Special Assessments; Release of Assessment, Penalty or Interest by City Council

Subject:

Special Assessments; Release of Assessment, Penalty or Interest by City Council; G.S. 160A-231; G.S. 105-380

Requested By:

Robert C. Cogswell, Jr. Fayetteville City Attorney

Questions:

(1)

What authority, if any, does a city council have to relieve a taxpayer of a special assessment, interest or penalty on said special assessment?

(2)

If authority exists for a city council to relieve a special assignment, interest or penalty thereon, upon what basis can they do the same??

(3)

If a city council improvidently relieves a taxpayer of a special assessment, interest or penalty thereon, to what liability, if any, are they subject either as a body or individually?

(4)

If the city council improvidently relieves a taxpayer of a special assessment, interest or penalty thereon, what action, if any, should they take to remedy the situation?

Conclusions:

(1)

Its authority is found in G.S. 160A-231.

(2)

The basis for its authority is the existence of some "irregularity, omission, error or lack of jurisdiction."

(3)

They may be liable individually pursuant to G.S. 105-380 (with reservations).

(4)

The council may rescind its action and return the lien to its status quo ante.

The following factual situation has been presented:

"Pursuant to a petition of the property owners, the City Council passed a resolution to pave a certain street in the City of Fayetteville. In accordance with North Carolina General Statute 160A-224 and 160A-227, the proper notices were sent to the property owners as relates to the preliminary resolution and the preliminary assessment roll. The letter of notification pursuant to 160A-227 advised the property owners that the letter was not a bill and that one would be forthcoming setting forth the actual rate of assessment and any penalties. After the assessment roll was confirmed and published in the newspaper, the Tax Collector sent out bills. One of the property owners had moved in the meantime, and therefore when the bill was sent to the last known address, it was returned to the Tax Collector with no forwarding address. No effort was made by personnel in the Tax Office at that time to ascertain the new address and it was over a year later when the property owner was finally made aware of the actual interest charge although as previously stated, all statutory requirements concerning notice and publication had been met. It should also be pointed out that the mailing address at which the particular property owner received the first two notices was not an address on the street paved. The property owner moved from that address to an address on the street that was paved in which the assessment was placed. In other words, during the period of time that the public hearings were conducted, the assessment roll confirmed, and all statutory notice requirements were met, the aggrieved property owner did not live on the street that was paved. The property owner requested that the Council relieve the interest and penalty thereon because an actual bill setting forth the same was never received. For this reason and this reason alone, the City Council unanimously passed a motion to relieve the particular taxpayer of the interest and penalty on the assessment."

Based upon the foregoing facts, an opinion has been requested upon four questions. Because of their similarity the first two questions will be considered together:

"(1) What authority, if any, does a city council have to relieve a taxpayer of a special assessment, interest or penalty on said special assessment?"

"(2) If authority exists for a city council to relieve a special assessment, interest or penalty thereon, upon what basis can they do the same?"

There are a number of notice requirements which must be met in connection with special assessments: after a city council adopts a preliminary resolution with respect to a project, a notice of hearing on the resolution must be published, and a copy of the resolution must be mailed to each affected property owner "as shown on the county tax records." G.S. 160A-224. After the hearing, and if an assessment resolution is adopted, the project proceeds. When it has been completed, the council determines the total cost and prepares a preliminary assessment roll, apportioning the total cost among the property owners. At this point, notices of the availability of the roll for public inspection, and of a hearing on the preliminary assessment roll, must be published. A similar notice of hearing, stating the amount of his proposed assessment, must also be mailed to each property owner. G.S. 160A-227. At the hearing, the council hears any objections to the roll which interested persons may have, and may approve or modify the assessments and may confirm the roll as it then is. G.S. 160A-228. G.S. 160A-228. After twenty days elapse, the city tax collector must publish one further notice, that the roll has been confirmed and that assessments may be paid, without interest, during the ensuing thirty days, but that payments made later will include interest. No notice by mail to property owners is required at this point. G.S. 160A-229. If an assessment is "not paid within this time, all installments thereof shall bear interest as provided in G.S. 160A-233." G.S. 160A-229. Interest is at the rate of 8% per annum. G.S. 160A-233.

The statement of facts indicates that "all statutory requirements concerning notice and publication had been met", and our opinion is based upon that premise. The questions must therefore be approached from the direction that no billing was required, and the unrequired bill that was sent was made in the same fashion to each owner, i.e., to his last known address. Moreover, the other mailed and published notices, as well as the actual work in progress, on the ground, provided ample notice that work was in progress, that assessments would be made, and that property owners would have to pay them. While it is regrettable in the extreme that the bill did not find its way into the property owner’s hands, the owner could have ascertained the amount of his charge merely by inquiring and not having done so, had the use of his money during the interim, as did other owners who consciously chose to delay payment. Payment of interest would have been no greater for him than for them.

In this light, G.S. 160A-231 delineates the council’s authority to make adjustments. Its statutory predecessor read:

"The governing body may correct, cancel or remit any assessment for a local improvement, and may remit, cancel or adjust the interest or penalties on any such assessment. The governing body has the power, when in its judgment there is any irregularity, omission, error or lack of jurisdiction in any of the proceedings relating thereto, to set aside the whole of the local assessment made by it, and thereupon to make a reassessment." G.S. 160-90.

The first sentence seems to grant broad discretionary authority to adjust assessments, penalties and interest, but the sentence was interpreted differently in McClester v. China Grove (1928) 196 N.C. 301. There the cost of assessments was underestimated and dissatisfied property owners prevailed upon the town board to reduce their assessments by 25%. However the Supreme Court found the adjustments to be improper, even after considering the above-quoted language:

"Here, the total amount of cost, required of the municipality, was assessed against the lots and parcels of land abutting directly on said improvement, in response to the request of the petition and in accordance with the provisions of the statute, hence we think the new board of aldermen was without authority to grant a reduction or rebate of 25 per cent of the original assessment roll, there being no suggestion of any irregularity in the proceedings. Gallimore v. Thomasville, (1926) 191 N.C., 648, 132 S.E., 657.

True, it is provided by C.S., 2715 and 3 C.S., 2806(f) that the governing body of a municipality may correct, cancel or remit any assessment made for local improvement, including interest or penalties thereon, and shall have the power, when in its judgment there is any irregularity, omission, error or lack of jurisdiction in any of the proceedings relating thereto, to set aside the whole of the local assessment, make a reassessment, etc., but these statutes, we apprehend, have no application to a fact situation similar to the one now under consideration. Gallimore v. Thomasville, supra."

Thus the Supreme Court held that some irregularity must exist before the quoted language could come into play. Since no irregularity appears from the facts stated (i.e., no failure to do an act required by law), China Grove supports the conclusion that the Council was without authority to adjust the property owner’s assessment, penalties or interest.

In addition, it is most significant that in recodifying G.S. 160-90 as G.S. 160A-231, the General Assembly omitted the former first sentence altogether. The present section begins with what was essentially the second sentence of G.S. 160-90:

"The council shall have the power, when in its judgment any irregularity, omission, error or lack of jurisdiction in any of the proceedings related thereto, has occurred, to set aside the whole of any special assessment made by it and thereupon to make a reassessment."

Thus, to answer the first two questions specifically, the authority of a city council to relieve a property owner of some part of a special assessment is found in G.S. 160A-231, and the basis of that authority is grounded upon the existence of some "irregularity, omission, error or lack of jurisdiction." Where none exists, the Council lacks authority to make any adjustment.

"(3) If a city council improvidently relieves a taxpayer of a special assessment, interest or penalty thereon, to what liability, if any, are they subject either as a body or individually?"

While we are satisfied that special assessments are not, standing alone, property taxes and are not, as property taxes, subject to the Machinery Act, nonetheless G.S. 160A-228 does provide that "from and after the time of confirmation, the assessments shall be a lien on the property assessed of the same nature and to the same extent as the lien for county and city property taxes . . ." (Emphasis added.) It further provides that "after the assessment roll is confirmed, a copy of it shall be delivered to the city tax collector for collection in the same manner as property taxes, except as herein provided." (Emphasis added.) If the assessment lien is "of the same nature" and "to the same extent" as the property tax lien, presumably it is subject to the same rules and restrictions, including the following provisions of G.S. 105-380(c):

"(c) Any tax that has been released, refunded, or compromised in violation of this section may be recovered from any member or members of the governing body who voted for the release, refund, or compromise by civil action instituted by any resident of the taxing unit, and when collected, the recovered tax shall be paid to the treasurer of the taxing unit. The costs of bringing the action, including reasonable attorneys’ fees, shall be allowed the plaintiff in the event the tax is recovered." (The word "tax" includes penalties and interest. G.S. 105-273(15).)

We have found no case construing this question in the light of G.S. 160A-228 and G.S. 105-380, and it is, of course, by no means certain that a court would find the members of the council liable.

"(4) If the city council improvidently relieves a taxpayer of a special assessment, interest or penalty thereon, what action, if any, should they take to remedy the situation?"

We believe that the council can adopt a resolution rescinding its former action, returning the claim and lien to its status quo ante. In an analogous situation, a taxpayer had asked to be relieved of any assessment of tax on property he owned, representing that it had already been listed by another, who paid the tax. The Commissioners, acting on the representation, ordered that the property be released from taxation. Later, after it appeared that the taxpayer had made an erroneous representation, the Board rescinded its previous order. On review the question was whether the Board could recind its action.

The Supreme Court held:

"In strictness the only point presented is the legal capacity of the commissioners to reverse and annual their own former erroneous action, not in reforming the tax list, but in the attempted exoneration of the intestate from a part of the taxes for which he is liable thereon, and thus to put out of the way an impediment and hindrance to their collection. It certainly requires neither reference nor argument to sustain so self-evident a proposition as the right (and we may add the duty) of the board, when the error is discovered, and more especially, when committed by the intestate’s own representation, to correct it and avert its consequences, and as little objection lies to the fair and deliberate manner in which the board retraced its steps." Lemly v. Commissioners of Forsyth (1881) 85 NC 379.

Rufus L. Edmisten Attorney General

Myron C. Banks Special Deputy Attorney General