Annexation of Land Covered by the State Boundary Commission

The Michigan Supreme Court held that the State Boundary Commission could not invalidate an Act 425 agreement for conditional land transfer between local government units. Rather, it can only determine if they are “in effect,” which would prevent any attempts by developers to annex the land to other cities. Additionally, the Supreme Court ruled that local governments entering a conditional land transfer agreement can include their own ordinances and zoning requirements.

The ability for local governments to transfer land freely between themselves creates a powerful, double edged tool for land management. On the one hand, local governments can pass land between themselves to foster development on land previously zoned for conservation. On the other hand, they can also transfer land between themselves to re-zone certain districts to specifically prevent over-development by private companies. As a result, the impacts of this court decision on the environment are only realized on a case-by-case basis.

In 2017, the Michigan Supreme Court decided whether a conditional land transfer agreement between Clam Lake Township and Haring Charter Township was valid per the State Boundary Commission (SBC) and if such an agreement could include zoning provisions. When TeriDee LLC, a private developer with ownership of a portion of the land covered by the agreement,  sued the Townships, seeking for them to annex the land to a nearby city, the SBC rejected the Townships’ agreement as invalid due to its lack of an economic development project, ruling in favor of TeriDee and development. The trial court rejected the agreement between the Townships for different reasons, finding its requirement for specific zoning ordinances to be legally impermissible. Upon two rounds of appeal, the Supreme Court ruled in favor of the Townships.

This case concerns a years-long dispute regarding an area of approximately 241 acres of undeveloped land within Clam Lake Township originally zoned for forest-recreational use. One hundred forty-one of those acres are owned by TeriDee LLC, a private developer who sought to create a mixed-use project on the land for commercial purposes. For such a development, the land would need to be connected to sewer and water systems. To facilitate this, TeriDee attempted in 2008 to get approval for an agreement that would have transferred the land from Clam Lake Township to the city of Cadillac’s jurisdiction.

The agreement was rejected via a voter referendum, and TeriDee filed a petition in 2011 for Cadillac to annex the land. During this time, Clam Lake Township and Haring Charter Township entered into an agreement under the Intergovernmental Conditional Transfer of Property by Contract Act – also known as an Act 425 agreement – that would transfer the land parcel from Clam Lake to Haring. The State Boundary Commission (SBC) found TeriDee’s petition legally sufficient, and invalidated the Townships’ agreement, finding that it did not establish a specific plan for an economic development project and was instead an attempt to block Cadillac’s annexation. By 2013, the parties renewed their efforts to retain control of the land in question. After developing a plan for commercial / residential use of the land, the Townships entered into an Act 425 agreement in May 2013 to transfer the land from Clam Lake to Haring.

While under the SBC’s review, TeriDee concurrently sued the Townships, alleging that their Act 425 agreement was invalid and was only meant to block the annexation that TeriDee sought. TeriDee also argued that the Townships’ agreement was void because it effectively required Haring’s zoning board to rezone the land. The SBC invalidated the Act 425 Agreement between the Townships based on TeriDee’s first argument, and the trial court rejected the agreement based on TeriDee’s latter argument. Upon appeal, the Michigan Court of Appeals upheld the decision in favor of TeriDee, which the Townships appealed further at the State Supreme Court.

First, did the SBC, in reviewing an annexation petition, have the authority to invalidate a separate Act 425 agreement? Second, can an Act 425 agreement for the conditional transfer of land between localities include requirements for a party to enact specific zoning ordinances?

The Court unanimously decided the SBC did not have the authority to invalidate Clam Lake and Haring’s Act 425 agreement. Act 425 allows local government units to conditionally transfer property for economic development projects for no more than 50 years at a time. However, it makes no mention of giving the SBC the power to determine the validity of such a contract. Rather, the Court held that the SBC only has the authority to determine whether an Act 425 agreement is “in effect.” In this case, since the Township’s Act 425 agreement was properly filed in June 2013, the agreement was in effect. The statute clarifies that when an Act 425 agreement is “in effect,” no part of the contracted land may be transferred or annexed elsewhere, thus preempting TeriDee’s petition for annexation. Accordingly, the Supreme Court overturned the lower courts’ decision that incorrectly affirmed the SBC’s authority to invalidate Clam Lake and Haring’s Act 425 agreement, which in turn forestalled TeriDee’s annexation attempt. Furthermore, the Court also held that the Townships are allowed to include zoning requirements in their Act 425 agreement.