HomeMy WebLinkAboutOrdinance No. 2141-2006Suggested by: City Attorney
CITY OF KENAI
ORDINANCE NO. 2141-2006
AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, AMENDING
KMC 17.05.080 AND 17.15.080 BY ADDING SECTIONS PROVIDING THAT CITY
WATER AND SEWER CHARGES WHICH ARE OVERDUE AND UNPAID SHALL
BECOME LIENS AGAINST THE PROPERTY SERVED.
WHEREAS, currently overdue water and sewer charges plus penalty and interest owed
tHe City of Kenai are a personal obligation of Ehe owner`af the property and not a'lien
of the property receiving the water and sewer services; and,
WHEREAS, if the property is foreclosed, abandoned or sold with unpaid water and
sewer charges the City of Kenai may not get paid for those monies owing; and,
WHEREAS, the City water and sewer fund is designed to be a self-sustaining entity
paid for bq the users of the water and sewer services; and,
WHEREAS, allowing water and sewer charges to go unpaid imposes an additional
burden on the other water and sewer customers of the City's utility system; and,
WHEREAS, allowing the charges to run with the land by making unpaid and overdue
utility charges be a lien on the property would increase collection rates and lesser the
burden on the paying water and sewer customers; and,
WHEREAS, two other cities on the Kenai Peninsula (Seward and Soldotna) have
similar provisions in their municipal codes.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI,
ALASKA, that two new sections of the Kenai Municipal Code are enacted as follows:
KMC 17.05.080ab)
I.
Overdue and unpaid water and sewer utility charges, plus any penalty or
interest owing, shall become a lien against the property served.
KMC 17.15.080(b)
II.
Overdue and unpaid water and sewer utility charges, plus any penalty or
interest owing, shall become a lien against the property served.
Ordinance No.2141-2006
Page 2 of 2
PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this 1 Sth day of
February, 2006.
' ~d~~<1`!-~~' ~~'~'
PAT PORTER, MAYOR
A'I`TEST:
L~~-''~"Z~+r% ) - ~/~-~F%lY-Y'"
Carol L. Freas, City Clerk
Introduced: February 1, 2006
Adopted: February 15,2006
Effective: March 15, 2006
„~c'lfa~e v~~t~ a P~~t, Gc` r,~itti a Futu~e"
210 Fidalgo Avenue, Kenai, Alaska 99611-7794
Telephone: (907) 283-7535 / Fax: (907) 283-3014
www.ci.kenai.ak.us
1VAEl0'1~ L~l ~f ~ lJ ~
TO: Mayor Porter and CouncIlors
FROM:C~--~ Cary R. Gravcs, City Attorney
DATE: Febiuary 23, 2006
RE: Priority of Water and Sewer Liens
Ordinance No. 2141-2006 would creatc a lien for un~aid water and sewer bills owed on property
serviced by th~ CiCy's water and sewer system. The ordinance is similar to ordinances in effect
in Seward aud Soidorna. Councilor Molloy asked if the provision ui the ordinance providuig ~hat
ttze ~iei1 "wouid be subordinate to only municipai tax and assessmcnt liens" tnighC violate Aiaska
~ law by creating a"super-priority" lien. Thc term "super-priority" is a term to describe a lien that
~~ essentially h~mnps earlier liens such a bank inortgages.
In Ke.nai Peninsula Borough v. A,ssociated Groeers, 889 P.2d 604 (Alaska 1995), a business iu
fin~neial troubl~ did not pay all the sales tax due to t'he Kenai Peninsul~ BoLOUgh. A lender
foreciosed on thc assets and operated the store as a successor in interesL. The Borough sued the
leudei fox the nnpaid sales tax under a Boiou~h oxdinanes pioviding foi liability for unpaid sales
taxes for a successor in interest (i.e. successor liability).
The Borough ordinance did not ct~eaCe a lien as Ordinance 2141-2006 would do. Ic created
successor liability foi unpaid sales tax. However, it did restrict the rights of an existing lien
hoIder by providing for successor liability. The issues are sunilar because a super-priority lien
would also restrict the rights of existing lien holders, so the Associated Grocers case is relevant.
Relying on AS 2935.410, the Alaska Suprerne Court sti~uck down the successor liability in the
Borough ordinance.
The statnte relied on by the Alaska Supieme Coutt in Associa~ted Grocers to st~ike down the
successor liabitiry in t11e Borough osdinance (AS 2935.410) is not applicable to hoine rule
municipalities as a timitation on thesr legislative authority. See AS 29.1(3.200 aud cf. I'airbanks
North Star Borough v. Howard, 608 P.2d 32 n.2 (Alaska 1980)(Noting Lhat the former AS
29.~3.415(a) applying to aeneral law municipalities did not necessarily restrict the authority of
~ home rule municipalsties). It could, thcrefore, be argued that the holding n2 Associated Grocer.s
~ ~~ is not applicable to a home rule ciry such as Kenai.
Mayor Porter and Councilocs
Februrary 23, 2006
Pane 2 of 2
Kenai is a hoine rule municipality, whereas, the Kenai Peninsula Borough is classified as a
geneiallaw municipality. Hoine rule municipalities have more legislative authority than gencral
law municipalities. Article X, Section 11 of the Alaska Constitution states, "A home rule
borough or city may exercise all legislaCive powers not prohibited by law or by charter." Home
iule powers are intended to be broadly ulterpreted. Jeffersow v. State, 527 P.2d 37, 42-43 (1974).
The courts in other jurisdictions have teached conf'licting conclusions about the validity of
municipal super-priority liens for water and sewer services. Some courts have allowed such
Iiens fo have a supei-priority. See Home Ow~2ers' Loan Corp. v. Public Water Works Dist. No.
2, 92 P.2d 745 (Colo. 1939); Uriited Sta.tes v. Ro.Izar's Inv~, Lac. 243 F. Supp. 459 (D. Mass.
1965); Mecharaics Sav. Bank v. Ke~iried~~, 12 NE 2d 852 (Mass. 1938). Other coiuts have not
allowed a super-priority. See Flome Owner's Loan Corp. v. Tj~son, 12 NP 2d 478 (Ohio 1938).
Given the ruln2g in Associated Grocers and the mixed case Iaw in other jtuisdictions, I believe
there is some question as to whether a municipal water and sewer lien may have super-prioxity
over other liens. I do not believe the lien needs to have a super-priority to be eFfective. As a
practical matter, new Ienders require water a~id sewei liens are paid up on t12e sale of property.
The intent of the ordinanee is to iu7prove unpaid water and sewer collections, not foreclose ou
property. My advice is Co delete the phrases "subordinate to only municipal tas and special
, ~ assessmenL liens" from Ordinarlce 2141-2006 and simply avoid the "supei-prior'tty" issue.
Let me know if you have questions or need further information
CTZGisp