In re the Matter of Dahlgren Township, City of Carver and the Commissioner of the Office of Administrative Hearings, Minnesota Attorney General’s Office

STATE OF MINNESOTA
IN COURT OF APPEALS
A17-0550

In re the Matter of Dahlgren Township, City of Carver and
the Commissioner of the Office of Administrative Hearings,
Minnesota Attorney General’s Office

Filed December 18, 2017
Affirmed
Smith, Tracy M., Judge

Carver County District Court
File No. 10-CV-16-657

Lori Swanson, Attorney General, Nathan J. Hartshorn, Assistant Attorney General,
St. Paul, Minnesota (for appellant Minnesota Office of Administrative Hearings)

Robert T. Ruppe, Michael C. Couri, Couri & Ruppe, P.L.L.P., St. Michael, Minnesota (for
respondent Dahlgren Township)

Matthew D. McDougall, R. Lawrence Harris, Melchert Hubert Sjodin, PLLP, Waconia,
Minnesota (for respondent City of Carver)

Considered and decided by Smith, Tracy M., Presiding Judge; Schellhas, Judge; and
Smith, John, Judge.

S Y L L A B U S
When parties to an orderly annexation agreement agree to a tax-reimbursement
amount, Minn. Stat. § 414.036 (2016) does not restrict that amount.

 Retired judge of the Minnesota Court of A ppeals, serving by appoi ntment pursuant to
Minn. Const. art. VI, § 10.

2
O P I N I O N
SMITH, TRACY M., Judge
Appellant Office of Administrative Hearin gs (OAH) appeals the district court’s
order vacating portions of two OAH orders regarding the orderly annexation of a parcel of
real property from respondent Dahlgren Township (the township) to respondent City of
Carver (the city).
The district court concluded that (1) the tax-reimbursement provision of the city and
the township’s orderly annexation agreement (the agreement) was not preempted by Minn.
Stat. § 414.036 and (2) OAH could not assess its costs in this matter to the city and the
township, and, even if it could, it had failed to justify its particular allocation of costs. OAH
argues that the district court erred in determining that the agreement was not preempted by
Minn. Stat. § 414.036 and in holding that OAH could not assess its costs. OAH also asks
this court to hold that the city and the township cannot make payment of tax reimbursement
by a property owner a condition of annexation.
Because we agree with the district court on the ultimate outcome regarding the tax-
reimbursement amount—although for a different reason—and the assessment of costs, and
because we conclude that OAH’s third re quest currently presents a nonjusticiable
controversy, we affirm.
FACTS
In 2009, the city and the to wnship entered into an orderly annexation agreement that
sets out the terms and conditions by which an area of land wi thin the township’s borders
can be annexed to the city. The agreement provides that the city will not annex any parcel

3
of property within the designated area “until such time as the Town ship has received
reimbursement for the loss of such taxable pr operty in the amount of $500 for each acre
described in the City resolution to be annexed to the City. Tax exempt property at time of
annexation is not subject to tax reimbursement.” The agreement does not specify who must
pay this reimbursement.
In February 2016, the Community A sset Development Group L.L.C. (CADG)
decided to purchase and devel op property owned by Diedrich and Jeanette Lenzen and
located within the area designated for annexation (the property). CADG’s planned usage
required the extension of the city’s utility service to the property, so the Lenzens petitioned
the city for immediate orderly annexation. When the Lenzens submitted their petition to
the city’s city planner, the c ity planner told them that, in order to pr ocess the petition, “a
fee of $500 per acre is to be paid to the Township.” As a result, CADG, which had not yet
purchased the property, issued a check to the town ship for $2,165. After the township
received the payment, the city passed a resolution to annex the property.
The city’s resolution and a filing fee were submitted to OAH with a request to issue
an annexation order. OAH issued an order requiring the city or the township to supplement
the record regarding the township’s “practice of charging the property owner a fee of $500
per acre for tax reimbursement for the loss to the Township.” This order did not approve
the annexation. The township complied with OAH’s order, and OAH issued an order
approving the annexation on the condition that the township return the $2,165 payment to
the Lenzens (OAH was unaware at this time that CADG, not the Lenzens, had paid the
reimbursement), authorizing the township to collect from the city $247.61 (the amount the

4
Lenzens had paid in property taxes the previous year), a nd assessing the city and the
township 50% each of OAH’s costs for handlin g the matter. The city and the township
sought amendment of that order, indicating to OAH for the first time that CADG, not the
Lenzens, had paid the tax reimbursement. Ba sed on this information, OAH issued a new
order vacating the prior order and requiring th e city or the townsh ip to supplement the
record regarding CADG’s interest in the property, which the city did.
On June 15, OAH issued an order (t he first amended order) approving the
annexation contingent on the city adopting a resolution in support of annexation correctly
describing the property, 1 authorizing the township to collect $247.61 from the city, and
assessing the city and the township 50% each of OAH’s costs. This order did not require
the township to repay the $2 ,165 to CADG as a condition of annexation; however, it did
note that the township lacked authority to charge the Len zens for tax reimbursement and
that OAH had no jurisdiction to determine wh ether the township had any authority to
charge non-property-owners for tax reimbur sement. The city adopted a resolution
correctly describing the property, and on J une 21, OAH issued an order (the second
amended order) that ordered annexation and kept all other terms and conditions of the first
amended order in effect.
The city and the township bo th appealed the first and second amended orders to the
district court. Although their appeals were not identical, both challenged the provisions of

1 Between the time the city submitted its re quest for annexation a nd the time the first
amended order was issued, the parties had discovered that the resolution for annexation did
not correctly describe the property.

5
the orders that (1) limited the amount of the tax reimbursement to which the parties could
agree and (2) imposed OAH’s costs in this ma tter on the city and th e township. After a
hearing, the district court issued an order vacating both of the challenged provisions.
OAH appeals.
ISSUES
I. Does Minn. Stat. § 414.036 cap the amount of tax reimbursement to which
parties to an orderly annexation agreement may agree?

II. Does OAH have the author ity to assess its pre-app eal costs to the city and
the township?

III. Is the authority of the c ity or the township to charge a property owner for tax
reimbursement in connection with an anne xation pursuant to their orderly annexation
agreement a justiciable controversy?

ANALYSIS
I. Minn. Stat. § 414.036 does not cap th e amount of tax reimbursement to which
the city and the township may agree in their orderly annexation agreement.

OAH contends that the $500-per-acre tax-reimbursement amount in the agreement
violates Minn. Stat. § 414.036 and that the st atute controls. The district court concluded
that the agreement’s tax-re imbursement provision is not preempted by Minn. Stat
§ 414.036 and that the agreement controls. The district court based its preemption decision
on Minn. Stat. § 414.0325, subd. 6 (2016), which states, in pa rt, “The provisions of an
orderly annexation agreement are not preempte d by any provision of this chapter unless
the agreement specifically provides so.”
The city and the township argue that the district c ourt correctly decided the
preemption issue, but that, even if the district court erred on that issue, this court should

6
nevertheless affirm on an alternative ground they asserted to the district court—namely,
that Minn. Stat. § 414.036 does not limit the amount of agreed-to tax reimbursement in the
first place. We agree that, if Minn. Stat. § 414.036 does not prohibit the $500-per-acre tax
reimbursement amount, we may affirm without considering whether that statute preempts
the agreement pursuant to Minn. Stat. § 414.0325, subd. 6. See Williams v. Nat’l Football
League, 794 N.W.2d 391, 395 (Minn. App. 2011) (“Appellate courts are free to affirm for
reasons other than those on which a decision is based.”), review denied (Minn. Apr. 27,
2011). We therefore begin with section 414.036.
Section 414.036 provides, in relevant pa rt, “Unless otherwise agreed to by the
annexing municipality and the affected town, when an order or other approval under this
chapter annexes part of a town to a municipality, the order or other approval must provide
a reimbursement from the municipality to the town for all or part of the taxable property
annexed as part of the order.” OAH argues th at (1) “all or part of the taxable property
annexed” means one year’s property taxes and (2) the “unless otherwise agreed to”
language merely permits parties to agree to an amount equal to or less than one year’s
property taxes. The city and the township, on the other hand, argue that the only limitation
the statute imposes is that the topic of tax reimbursement must be addressed in an orderly
annexation agreement, otherwise the orde r approving annexation must provide for
reimbursement as outlined in the statute. We need not decide whether OAH is correct in
its first proposition—that the amount described in the statute is one year’s property taxes—
if the city and the township are correct that the unless-otherwise-agreed-to proviso permits
the parties to agree to an amount unrestricted by the statute.

7
Appellate courts review questions of statutory interpretation de novo. Poehler v.
Cincinnati Ins. Co. , 899 N.W.2d 135, 139 (Minn. 20 17). The goal of statutory
interpretation is to ascertain the intention of the legislature. Marks v. Comm’r of Revenue,
875 N.W.2d 321, 324 (Minn. 2016); see also Minn. Stat. § 645.16 (2016). We read and
interpret the statute as a whole. City of Rochester v. Kottschade , 896 N.W.2d 541, 546
(Minn. 2017). When the language of the statute is unambiguous, “the letter of the law shall
not be disregarded under the pretext of pursuing the spirit.” Minn. Stat. § 645.16.
OAH argues that the unless-otherwise- agreed-to proviso does not permit an
agreement to reimbursement in excess of a year’s property taxes because “limiting
conditions cannot be used to expand the ambit of the provisi ons that they modify.” See
Minn. Stat. § 645.19 (2016) (“Provisos shall be construed to limit rather than to extend the
operation of the clauses to which they refer.”). According to OAH, because the clause to
which this proviso applies sets the reimbursement amount at one year’s property taxes, the
proviso cannot be read to “extend” the range of permissible reimbursement amounts
beyond that amount. Rather, according to OAH, the proviso permits parties to an orderly
annexation agreement to “agree to reduce or eliminate the reimbursement fee . . . but it
cannot possibly authorize them to impose a separate and larger payment.”
We disagree. OAH’s interpretation impr operly equates a limitation on when an
order approving annexation must provide for tax reimbursement with a limitation on the
amount of reimbursement to which the par ties may agree in an orderly annexation
agreement. Properly read, section 414.036 addresses only when an order approving
annexation must provide for ta x reimbursement. The pertinent clause generally requires

8
an order approving annexation to provide for tax reimbursement, but the proviso then limits
operation of that clause to situations where th e parties have not agreed otherwise. When
the parties have agreed otherwise regarding tax reimbursement, the order will not provide
for it. This interpretation acco rds with the plain language of the statute and follows the
principle that provisos limit, rather than extend, the operation of the clauses to which they
refer. See Minn. Stat. § 645.19.
Moreover, OAH’s interpretation of the proviso seeks to read into the statute words
that are not there. In order for its interpretation to be correct, the statute would have to be
reworked to read al ong the lines, “Unless an amount less than that specified herein is
otherwise agreed to . . . .” However, this is not the text of the statute, and when the text of
a statute is unambiguous, we will not read additional words into it. Reiter v. Kiffmeyer,
721 N.W.2d 908, 911 (Minn. 2006).
Applying the plain-language interpretation of the statute to the facts of this case, we
conclude that Minn. Stat. § 414.036 does not prevent the city and the township from
agreeing to a tax-reimbursement rate of $500 per acre, even if that amount is more than
what an order approving annexation would provide in the absence of their agreement. As
a result, the district court did not err in vacating the portion of the first and second amended
orders that limits the tax-reimbursement amount to $247.61 per acre. Because we affirm
this decision by the district court on the basi s of interpretation of Minn. Stat. § 414.036,
we need not reach the question of preemption under Minn. Stat. § 414.0325, subd. 6.

9
II. OAH does not have the authority to a ssess its pre-appeal costs to the city and
the township.

The district court vacated the portion of the first and second amended orders
assessing OAH’s costs on the grounds that (1) this was not a “contested boundary
adjustment matter” and OAH had “set forth no legal authority” for assessing costs in an
uncontested boundary adjustme nt matter such as an annexa tion pursuant to an orderly
annexation agreement; and (2) even if OAH could assess its costs in an uncontested
boundary adjustment matter, OAH had failed to justify the apportionment of costs used in
this case. OAH argues that the district court erred because th is matter constitutes a
“contested case” under the Minnesota Administ rative Procedures Act for which it may
assess its costs under Minn. Stat. §§ 414.01- .12 (2016) and beca use it justified the
allocation of costs in this cas e. OAH’s authority to assess its costs requires construction
of a statute, which we review de novo. Poehler, 899 N.W.2d at 139.
A. Minn. Stat. § 414.12, subd. 3(c), do es not authorize OAH to assess costs
in this matter.

The costs of administrative proceedings in municipal boundary adjustments are
addressed in Minn. Stat. § 414.12, subd. 3. In the district court, OAH quoted and relied on
part (c) of that subdivision as its authority for assessing and allocating costs. Part (c) states,
“If the parties do not agree to a division of the costs before the commencement of
mediation, arbitration, or hearing, the costs must be allocated on an equitable basis by the

10
mediator, arbitrator, or chief administrative law judge.” 2 Because this case does not
involve a mediation or arbitration, whether Minn. Stat. § 414.12, subd. 3(c), authorizes
OAH to assess its costs to the city and the township turns on whether there was a “hearing”
in this case. We conclude that there was not.
OAH cites to Minn. Stat. § 414.12, subd. 1(b) (2016), which authorizes the OAH to
“conduct hearings and issue final orders rela ted to the hearings.” But even if OAH had
authority to conduct a hearing in this case, the question is whether it did. Multiple sections
of chapter 414 refer to hearings as having a “time and place.” See, e.g. , Minn. Stat.
§§ 414.02, subd. 2, .031, subd. 3, .0325, subd. 2, .041, subd. 4, .06, subd. 2 (2016); see also
Minn. Stat. § 414.09, subd. 1(b) (2016) (“The place of the hear ing shall be in the county
where a majority of the affect ed territory is situated, and shall be established for the

2 Parts (a), (b), and (d) of that subdivision state:

(a) The parties to any matter di rected to alternative dispute
resolution under subdivision 1 must pay the costs of the
alternative dispute resolution process or hearing in the
proportions that they agree to.
(b) Notwithstanding section 14.53 or other law, the Office of
Administrative Hearings is not liable for the costs. . . .
. . . .
(d) The chief administrative law judge may contract with the
parties to a matter for the pur pose of providing administrative
law judges and reporters for an administrative proceeding or
alternative dispute resolution.

Because the city and the townsh ip neither (a) agreed to a di vision of OAH’s costs, nor
(d) contracted with OAH for it to provide services, only part (c) or (e) of Minn. Stat.
§ 414.12, subd. 3, could provide a basis for OAH to assess its costs in this case. Part (e) is
discussed infra Section II(B).

11
convenience of the parties.”).3 OAH does not identify any hearing that was conducted, at
any time or at any place. Because there was no “mediation, arbitration, or hearing,” OAH
had no basis for assessing its costs to the city and the township under Minn. Stat. § 414.12,
subd. 3(c), and the district court did not err in vacating that part of OAH’s orders.
The parties brief whether this matte r was a “contested case” and whether
subdivision 3(c) could ever apply to OAH’s costs in connection with its review of an
annexation resolution pursuant to an orderl y annexation agreement under Minn. Stat.
§ 414.0325, subd. 1(h) (2016). We need no t decide the meaning of “contested case,”
whether OAH may ever conduct a hearing in co nnection with its review of a resolution
submitted pursuant to an orde rly annexation agreement unde r Minn. Stat. § 414.0325,
subd. 1(h), or whether Minn. Stat. § 414.12, subd. 3(c), would authorize assessments of
OAH’s costs in such a circumstance. Minn. Stat. § 412.12, subd. 3(c), provides for the
assessment and allocation of costs of arbitra tions, mediations, and he arings, and none of
those events took place here.
B. We decline to consider whether OA H may assess its costs under Minn.
Stat. § 414.12, subd. 3(e), because OA H did not make that argument in
the district court.

On appeal, OAH argues for the first time that Minn. Stat. § 414.12, subd. 3(e), also
authorizes it to assess its cost s in this matter to the city and the township . Minn. Stat.
§ 414.12, subd. 3(e), addresses OAH’s assessment of the “cost of services” and does not

3 We note that, in federal administrative la w, “submission[s] in written form only” may
sometimes constitute a hearing, see United States v. Fla. E. Coast Ry., 410 U.S. 224, 241,
93 S. Ct. 810, 819 (1973), and we do not foreclose the possibility that written submissions
could substitute for a hearing in another case, but that is not what happened here.

12
refer to arbitrations, mediations, or hearings. “[A] party may not ‘obtain review by raising
the same general issue litigated belo w but under a different theory.’” Crowley v. Meyer,
897 N.W.2d 288, 293 (Minn. 2017) (quoting Thiele v. Stich, 425 N.W.2d 580, 582 (Minn.
1988)). Rather, “litigants are bound in this court by the theory or theories, however
erroneous or improvident, upon which the action was actually tried below.” Annis v. Annis, 250 Minn. 256, 263, 84 N.W. 2d 256, 261 (1957). OAH never argued that Minn. Stat.
§ 414.12, subd. 3(e), authorized it to assess the costs of its judicial services to the city and
the township in the district court. Rather, in its district court briefing, OAH plainly relied
upon only the Minnesota Administrative Procedure Act (specifically Minn. Stat. §§ 14.53-
.55 (2016)) and Minn. Stat. § 414.12, subd. 3(b)-(c). Becaus e OAH did not present this
argument to the district court, we decline to consider it here.
III. The authority of the city or the township to charge a property owner for tax
reimbursement is not justiciable.

OAH asks us to decide that the city and the township lack legal authority to charge
a property owner for tax reimbursement under their orderly annexation agreement. The
presence of a justiciable controversy is essen tial to the exercise of our jurisdiction.
Schowalter v. State, 822 N.W.2d 292, 298 (Minn. 2012).
[A] justiciable controversy exis ts if the claim (1) involves
definite and concrete assertions of right that emanate from a
legal source, (2) involves a genuine conflict in tangible
interests between parties with adverse interests, and (3) is
capable of specific resolutio n by judgment rather than
presenting hypothetical facts th at would form an advisory
opinion.

13
Id. at 298-99 (quotation omitted). We may co nsider the issue of whether a justiciable
controversy exists, even when the issue has not been raised by the parties. Izaak Walton
League of Am. Endowment, Inc. v. State, Dept. of Nat. Res. , 312 Minn. 587, 589, 252
N.W.2d 852, 854 (1977).
Here, there is no “genuine conflict in ta ngible interests” impacted by whether the
city or the township can impose a tax-reimbursement fee on a property owner. In its first
amended order, OAH concluded that parties to an orderly annexation agreement may never
require property owners within the area su bject to annexation to pay the property-tax-
reimbursement fee. However, this decision had no effect on the city, the township, or the
property owners (the Lenzens). As the record makes clear, the tax-reimbursement fee was
paid by a non-property-owner (CADG), and OAH specifically declined to reach the issue
of whether a non-property-owner could be required to pay the tax reimbursement.
At oral argument to this court, OAH claimed that annexation was conditioned on
township returning the funds to CADG. However, the facts indicate otherwise: nothing in
the record states that OAH placed such a condition on approval of the annexation, both the
city and the township consider the annexation to have taken place without the return of the
funds, and the second amended or der clearly states that the pr operty is annexed effective
June 21, 2016. Thus, regardle ss of whether we hold that the city or the township may
charge a property owner the tax reimbursement , the effectiveness of the annexation will
not be affected, nor will the township be obligated to return the funds to CADG. In short,
no tangible interest would be affected by a holding on this issue.

14
OAH argues that it can nevertheless seek relief as an aggrieved party, because it is
acting on behalf of the people of Minnesota to prevent townships from exacting a “ransom”
from developers. We are unconvinced that this concern converts the issue of who may be
required to pay the reimbursement into a justiciable controversy. Although it is true that a
technically nonjusticiable cas e may nevertheless be heard when the case “presents an
important question of statewide significance th at should be decide d immediately,” such
cases must still be “func tionally justiciable.” Dean v. City of Winona , 868 N.W.2d 1, 6
(Minn. 2015) (quotation omitted ). Functional justiciability requires that “the record
contains the raw material (including effect ive presentation of both sides of the issues
raised) traditionally associated with effective judicial decision-making.” Id. (quotation
omitted). Neither CADG nor any other developer sought relief in this case. We are not
confident the record is sufficiently developed, in light of the fact that we lack input from
any party that would have an actual stake in the outcome. Further, it does not appear this
issue is of such significance that it must be decided immediately. Cf. id. (holding that
although the right to rent one’s property was an important property interest, it did not rise
to the level of an issue of statewide significance requiring the application of the
justiciability exception in question).
Because the issue of who may be charged does not involve a genuine conflict in
tangible interests, and because the issue is not “technically justiciable” or of such statewide
significance that it should be decided immediately, we decline to reach the issue of whether
the city or the town ship may impose a tax-reimbursement fee on a property owner as a
condition of annexation under their orderly annexation agreement.

15
D E C I S I O N
The district court did not err in vacating the portion of the first and second amended
orders approving annexation that limited th e tax-reimbursement amount to $247.61 per
acre because the city and the township could agree to a reimbursement amount that is not
limited by Minn. Stat. § 414.036. The district court did not err in vacating the portion of
the orders assessing and allo cating OAH’s costs to the city and the township because
assessment and allocation was not authorized under Minn. Stat. § 414.12, subd. 3(c).
Finally, we do not address the issue of whethe r the city or the town ship could require a
property owner to pay the tax-reimbursement fee as a condition of annexation because that
issue is not a justiciable controversy in this case.
Affirmed.