Council won’t apply judge’s ruling on natural gas to all condo units

After meeting in executive session at a special meeting Monday night, the Homer City Council said it would stick to its original ordinance regarding how it assesses condominiums for the Homer Natural Gas Distribution System project. 

That decision seems to defy a Kenai Superior Court judge’s ruling issued a year ago. It also goes against a recommendation by former City Manager Walt Wrede not to appeal that ruling in a lawsuit by condo owner Ken Castner, as well as a memorandum from City Attorney Thomas Klinkner advising Wrede to apply the Castner ruling to all condo assessments.

“We met with the attorney regarding condo assessments and decided to follow the original improvement plan,” council member David Lewis said in a public statement after the executive session.

Klinkner and council members Beau Burgess, Catriona Reynolds and Lewis confirmed that the statement meant the city would proceed with the assessment plan laid out in Ordinance 13-02 establishing the Natural Gas Homer Special Assessment District, which assesses condominiums and other lots on a per-parcel number basis.

That is, if a property owner has a separate parcel number for tax purposes, the owner would be assessed by the parcel number.

What’s not clear is if in saying it would Citing the privacy of executive session discussions, none of the council members would elaborate on the implications of its statement regarding the Castner decision.

“As a group we came up with a statement,” Reynolds said. “I would be misinterpreting the group to answer that question.”

However, in a follow-up question to Klinkner regarding the council’s stance toward the Castner case, Klinkner wrote, “The council recognizes that the city is obligated to follow Judge Huguelet’s decision with regard to Mr. Castner’s property.”

In March 2013, Kachemak Bay Title Building condominium owner Castner filed suit in Kenai Superior Court challenging the city’s assessment plan as it applies to his condos and got a summary judgment from Superior Court Judge Charles Huguelet striking down part of Ordinance 13-02 that required Castner to pay multiple assessments.

Castner attended Monday’s special meeting and was there when Lewis issued his statement.

“When they came out of executive session, I never expected them to say they’re sticking to the plan,” Castner said. “The judge files an order and you either comply or you’re in big trouble.”

Because of the structure of his condo association, Castner owns one office condo and also has a share in some property tax parcels, including a boiler room. Instead of paying the per-lot assessment of $3,283.30, as an apartment building owner would, the Kachemak Bay Title Building condo owners would be assessed nine times, or $29,549.70, and Castner assessed three times, or $9,849.90.

In January of 2014, Huguelet granted Castner summary judgment striking part of the ordinance and wrote an opinion supporting Castner’s motion. Huguelet said Castner would benefit from the gas line extension.

“The assessment charge, however, is disproportionate to the benefit received,” Huguelet wrote. “The city’s assessment with respect to condominium owners is arbitrary and unreasonable.”

Huguelet also said Castner had standing to challenge the ordinance before the final assessment roll has been published. The city had argued that Castner’s case was premature. Huguelet said that by challenging the ordinance twice in public hearings, Castner had standing to appeal the ordinance in court in 2013.

Former City Manager Walt Wrede said in February 2014 that the city would not appeal Huguelet’s decision.

“The city reviewed the costs and benefits of filing an appeal and concluded that, on balance, it was in the overall best interest of the community to accept the judge’s decision and move on,” Wrede said in a press release then.

In a Nov. 7 memo to Wrede, Klinkner wrote that “at a minimum, it (the Castner decision) binds the city in its assessment of Castner’s condominium property.” He also recommended “that the city apply the same assessment method to any other condominium where more than one unit is served by a single service connection to the natural gas distribution system.”

In a Dec. 12 “transition” memo to interim City Manager Marvin Yoder, Wrede calculated that the natural gas assessment district would lose $334,000 by assessing 102 condos on a per-lot basis. That loss would have to be absorbed somehow. In a Nov. 24 status report on the gas line, Wrede noted that the project had come in $340,000 under budget.

In the Dec. 12 memo, Wrede summarized for Yoder the issue with condos and the final assessment roll. He wrote that the council could accept Klinkner’s recommendation, but if the council had questions or disagreed, it also could meet in executive session on Jan. 12 to discuss other options. That memo set up Monday’s special meeting and the executive session.

There is some question if the council could legally make a decision in executive session. Alaska’s Open Meetings Act, Alaska Statute 44.62.310, allows governmental bodies to meet in executive session to discuss “matters, the immediate knowledge of which would clearly have an adverse effect upon the finances of the public entity.” However, the act also says that “action may not be taken at an executive session, except to give direction to an attorney or labor negotiator regarding the handling of a specific legal matter or pending labor negotiations.”

In an email replying to a question by the Homer News asking if the council had “acted” under the statute, Klinkner wrote, “The council held the executive session to discuss whether to change the approach to assessment in the improvement plan that it previously had adopted at a public meeting. The council determined not to make any changes to the improvement plan. Thus, no action was taken at the executive session.”

While Burgess said he did not want to speak on the record regarding the council’s statement at the executive session, at the regular council meeting he asked Klinkner to outline the process for appealing the final Natural Gas Homer Special Assessment District roll. His question came after the council passed Resolution 15-005 amending the roll and exempting certain properties. Properties that do not benefit from the gas line, such as lots without direct access to the line, can be exempted.  

Klinkner said the final assessment roll will proceed like so:

• The city will develop an assessment roll and list each parcel that’s subject to assessment;

• Notices will be sent to each property owner;

• After notices are sent out, there is a time period when property owners can object;

• The council also will hold public hearings on the final roll when property owners can object;

• The council will then decide to adopt or amend the final roll, and

• If property owners object, they can appeal to Superior Court.

Burgess said in a phone interview that condo owners who object to assessment can voice their objections during that process. He said while he didn’t want to speak about the assessment process now, he would speak on the record at a future council meeting when the assessment roll comes up.

Castner said he won’t wait for a public hearing to take up the matter again. If his units are again assessed against Huguelet’s summary judgment, “I’m going back to court,” Castner said. “I have an existing case.”

Castner said he will talk about the council’s latest decision in a meeting with other condo owners this week. Even if the city exempts his condo units, Castner said there’s an equal protection issue and that Huguelet’s decision affects all condos.

“If they do a partial thing,” he said, meaning exempting him alone, “I’m going to do everything in my power to get it back to Huguelet.”

Yoder said he did not attend the executive session. Based on Wrede’s memo, Yoder said he thought the council would proceed with Klinkner’s recommendation to comply with the Castner decision. 

Email requests to other council members for comment and clarification were not returned by press time.

Michael Armstrong can be reached at michael.armstrong@homernews.com.

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