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Towns have right to seek annexation waivers

A town may condition approval of a development on the developer’s waiver of its right to seek annexation into another community.

Because a town has authority to enter contracts necessary for the exercise of its corporate powers, the Wisconsin Court of Appeals held on Sept. 16 that “[n]othing in the relevant statutes prohibits a Town from seeking an annexation waiver in its negotiations with a property owner.”

The 164 of Waukesha Limited Partnership sought to develop a commercial property located in the town of Waukesha.

The town had previously been burned when it approved a grocery store and the owner then sought and obtained annexation into the City of Waukesha, depriving the town of substantial tax revenue.

To avoid a repeat of this scenario, the town obtained a waiver from the developer of its right to seek annexation, and the agreement contained a $250,000 liquidated damage clause for breach.

Nevertheless, the developer sought annexation by the city of Waukesha. The town sued for breach of contract.

Waukesha County Circuit Court Judge Kathryn W. Foster granted summary judgment to the town, and the Court of Appeals affirmed.

The developer argued that, since the statutes don’t expressly give towns the authority to request annexation waivers from property owners, the authority doesn’t exist; the town argued that since the statutes don’t expressly prohibit it, the authority does exist.

The court agreed with the town.

For support, the court cited a law review article which notes, “town officials in Wisconsin are increasingly reacting against the more limited powers of towns among Wisconsin’s local governments and, with some success, they have sought a share of the urban powers and growth that traditionally occurred in cities and villages.” Robert D. Zeinemann, Overlooked Linkages Between Municipal Incorporation and Annexation Laws: An In-Depth Look at Wisconsin’s Experience, 39 Urb. Law 257 (2007).

The court concluded that the town had the authority to enter the annexation waiver as part of the exercise of its corporate powers.

The court then distinguished Hoepker v. City of Madison Plan Commission, 209 Wis.2d 633, 563 N.W.2d 145 (1997), which holds that a municipality may not condition plat approval upon annexation.

The court reasoned, “The developer sought cooperation and accommodation from the Town as it moved forward with its plans for a substantial commercial development. Nothing in the file suggests Hoepker-style coercion here.”

Finally, the court held that the agreement was not void for lack of consideration. The court found consideration in the town’s modification of its zoning code, and assistance and participation by town officials in developing the property.

Case analysis

The opinion is a shocking repudiation of Supreme Court precedents.

In Hoepker, the court held that sec. 236.45 does not authorize a city to adopt an ordinance permitting it to condition approval of a plat on annexation.

In Town of Lafayette v. City of Chippewa Falls, 70 Wis.2d 610, 629, 235 N.W.2d 435 (1975), the court held that annexation cannot be the result of any undue influence or pressure from the annexing municipality.

In Town of Fond du Lac v. City of Fond du Lac, 22 Wis.2d 533, 539-540, 126 N.W.2d 201 (1964), the court held that a city cannot use economic pressure to promote annexation.

In Town of Fond du Lac, the court wrote, “The signing of an annexation petition, like voting, constituting participation in a governmental process is governed by a higher standard of conduct than prevails in the marketplace — votes are not a commodity of commerce.”

Although on their face, the decisions apply to annexing municipalities, rather than municipalities seeking to prevent annexation, their import is clear — municipalities may not hold property owners hostage contingent on their waiver of the political right to participate in annexation proceedings.

The holding is all the more remarkable in that towns have less authority than cities or villages. Yet this opinion gives them greater rights when it comes to annexation than cities.

For support, the court cites an unsupported statement in the Zeinemann law review article that towns rebel against their limited powers and, “with some success,” have sought more powers.

But the court ignores another statement in the Zeinemann article: “In practice Wisconsin towns, cities, and villages vie for territory and property tax base.” For better or worse, that is the state of the law in Wisconsin when it comes to annexation. The court’s opinion gives an advantage to towns in that struggle without any basis in the statutes or the case law.

The court’s other basis for distinguishing Hoepker is equally troubling — that there was no coercion. In Hoepker, the property owners’ choice was to sign an annexation petition or leave their land undeveloped.

Here, the choice was to sign the annexation waiver or leave the land undeveloped. There can be no principled basis for distinguishing between the two sets of choices.

Furthermore, even if there was no coercion in this case, it would be the height of naivete to think that other towns will not treat this opinion as a license to withhold from property owners whatever they want unless those owners sign annexation waivers.

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