Horak Prairie Farm, L.p. Vs. City Of Cedar Rapids Vs. City Of Cedar Rapids

IN THE SUPREME COURT OF IOWA
No. 41 / 06–1822
Filed May 9, 2008
HORAK PRAIRIE FARM, L.P.,
Appellant,
vs.
CITY OF CEDAR RAPIDS,
Appellee.
------------------------
LEONARD DOLEZAL,
Appellant,
vs.
CITY OF CEDAR RAPIDS,
Appellee.
Appeal from the Iowa District Court for Linn County, Robert E.
Sosalla, Judge.
Plaintiffs challenge the special assessments levied on their
properties for public improvements and the City’s use of RISE program
funds. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Dennis J. Mitchell of Meardon, Sueppel & Downer P.L.C.,
Iowa City, for appellants.
William J. Wright, Cedar Rapids, for appellee.
2
LARSON, Justice.
The plaintiffs appeal the district court’s ruling affirming special
assessments levied against their properties for improvements made to an
abutting roadway, arguing (1) the City of Cedar Rapids improperly
applied Revitalize Iowa’s Sound Economy (RISE) grant funds only to the
public’s portion of the improvement costs, and (2) the special
assessments were excessive. We affirm in part, reverse in part, and
remand.
I. Facts and Prior Proceedings.
On December 31, 2003, the City of Cedar Rapids adopted an
improvement project described as the “76th Avenue SW from 6th Street
to CRANDIC Railroad East of 18th Street, Pavement Improvements” (the
project). The project involved paving 76th Avenue SW from 6th Street
west to the CRANDIC Railroad, installing storm sewers, installing traffic
signals at the intersection of 76th Avenue SW and 6th Street, and adding
turn lanes at that intersection for east and westbound traffic on 76th
Avenue SW. Eleven properties, including parcels owned by Horak Prairie
Farm, L.P. and Leonard Dolezal (the plaintiffs), abutted 76th Avenue SW
to the north and south. The plaintiffs were specially assessed for the
improvements east of 6th Street and for the installation of the traffic
signals. The City applied for, and was issued, a RISE grant in connection
with the project and used that money to fund the public’s portion of the
project costs.
The plaintiffs appealed the special assessments, arguing the City
improperly applied the RISE funds only to the public’s share of the
project costs rather than applying it to the total cost of the project.
Additionally, the plaintiffs complained that the amount of the assessment
3
exceeded the special benefit conferred on their properties. The district
court entered judgment for the City, and the plaintiffs appealed.
II. Standard of Review.
The district court’s ruling on the RISE issue was based on an
interpretation of Iowa Code chapter 315 (2005). Accordingly, we review
the district court’s ruling on this issue for correction of errors at law.
State ex rel. Miller v. Smokers Warehouse Corp., 737 N.W.2d 107, 109
(Iowa 2007).
We review the district court’s ruling on the plaintiffs’ challenge to
the special assessments de novo. Uhlenhake v. City of Ossian, 418
N.W.2d 642, 647 (Iowa 1988). We give weight to the district court’s
findings, but are not bound by them. Id.
III. The RISE Issue.
The RISE program, established in Iowa Code chapter 315 and
administered by the Department of Transportation, was created to
promote economic development in Iowa through “the establishment,
construction, improvement and maintenance of roads and streets.” Iowa
Code § 315.3(1). The program is funded by a portion of the motor fuel
and special fuel excise taxes. Iowa Code § 315.2(1). Qualifying projects
can be funded in whole or in part by RISE money. Iowa Code §§ 315.5,
315.6. In order to fully pay for any particular project, RISE funds can be
combined with money from other sources such as a primary road fund,
the sale of general obligation bonds, other city or county revenues, or
money from participating private parties. Iowa Code § 315.6(1). The
issue presented in this case is whether RISE funds granted for a
particular project can be used solely to pay for the public’s portion of the
project costs or whether such funds must also be allocated to cover a
4
portion of the costs incurred by private landowners by way of a special
assessment. This is an issue of first impression.
The general purpose of the RISE program is to fund construction
and improvement of public roadways. Iowa Admin. Code r. 761—
163.4(b). Nothing in Iowa Code chapter 315 or our administrative code
requires that RISE funds be applied to the entire costs of a project,
including those costs allocated to private landowners as special
assessments. In fact, the administrative code specifically prohibits use of
RISE funds for “private road projects or for any other private purpose.”
Iowa Admin. Code r. 761—163.4(b). Applying RISE monies only to that
portion of a project benefiting the public is consistent with the general
purpose of the RISE program. Requiring that a portion of the costs
allocated to private landowners as a result of the special benefit received
by those landowners be paid by RISE funds is inconsistent with the
purpose of the RISE program and administrative rule 761—163.4(b).
Moreover, applying RISE funds only to that portion of a project
benefiting the public is consistent with the purpose of the special-
assessment process at issue in this case. “Special assessments are a
tool given to cities to assist them in financing public improvements.”
City of Davenport v. Shewry Corp., 674 N.W.2d 79, 84 n.1 (Iowa 2004).
Special assessments require private landowners to reimburse the city for
the cost of public improvements that specially benefit the landowners.
Id.; Uhlenhake, 418 N.W.2d at 646. Requiring that RISE funds, created
specifically to fund public improvements, be applied toward those costs
specially assessed to private landowners would be inconsistent with the
underlying goal behind special assessments—to ensure that private
landowners pay their fair share of improvements specially benefiting
their properties.
5
The plaintiffs argue that applying RISE money only to the public’s
portion of improvement costs allows the City to profit by permitting the
City to avoid paying its share of the costs. We do not agree. This is not a
situation in which the City received RISE money in excess of the City’s
payment obligations under the project. See, e.g., Kragnes v. City of
Des Moines, 714 N.W.2d 632, 640–41 (Iowa 2006) (discussing the
difference between a permissible fee and an impermissible tax: “ ‘If [a
fee] is calculated not just to recover a cost imposed on the municipality
or its residents but to generate revenues that the municipality can use to
offset unrelated costs or confer unrelated benefits, it is a tax, whatever
its nominal designation.’ ”) (quoting City of Hawarden v. US West
Comm’ns, Inc., 590 N.W.2d 504, 509 (Iowa 1999)). There is no evidence
in the record suggesting that the City retained a portion of the RISE
funds granted for this particular project and applied those funds to other
uses. All evidence in the record shows the RISE funds received by the
City were properly used to pay the costs of this particular project. We
affirm the district court’s ruling on this issue.
IV. The Special Assessment Issue.
The plaintiffs also complain that the project costs specially
assessed to their properties were excessive.
Iowa Code section 384.38 permits a city to assess private
properties for the cost of public improvements. See Shewry Corp., 674
N.W.2d at 84 n.1. However, the costs assessed to a property must not
exceed the special benefit conferred upon the property by the
improvements, nor can the assessment exceed twenty-five percent of the
value of the property. Iowa Code §§ 384.61, 384.62(1). These limitations
ensure that individual property owners are not subsidizing the general
benefits enjoyed by the public resulting from the improvements,
6
particularly when street improvements are at issue. See generally
Goodell v. City of Clinton, 193 N.W.2d 91, 94 (Iowa 1971); Milton O. &
Phyllis A. Thorson Revocable Estate Trust v. City of West Des Moines, 531
N.W.2d 647, 650 (Iowa Ct. App. 1995) (“[S]treet paving projects usually
confer both general and special benefits, and the abutting property
owners are not required to pay for the general benefits accruing to the
community at large.”).
We have established a number of presumptions to guide our review
of a city’s special assessment for public improvements. “[T]he city
council’s determination that property will be specially benefited by an
improvement is conclusive.” Uhlenhake, 418 N.W.2d at 648–49; see also
Goodell, 193 N.W.2d at 93. A property owner cannot generally argue that
he has not received any benefit from a public improvement; rather, a
property owner must show that the benefit received was not as great as
that determined by the city. Knudsen v. City of Des Moines, 254 N.W.2d
1, 3 (Iowa 1977); Gingles v. City of Onawa, 241 Iowa 492, 494–95, 41
N.W.2d 717, 718 (1950) (“ ‘Speaking generally, there is a fair
presumption that all real estate receives some degree of benefit from the
permanent improvement of a street upon which it abuts. It is upon such
presumption that the whole system of special assessments for local
improvements is justified and sustained.’ ”) (quoting Chicago, R.I. &
P. Ry. v. City of Centerville, 172 Iowa 444, 447, 153 N.W. 106, 107, 154
N.W. 596 (1915)). We presume that the amount of the city’s assessment
is correct and does not exceed the special benefit conferred on the
property by the improvement. Uhlenhake, 418 N.W.2d at 647. “The
burden is on the protesting property owner to show his assessment is
excessive by evidence which includes proof of the actual benefit to his
property. In the absence of such evidence, the assessment must stand.”
7
Goodell, 193 N.W.2d at 93. If the property owner carries his burden, the
court may reduce the amount of the assessment. Uhlenhake, 418
N.W.2d at 647. Unfortunately, mathematical and analytical certainty is
usually impossible in these cases, and thus, we must rely on
approximations to determine the correct amount of the assessment. See
Knudsen, 254 N.W.2d at 4; Spring Valley Apartments, Inc. v. City of
Cedar Falls, 225 N.W.2d 129, 131 (Iowa 1975); Goodell, 193 N.W.2d at
95. The ultimate question is whether the assessment “represents a fair
proportional part of the total cost.” Rood v. City of Ames, 244 Iowa 1138,
1158, 60 N.W.2d 227, 238 (1953).
In the present case, the plaintiffs’ properties were each assessed
$49,270 for the following improvements made to the abutting roadway
and intersection: installation of traffic signals, installation of turn lanes,
grading and drainage work incidental to installation of the traffic signals
and turn lanes, and assessment and consulting fees. Both properties are
currently zoned for agricultural use, but the highest and best use of both
properties is for future development for commercial or industrial use.
The plaintiffs’ properties clearly received a special benefit from the
improvements. The future use of the properties for commercial or
industrial use necessitated the traffic control provided by the traffic
signals and turn lanes. It is well-settled Iowa law that a property can be
assessed for improvements based on the benefit to the future use of the
property. Spring Valley Apartments, Inc., 225 N.W.2d at 131–32; Mulford
v. City of Iowa Falls, 221 N.W.2d 261, 266 (Iowa 1974) (“The
consideration of future uses, reasonably to be anticipated, may be
considered in determining the benefit to property to be assessed.”);
Goodell, 193 N.W.2d at 93 (“In considering the benefits flowing from a
special improvement, it is proper to consider future uses and
8
expectations as well as present use to which the property is put.”). As we
have said,
“the benefits to be derived in such cases are ordinarily not
instant upon the inception or completion of the
improvement, but materialize with the developments of the
future. They are nonetheless benefits because their full
fruition is postponed, or because the present use to which
the property is devoted is not of a character to be materially
affected by the improvement.”
Beh v. City of West Des Moines, 257 Iowa 211, 222, 131 N.W.2d 488, 495
(1964) (quoting Chicago, R.I. & P. Ry., 172 Iowa at 449, 153 N.W. at 108).
Additionally, any ingress and egress from these properties in the future
will be enhanced by the gaps in traffic created by the improvements. We
recognize, as we have in the past, the plaintiffs’ properties, as
agricultural properties, “[do] not receive the same immediate benefit from
public improvements as does other land.” Uhlenhake, 418 N.W.2d at
647. It is for this reason our legislature enacted Iowa Code section
384.62. Section 384.62(4)(d) allows landowners, such as the plaintiffs,
to defer payment of a special assessment until such time as the property
is no longer classified as agricultural land.
Determining that a property specially benefits from a public
improvement is a relatively simple exercise when compared to
determining the value of that special benefit for assessment purposes.
See Spring Valley, 225 N.W.2d at 131 (“[T]he task of determining what
assessment for special improvement is proper is ‘difficult, complicated
and technical,’ one which has no precise mathematical answer.”) (quoting
Mulford, 221 N.W.2d at 268). Calculating the amount of special benefit
received by a property is an inexact science. The City set forth a detailed
description of its assessment procedures. The City determined that the
public benefit of the traffic signals was fifty percent and, as a result,
9
assessed each of the four abutting landowners, including the plaintiffs,
twelve and one-half percent of the cost of installing the traffic signals.
Additionally, each of the plaintiffs was assessed twenty-five percent of the
cost of installing the turn lanes abutting their property. These
assessments, as well as the assessments for assessment fees and
consulting fees, are reasonable. “ ‘[T]he final and decisive inquiry is
whether the assessment when made is just and equitable and bears
some reasonable proportion to the benefits which the property derives
from the improvements for which payment is to be made.’ ” Knudsen,
254 N.W.2d at 4 (quoting Early v. City of Ft. Dodge, 136 Iowa 187, 189–
91, 113 N.W. 766, 767 (1907)). We think, in this case, the City’s special
assessments on the plaintiffs’ properties met this standard. The
plaintiffs have failed to carry their burden to show the assessments are
excessive. We affirm the district court’s ruling on this issue.
Interestingly, the City assessed the plaintiffs’ properties for 100%
of the cost of the grading and drainage work that was incidental to
installation of the turn lanes and traffic signals. The public benefit of the
traffic signals and turn lanes was fifty percent. Because installation of
the turn lanes and traffic signals necessitated the grading and drainage
work, the public benefit of the grading and drainage work should also be
fifty percent. The plaintiffs carried their burden to show the special
assessment for the grading and drainage work exceeded the special
benefits conferred on the plaintiffs’ properties. We reverse the district
court’s ruling on this narrow issue and remand for the limited purpose of
reducing the special assessments for the grading and drainage work on
the plaintiffs’ properties by fifty percent.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.