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Nebraska Supreme Court Expands Municipalities’ Authority to Annex Adjacent Agricultural Land

on Thursday, 1 July 2021 in Dirt Alert: David C. Levy, Editor

In two decisions it issued on May 28, 2021, the Nebraska Supreme Court made significant new law regarding annexations.  It clarified the standard under which a municipality may annex adjacent agricultural land.  It also set forth the factors that make agricultural land urban or suburban in character, thus eligible for annexation.

Nebraska law authorizes a municipality to “annex,” or include within its limits, any contiguous or adjacent land that is urban or suburban in character.  See sections 16‑117(1),16-130(2), 17-405.01(1) and 17‑407(2)[1].  A municipality may not annex “agricultural lands which are rural in character.”  Id

In County of Sarpy v. City of Gretna, 309 Neb. 320 (2021) and Darling Ingredients Inc. v. City of Bellevue, 309 Neb. 338 (2021), the Supreme Court clarified prior precedent suggesting that a municipality could not annex unplatted and unimproved agricultural land.  See Wagner v. City of Omaha, 156 Neb. 163 (1952).  The recent opinions underscore an evolving body of Nebraska law supporting a municipality’s right to annex adjacent agricultural land it designates for future development.  We summarize them below.

County of Sarpy v. City of Gretna, 309 Neb. 320 (2021).

In 2017, the City of Gretna (“Gretna”) annexed undeveloped agricultural land near the Highway 370 corridor in Sarpy County, Nebraska (the “Property”).  Sarpy County (“Sarpy”) sued to invalidate the annexation.  Citing Wagner, Sarpy argued the Property was rural in character, thus Nebraska law prohibited its annexation.

The Sarpy County District Court agreed with Sarpy and invalidated the annexation.  Gretna appealed to the Supreme Court. 

The sole issue before the Supreme Court was whether the Property was rural in character.  It found that the Property was urban or suburban in character.  It reversed the decision of the District Court and validated the annexation.

The Court emphasized that Nebraska law does not prohibit annexation of agricultural lands, only those rural in character.  See Bierschenk v. City of Omaha, 178 Neb. 715 (1965).  In distinguishing Wagner, the Court held that it must consider more than the Property’s current use or development.  It must consider the location of the Property, its character, its proximity to growth areas, its degree of development, and its contemplated future development.  See Sullivan v. City of Omaha, 183 Neb. 511 (1968); Voss v. City of Grand Island, 186 Neb. 232 (1970); Swedlund v. City of Hastings, 243 Neb. 607 (1993); SID No. 196 of Douglas County v. City of Valley, 290 Neb. 1 (2015).  

Gretna argued the Property was urban or suburban in character, thus eligible for annexation.  First, Gretna outlined existing plans for future development of the Property, including an Interstate 80 interchange and community entrance.  Gretna also highlighted development of the surrounding areas, including a new elementary school opening near the Property in fall 2021. 

Second, Gretna alleged commercial activity at a seasonal recreation business on the Property called Vala’s Pumpkin Patch.  In Plumfield Nurseries, Inc. v. Dodge County, 184 Neb. 346 (1969), the Supreme Court held that a business, accessed by gravel roads, on an unplatted agricultural parcel, was still a business and was therefore urban in character.

Third, Gretna offered an appraisal showing the highest and best use of the Property was residential development.  In Holden v. City of Tecumseh, 188 Neb. 117 (1972), the Supreme Court considered a residential or commercial land value in excess of agricultural land value as evidence of urban or suburban character.  The Gretna Court concurred but disclaimed that land value alone does not determine character.

The Court ruled for Gretna on each of these arguments.  It stated “[t]he city, the county, the state, and other governmental agencies all have plans to develop the area because it is the fastest growing area in Nebraska.  These are characteristics ‘belonging to a city’…and are accordingly urban or suburban in nature.” 

As a matter of first impression, the Court declined to consider “greenbelt” tax status as evidence of rural character.  Greenbelt status authorizes special valuation of certain agricultural land for real property taxes.  See section 77-1344.  The Court found no legislative intent for greenbelt status to restrict a municipality’s annexation authority.

Darling Ingredients Inc. v. City of Bellevue, 309 Neb. 338 (2021).

In 2019, the City of Bellevue (“Bellevue”) annexed undeveloped agricultural land near Offutt Air Force Base in Sarpy County, Nebraska (the “Property”).  Landowners Darling, Inc. and Frank Krejci (collectively, “Landowners”) sued to invalidate the annexation. 

Landowners argued that Nebraska law prohibited the annexation.  First, citing Wagner, Landowners argued the Property was rural in character.  Second, Landowners argued the Property was not contiguous or adjacent to Bellevue.  Third, Landowners argued that Bellevue annexed the Property for an improper purpose.

The Sarpy County District Court agreed with Landowners and invalidated the annexation.  Bellevue appealed to the Supreme Court. 

There were two issues before the Court: (i) whether the Property was rural in character, and (ii) whether the Property was contiguous or adjacent to Bellevue.  It did not consider the third issue, Landowners’ improper purpose challenge, as the District Court opinion did not address the issue.

The Supreme Court found that the Property was urban or suburban in character and that it was contiguous or adjacent to Bellevue.  It reversed the decision of the District Court, and remanded the case for further proceedings regarding Landowners’ improper purpose challenge.

1. The Property is Urban or Suburban in Character.

Landowners argued that the Property was rural in character.  The Court cited Gretna and the doctrinal progression above.  Accordingly, it considered the location of the Property, its character, its proximity to growth areas, its degree of development, and contemplated future development.

The Court highlighted urban features of the surrounding area including Highway 75, residential subdivisions, an elementary school, and Offutt Air Force Base (employing approximately 10,000 people).  It also identified ongoing commercial activity, including a commercial storage facility, industrial establishments, and a former baseball complex. 

The Court noted that Landowners did not use the Property solely for agricultural purposes.  Darling owned and operated an organic fertilizer plant on the Property.  Krejci listed “small industrial lots” on the Property for sale.  The listing referenced exposure to thousands of cars on major thoroughfares as a feature. 

The Court determined the Property urban or suburban in character.  As in Gretna, it declined to consider the greenbelt tax status of any subject parcels as evidence of rural character.

2. The Property is Contiguous or Adjacent to Bellevue.

Nebraska law authorizes annexation of land that is urban or suburban in character if it is “contiguous” or “adjacent” to a municipality.  “Contiguous” or “adjacent” means adjoining, touching, and sharing a common border.  See County of Sarpy v. City of Papillion, 277 Neb. 829 (2009).  A municipality may annex several tracts as long as one tract is “substantially adjacent” to the municipality and the other tracts are substantially adjacent to each other.  Id.

Landowners argued the Property was not contiguous or adjacent to Bellevue.  Instead, Landowners argued the Property was contiguous only to an “island” of Bellevue, or a portion that does not share a border with the rest of the corporate limits.  They argued that the 2009 “island annexation” was improper and the Court should not consider the island to determine whether the Property is contiguous or adjacent.

The Court rejected Landowners’ argument.  It presumed the prior annexation valid as the one‑year statute of limitations to challenge it expired prior to the appeal.  Accordingly, it found that the Property shared a common border with Bellevue and the parcels were substantially adjacent to one another. 

3. The District Court Must Consider the Annexation’s Purpose.

Landowners argued to the District Court that Bellevue annexed the Property solely to increase tax revenue.  Under Nebraska law, a municipality may not annex land solely to increase tax revenue.  SID No. 196 of Douglas County v. City of Valley, supra, citing Witham v. City of Lincoln, 125 Neb. 366 (1933).  The District Court did not address Landowners’ improper purpose challenge, finding the other issues dispositive.  Accordingly, the Supreme Court remanded the case to the District Court to consider this challenge.

[1] All references are to the Nebraska Revised Statutes.

Tanner C. Whited

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