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Section Review

Assessing assessments: The Appeals Court issues first appellate decision on municipal betterment assessment methodologies

Douglas H. Wilkins is a partner at Anderson & Kreiger, LLP and represented the town of Acton in the trial court and appellate court in the W.R. Grace case.
Rarely does something new affect the well-plowed field of sewer betterment assessments. Massachusetts cities and towns have long used sewer betterment assessments to defray costs of public sewers and drains.1 Lawyers routinely deal with the status of these assessments as a lien upon property2 and with the abatement process3 for individual assessments.4

Yet, surprisingly, no appellate case addressed the validity of methods that municipalities use to calculate these assessments until last November.5 Even at the trial court, there is scant authority.6 After reviewing W.R. Grace’s holding and the facts before the court, this article explores the prospects for future challenges.


Statutory background

The sewer assessment bylaw in W.R. Grace employed the so-called uniform unit method, authorized by an amendment to Massachusetts General Laws chapter 83, section 15.7 That method allows the town to assess all land fronting on a sewered street on the basis of “residential equivalents.” The town assigns each parcel a number of “sewer units.” The statute requires that “[e]ach sewer unit shall be equal to a single family residence.” Because sewer assessments must apply not only to existing uses, but to the property’s potential future uses, the statute specifies that potential uses “shall be calculated on the basis of zoning then in effect.” Multi-family residences and commercial and industrial properties all receive assessments based upon the “residential equivalent,” namely by translating the multi-family, commercial or industrial property’s expected sewer usage into the number of single-family residences.

The next portion of the statute sets the stage for the challenge in W.R. Grace. It provides: “Existing and potential multifamily, commercial, industrial and semipublic uses shall be converted into sewer units on the basis of residential equivalents.” As the Appeals Court noted, “the statute does not define, nor does it direct or suggest, any basis to be used for determining ‘residential equivalents.’”8 Does this give the town free rein?

W.R. Grace stops short of an affirmative answer, but gives the town substantial deference.9 In upholding Acton’s determination as “not arbitrary or irrational,” the court relied upon evidence supporting the town’s determination of (1) the zoning potential of Grace’s property and (2) “the residential equivalent criteria” — namely the formula for translating commercial and industrial property into residential equivalents. The court observed the town’s choices were “grounded in a direct relationship between those determinations and expected use of the system, i.e., flow rates in gallons per day.” This holding preserves the substantial flexibility granted to the towns to enact a home rule bylaw that chooses a local methodology reflecting local conditions and local judgments.


Statutory proportionality

The court rejected Grace’s proposal that it read a more searching standard into statutory language regarding “proportionality.” Grace’s argument ran essentially as follows. In Massachusetts General Laws chapter 83, section 14, the legislature requires that a landowner “pay to the town a proportional part of the charge of making and repairing” the main drain or common sewer. Section 15 requires that the town calculate the final assessment “after having proportioned the cost of special and general benefit facilities.” Grace argued that these provisions established a judicially reviewable standard of “proportionality” and that its assessment was not proportional. It charged that the bylaw overassessed Grace’s property as the alleged result of town meeting politics by which residents attempted to overcharge a foreign corporation. Grace’s proportionality test could have had sweeping implications for judicial review of local sewer assessment bylaws. It could have produced a system that resembled the courts’ proportionality review under the state constitution10 in the property tax context, with all the problems that engendered and all the litigation that ensued.11

For the Appeals Court, however, Acton bylaw’s compliance with the statute established that it was proportional: “[b]ecause the by-law formula is grounded in flow rates for the conversion of commercial uses into equivalent residential sewer units, it is clear that the costs are calculated in proportion to the benefits conferred.”12 The uniform unit method itself achieves proportionality, unless the town acts arbitrarily or irrationally (or, presumably, based upon some illegal criterion).

It is worth noting that Grace’s “proportionality” argument also created tension with the legislature’s intent to authorize assessment systems that are easily administered townwide even though systems may rely upon approximations, rather than precision. In particular, the alternative to the uniform unit assessment method, known as the uniform rate method, takes account only of the parcel’s “frontage,” the lot’s “area within a fixed depth” from a way served by a sewer, or a combination of both.13 This clearly authorized method bears a less obvious relationship to the benefits conferred than the uniform unit method. To have asserted a right of judicial review of “proportionality” in the face of legislative tolerance for this kind of rough calculation would have demanded a precision not required by statute and would have defeated the goal of having an administrable system. The Appeals Court’s decision avoided this tension.14


Future challenges

With these issues now resolved (barring future decisions by the Supreme Judicial Court), the question of W.R. Grace’s impact remains. Acton’s approach, having been upheld by the Appeals Court, may prove to be a model for other municipalities. Several caveats are necessary, however.

First, it is important to identify which aspects of Acton’s methodology have general application and which ones have only local significance. The court’s footnote 1 provides some specifics regarding Acton’s calculations by noting that Acton defined a single residential unit as 300 gallons per day and assigned 75 gallons per day per 1,000 square feet of floor space as the flow rate for commercial property, making 4,000 square feet equivalent to one residential unit. While the court did not discuss the relative significance of these figures, Acton’s brief argued that the only issue is the bottom line, namely the 4,000 square foot per residential unit figure. That argument finds support in analogous SJC decisions15 and follows the statute, which does not specify methods beyond requiring residential equivalents. If the bottom line is rational, then the intermediate calculations and choices should be irrelevant.16 The Appeals Court discussion of only the bottom line implicitly supports this view.

Second, a comparison of the record with the Appeals Court summary shows complexities that towns and landowners must face in practice. The court states Acton considered “actual flow rates” and sewage flow design criteria from the Department of Environmental Protection’s Title V (sewage disposal) regulations at 310 CMR 15.203. This accurately states the trial court record, but does not reflect the sequence of events. The issues initially facing the town and Grace had changed by the time the parties litigated the matter.

Acton had to calculate the “residential equivalents” before it constructed the sewer system. Therefore, it initially chose17 to rely solely upon the DEP criteria, adjusted for local experience, and to select the size of house (three bedrooms) that occurred most frequently in Acton. The DEP regulations, applied without adjustment, would have dictated a 330-gallon residential equivalent for a three-bedroom house. In calculating the 300-gallon number, the town made adjustments, based upon local data showing that sewer usage does not rise in Acton as sharply as DEP’s regulations predict. It also noted DEP’s regulations were statewide figures intended for a different purpose, namely the sizing of septic systems, rather than calculation of sewer assessments. The adjustment from 330 to 300 gallons thus reflected the judgment of Acton’s health and planning departments, its selectmen (sitting as sewer commissioners) and Town Meeting. It also reduced the assessments of residential property relative to commercial and industrial property. Grace seized upon this result to argue discriminatory assessment. It acknowledged the town did not have to use DEP quantities at all, but argued that, if the town used DEP criteria for commercial units (75), it was bound to use the DEP number (330).

The court never had to decide that particular issue because the actual data, generated in the course of operation and permitting of the sewer system, confirmed the bottom-line accuracy of the town’s choice of 4,000 square feet as a residential equivalent while the litigation was pending. Interestingly, though, the actual data did not confirm the intermediate numbers used for residential and commercial flow.18 Had the court entertained challenges to the intermediate numbers that Grace targeted, therefore, it could have reached the wrong final result.

In short, even if other towns choose to rely upon DEP’s Title V regulations for calculation of sewer assessments, they can point to Acton’s experience only to rebut potential claims that “consistency” necessarily requires uniform reliance on DEP’s numbers. Towns will likely need local facts to justify their own particular adjustments to DEP’s numbers. Nothing in W.R. Grace allows them simply to copy Acton’s calculations, without similar local data.

Finally, towns are still exposed to the same risks of abatement applications that existed prior to W.R. Grace. Grace mounted a facial challenge to the assessment methodology in the bylaw because it had only received an estimated assessment, under Massachusetts General Laws chapter 83, section 15B, rather than a final assessment. The second part of the opinion in W.R. Grace rejected arguments based upon the features of Grace’s own parcel as premature prior to final assessments.19 If Grace wanted to challenge the bylaw as applied, it had to wait for notice of final assessment under Massachusetts General Laws chapter 80, section 5 and exhaust its administrative abatement remedies.


Conclusion

In sum, W.R. Grace supports the towns’ flexibility in adopting a duly promulgated home rule bylaw that chooses among rational approaches in calculating “residential equivalents,” as long as they justify their bottom-line assessments with available data. As long as they do so, they need not fear a searching review under a general “proportionality” test, or challenges to particular components of their methodology.

Landowners who mount facial challenges to local assessment methodologies therefore face difficult hurdles. Alternatively, they will simply continue to file individual abatement applications raising as-applied challenges to their assessments, without challenging assessment methodologies.

Now that W.R. Grace has upheld Acton’s assessment formula, time will tell whether the Appeals Court decision effectively ends these types of challenges, or is only the first chapter in a longer tale.


End notes

1. See Mass. Gen. Laws ch. 83, § 15; Wright v. Boston, 63 Mass. 233 (1852).[back]

2. Mass. Gen. Laws ch. 83, § 27.[back]

3. See Stepan Chemical Co. v. Town of Wilmington, 8 Mass. App. Ct. 880, 881 (1979) (rescript) (assessments must be imposed upon all who benefit from the sewer project, which includes those who have no buildings on their lots or who do not wish to connect to the sewer). See also Gudanowski v. Northbridge, 17 Mass. App. Ct. 414 (1984) (an action in the nature of certiorari is available to challenge administrative decisions on abatement of betterment assessments).[back]

4. Mass. Gen. Laws ch. 83, § 28.[back]

5. W.R. Grace & Co.- Conn. v. Town of Acton, 62 Mass. App. Ct. 462 (2004)(uniform unit method). [back]

6. See Bozenhard v. Town of Shrewsbury, 18 Mass. L. Reporter 141 (Worcester Sup. Ct. 2004) (Agnes, J.) (upholding constitutionality of the uniform rate method). [back]

7. See St. 1978, c. 214. [back]

8. W.R. Grace, 62 Mass. App. Ct. at 465.[back]

9. Id. [back]

10. Mass. Const. pt. 2, c.1, § 1, art. 4[back]

11. See, e.g., Tregor v. Assessors of Boston, 377 Mass. 602, cert. denied 44 U.S. 841 (1979); Kensington v. Assessors of Boston, 380 Mass. 888, 895 (1980).[back]

12. W.R. Grace, 62 Mass. App. Ct. at 465.[back]

13. Mass Gen. Laws ch. 83, § 15, par 2. [back]

14. See also Bozenhard, 18 Mass. L. Rptr. at 142 (holding uniform unit rate is constitutionally “proportional” even though it “does not take into account all conceivable differences in each parcel of land”).[back]

15. Many cases in other contexts (mostly addressing analogous problems in administrative rate setting) have held courts should look only at the bottom line, in the absence of a statutory directive that the agency make particular choices in arriving at the bottom line. Mass. State Pharmaceutical Ass’n v. Rate Setting Comm’n, 387 Mass. 122, 126-27 (1982); Auto. Insurers Bureau of Mass. v. Comm’r of Ins., 420 Mass. 599, 612 (1995)(confiscation challenge). Other cases hold that the choice of a methodology is generally “committed to agency discretion and is beyond the scope of our review.” Attorney Gen. v. Dep’t of Pub. Utils., 392 Mass. 262, 268 (1984), quoted in Greater Media, Inc. v. Dep’t of Pub. Utilis., 415 Mass. 409, 417 (1993). The Appeals Court did not expressly rule upon the applicability of these cases to the sewer assessment context, but there is no apparent reason why a different rule should apply.[back]

16. Otherwise, a landowner might choose to challenge particular aspects of the methodology that work to its disadvantage, while ignoring offsetting choices that may offset those disadvantages. Another landowner might choose to challenge other aspects. If both landowners win, the town may be subject to conflicting judgments, both of which undermine the purpose of a uniform assessment methodology. Looking at the bottom line is the only way to avoid selective litigation of particular components.[back]

17. The parties to W.R. Grace agreed that nothing compelled the town to use Title V regulations at all in calculating the sewer assessments. If actual data had been available, the town might have preferred to use actual data, relying upon Title V regulations, with appropriate adjustments, for confirmation of the results from the actual data — or to ignore the Title V numbers altogether. [back]

18. The actual data showed an average daily residential sewage flow of about 160 to 180 gallons, not 300 gallons. Actual commercial flow was the same: about 180 gallons for 4,000 square feet. The town’s original calculation and the actual data thus arrived at the same result (4,000 square feet = two residential units), but on different numbers. The commercial flow rate came from Grace’s expert, who used an actual flow of 45 gallons per day per 1,000 square feet for a commercial property. Other towns that choose to use DEP regulations for sewer assessment purposes are likely to have similar experiences, because the Title V regulations overstate actual usage, in order to maintain a substantial margin of safety in designing sufficiently large septic systems. [back]

19. W.R. Grace, 62 Mass. App. Ct. at 466. See also Mass. Gen. Laws ch. 83, § 15B (“the provisions of chapter eighty relating to abatements shall not apply to estimated assessments under this section”).[back]

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