Opinion
No. A06-1738.
Filed July 31, 2007.
Appeal from the District Court, Washington County, File No. C2-05-7924.
David T. Magnuson, Magnuson Law Firm, (for appellant).
R. Gordon Nesvig, (pro se/co-counsel for respondent Nesvig).
Laurie J. Miller, Fredrikson Byron, P.A., (for respondent D. R. Horton, Inc. — Minnesota and co-counsel for respondent Nesvig).
James F. Shiely, Jr., Gearing Shiely, P.A., (for respondent City of St. Paul Park).
Considered and decided by Halbrooks, Presiding Judge; Lansing, Judge; and Hudson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2006).
UNPUBLISHED OPINION
Appellant Town of Grey Cloud Island challenges the district court's order of July 19, 2006, affirming the Administrative Law Judge's (ALJ's) order allowing respondent City of St. Paul Park to annex certain land. Appellant argues that (1) the substantial-evidence test for annexation is not satisfied when only about one-quarter of the land in question is buildable and is part of the national park system; and (2) the ALJ's increase in the amount of land to be annexed is contrary to law. Because substantial evidence existed to support annexation, we affirm in part. But because the statutory procedures for annexing additional land were not followed, we reverse in part and remand.
FACTS
Respondent Gordon Nesvig (hereinafter "Nesvig") owns approximately 308 acres located in appellant Grey Cloud Island Township (hereinafter "Township"). Specifically, the property at issue is located immediately to the south of the City of St. Paul Park (hereinafter "City") on the Mississippi River and is bordered on the north and east by the City of St. Paul Park, on the west by the Dakota County line, and on the south by the Township of Grey Cloud Island. Respondent D.R. Horton, Inc. (hereinafter "Horton"), a developer, has an option to purchase the subject property from respondent Nesvig. The City, together with Horton and Nesvig, has been engaged in planning for development of the subject property for several years. The proposed development of 106 acres of the subject property consists of 653 units of mixed housing: single-family homes, twinhomes, townhomes, and multi-family units, including condominiums for senior housing. The rest of the property (about 200 acres) would be left natural. The ALJ found that the natural-resources inventory performed as part of the required Alternative Urban Area-wide Review (AUAR) determined "that a majority of the ecological settings on the property were moderate to very poor in condition, or very highly degraded." For example, the forested bluffs along the river were found to be highly degraded; there were high levels of erosion; and invasive species were causing further erosion.
The subject property is located within the Mississippi National River and Recreation Area (MNRRA), and is part of the National Park System. The MNRRA is a federal protection program administered in Minnesota through the Minnesota Critical Area Act, Minn. Stat. §§ 116G.01 — .14 (2004), which has been implemented by Executive Order 79-19. The property is also located within the Mississippi River Corridor Critical Area, which was established by the 1979 executive order. The executive order also designated the area a "rural open space district." The executive order mandated that rural open-space districts "shall be used and developed to preserve their open, scenic and natural characteristics and ecological and economic functions." Exec. Order No. 79-19, 3 S.R. 1680, 1693 (Mar. 12, 1979). The executive order does not prohibit residential development in a rural-open-space district. "Local government units are directed to protect the Critical Area's resources, prevent and mitigate irreversible damage, and enhance its public value." MN Ctr. for Envtl. Advocacy v. City of St. Paul Park, 711 N.W.2d 526, 529 (Minn.App. 2006).
In March 2003, the City and the Township adopted resolutions providing for environmental review through an AUAR; a draft AUAR was completed in May 2003. In November 2003, a final AUAR was completed and submitted to the Environmental Quality Board (EQB) — the state entity responsible for ensuring the effectiveness of the environmental-review rules. Comments submitted during the review process from a total of 20 different agencies, local units of government, nonprofit organizations, and individual citizens were attached in the appendix of the AUAR. The Minnesota Department of Natural Resources (DNR) objected to the final AUAR in March 2004, but it withdrew all objections in May 2004 after further discussions and/or meetings with the RGU (responsible governmental unit, the City). The final draft of the AUAR was adopted by the RGU on May 17, 2004. The Minnesota Center for Environmental Advocacy (MCEA) filed a complaint challenging the final AUAR, arguing that the RGU's decision of the adequacy of the AUAR was arbitrary and capricious and not supported by substantial evidence or contrary to applicable law. The district court granted summary judgment to the City. On appeal, this court affirmed in a divided opinion. MN Ctr. for Envtl. Advocacy, 711 N.W.2d 526.
On December 21, 2004, respondents Nesvig and Horton filed a petition with the Minnesota Office of Municipal Boundary Adjustments under Minn. Stat. § 414.031 (2004), seeking annexation of the property by the City. Respondents had the support of the City, which adopted a resolution supporting the petition for annexation on October 18, 2004. See Minn. Stat. § 414.031, subd. 1(a)(3), (c) (2004) (governing initiation of a proceeding for the annexation of unincorporated property abutting a municipality).
This is the second annexation petition. Nesvig filed the first one in 1999, involving about 600 acres he owned in the Township. There were six days of hearings, district-court orders, a remand to the ALJ, a settlement agreement (which was allowed to expire in 2004), and ultimately Nesvig withdrew his request for further review of the ALJ's order in October 2004. See MN Ctr. for Envtl. Advocacy v. City of St. Paul Park, 711 N.W.2d 526 (Minn.App. 2006) (holding that the final AUAR in this case was not inadequate as a matter of law).
In a letter dated February 28, 2005, the deputy commissioner of the Department of Administration delegated a final decision in this matter to the Office of Administrative Hearings pursuant to Minn. Stat. § 414.12, subd. 2(a) (2004). Appellant Township objected to the annexation petition, and a contested agency hearing was held before an ALJ from July 25 through July 28, 2005. The ALJ's order states that at the hearing, Nesvig proposed that his homestead and certain so-called "island" lots be included in the area proposed for annexation. The Metropolitan Council staff suggested that the "island" lots, which would be created if the original annexation petition was granted, be included in the annexation. The "islands" were located between the property proposed for annexation and the City of St. Paul Park. After the hearing, in an order issued on November 2, 2005, the ALJ approved the annexation. In accordance with the suggestions from Nesvig and the Metropolitan Council, the ALJ added Nesvig's 30-acre home parcel and two additional parcels ("islands") to the annexed land described in the petition. The hearing was not recessed and notice was not republished for the addition of these parcels to the annexation order pursuant to Minn. Stat. § 414.031, subd. 4(a) (2004).
Appellant challenged the ALJ's order of November 2, 2005, in district court under Minn. Stat. § 414.07 (2004). The district court order of July 19, 2006, affirmed the ALJ on all issues. Appellant filed this appeal, and this court issued an order construing the appeal to be from the district court order of July 19, 2006.
DECISION I
Under Minnesota law, there are 14 factors that must be considered regarding an annexation petition. Minn. Stat. § 414.031, subd. 4(a) (2004). Annexation may be ordered, based on the factors listed in subdivision 4(a), upon finding: "(1) that subject area is now, or is about to become, urban or suburban in character; (2) that municipal government in the area proposed for annexation is required to protect the public health, safety, and welfare; or (3) that the annexation would be in the best interest of the subject area." Id., subd. 4(b). "If only part of a township is to be annexed, the director shall consider whether the remainder of the township can continue to carry on the functions of government without undue hardship." Id., subd. 4(c).
Appellant Township argues that the record does not contain substantial evidence to support the ALJ's order annexing the property, because (1) the property cannot become urban or suburban, as 75% of the property is unbuildable; and (2) the property cannot be developed as planned due to its environmental and land-use designations. An order of annexation enjoys a presumption of correctness. McNamara v. Office of Strategic Long Range Planning, 628 N.W.2d 620, 625 (Minn.App. 2001), review denied (Minn. Aug. 22, 2001). "Therefore, on review, we will not interfere with the decision unless the decision is either based on an erroneous theory of law or is not supported by substantial evidence in the record." Id. (citing Town of Forest Lake v. Minnesota Mun. Bd., 497 N.W.2d 289, 291 (Minn.App. 1993), review denied (Minn. Apr. 29, 1993)). Substantial evidence is defined as: "(1) more than a scintilla of evidence; (2) such that a reasonable mind might accept it as adequate to support a conclusion; or (3) more than `some evidence' and more than `any evidence.'" McNamara, 628 N.W.2d at 627.
The reviewing court may not substitute its decision for that of the agency. Township of Thomastown v. City of Staples, 323 N.W.2d 742, 744 (Minn. 1982). When a district court acts as an appellate tribunal with respect to an agency decision, this court will independently review the agency's record. In re Hutchinson, 440 N.W.2d 171, 175 (Minn.App. 1989), review denied (Minn. Aug. 9, 1989).
Here, the ALJ considered all 14 factors in its order, making extensive findings and supporting these findings with citations to the record. And although Minn. Stat. § 414.031, subd. 4(b), requires satisfaction of only one of the three annexation criteria, the ALJ found that all three were met: "[T]he subject area described in the Petition for Annexation is about to become urban or suburban in character. . . .[M]unicipal government in the area proposed for annexation in the petition is required to protect the public health, safety and welfare. . . .[A]nnexation to the city of the area described in the petition is in the best interest of the subject area."
Appellant argues that there is not substantial evidence to support the ALJ's finding on the first factor of Minn. Stat. § 414.031, subd. 4(b), regarding urbanization or suburbanization of the area. Appellant did not brief the other two criteria for annexation. Appellant has consequently waived appellate consideration of those issues. See Melina v. Chaplin, 327 N.W.2d 19, 20 (Minn. 1982) (holding that issues not briefed on appeal are waived). Because the statute only requires the ALJ to find that at least one of the criteria is met, even if appellant were to succeed on its "urbanization" argument, the annexation is still supported by the other two criteria, which the ALJ found were also met and which appellant does not challenge. See Minn. Stat. § 414.031, subd. 4(b)(2, 3). Nevertheless, we have considered appellant's urbanization-factor arguments and conclude that they are unpersuasive.
"Urban or Suburban" Factor
Appellant argues that there is not substantial evidence in the record to support the ALJ's finding that the subject area is about to become urban or suburban, contending that only 74 of the 300 acres are buildable. Respondents argue that 106 acres are buildable and that, in any event, there is no requirement that unbuildable land remain under the control of the Township. The district court agreed with respondents, explaining that "[o]ne of the factors to be considered is the quantity of land and the natural terrain in the area." See Minn. Stat. § 414.031, subd. 4(a)(2). Whether the land is buildable may be a consideration in this factor, but it does not control the outcome of the case. All 14 factors must be balanced to determine whether the area is about to become urban or suburban. Id., subd. 4(a). The ALJ clearly considered such information and concluded that about one third of the property is buildable and that "[t]he present and projected population growth of the subject area and adjacent units of government suggests a trend towards urbanization." There is ample support in the record for this finding: (1) Nesvig's testimony stating that approximately 116 acres are buildable; (2) testimony by Schlichting of the Metropolitan Council stating that 106 acres are buildable; (3) Schlichting's testimony that the property is part of a developing community; and (4) testimony by Uttley of the Metropolitan Council anticipating urbanization before 2010. Furthermore, the Township's board supervisors admitted that the property was ripe for development and that the urbanization trend was moving south toward the subject property.
The ALJ also found, and the record supports, that this increased population and the environmental inventory, which indicated that the condition of the property was moderate to very poor, favor annexation. Specifically, the ALJ determined that "[t]he ecological and environmental restoration proposed in the AUAR's mitigation plan would be more likely to be achieved through the proposed urban development of the subject property than through low density development under the Township's existing Comprehensive Plan." The City, unlike the Township, is capable of providing the necessary services to the growing population, such as sewer systems, storm-water management and environmental maintenance of the area. There are copious findings in the ALJ's 47-page order supporting his conclusion that the property meets all three subdivision 4(b) criteria for annexation. And each finding is supported by citation to the transcript or exhibits in the record. We conclude that there is substantial evidence to support annexation.
II
Appellant next argues that the property cannot be developed as planned due to its environmental and land-use designations. Appellant's argument focuses on what appellant "believes are inconsistencies between the proposed development and Metropolitan Council policies and existing federal and state land use controls." The parties agree that because the subject property is in the Critical Area, after a recommendation by the Metropolitan Council, the DNR must approve any amendment to the City's comprehensive plan, which would include examining the proposed development for compliance with the Critical Area Act. Appellant argues that the plan will never be approved because the density of the proposed development violates the requirements of the Critical Area Act and the rural open-space district. But the ALJ correctly observed: "[T]he subject property will remain in the Critical Area regardless of whether or not annexation occurs." That is, whether or not the property is annexed, the Critical Area guidelines that protect the area's natural resources will apply. In addition, the district court previously determined in the 2001 annexation petition that the Critical Area designation "cannot be a compelling factor in the denial of the annexation from Grey Cloud Island Township."
Furthermore, DNR approval of a Critical Area Plan amendment, by definition, can only be obtained after the property is formally annexed by the City and an amendment is actually proposed. Indeed, before annexation, the City has no legal interest in, or jurisdiction over, the subject property. Finally, we agree with the ALJ's conclusion that "[d]isapproval of a development cannot be presumed in light of the withdrawal by the DNR of its objections to the AUAR after modifications were made." Accordingly, the ALJ did not err in declining to speculate on a DNR decision regarding an amendment to the City's comprehensive plan that has yet to be drafted or proposed.
III
Appellant argues that the ALJ violated Minnesota law and denied the Township residents of the "island" lots their due-process rights by annexing the Nesvig homestead and "island" lots without first recessing the hearing and publishing notice of the proceedings. We review de novo whether the annexation violated a statute or constitutional rights because it is a question of law. See Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984) (reviewing questions of law de novo). Appellant has the burden of proving beyond a reasonable doubt that the annexation violated constitutional rights. McNamara, 628 N.W.2d at 629.
Respondents argue that the Township is precluded from raising this issue on appeal because the Township did not raise it below. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (declining to consider issues that were not presented or decided by the district court). But the administrative-hearing transcript clearly demonstrates that appellant objected to adding Nesvig's 30-acre homestead and the "island" lots to the proposed area for annexation. During the administrative hearing, the Township's attorney stated the following regarding the homestead: "Your Honor, I would object to adding [the homestead] to the petition, because obviously, that is not to become urban or suburban if it's a 30-acre parcel with one house and plans for one more." The Township's attorney also objected to inclusion of the "islands," noting that there would be issues with proper notice:
The town would, of course, object to that, and one reason, of course, is that this would take any number of residents of the town and, slam bang, they'd go into the City of St. Paul Park without prior notice or almost no notice of what's going to happen to them. . . .
The notice issue was clearly raised below and accordingly, we will address it.
Appellant Township argues that the ALJ failed to follow the statutes governing municipal-boundary adjustments when it annexed the Nesvig homestead and the "island" lots. Minnesota law permits the ALJ to modify the area to be annexed under certain conditions:
The director may alter the boundaries of the area to be annexed by increasing or decreasing the area so as to include only that property which is now or is about to become urban or suburban in character or to add property of such character abutting the area proposed for annexation in order to preserve or improve the symmetry of the area, or to exclude property that may better be served by another unit of government.
Minn. Stat. § 414.031, subd. 4(f) (2004) (emphasis added). In addition, Minn. Stat. § 414.09, subd. 1(e) (2004), governs the uniform procedures pertaining to municipal-boundary adjustments: "When the director exercises authority to change the boundaries of the affected area so as to increase the quantity of the land, the hearing shall be recessed and reconvened upon two weeks' published notice in a legal newspaper of general circulation in the affected area." Id.
In this case, the hearing was not recessed and notice was not published. Yet the ALJ's order unquestionably altered the area to be annexed, stating that "the area to be annexed should be increased from that set out in the original petition so as to include the area described in Findings of Fact Nos. 14 15 so as to improve the symmetry of the area." Findings of Fact numbers 14 and 15 refer to Nesvig's 30-acre homestead and the two "island" lots.
Respondents argue that during the proceedings no party "suggested that the annexation hearing should be adjourned until notice could be published or provided to all residents of the Township `island' parcels. . . . Nor did the Township suggest that to use the authority granted in Minn. Stat. § 414.031, subd. 4(f), would be unconstitutional." And with respect to Nesvig's homestead, it was Nesvig himself who proposed that his homestead be added to the area proposed for annexation.
But Nesvig has no authority to speak for the residents of the island lots. In any event, we must agree with appellant, who correctly argues that the ALJ was bound by and required to apply Minnesota law. Atwood v. Holmes, 229 Minn. 37, 42, 38 N.W.2d 62, 66 (1949) ("An issue of illegality not presented to the trial court, though it involves a mere error of law, may be considered for the first time on appeal if it involves a controlling legal principle or statute which, with respect to undisputed facts, the courts are judicially bound to know. Failure to present to the trial court that of which it is charged with judicial knowledge does not preclude its consideration for the first time upon appeal."). Here, the ALJ failed to recess the hearing and publish notice and thus did not adhere to the procedures prescribed by Minn. Stat. § 414.09, subd. 1(e).
Moreover, Nesvig's authority to waive the statute's notice requirements — even with respect to his own homestead — is far from clear.
Appellant also argues that the ALJ failed to apply and analyze the 14 statutory factors in section 414.031, subd. 4(a), in relation to the additional annexation of the homestead and "island" lots. We decline to address this issue given our holding that the ALJ erred by not providing notice and an opportunity for hearing prior to annexing the homestead and "island" lots.
Because the statute required the ALJ to recess the hearing and to publish notice for the annexation of the homestead and "island" lots, we reverse that portion of the annexation order and remand for proceedings consistent with this opinion. Because the record contains substantial evidence to support the ALJ's order annexing the original subject property, we affirm the remainder of the annexation order.