Haugland v. City of Bismarck, 20110077.

• Decision Date: 06 July 2012
• Docket Number: No. 20110077.,20110077.
• Parties: Erling “Curly” HAUGLAND, Plaintiff, Appellant and Cross–Appellee, v. CITY OF BISMARCK, Defendant, Appellee and Cross–Appellant.
• Court: North Dakota Supreme Court

818 N.W.2d 660

2012 ND 123

Erling “Curly” HAUGLAND, Plaintiff, Appellant and Cross–Appellee,

v.CITY OF BISMARCK, Defendant, Appellee and Cross–Appellant.

No. 20110077.

Supreme Court of North Dakota.

July 6, 2012.

Monte L. Rogneby, Bismarck, N.D., for plaintiff, appellant and cross-appellee.

Randall J. Bakke (argued) and Shawn A. Grinolds (appeared), Bismarck, N.D., for defendant, appellee and cross-appellant.

SANDSTROM, Justice.

[¶ 1] Erling “Curly” Haugland appeals and the City of Bismarck cross-appeals from a summary judgment declaring North Dakota's Urban Renewal Law, N.D.C.C. ch. 40–58 (“the Act”), is not unconstitutionaland Bismarck's implementation of an urban renewal plan and use of tax increment financing to fund urban renewal projects in its urban renewal area complies with the Act. Haugland claims the Act violates the gift clause provisions of N.D. Const. art. X, § 18, the requirements for imposing taxes in N.D. Const. art. X, §§ 3 and 5, and the equal protection provisions of the state and federal constitutions. He also claims Bismarck's implementation of a perpetual urban renewal plan violates the Act. We hold the Act is constitutional, but the summary judgment record in this case does not establish whether Bismarck's renewal plan complies with the provisions of the Act. We affirm in part, reverse in part, and remand for further proceedings.

I

[¶ 2] Haugland's lawsuit raises issues about Bismarck's implementation of an urban renewal plan under the Act and use of tax increment financing under the renewal plan to fund renewal projects within its downtown renewal area. SeeN.D.C.C. § 40–58–01.1(7)–(9) (defining “development or renewal area” as industrial or commercial property, slum or blighted area, or a combination of those properties or areas designated by a municipality as appropriate for a development or renewal project; defining “development or renewal plan” as a sufficiently complete plan for a development or renewal project which conforms to the municipality's general plan; and defining “development or renewal project” to include authorized undertakings in a renewal area for development of industrial or commercial properties or for elimination and prevention of the development or spread of slums and blight) and N.D.C.C. § 40–58–20 (outlining procedure for tax increment financing). To understand those issues, we briefly outline the statutory framework of the Act and Bismarck's implementation of its urban renewal plan under the Act, which generally authorizes a municipality to use private enterprise and public resources, including tax increment financing, to pay for the development, rehabilitation, or redevelopment of a renewal area under a renewal plan. SeeN.D.C.C. §§ 40–58–03 and 40–58–20.

[¶ 3] Section 40–58–04, N.D.C.C., authorizes a municipality to use private and public resources to facilitate the development of industrial or commercial properties, to eliminate and prevent the development or spread of slums and urban blight, and to rehabilitate slum and blighted areas by encouraging voluntary rehabilitation and by compelling repair of deteriorated or deteriorating structures and redevelopment of those areas. Section 40–58–01.1(14), N.D.C.C., defines “industrial or commercial property” to mean “unused or underutilized real property that is zoned or used as an industrial or commercial site.” Section 40–58–01.1(23), N.D.C.C., defines a “slum area” to mean:

an area in which there is a predominance of buildings or improvements, whether residential or nonresidential, which by reason of dilapidation, deterioration, age or obsolescence, inadequate provision for ventilation, light, air, sanitation, or open spaces, high density of population and overcrowding, or the existence of conditions which endanger life or property by fire and other causes, or any combination of these factors is conducive to ill health, transmission of disease, infant mortality, juvenile delinquency, or crime, and is detrimental to the public health, safety, morals, or welfare.

Section 40–58–01.1(2), N.D.C.C., defines a “blighted area” to mean:

an area other than a slum area which by reason of the presence of a substantial number of slums, deteriorated or deteriorating structures, predominance of defective or inadequate street layout, faulty lot layout in relation to size, adequacy, accessibility, or usefulness, unsanitary or unsafe conditions, deterioration of site or other improvements, diversity of ownership, tax or special assessment delinquency exceeding the fair value of the land, defective or unusual conditions of title, improper subdivision or obsolete platting, or the existence of conditions which endanger life or property by fire and other causes, or any combination of these factors, substantially impairs or arrests the sound growth of a municipality, retards the provision of housing accommodations or constitutes an economic or social liability and is a menace to the public health, safety, morals, or welfare in its present condition and use.

[¶ 4] A municipality has “all the powers necessary or convenient” to effectuate the purposes of the Act, including the authority to adopt, modify, and amend necessary renewal plans and to undertake and carry out renewal projects within its area of operation for voluntary or compulsory repair and rehabilitation of buildings and improvements in connection with renewal projects; to appropriate funds, make expenditures, and levy taxes necessary to carry out the purposes of the Act; to make and execute contracts necessary or convenient to exercise its powers under the Act; and to acquire, deal with, and dispose of property in a renewal area. SeeN.D.C.C. §§ 40–58–07 (describing municipality's powers), 40–58–09 (authorizing municipality to dispose of property in renewal area), and 40–58–18 (authorizing municipality to adopt ordinance for repair, closing, and demolition of dwellings unfit for human habitation).

[¶ 5] Before exercising any of its powers under the Act, a municipality must adopt a resolution finding one or more slum or blighted areas or industrial or commercial properties exist in the municipality and the development, rehabilitation, conservation, or redevelopment of the area or properties is necessary in the interest of the public economy, health, safety, morals, or welfare of the municipality's residents. N.D.C.C. § 40–58–05. The Act outlines the requirements for a municipality to approve a resolution for adoption of a renewal plan and includes a procedure for modifications of a renewal plan that substantially change a previously approved plan. N.D.C.C. § 40–58–06.

[¶ 6] The Act authorizes a municipality to use tax increment financing under N.D.C.C. § 40–58–20 to pay for development or renewal of the renewal area under the renewal plan and any modifications of the plan. When tax increment financing is used to pay for development or renewal of the renewal area, the county auditor ascribes two taxable values to each lot and parcel of land in the renewal area—an original taxable value when the municipality requests the auditor to compute and certify that value and a subsequent taxable value based upon the net amount the original taxable value has increased or decreased as a result of renewal of the area under the renewal plan and any modifications. SeeN.D.C.C. § 40–58–20(1)–(3). The net amount of the increase or decrease is the incremental value or lost value. N.D.C.C. § 40–58–20(3). An owner of property in a renewal area pays property taxes based on the redeveloped taxable value of the land. SeeN.D.C.C. § 40–58–20(2)–(5). The property tax attributable to the original taxable value of each lot and parcel is distributed to the normal property tax recipients, including the park district, the school district, and the county, and the property tax attributable to any incremental increased taxable value is diverted from those normal recipients to the municipality to pay for renewal projects “until the cost of development or renewal of the area has been reimbursed” to the municipality. SeeN.D.C.C. § 40–58–20(4) and (7). Section 40–58–20(10), N.D.C.C., also describes a procedure to be employed when the cost of renewal of any renewal area has been fully paid and all obligations to pay the cost have been retired, or the municipality has received sufficient funds to retire its obligations.

[¶ 7] Here Haugland's complaint alleges Bismarck adopted its renewal plan in January 1979 and substantially modified the plan in December 1979, July 1984, June 1988, November 1994, October 2006, and March 2010. This record reflects that at a Bismarck City Commission meeting in December 1978, Bismarck adopted a resolution to amend a previously approved renewal plan. The resolution stated the described area of about 14 downtown city blocks “consists of a combination of slum and blighted areas” appropriate for a renewal project financed with tax increment funds. After notice and a public hearing, Bismarck approved the modified renewal plan on January 23, 1979, in a resolution directing the City Auditor to take appropriate action to obtain tax increment financing resulting from the renewal of the area to reimburse Bismarck for renewal costs. The renewal plan described the boundaries of the renewal area, objectives of the plan, proposed renewal actions, land use plans, and project proposals. The plan proposed acquisition of substandard and blighted properties, disposal, retention, or dedication of various lands for redevelopment by private or corporate developers, installation of public improvements, and rehabilitation of buildings to local standards.

[¶ 8] In December 1979, after notice and a public hearing, Bismarck modified the previously approved renewal plan to add about 35 contiguous city blocks to the renewal area. Bismarck adopted a resolution stating the modified area “consists of a combination of slum and blighted areas” appropriate for a renewal area. The renewal plan again...