In re the Matter of Ossawinnamakee Road Homeowners v. Commissioner of City of Breezy Point, ...

• Court: Court of Appeals of Minnesota
• Decided: March 25, 2024
• Docket: a231186
• Status: Unpublished

Opinion

This opinion is nonprecedential except as provided by Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA IN COURT OF APPEALS A23-1186

In re the Matter of Ossawinnamakee Road Homeowners, Appellant,

vs.

Commissioner of City of Breezy Point, Respondent,

Office of Administrative Hearings, Respondent.

Filed March 25, 2024 Affirmed Schmidt, Judge

Crow Wing County District Court File No. 18-CV-22-2427

Jon P. Parrington, Jon P. Parrington, P.A., Minneapolis, Minnesota (for appellant)

Joseph J. Langel, Mary M. Haasl, Ratwik, Roszak & Maloney, P.A., St. Paul, Minnesota (for respondent Commissioner of City of Breezy Point)

Keith Ellison, Attorney General, Nathan J. Hartshorn, Assistant Attorney General, St. Paul, Minnesota (for respondent Office of Administrative Hearings)

Considered and decided by Wheelock, Presiding Judge; Slieter, Judge; and

Schmidt, Judge. NONPRECEDENTIAL OPINION

SCHMIDT, Judge

Appellant Ossawinnamakee Road Homeowners challenges the district court’s

affirmance of a decision by respondent Office of Administrative Hearings (OAH) denying

appellant’s petition for detachment. Because the OAH engaged in reasoned

decision-making and that decision is supported by substantial evidence, we affirm.

FACTS

This dispute concerns approximately 83.97 acres of land (Subject Parcels 1) within

the City of Breezy Point (the City) along Lake Ossawinnamakee. The facts, as established

during the contested hearing, are largely undisputed. The Subject Parcels are owned by

135 property owners and consist of 51 single family homes, two townhome buildings with

two attached units, two townhome buildings with four attached units, and 62 garage or

storage buildings. The Subject Parcels are not contiguous to other land within the City,

and some are located in both the City and the Township of Ideal (the Township). Some

dwellings are occupied year-round, while others are occupied seasonally.

The Subject Parcels are zoned R-2, “which is the category for medium density

residential,” and does not permit “agricultural and manufacturing uses[.]” The City’s

comprehensive plan contains existing land use maps that list the Subject Parcels as a mix

of low- and medium-density residential property. The future land-use map also lists the

Subject Parcels as low density residential. A designation of low-density residential refers

1 The Subject Parcels are legally defined as Government Lots 1, 2, and 3 in Section 4, and Government Lots 1 and 2 in Section 3, all in Township 136 N Range 28 W.

2 to uses that include “single-family homes with some twin homes and other low-density

attached housing.” A designation of medium-density residential refers to uses that include

“a mix of housing types including single-family detached dwellings, twin homes,

townhomes, row houses, apartments, and senior housing.”

The City maintains a police department, which regularly patrols and responds to

medical calls for the Subject Parcels. The City contracts with Pequot Lakes Fire

Department for firefighting services. The City’s public-works department provides

services such as road maintenance and snow plowing. A Joint Powers Agreement between

the City and the Township has the Township providing road maintenance and repair

services to the roads serving the Subject Parcels, while the City provides those services to

certain roads in the Township. The City is, however, permitted to service the roads in the

Subject Parcels and has done so in response to resident calls and to address “major issues.”

The City also provides election services, maintains building-permit records, and issues

licenses for various activities. The Subject Parcels do not receive water and sewer service

from the City, and the City does not plan to extend sewer services to the Subject Parcels.

In November 2021, appellant filed a petition for detachment from the City. The

OAH held a hearing on appellant’s petition in January 2022. Regarding the requirements

for detachment under Minnesota Statutes section 414.06 (2022), the parties stipulated

that: (1) the required number of property owners signed the petition; (2) the Subject

Parcels are located within the boundaries of the City and abut a boundary of the Township;

(3) detachment of the Subject Parcels would not unreasonably affect the symmetry of the

City’s boundaries; (4) detachment of the Subject Parcels would still require property

3 owners, who are obligated to make payments related to a special assessment for roads, to

pay the full amount of the assessment following detachment; and (5) the Subject Parcels

are not developed for urban commercial or industrial purposes.

At the hearing, the administrative law judge (ALJ) considered the remaining

requirements for detachment: (1) whether the Subject Parcels are rural in character and not

developed for urban residential purposes; (2) whether the Subject Parcels are needed for

reasonably anticipated future development; and (3) whether, if the Subject Parcels were

detached, the remainder of the municipality could continue to carry on the functions of

government without undue hardship.

Following the hearing, the ALJ issued an order denying detachment. The ALJ found

appellant failed to establish “that the property proposed for detachment is rural in character

and not developed for urban residential purposes, and that the undeveloped land within the

Subject Parcels is not needed for reasonably anticipated future development.” The ALJ

also found that the City would experience “undue hardship in carrying on the functions of

government” if the petition for detachment were granted.

Appellant filed a timely appeal and application for review in the district court.

Respondent opposed the appeal, arguing that substantial evidence supported the ALJ’s

findings denying the petition for detachment.

After a hearing on the appeal, the district court affirmed the OAH’s denial of the

petition for detachment. The court held that “[b]ased on the evidence and record as a

whole . . . the ALJ’s findings in the Order are not based on an erroneous theory of law.”

This appeal follows.

4 DECISION

Appellant challenges the ALJ’s denial of their petition for detachment. Property

may be detached from a municipality in accordance with Minnesota Statutes

section 414.06. After a hearing, the chief ALJ may order detachment if: (1) the requisite

number of property owners have signed the petition; (2) the property is rural in character

and not developed for urban residential, commercial, or industrial purposes; (3) the

property is within the boundaries of the municipality and abuts a boundary; (4) the

detachment would not unreasonably affect the symmetry of the detaching municipality;

and (5) the land is not needed for reasonably anticipated future development. Minn. Stat.

§ 414.06, subd. 3. The ALJ may deny the petition for detachment if “the remainder of the

municipality cannot continue to carry on the functions of government without undue

hardship.” Id.

A person aggrieved by an order issued under chapter 414 may appeal to the district

court and must demonstrate that the order: (1) “was issued without jurisdiction to act”;

(2) “exceeded the orderer’s jurisdiction”; (3) “is arbitrary, fraudulent, capricious or

oppressive or in unreasonable disregard of the best interests of the territory affected”; or

(4) “is based upon an erroneous theory of law.” Minn. Stat. § 414.07, subd. 2(a) (2022).

A decision is arbitrary and capricious if the agency:

(a) relied on factors not intended by the legislature; (b) entirely failed to consider an important aspect of the problem; (c) offered an explanation that runs counter to the evidence; or (d) the decision is so implausible that it could not be explained as a difference in view or the result of the agency’s expertise.

5 Citizens Advocating Responsible Dev. v. Kandiyohi Cnty. Bd. of Comm’rs,

713 N.W.2d 817, 832 (Minn. 2006). An agency’s conclusions are not arbitrary

and capricious so long as there is a “rational connection between the facts found and

the choice made.” In re Review of 2005 Annual Automatic Adjustment of Charges,

768 N.W.2d 112, 120 (Minn. 2009) (quotation omitted).

In reviewing decisions of administrative agencies, this court need not defer to the

district court’s decision. Signal Delivery Serv., Inc. v. Brynwood Transfer Co.,

288 N.W.2d 707, 710 (Minn. 1980). Accordingly, we conduct “an independent

examination of the administrative agency’s record and decision and arrive at [our] own

conclusions as to the propriety of that determination.” Id.

Agency decisions “enjoy a presumption of correctness.” City of Lake Elmo v. City

of Oakdale, 468 N.W.2d 575, 577 (Minn. App. 1991). This court “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.” McNamara v. Office of Strategic & Long

Range Planning, 628 N.W.2d 620, 625 (Minn. App. 2001).

Findings of fact made by an agency are reviewed under the substantial-evidence

test, which requires an “independent examination of the record.” Lake Elmo, 468 N.W.2d

at 577. “Substantial evidence is defined as: (1) such relevant evidence as a reasonable

mind might accept as adequate to support a conclusion; (2) more than a scintilla of

evidence; (3) more than some evidence; (4) more than any evidence; or (5) the evidence

considered in its entirety.” Cannon v. Minneapolis Police Dep’t, 783 N.W.2d 182, 189

(Minn. App. 2010) (quotation omitted).

6 I. The ALJ reasonably determined the Subject Parcels are not “rural” in character and that determination is supported by substantial evidence.

Appellant challenges the ALJ’s finding that the Subject Parcels are not rural in

character. See Minn. Stat. § 414.06, subd. 3 (providing that the ALJ may order detachment

upon finding, among other things, that the property is “rural in character and not developed

for urban residential, commercial or industrial purposes”). The statute does not define the

term “rural.” See Minn. Stat. § 414.06.

“We review de novo an agency decision that turns on the meaning of words in

a statute or regulation.” In re NorthMet Project Permit to Mine Application,

959 N.W.2d 731, 757 (Minn. 2021) (quotation omitted); In re Annexation of Certain Real

Prop. to City of Proctor, 925 N.W.2d 216, 218 (Minn. 2019) (“We review questions of

statutory interpretation de novo.”). In reviewing questions of law, we are neither bound by

the agency’s decision, nor do we defer to agency expertise. Id.

In addressing the “rural” factor, the ALJ relied on the “commonly understood

definitions” of the term. The ALJ found that the Subject Parcels are “platted land and

almost all of the lots have been developed with residential structures.” The ALJ also found

that the Subject Parcels are “urban within the context of a small city in a lakes district of

outstate Minnesota,” and noted that one lot “has been developed to include multi-family

housing units, which are not consistent with rural character.” The ALJ concluded that

appellant failed to demonstrate that the Subject Parcels are rural in character.

Appellant relies on two arguments in asserting that the ALJ erred in determining the

Subject Parcels are not rural in character. First, appellant argues that the statutory term

7 “rural” should not be defined based on its common usage, and instead should be understood

as it is used by the U.S. Census Bureau and in the Minnesota Department of Transportation

rules. We reject applying these broader definitions. Instead, we apply the statutory

directive to use the “common and approved usage” of the term. Minn. Stat. § 645.08

(2022). “Rural” is defined as “[o]f, relating to, or characteristic of the country.” The

American Heritage Dictionary of the English Language 1536 (5th ed. 2011). Based on our

de novo review, we conclude that the ALJ applied the proper definition of “rural.”

Second, appellant challenges the ALJ’s determination that they failed to prove that

the Subject Parcels are rural. They highlight that the Subject Parcels do not receive city

water or sewer services; they do not have streetlights, sidewalks, gutters, or fire hydrants;

they do not have municipal garbage pickup; and they receive mail by a rural mail carrier. 2

We are not persuaded that these facts render the ALJ’s conclusion arbitrary and capricious

or otherwise show that the conclusion is not supported by substantial evidence.

Our independent examination of the record reveals that the ALJ’s findings are

supported by substantial evidence. The ALJ determined that the Subject Parcels are not

rural in character and have been developed for urban residential purposes. In reaching that

conclusion, the ALJ made the following findings: the Subject Parcels “are platted land and

almost all of the lots have been developed with residential structures”; one of the Subject

Parcels has been developed to include multi-family housing units “which are not consistent

2 Appellant also protests that the ALJ did not conduct a “site visit” for the purposes of the hearing. However, our review of the law revealed no requirement that the ALJ conduct a site visit during a hearing on a petition for detachment.

8 with rural character”; the Subject Parcels are zoned R-2, which is the classification for

medium-density residential development; there are 135 property owners within less than

85 acres; and the City provides services to the Subject Parcels, including police, contracted

firefighting, and public works.

In sum, because the ALJ applied an appropriate definition for the term “rural,” and

the ALJ’s findings are supported by substantial evidence, we conclude appellant has failed

to demonstrate that the Subject Parcels are “rural” in order to meet the statutory

requirement for detachment. 3

II. The City would face an undue hardship if the Subject Parcels are detached.

Appellant challenges the ALJ’s undue hardship conclusion, contending the City will

not experience an undue economic hardship if the Subject Parcels are detached because the

City has revenue coming in and is doing well financially. See Minn. Stat. § 414.06, subd. 3

(“The chief administrative law judge may deny the detachment on finding that the

remainder of the municipality cannot continue to carry on the functions of government

without undue hardship.”). We are not persuaded.

The ALJ found that “the Subject Parcels yield property tax payments to the City of

$110,845.40, representing four percent [4%] of the City’s total property tax levy of

$2,747,401.173.” The ALJ also found that the loss of that revenue would be equivalent to

the loss of two public-works employee positions or one full-time police officer. From these

factual findings, the ALJ determined that the City’s “loss of 4 percent [4%] of its levied

3 Given our conclusion that appellant failed to meet their burden on the “rural” factor, we need not address the “reasonably anticipated for future development” issue.

9 property tax total would create an undue hardship in carrying out the functions of the

municipality related to public works services and policing.”

Our review of the record reveals that the ALJ’s findings are supported by substantial

evidence, and those findings support the conclusion that detachment would create an undue

hardship for the City. Because that conclusion is not based on an erroneous theory of law,

we defer to the ALJ’s decision as an independent basis for affirming the order denying

appellant’s request for detachment. See McNamara, 628 N.W.2d at 625.

Affirmed.