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.
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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
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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
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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.
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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,
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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.”
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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
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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,
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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.