Judge: In city’s gas assessments, condo complex should be treated as one unit

A 2-inch natural gas distribution pipe run to a lot is the same whether the lot has an apartment building or a condominium complex, Kenai Superior Court Judge Charles Huguelet said in a decision released Monday in response to a lawsuit filed by condo owner Ken Castner.

By that logic, a city of Homer ordinance assessing condominiums individually places “an arbitrary, unreasonable and inequitable burden” on condominium owners, Huguelet wrote. The city cannot assess condominium units separately, and must assess them on a per-lot basis.

“I’m very happy, because it’s just like I told them: You cannot be disproportionate in your assessments,” Castner said Tuesday.

In an email, City Manager Walt Wrede said he did not have much in the way of comment because he is still reviewing the decision.

“I will say though that the city is very surprised and disappointed with this decision. Sometimes judges get things wrong and that appears to be the case here,” Wrede said. “Over the next few days we will review the decision in more detail and weigh all of the options available to the city going forward.”

Huguelet made his decision in response to a civil suit filed by Castner, owner of three condominium units in the Kachemak Bay Title Building. Because of the structure of the condo association, Castner also has a share in some condos, including a boiler room, and not just an office condo. Instead of paying the per-lot assessment of $3,283.30, the Kachemak Bay Title Building condo owners would be assessed nine times, or $29,549.70, and Castner assessed $9,849.90. 

Castner filed his lawsuit last March after the Homer City Council passed an ordinance creating the Natural Gas Homer Special Assessment District. That ordinance based assessments by Kenai Peninsula Borough parcel number, that is, if a property owner had a parcel number for a property and paid a tax bill for that parcel, as is done for condominiums. 

Castner and other condominium owners and representatives of condominium associations spoke against that approach. A 10-unit condominium building on one lot would be assessed 10 times, while a 10-unit apartment building on one lot would be assessed once.

“We feel that this is unfair and is placing an inordinate burden of financing the natural gas line on condominium associations,” Amy Springer, Margarida Kondak and David Duke, representatives of three condo associations, wrote in public testimony last year.

Castner said he did not object to the Natural Gas Homer Special Assessment District itself, but to how condos were assessed. He also objected to how the district was approved. Castner sought and was granted summary judgment preventing the city from assessing his condos separately. Judge Huguelet’s decision does not void the creation of the natural gas assessment district.

The city argued that Castner’s properties were assessed on a “per lot” basis because his properties derived a benefit from the gas line. Huguelet agreed that under Alaska law properties that benefit from a service are subject to an assessment. Castner conceded that he gained a benefit but that he was being assessed disproportionate to the benefit received. Huguelet noted that regardless of lot size or building on it, each lot would receive one, 2-inch pipe to connect natural gas service to the lot.

Alaska does not have any case law deciding the issue of assessments and proportionality with respect to condos. In a Wisconsin case, Steinbach v. Green Lake Sanitary District, condo owners paid an “availability” charge per unit for the same 4-inch sewer line stub as other lots received. The plaintiffs paid 18 times what a single-lot owner paid. The Wisconsin Supreme Court ruled that the assessment was unreasonable to the benefit received. Huguelet said he
found the reasoning in Steinbach to be compelling.

“Lots or parcels that have multiple habitable units and leases were provided the same access to the gas line through one 2-inch high density polyethylene pipe to the lot and were charged only one assessment charge per lot or parcel. In effect, condominium owners in Plaintiff’s building were assessed a charge nine times higher for the same single 2-inch high density polyethylene pipe,” Huguelet wrote.

The city did win on one point: that it did not need to hold a vote to get approval of the Homer Natural Gas Special Assessment District, as Castner alleged.

Rather than a vote being held, with a majority of votes cast making the decision, property owners had to object in writing to creation of the district. If they did not object, that was considered approval. To fail, a majority of the lot owners would have had to object, with each lot getting a vote. Under the Alaska Constitution, a special assessment district is listed as an acceptable exception to a municipal body contracting for debt, Huguelet wrote.

Wrede said there are about 118 condo assessments on 16 lots. If condos are not charged an assessment per unit, that would decrease the number of assessments, with a net loss of 102 assessment properties and an impact of about $340,000. With 3,855 assessments, the assessment increase would be about $88. A final assessment will be done after the gas line is built. It is likely the assessment will not go up, Wrede said.

Michael Armstrong can be reached at michael.