Sikma loses challenge to Holmes Harbor sewer fees
June 25, 2008 · Updated 4:02 PM
A judge's decision last week solved one legal problem for the Holmes Harbor Sewer District, but may have created another.
Rendering a decision on a lawsuit brought against the district by developer Jack Sikma two weeks earlier, Judge Alan Hancock ruled that the district does have the authority to charge availability fees against vacant property.
But at the same time, he ordered the district to treat the fees -- which are levied against all vacant properties at a flat rate of $48.33 per month -- as a property tax instead of a charge.
Hancock's Feb. 13 decision comes after Sikma, who has the largest vacant land holdings within the Freeland area sewer district, argued Jan. 27 that the fees were unconstitutional. Had he won, landowners may have been able to opt out of the payment. The district would have also lost about 55 percent of the revenue used to support its annual $278,000 operating budget.
Even though Sikma's argument did not fly with the court, Hancock's ruling will force either an appeal or a big change in how the district gets its money. Stan Walker, president of the sewer district's board of directors, said this week that basing availability or "standby" fees on land value like any other property tax could create a tax that is too expensive for some landowners.
"It could make this more like a tax than ever," he said.
On Jan. 27, Sikma's attorney, Elaine Spencer, argued that the standby fee was not equitable, since owners of vacant lots pay a fee nearly as large as a similar, $58.33 monthly fee paid by homeowners in the district. Walker said calculating the fee based on property value would create even greater inequity.
While district staff was crunching numbers this week to find out if Hancock's order to change the fee payment system will work, Walker said it probably won't, which means the district will probably appeal the decision.
Overall, Walker said, Hancock's decision was good for the district because it affirms its right to charge standby fees.
Sikma did win one concession in the suit. Hancock ordered the sewer district to beg off on foreclosure proceedings it initiated against several of Sikma's properties. Those foreclosures were triggered by the nonpayment of standby fees. In his decision, Hancock wrote that the district should not attempt to foreclose until it has a new standby fee system in place.
Going back to court is not something the district does lightly. Walker said the legally-embattled district is doing everything it can to avoid more litigation.
However, the district has another date in court coming up Monday, when Judge Hancock will rule on the legality of a $20 million bond sale the district made in 2000.
That sale, which has trigged a class action lawsuit by bond investors, was ruled by the state auditor's office in 2001 as violating state law. A similar decision by the court would confirm the auditor's judgment legally.