Denied: Administrative law judge rules on Brainerd/Baxter annexation dispute

Brainerd's bid to annex a portion of Baxter was denied. The ruling came from Administrative Law Judge James LaFave late last week. "Brainerd's primary motivation for this annexation is civic pride," LaFave stated in a court document. "That is und...

Brainerd’s petition to annex the Brainerd Public Utilities’ site from Baxter into Brainerd’s boundaries was denied by an administrative law judge. The BPU facility wastewater facility has operated at the site since about 1981. Kelly Humphrey / Brainerd Dispatch
Brainerd’s petition to annex the Brainerd Public Utilities’ site from Baxter into Brainerd’s boundaries was denied by an administrative law judge. The BPU facility wastewater facility has operated at the site since about 1981. Kelly Humphrey / Brainerd Dispatch

Brainerd's bid to annex a portion of Baxter was denied.

The ruling came from Administrative Law Judge James LaFave late last week.

"Brainerd's primary motivation for this annexation is civic pride," LaFave stated in a court document. "That is understandable. But Brainerd submitted only minimal evidence that granting the petition would be in its best interest, and no evidence that the proposed concurrent detachment and annexation is in the best interests of Baxter. The law contemplates that a property's status quo must be maintained unless all parties benefit from its concurrent detachment and annexation. The petition must, therefore, be denied."

Brainerd has the ability to appeal the decision to Crow Wing County District Court by filing an application within 30 days of the order dated March 2 or a written amendment of finding of facts, or conclusions of law within seven days.

In his 19-page ruling, LaFave noted this is not a typical annexation case. At issue is the address of the Brainerd wastewater treatment plant on about 100 acres in Baxter. The city of Brainerd sought to have the Brainerd Public Utilities' property annexed into its city boundaries. Baxter adamantly opposed the petition and one of its arguments specifically struck home with the judge, that Brainerd failed to show an annexation was in the best interests of both cities.


"We have never been the aggressor in this situation. We've been defending what our people asked us to do and the decision is the decision and if people can live with that we move on," Baxter Mayor Darrel Olson said, noting while they were initially told the administrative judge's ruling was final, they later heard there may be room to appeal the decision. With that, Olson noted he wasn't sure this was a final chapter. Calls to Brainerd officials were not returned Wednesday.

The dispute, which has been talked about for years, became more heated recently with Brainerd city and public utilities commission officials seeking the annexation through court.

"I feel good for the people that asked us to not acquiesce to it," Olson said of residents who attended a meeting regarding the annexation. Olson said there have been residential complaints about the facility and its lack of response to residents for years, which were notably reduced when the facility was expanded. Baxter sent out a notice to those living within a half-mile of the facility. About 15 people attended the meeting and four sent letters. To a person, Olson said, they voiced the opinion to oppose the annexation. "We felt like we had a responsibility to go ahead and deny it and take our lumps. I feel like we did what we were asked to do and the judge made the decision."

In his ruling, LaFave stated Brainerd did not prove by a preponderance of the evidence that the proposed "concurrent detachment and annexation" meets the statutory requirements for approval.

Office of Administrative Hearings' costs for the case are to be divided equally between Baxter and Brainerd.


For its other arguments, LaFave ruled Baxter-while owning one-third of the facility's capacity and a lift and connecting pipes-did not meet the statutory definition of a property owner. In addition, LaFave disagreed the Office of Administrative Hearings lacked jurisdiction based on the annexation petition constituting an amendment of the 2007 agreement between the two cities for the treatment plant. Either way, LaFave stated the essential point requiring resolution in the case was whether the proposed action is in the best interests of both Brainerd and Baxter-something Brainerd needed to prove by a preponderance of evidence.

Brainerd asserted the annexation was in its best interest, pointing to fees it pays to Baxter that Brainerd stated it would not charge. Those include stormwater fees, franchise fees and permitting fees. The ruling noted those charges are paid by BPU customers in both Brainerd and Baxter. Baxter charges BPU $4,600 annually for stormwater fees and $2,000 annually in franchise fees.


"These fees, given the size of the cities and their operating budgets, are not significant. In addition, when the need arises, Baxter also charges BPU permitting fees. For instance, during the construction of the expanded facility, Baxter charged a permit fee of approximately $400 and a building permit fee of $147,000. Again, those fees were passed on to BPU customers in both cities."

LaFave noted there are no current plans to expand the facility and unless regulations related to wastewater treatment are altered, there is no need to in the foreseeable future. Less than half of the BPU's current capacity is being used, so exponential growth would be needed to require expansion, the ruling stated.

Brainerd argues if the property were in Brainerd, BPU would not be assessed any permitting fees. Notably, however, Baxter has not charged BPU any permitting fees since the facility was expanded in 2007 and there are currently no plans to expand the facility, LaFave stated in his ruling.

"Therefore, Brainerd's 'benefit' regarding permit fees is avoiding an unknown fee at some undetermined time in the future," LaFave stated. "This speculative benefit is insufficient to warrant annexation."

Additionally, Brainerd argued it would benefit by achieving "non-financial efficiencies in the administration of government services" to the property. To explain those efficiencies, Brainerd noted its police headquarters were closer to BPU than Baxter's.

"But Brainerd's Police Department is a mere 2 miles closer to the property," LaFave stated. "And the record lacks any indication that the property is frequently utilizing police services or that Baxter police have been somehow ineffective in protecting the property. Mere proximity does not establish best interests," LaFave wrote in his ruling.

He noted Brainerd also maintains it should not have to pay another city for services it can provide for itself, it should not have to work through another city's staff and subject itself to that city's regulations for property that it owns and operates.

"Brainerd contends that bringing the facility and the BPU within its boundaries substantially reduces the bureaucracy involved in the routine operation of the facility and promotes operational efficiency. There is a commonsense appeal to Brainerd's argument. But Brainerd did not articulate, specifically, how annexation would substantially reduce bureaucracy. And Brainerd did not introduce facts, beyond the police department's proximity, indicating that annexation would lead to non-financial efficiencies in the administration of government services that would accrue to Brainerd's benefit."


Finally, LaFave stated Brainerd also argued bringing BPU within the boundaries of Brainerd would alleviate confusion.

"Brainerd stated this reason in the petition for initiating the concurrent detachment and annexation. But again, Brainerd points to no specific facts demonstrating confusion regarding BPU's presence within Baxter's boundaries, and the Administrative Law Judge found none.

"In sum, scant evidence exists showing the proposed concurrent detachment and annexation is in Brainerd's best interests."

LaFave found Brainerd provided no evidence regarding confusion about BPU being in Baxter.

"As previously mentioned, there is a strong surface appeal to Brainerd's argument that because it owns the property and runs the facility that the Property should be within its city limits. But the benefits Brainerd identifies are almost entirely intangible. The statute requires more.

" ... Even if Brainerd could show the concurrent detachment and annexation is in its best interests, it must also prove it is in Baxter's best interests. Brainerd argues elimination the stormwater fees, franchise fees, and permitting fees Baxter charges the BPU is a benefit to Baxter because Baxter's citizens will be spared their portion of those costs. As previously mentioned, the stormwater fees and franchise fees are nominal and the permit fees are speculative.

"Also, Brainerd's argument fails to acknowledge that Baxter will lose the $6,600 in revenue from those fees. Brainerd also maintains that Baxter will no longer be required to pay Brainerd for fire service protection, saving Baxter $3,300 annually. That amount, however, is just over 1 percent of the entire amount Brainerd annually assesses Baxter for fire services. And net, based on the fees discussed above, Baxter will lose $3,300 in fee revenue.

"Brainerd also argues that 'Baxter has no evidence that it will suffer any detriment as a result of annexation.' It claims Baxter's concern that it will lose zoning enforcement authority is illusory. And, according to Brainerd, the contracts between the cities contemplate ongoing joint oversight of the facility, regardless of the outcome of this proceeding.

"Even assuming this is true, that is not the applicable standard. The mere fact that Baxter will not suffer any significant detriment if the petition is granted does not mean granting the petition is in Baxter's best interests."


• May 2006, Brainerd indicates a desire to have the Brainerd Public Utilities property brought into the city. The dispute became more visible again in 2015.

• Aug. 8, 2017, Brainerd City Council approves a resolution supporting a petition for concurrent detachment and annexation for the Brainerd Public Utilities facility, which sits on seven parcels of land on 99.51 acres.

• Aug. 28, 2017, the resolution and petition are filed with the Municipal Boundary Adjustment Unit of the Minnesota Office of Administrative Hearings.

• Both cities represented their arguments at a hearing in early December 2017 at the Crow Wing County Land Service Building.

• Since 1981, Brainerd, through its Public Utilities Commission (Brainerd Public Utilities or BPU) has operated a wastewater treatment facility at the site. The facility treats non-septic-system sewage from all Brainerd and Baxter residents. In addition to the facility, BPU provides potable water and electricity to nearly all Brainerd residents and a small number of Baxter residents.

• Since about 1997, Parcel 1 has also contained the BPU Service Center, an office, a customer service facility for BPU customers, a maintenance facility, as well as indoor and outdoor storage. The storage and maintenance areas are used for all of BPU's utilities (water, sanitary sewer, and electrical).

• BPU substantially upgraded the facility in 2007. That year, Brainerd and Baxter entered into an agreement regarding the expanded facility and its capacity because Baxter's need for capacity had increased. The agreement states Baxter will purchase and own one-third share of the expanded capacity and Brainerd will own and operate two-thirds of the expanded capacity.

• In 2009, Brainerd and Baxter entered into a finance agreement. In a general sense, Brainerd owns two-thirds of the capacity of the facility and, therefore, two-thirds of the cost is allocated to Brainerd. In addition, the ongoing operational costs of the facility are generally allocated to the cities based on the relative flow amounts from each city.

• The 2009 finance agreement states both parties established a Joint Wastewater Management Board with representatives from both cities although the board was never formed and has never met. In 2016, Baxter appointed board members for the first time and Brainerd appointed board members in 2017.

• Brainerd purchased a parcel off Eagle Drive, which was formerly a racquetball club, in 2015. Brainerd acquired this parcel as a buffer for the facility and for potential cold storage.

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