analysis or make findings that the 555 Complex was benefited before
levying the special assessment. The Tribunal similarly denied the city’s request for summary
disposition, concluding that there remained genuine issues of material fact regarding whether the
sidewalk and streetscape project conferred a special benefit on the 555 Complex and, if so, the
extent of the benefit.4 We discuss additional facts in the analysis section of this opinion, as
necessary to resolve the appeal.
3
The improvements at issue were part of the third and final phase of a massive construction project
that involved upgrades to or the replacement of sewers, utilities, lead service lines, water lines, and
roadways in the area of South Old Woodward Road.
4
The Tribunal noted that discovery remained open. We note that the city has not filed a cross-
appeal, nor does it argue that the Tribunal erred by denying its request for summary disposition.
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II. ANALYSIS
A. STANDARDS OF REVIEW
The Tribunal has exclusive and original jurisdiction over “[a] proceeding for direct review
of a final decision, finding, ruling, determination, or order of an agency relating to assessment,
valuation, rates, special assessments, allocation, or equalization, under the property tax laws of
this state.” (Emphasis added.) In Briggs Tax Serv, LLC v Detroit Pub Sch, 485 Mich 69, 75; 780
NW2d 753 (2010), our Supreme Court discussed the relevant standards of review:
The standard of review of Tax Tribunal cases is multifaceted. If fraud is not
claimed, this Court reviews the Tax Tribunal’s decision for misapplication of the
law or adoption of a wrong principle. We deem the Tax Tribunal’s factual findings
conclusive if they are supported by “competent, material, and substantial evidence
on the whole record.” But when statutory interpretation is involved, this Court
reviews the Tax Tribunal’s decision de novo. We also review de novo the grant or
denial of a motion for summary disposition. [Citations omitted.]
In Bonner v City of Brighton, 495 Mich 209, 221-222; 848 NW2d 380 (2014), the Supreme
Court discussed the review of the ordinance language:
Further, because ordinances are treated as statutes for purposes of
interpretation and review, we also review de novo the interpretation and application
of a municipal ordinance. Since the rules governing statutory interpretation apply
with equal force to a municipal ordinance, the goal of construction and
interpretation of an ordinance is to discern and give effect to the intent of the
legislative body. The most reliable evidence of that intent is the language of the
ordinance itself and, therefore, the words used in an ordinance must be given their
plain and ordinary meanings. [Citations omitted.]
B. SPECIAL ASSESSMENTS – LEGAL PRINCIPLES
While resembling a tax, a special assessment is not a tax; instead, it is “a specific levy
designed to recover the costs of improvements that confer local and peculiar benefits upon property
within a defined area.” Kane v Williamstown Twp, 301 Mich App 582, 586; 836 NW2d 868 (2013)
(quotation marks and citation omitted); see also City of Highland Park v State Land Bank Auth,
340 Mich App 593, 614; 986 NW2d 638 (2022) (“In contrast to a tax, a special assessment is
imposed to defray the costs of specific local improvements, rather than to raise revenue for general
governmental purposes.”) (citation omitted). Special assessments are “sustained upon the theory
that the value of the property in the special assessment district is enhanced by the improvement for
which the assessment is made.” Kadzban v City of Grandville, 442 Mich 495, 500; 502 NW2d
299 (1993) (quotation marks and citations omitted).
“[M]unicipalities are not free to levy special assessments without regard for the amount of
benefit that inures to the assessed property. For a special assessment to be valid, there must be
some proportionality between the amount of the special assessment and the benefits derived
therefrom.” Id. at 501-502 (quotation marks and citation omitted). “In the absence of such a
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relationship, the special assessment would be akin to the taking of property without due process
of law.” Id. at 502 (quotation marks and citation omitted). In Ahearn v Bloomfield Charter Twp,
235 Mich App 486, 493; 597 NW2d 858 (1999), this Court restated, in part, our Supreme Court’s
holding in Kadzban, articulating a two-prong test for evaluating the validity of a special
assessment:
Two requirements must be met in order for a special assessment to be
deemed valid: (1) the improvement funded by the special assessment must confer
a special benefit upon the assessed properties beyond that provided to the
community as a whole, and (2) the amount of [the] special assessment must be
reasonably proportionate to the benefits derived from the improvement. [Citations
omitted.]
With respect to the first requirement, “[i]n order for an improvement to be deemed to have
conferred a ‘special benefit,’ it must cause an increase in the market value of the land specially
assessed.” Id. In regard to the second requirement, “[a] determination of increased market value
is necessary to determine whether the benefit is proportionate to the cost incurred.” Id. It is a
“well-settled principle that municipal decisions regarding special assessments are presumed to be
valid,” and “the decisions of municipal officers regarding special assessments generally should be
upheld.” Kadzban, 442 Mich at 502 (quotation marks and citation omitted). When courts review
the validity of special assessments, they are not tasked with determining whether there is a rigid
dollar-for-dollar balance between the value of the benefit and the amount of the special assessment.
Id. “Rather, a special assessment will be declared invalid only when the party challenging the
assessment demonstrates that there is a substantial or unreasonable disproportionality between the
amount assessed and the value which accrues to the land as a result of the improvements.” Id.(quotation marks and citation omitted).
The questions whether and how much the value of property has increased because of an
improvement are factual, which must be resolved on the basis of the evidence presented by the
parties. Id. Accordingly, the pertinent findings are made by the trier of fact, i.e., the Tribunal. Id.Because of the presumption of validity, “to effectively challenge special assessments, plaintiffs, at
a minimum, must present credible evidence to rebut the presumption that the assessments are
valid.” Id. at 505. Absent such evidence, the Tribunal has no basis to strike down a special
assessment. Id. If a plaintiff presents evidence that effectively rebuts the presumption of validity,
the burden going forward with evidence shifts to the municipality. Id. at 505 n 5. “At that point,
the city must . . . present evidence proving that the assessments are reasonably proportionate in
order to sustain the assessments.” Id.5
5
The Kadzban Court noted:
Street and utility improvements are common bases for special assessments.
In numerous instances, abutting property has been specially assessed the costs of
paving a road or installing a sewer system. However, not every street improvement
primarily benefits the property that abuts the street. Indeed, in some instances, an
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C. DISCUSSION AND RESOLUTION
Without taking into consideration the city’s ordinances, we would easily conclude that the
Tribunal did not err by denying petitioners’ motion for summary disposition because they did not
present any evidence concerning the impact—or lack thereof—that the sidewalk and streetscape
project had on the market value of the 555 Complex as necessary to rebut the presumption of
validity. But of course, we must examine the pertinent city ordinances because petitioners’ stance
is premised entirely on the city commission’s alleged failure to comply with the ordinances. We
conclude that petitioners’ ordinance-based arguments ultimately do not change the equation
because the city commission complied with the city’s ordinances and was thus entitled to the
presumption of validity. Accordingly, the Tribunal did not err by denying petitioners’ motion for
summary disposition.
The presumption of validity or proportionality is a creature of the common law and dates
back to 1894 in Michigan. See In re Eight & One-Half Mile Relief Drain, 369 Mich 641, 649; 120
NW2d 789 (1963) (“The presumption, declared and redeclared many times since, appeared first in
Powers v Grand Rapids, 98 Mich 393, 397; 57 NW 250 [1894].”). In Powers, 98 Mich at 397,
our Supreme Court observed:
The presumption is that, in making the district and the assessment, the
officers of the municipality acted in good faith, and have correctly and faithfully
exercised the discretion reposed in them. In such case, where mistake or abuse of
discretion is not manifest or demonstrable, the determination of the municipal
officers in whom such discretion is vested is conclusive, and it is not reviewable by
the courts. [Treatise citation omitted.]
A legislative body, which would include the city commission in this case, “may alter or
abrogate the common law through its legislative authority.” See Murphy v Inman, 509 Mich 132,
153; 983 NW2d 354 (2022).6 Therefore, notwithstanding the common-law presumption of
validity, the city commission was first required to comply with the city’s relevant ordinances
regarding special assessments. See also Adams v Bay City, 78 Mich 211, 215-216; 44 NW 138(1889). Only after such compliance could the city take advantage of the protections offered by
the common-law presumption of validity. In other words, if the city commission acted in
“improved” street, e.g., one that is widened from a two-lane residential street to a
four-lane thoroughfare, may be a detriment to abutting property. In such instances,
we have invalidated special assessments because the assessed property received no
special benefit in addition to the benefit that was conferred upon the community as
a whole. [Id. at 500-501 (citations omitted).]
6
We note that MCL 117.4d(1)(a) states that “[e]ach city may in its charter provide . . . [f]or
assessing and reassessing the costs, or a portion of the costs, of a public improvement to a special
district.” Chapter X, § 1, of the city’s charter, authorizes the imposition of special assessments by
the city commission, and § 2 authorizes the enactment of ordinances to govern special-assessment
procedures.
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conformance with the city’s ordinances in confirming the special assessment roll, the assessment
would be presumed valid and proportional, and petitioners would have been required to submit
evidence to rebut the presumption. But if the city commission did not comply with the ordinances
in the first instance as required to confirm a special assessment roll, the assessment cannot stand
and must be vacated, without regard to the presumption of validity.
We now turn to the ordinances at issue in this case. Birmingham City Code (BCC), § 94-
1, provides:
This chapter is adopted to comply with Chapter X of the Charter for the city
to provide by ordinance for a complete special assessment procedure concerning
the initiation of projects, plans and specifications, estimates of cost, notice and
conduct of hearings, making and confirming of assessment rolls, correction of
errors, contested assessments, financing of improvements made by special
assessment, collection of special assessments and interest thereon, deferral of
payments due to hardship, and all other matters concerning special assessments.
“The city commission shall have the power and authority to determine that the whole or
any part of the cost of any public improvement shall be defrayed by special assessments upon the
property especially benefitted, consistent with the procedures set forth in this chapter.” BCC, § 94-
3.
BCC, § 94-8(b)(3) provides that “[i]f the commission determines to continue to proceed
with [an] improvement, the commission shall adopt a resolution . . . [p]rescribing what portion of
the cost of such improvement shall be paid by special assessment upon the property especially
benefited, determining what benefits will be received by affected properties and what portion, if
any, of the cost shall be paid by the city[.]” (Emphasis added.) And BCC, § 94-9, which addresses
special assessment rolls, provides, in pertinent part:
(b) The manager shall make a special assessment roll of all lots and parcels
of land within the designated district to be benefited by the proposed improvement
and assess to each lot or parcel of land the amount benefited thereby. The amount
spread in each case shall be based upon the cost estimate of the city engineer.
***
(f) If, after hearing all objections and making a record of such changes as
the commission deems justified, the commission determines that it is satisfied with
said special assessment roll, and that assessments are in proportion to benefits
received, it shall thereupon pass a resolution making such determination and
confirming the roll. [Emphasis added.]
In our view, the key language is found in BCC, §§ 94-8(b)(3) and 94-9(f), which required,
in the context of this case, that the city commission adopt a resolution determining what benefits
the 555 Complex would receive as a result of the sidewalk and streetscape improvement and that
the city commission make a determination that the special assessment would be in proportion to
the benefits received. These provisions constituted requirements that had to be satisfied before the
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special assessment roll could be confirmed. Although it is true that the common law on special
assessments provides that a “benefit” to property is solely measured in terms of an increase in
market value, see, e.g., Kadzban, 442 Mich at 501; Dixon Rd Group v City of Novi, 426 Mich 390,
400; 395 NW2d 211 (1986), the city’s ordinances do not define the term “benefit.” But an
“improvement” under the ordinances is defined as “a public improvement of such a nature as to
specially benefit any real property, any part of the cost of which is to be assessed against one or
more lots or parcels of land, in proportion to the benefit derived therefrom.” BCC, § 94-2
(emphasis added). Accordingly, a determination by the city that there will be an “improvement”
to property necessarily correlates to a determination that the property will be “specially benefited”
for purposes of the BCC.
In interrogatories sent to the city by petitioners, the following question was asked and
answered:
3. Please explain the method that was used to determine the amount of the
Special Assessment that has been allocated to the Subject Property.
Answer: The City calculated the total amounts for the entire Streetscape
(Streetscape costs include but are not limited to: sidewalks, planters, utilities,
underground utilities, construction, sprinkler, concrete pavement, concrete
sidewalk, removal, installation, concrete curb, soil, boulders, landscaping and all
other elements that can be categorized in the sidewalk area of the Project which
was then (“Streetscape Amount”)). The total Streetscape Amount was then divided
by the total the amount of the linear foot for the Project, and multiplied this amount
by the linear foot the Subject Property has (This cost less 25% since the City pays
25%). Answering further, the City detailed and summarized this information at
various public hearings, including March 14, 2022, and April 11, 2022. By way of
further response, the City is providing information presented to the City
Commission (on March 14, 2022, and April 11, 2022), and spreadsheets outlining
its position, pursuant to MCR 2.309(E). The City will make available to Plaintiffs
for inspection additional, non-relevant, documents concerning the entire Project at
a mutually convenient date and time.
The city’s answer appeared to reveal that a prospective increase in market value of the 555
Complex played no role in determining the amount of the special assessment. In the city’s
response to petitioners’ interrogatory asking whether the city contended that the project would
increase the value of the 555 Complex, the city replied, in part, that it had “not yet retained an
appraiser or valuation expert to determine any increase in value.” But as indicated earlier, under
the city’s ordinances, any “improvement” to property is considered to be a “benefit,” and the
ordinances do not provide or suggest that a “benefit” is measured in terms of an increase in market
value.
The city submitted an affidavit executed by Scott Zielinski, the assistant city engineer, who
averred that he was involved in preparing two reports for the city commission that informed the
members of “the proposed special benefits, the nature of it, the improvement, the costs, the benefit
derived therefrom, and the reasonable proportionality of assessing the special assessment against
the affected property owners.” He listed all of the attributes of the sidewalk and streetscape project,
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and Zielinski noted that he had recommended approval of the special assessment because “the
improvements” associated with the project increased the value of the adjacent properties. Zielinski
further averred that it was his “opinion that the special assessment was proportionate to the increase
in value of all of the properties[.]” He indicated that the city commission “took all of the
information, my report, my spreadsheet, [the city’s engineer’s report], and other pertinent
information, and formulated its decision based upon these reports and our recommendation.”
(Emphasis added.) There was no documentary evidence contradicting Zielinski’s affidavit;
therefore, we must accept that the city commission’s determination of the special assessment was
formulated as claimed by Zielinski.
We have reviewed the minutes from the city commission meetings held on March 14 and
April 11, 2022, that concerned the sidewalk and streetscape improvement project. During the
March 14, 2022 meeting, the city commission adopted a resolution “declaring the necessity of the
improvement” and special assessment district, “with special assessments levied in accordance with
benefits against the properties within such assessment district[.]” It is quite evident that the city
commission viewed the “improvements” or “benefits” to be the planned physical attributes of the
streetscape to be constructed in phase three of the project. With respect to the April 11, 2022
meeting, at which the city commission confirmed the special assessment roll, the minutes revealed
that Zielinski was present and provided information to the commission and that the commissioners
confirmed the roll after making remarks finding that the project would greatly improve the
aesthetics and safety of the area.
We conclude that on consideration of Zielinski’s affidavit in conjunction with the minutes
of the pertinent meetings, the city commission complied with the ordinances by determining that
the 555 Complex would receive benefits from the project in the form of aesthetic and safety
improvements created by the physical attributes of the streetscape and that the special assessment
would be in proportion to or in accordance with the benefits to be received.
III. CONCLUSION
We hold that city commission complied with the city’s ordinances; therefore, the city was
entitled to the presumption of validity and the Tribunal did not err by denying petitioners’ motion
for summary disposition given the absence of documentary evidence to overcome the presumption.
The case must proceed in the Tribunal for a determination whether the special assessment was
reasonably and substantially proportionate to any increase in the market value of the 555 Complex
due to the sidewalk and streetscape improvements.
We affirm. Having fully prevailed on appeal, the city may tax costs under MCR 7.219.
/s/ James Robert Redford
/s/ Michael F. Gadola
/s/ Michael J. Riordan
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