Town, residents settle lawsuit opposing assessments for island-wide utility burial

William Kelly   |  Utilities  |  March 8, 2021

The town has agreed to settle a lawsuit filed against it by two residents who failed to obtain class-action status for their challenge of property assessments to pay for the town-wide burial of all overhead utilities.

The settlement means the case will be dismissed without going to trial. But if that’s a victory for the town, it didn’t come cheap; the town cannot seek reimbursement for nearly $600,000 in legal costs.

The Town Council last week agreed, without comment, to a settlement offer from residents Michael Scharf, a former zoning commissioner who owns a house in the North End, and Carol Kosberg, a South End condominium owner.

“We’re just glad to put this behind us and move forward,” Town Manager Kirk Blouin said Friday.

Kosberg and Scharf, represented by Boca Raton attorneys William Berger and Henry Handler, made the offer after losing an appellate court decision on Jan. 28.

A judicial panel for Florida’s Fourth District Court of Appeal denied oral arguments and affirmed without elaboration a lower court’s denial of class-action certification. The decision became final on Feb. 19 after Kosberg and Scharf did not move for a rehearing.

The settlement calls for a dismissal of all claims and states that each side agrees to pay for its own costs.

Under the Florida law in which the suit was filed, the town could not have recouped more than $19,000 for its legal fees, said Joanne O’Connor, a West Palm Beach attorney representing the town along with attorney Robert Wilkins.

As of Thursday, the town has spent $590,621 defending itself in the case since Kosberg and Scharf filed the suit in 2017, according to the town Finance Department.

Scharf and Kosberg were appealing Palm Beach County Judge James Nutt’s November 2019 denial of class-action certification.

In his ruling, Nutt said Kosberg and Scharf failed to demonstrate that their complaint would adequately and fairly represent the divergent interests of all other property owners who would have been certified as class members.

Both parties had agreed that the assessment challenge would be set aside until the class action matter was resolved.

A class-action certification would have enabled Kosberg and Scharf to collect reimbursement from the town for their attorneys’ fees should they have prevailed in the case. But failure to win the certification did not prevent them from going forward with their assessment challenge as individuals if they had so chosen.

Attorneys on both sides declined to comment on the case. Asked on Thursday about the decision to settle, Scharf said, “The suit is over. I only want what is best for the town. I hope the project gets completed in a cost effective and efficacious manner. That’s my only comment.”

The town says a buried utility system is safer, more reliable and aesthetically superior to an overhead system.

The burial of all power, cable television and telephone lines in town began in 2017 and is expected to be completed around 2027. The construction cost has been revised upward from $103 million to $120 million after applying an $8 million federal grant that will be applied to one phase of the work.

Voters in a 2016 referendum narrowly approved up to $90 million in bonds to finance most of the project.

The town is repaying the bonds through annual assessments on individual properties over a period of 30 years.

Each assessment is determined based on a methodology that measures the “special benefit” that a buried utility system provides to that property. The town says the methodology has been upheld by the courts in other cases.

More than 7,000 parcels were assessed. Individual assessments range from a few hundred dollars to thousands of dollars.

Each property is rated based on the improved safety, reliability and aesthetic value it would receive from the town-wide utility burial. Also considered is the size and type of each property, including whether it is single-family, condominium, vacant, non-residential or multi-family.

Scharf and Kosberg contended in the suit that there are no special benefits from buried utilities because there’s no objective evidence of an increase in the affected parcels’ market values.

They asked a judge to halt the assessments and force the town to refund the money it had collected. But Nutt said there was an obvious conflict between those who had voted for and those who voted against the referendum.

“There is plainly not a uniform class-wide view of either the benefits or the [assessment] apportionment,” he wrote.

If the assessments were invalidated, the town would have had to repay the bonds through a property tax increase, Nutt wrote.
Property taxes are based on each property’s taxable value – a different approach than the special assessment formula.

“In the end, some class members would financially benefit from the relief while others would be financially disadvantaged,” he wrote.

The Kosberg-Scharf suit is one of three filed against the town challenging the referendum language or the assessments.

The other two, brought by South End resident Arthur Goldmacher and by PBT Real Estate, were both dismissed without going to trial.

The town spent $184,701 defending against the Goldmacher suit, in which he alleged that the referendum language was misleading to voters.

Palm Beach County Circuit Judge Cymonie Rowe ruled that the ballot language was not misleading and did not violate any laws. Florida’s Fourth District Court of Appeals upheld Rowe’s decision in March 2018.

The town has spent $159,408 in the case against PBT Real Estate, in which U.S. District Judge Donald Middlebrooks in 2019 dismissed constitutional claims against the town.

PBT Real Estate appealed Middlebrooks’ decision to the 11th Circuit Court of Appeals, which last week upheld the dismissal.

Citing the “frivolous” nature of the lawsuit, Middlebrooks also granted the town’s request for reimbursement from PBT Real Estate for $121,377 in attorneys’ fees and $4,676 in costs.

PBT Real Estate has appealed that decision to the circuit court, which hasn’t ruled on it.

PBT Real Estate’s agent in John D. O’Neill, an attorney and West Palm Beach resident. PBT Real Estate is a property owner in the Palm Beach Towers, whose board of directors has said it is not involved with the case.

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