Interchange Partners, L.L.C. v. City of West Des Moines

IN THE COURT OF APPEALS OF IOWA

No. 17-0082
Filed April 18, 2018

INTERCHANGE PARTNERS, L.L.C.,
Plaintiff-Appellee,

vs.

CITY OF WEST DES MOINES, IOWA,
Defendant-Appellant.
________________________________________________________________

Appeal from the Iowa District Court for Dallas County, Paul R. Huscher,

Judge.

The City of West Des Moines appeals the district court’s ruling invalidating

the ordinances imposing a connection fee levied by the City. AFFIRMED.

Ivan T. Webber, James R. Wainwright, and Maria E. Brownell of Ahlers &

Cooney, P.C., Des Moines, for appellant.

George A. LaMarca and Ryan C. Nixon of LaMarca Law Group, P.C., Des

Moines, for appellee.

Charles F. Becker and Espnola F. Cartmill of Belin McCormick, P.C., Des

Moines, for amicus curiae, Home Builders Association of Greater Des Moines.

Considered by Vogel, P.J., and Potterfield and Mullins, JJ.
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VOGEL, Presiding Judge.

At the heart of this litigation is whether a city can finance the construction of

roadway culverts by establishing a district under Iowa Code section 384.38(3)(a)

(2015), then collect fees from certain properties within the district. The City of West

Des Moines (the City), enacted ordinances to allow for this form of financing.

Interchange Partners, L.L.C. (Interchange) brought suit to contest the City’s action.

The district court ruled in Interchange’s favor, concluding (1) the property does not

have the required connection to a city utility, (2) the placement of culverts under

the City’s streets does not constitute a city sewer, and (3) the connection fee is not

equitably apportioned among all persons in the district benefiting from the culverts.

The City appeals the district court’s decision. As an initial matter, the City

claims the district court, and this court on appeal, lack subject matter jurisdiction

because certiorari is the exclusive means to challenge the City’s ordinance and

Interchange’s failure to petition for a writ of certiorari within thirty days of the

enactment of Ordinance No. 2117 is fatal. The City also claims the district court

erred in finding Ordinance Nos. 2024 and 2117 were illegal because the City validly

created a city sewer utility, properties within the district have the proper connection

to this utility, and the calculation and apportionment of the fee is equitable.1

Concluding we do have jurisdiction to hear the appeal and the district court did not

err in interpreting Iowa Code section 384.38(3)(a), we affirm the district court’s

ruling.

1 The amicus brief filed by The Home Builders Association of Greater Des Moines in this
appeal generally supports the position of Interchange.
 3

I. Background Facts and Proceedings

On October 14, 2013, the City approved and passed Ordinance No. 2006

“to establish the method and requirements for the establishment of individual

stormwater connection fee districts to fund the design and construction of certain

stormwater drainage facilities on major streets.” The stated intent of the ordinance

includes “to set forth the method of recovery of proportional cost shares from those

property owners who develop property within the” district.

Pursuant to Iowa Code section 384.38(3)(a), and after notice and public

hearing regarding Ordinance No. 2024, the City established the Sugar Creek

Stormwater Connection Fee District on April 11, 2014. The ordinance requires

payment of the connection fee pursuant to the following:

1. For property being platted the fee is due and payable before
approval of the final plat.
2. For property subject to a site plan the fee is due and
payable before approval of the site plan.
3. For all other property the fee is due and payable before
issuance of a building permit.

No fees were assessed to properties already developed or land considered

to be undevelopable. Possibly due to only a portion of its property being located

within the district, Interchange was not provided notice of Ordinance No. 2024. On

October 5, 2015, the City enacted Ordinance No. 2117, which properly notified

Interchange and confirmed its property is included in the district and, thus, subject

to the connection fee.

The City intended to use connection fees from the district to fund the

construction of seventeen structures—mostly roadway culverts—along natural

drainage channels. The City acknowledged the new structures will not increase or
 4

decrease the runoff capacity from Interchange’s properties, and the new structures

will not improve the storm water flow capacity of the existing creek network.

On October 23, 2015, Interchange challenged the enactment of Ordinance

No. 2117 “by and through Ordinance No. 2024” by filing a petition with the district

court pursuant to Iowa Code section 384.66(1) asserting its “connection fee

district” was wholly illegal, null, and void under Iowa Code section 384.38(3)(a).2

Specifically, Interchange asserted the improvements, to be financed by the fees,

are not city sewer or water utilities, Ordinance No. 2117 does not service its

property because there is no utility to which its property could physically connect,

and the assessment of the fees is inequitable across the newly created district.

The case proceeded to a bench trial before the district court where the court

ruled in favor of Interchange. The district court held the City’s Ordinances Nos.

2024 and 2117 are not compliant with the Iowa Code because the property does

not have the required connection to a city utility, the placement of culverts under

the City’s streets does not constitute a city sewer, and there is no equitable

apportionment of the costs as each person benefited by the culverts in the district

is not required to pay the connection fee.

The City appeals.

II. Standard of Review

Review of rulings on subject matter jurisdiction is for correction of errors at

law. Klinge v. Bentien, 725 N.W.2d 13, 15 (Iowa 2006). The district court’s ruling

on the connection fee issue was based on an interpretation of Iowa Code chapter

2
The petition was later amended on June 6, 2016.
 5

384. Accordingly, we review the district court’s ruling for correction of errors at

law. State ex rel. Miller v. Smokers Warehouse Corp., 737 N.W.2d 107, 109 (Iowa

2007). Our review of the equity of property assessments is de novo. Nelson v.

City of Hampton, 802 N.W.2d 224, 230 (Iowa 2011). We give weight to the findings

by the district court but are not bound by them. Id.

III. Subject Matter Jurisdiction

The City asserts this court lacks subject matter jurisdiction over the case

because the Iowa Code does not provide a specific means for appealing

connection fees. It claims Interchange’s exclusive remedy is to seek a writ of

certiorari to test the legality of the City’s quasi-judicial proceeding in enacting or

adopting Ordinance No. 2117. See Iowa R. Civ. P. 1.1402; Sergeant Bluff-Luton

Sch. Dist. V. City Council of Sioux City, 605 N.W.2d 294, 297 (Iowa 2000). Subject

matter jurisdiction can be raised at any time. See Klinge, 725 N.W.2d at 16.

Therefore, because Interchange did not follow its only available course of action

through seeking a writ of certiorari, the City argues this case must be dismissed.

Iowa Code section 384.66 provides a test of regularity for persons holding

an interest in property subject to a special assessment. Iowa Code § 384.66.

“Special assessment” is not defined in chapter 384. Generally, a special

assessment requires “private landowners to reimburse the city for the cost of public

improvements that specially benefit the landowners.” Horak Prairie Farm, L.P. v

City of Cedar Rapids, 748 N.W.2d 504, 507 (Iowa 2008) (citations omitted). As

discussed below, section 384.38(3)(a) allows cities to impose “fees” on affected

landowners “for the connection of property to the city sewer or water utility.” Iowa
 6

Code § 384.38(3)(a). Charging for the benefit of connecting to a utility is generally

consistent with a special assessment.

Iowa Code sections 384.38 and 384.66 are both located in chapter 384,

division IV. This division IV is titled “Special Assessments,” and section 384.38 is

titled “Certain costs assessed to private property.” When Iowa enacted 384.38(3),

the legislature explained the “bill authorizes a city . . . to establish one or more

special assessment districts within the city and adopt schedules of fees to cover

the cost of connecting a city sewer or water utility to properties serviced by the

utility.” H.F. 2343, 75th G.A., 2d Sess. explanation (1994). An explanation

attached to a bill suggests the legislative intent. Iowa Ins. Institute v. Core Group

of Iowa Ass’n for Justice, 867 N.W.2d 58, 76 (Iowa 2015) (citations omitted). By

placing section 384.38(3) in the Special Assessments division, and by explaining

section 384.38(3) allows the establishment of special assessment districts, the

legislature showed it intended for “fees” under section 384.38(3) to be “special

assessments” subject to review under 384.66.

The City notes other special assessments in chapter 384, division IV, use

different procedures. Unlike section 384.38(3), other special assessments may

involve a preliminary and final assessment plat and schedule, lot valuations, a

resolution of necessity, certification to the county treasurer, agricultural

deferments, and payment to the country treasurer. Iowa Code §§ 384.42–.65.

However, the City does not explain why any of these differences require separating

section 384.38(3) from other special assessments under chapter 384, division IV,

for purposes of review under section 384.66.
 7

The City enacted ordinance No. 2006 on October 14, 2013, setting up the

district. On October 5, 2015, the City enacted Ordinance No. 2117 notifying

Interchange that its property is located within the district. On October 23, 2015,

Interchange filed its petition. Despite filing the petition with the incorrect caption,

Interchange clearly challenged the validity of the ordinance.3 Because Interchange

filed its petition within thirty days of the City’s enactment of the new ordinance, and

because this petition protesting a special assessment is authorized under Iowa

Code section 384.66, the district court had subject matter jurisdiction to hear the

case, as do we on appeal.

IV. City Ordinances

The City asserts the district court erred in its interpretation of section

384.38(3)(a). The district court found (1) Interchange’s property is not “connected”

to a city utility just because its natural water drainage eventually flows into the

newly constructed culverts; (2) even if a connection exists, the culverts are not a

“city sewer utility”; and (3) even if the culverts were a city sewer utility, the fees

charged are not equitably assessed across the district.

Our analysis begins with the general framework of chapter 384, which

governs city finances. Grove v. City of Des Moines, 280 N.W.2d 378, 379 (Iowa

1979). Section 384.38 permits a city to assess private properties for the cost of

3
A district court serves in an appellate capacity when reviewing the actions of an inferior
tribunal in certiorari proceedings. See Sueppel v. Eads, 156 N.W.2d 115, 116 (Iowa
1968). The misstep of filing an appeal, rather than petitioning for writ of certiorari, is
ordinarily not fatal to our review. See Shannon v. Hansen, 469 N.W.2d 412, 414 (Iowa
1991); see also State v. Bartley, 797 N.W.2d 608, 610 (Iowa Ct. App. 2011). We proceed
as if a petition for writ of certiorari were filed. Iowa R. App. P. 6.108; Hearity v. Iowa Dist.
Ct., 440 N.W.2d 860, 862 (Iowa 1989).
 8

public improvements. Iowa Code § 384.38; Horak Prairie Farm, L.P., 748 N.W.2d

at 507.

1. A city may assess to private property within the city the cost
of construction and repair of public improvements within the city, and
main sewers, sewage pumping stations, disposal and treatment
plants, waterworks, water mains, extensions, and drainage conduits
extending outside the city.
...
3. a. A city may establish, by ordinance or by resolution
adopted as an ordinance after twenty days’ notice published in
accordance with section 362.3, and a public hearing, one or more
districts and schedules of fees for the connection of property to the
city sewer or water utility. If the governing body directs that notice
be made by mail, the notice shall be as required in section 384.50.
Each person whose property will be served by connecting to the city
sewer or water utility shall pay a connection fee to the city. The
ordinance shall be certified by the city and recorded in the office of
the county recorder of the county in which a district is located. The
connection fees are due and payable when a utility connection
application is filed with the city. A connection fee may include the
equitable cost of extending the utility to the properties, including
reasonable interest from the date of construction to the date of
payment. All fees collected under this subsection shall be paid to the
city treasurer. The moneys collected as fees shall only be used for
the purposes of operating the utility, or to pay debt service on
obligations issued to finance improvements or extensions to the
utility.

Iowa Code § 384.38. “An ordinance is presumed to be reasonable and valid, and

the burden is upon one who attacks it to show it is not.” Inc. Town of Carter Lake

v. Anderson Excavating & Wrecking Co., 241 N.W.2d 896, 901 (Iowa 1976)

(citations omitted).

A. City Sewer Utility

The City first argues its planned system of culverts create a city sewer utility

under section 384.38(3)(a). As the district court noted, the planned culverts simply

“permit the continued natural flow of storm water drainage through covered

passageways, [which] does not constitute a city sewer utility.” We agree that
 9

roadway culverts do not constitute a sewer system or utility that provide a special

benefit associated with a connection fee.

Under section 384.38(1), a city may issue assessments for “the cost of

construction and repair of public improvements within the city, and main sewers,

sewage pumping stations, disposal and treatment plants, waterworks, water

mains, extensions, and drainage conduits extending outside the city.” Iowa Code

§ 384.38(1); see also Home Builders Ass’n of Greater Des Moines v. City of W.

Des Moines, 644 N.W.2d 339, 346 n.2 (Iowa 2002). Section 384.37 provides

definitions for a public improvement, district, sewer, and sewer system:

4. “District” means the lots or parts of lots within boundaries
established by the council for the purpose of the assessment of the
cost of a public improvement.
....
19. “Public improvement” includes the principal structures,
works, component parts and accessories of any of the following:
a. Sanitary, storm and combined sewers.
b. Drainage conduits, channels and levees
....
e. Sewage pumping stations, and disposal and treatment
plants.
f. Underground gas, water, heating, sewer and electrical
connections located in streets for private property.
....
22. “Sewer” means structures designed, constructed and
used for the purpose of controlling or carrying off streams, surface
waters, waste or sanitary sewage.
23. “Sewer systems” are composed of the main sewers,
sewage pumping stations, treatment and disposal plants, lateral
sewers, drainage conduits or channels and sewer connections in
public streets for private property.

These statutes allow a city to assess private property owners for the costs

of a variety of public improvements within the city.4 See Iowa Code § 384.38(1).

4
Interchange asserts the intent behind the connection fee in this case was to pave roads
for future development in West Des Moines. Under chapter 384, the City can assess, via
 10

However, a city may only charge a connection fee for costs associated with a “city

sewer or water utility.” Id. § 384.38(3)(a).

As the district court interpreted, a “sewer” is a structure designed,

constructed, and used to control or carry off water. See id. § 384.37(22). The

City’s planned culverts do not create a new structure to control or carry off surface

water. See id. Instead, the planned culverts simply maintain the properties’

access to surface water drainage via the same creek system the properties have

relied upon for hundreds if not thousands of years. Interchange’s expert testified

the planned roadway culverts would not function as sewers. The City’s expert

declined to say the planned culverts are city sewer or water utilities, stating, “that

wasn’t a question I was asked to—to look into.” Finally, the City admitted in an

interrogatory that, “Construction of under-road culverts and bridges downstream

from [Interchange’s] property will neither increase nor decrease the runoff capacity

from [Interchange’s] property.” Therefore, the district court did not err in

determining the City’s planned improvements do not qualify as a city sewer utility.

See id. § 384.38(3)(a). While the City is authorized to assess private property for

the cost of public improvements under section 384.38(1), the City may not charge

connection fees for the improvements at issue here. See id.

B. Connection to City Sewer or Water Utility

Second, the City argues it has provided a “connection of [the Interchange]

property to the city sewer or water utility.” Id. The City urges that simply allowing

special assessments, the cost of public improvements within the city, which includes
“street grading, paving, graveling, macadamizing, curbing, guttering, and surfacing with
oil, oil and gravel or chloride.” See Iowa Code §§ 384.37, .38(1).
 11

water to drain from a property through its planned culverts creates the required

“connection” to its sewer.

As explained above, the planned improvements do not constitute a “sewer.”

Accordingly, the City cannot provide the required “connection” to a sewer because

the planned improvements do not involve a sewer. See id.

Even if the planned improvements constitute a “sewer,” the required

connection is still missing. Once a city sewer or water utility district is established,

the connection fee is due and payable when the utility connection application is

filed with the city. Id. The fact that a connection application is required indicates

the property owner must do something to request a connection of the property to

the utility; no connection application is needed if the property is automatically

connected. As shown above, water has drained from Interchange’s properties into

the existing creek system for hundreds if not thousands of years. The planned

improvements merely allow this drainage to continue. As the district court found,

property is not connected to a sewer merely because water drains from the

property and “at some point passes through a culvert under a city street.”

Therefore, even if the planned improvements constitute a sewer, the district court

did not err when it found the City has not provided a connection of the property at

issue to this sewer. See id.

C. Equitable Fee

Finally, assuming the City has provided a connection to a sewer, the City

argues its calculation and apportionment of the connection fee is equitable. Each

person served by a city sewer or water utility must pay a connection fee. Id. The

“connection fee may include the equitable cost of extending the utility to the
 12

properties.” Id. The City contends the connection fee is imposed only when a

connection application is filed, and the fee is calculated by reference to the amount

of developable land within the district.

As an initial matter, “connection fees are due and payable when a utility

connection application is filed with the city.” Id. This is consistent with the court’s

conclusion that a connection is required; if a property could properly drain its land

without a connection—for example, if a property naturally drained into a nearby

stream—then it would never file a connection application and never be charged a

fee. The City realized this problem, so it altered the way it collects fees under

Ordinance No. 2024, requiring the fee was due and payable before approval of the

final plat, before approval of the site plan, or before issuance of a building permit.

Collecting the fee without a connection application is inconsistent with the plain

language of section 384.38(3)(a).

Additionally, the City asserted the remaining developable land in the district

requires drainage improvements and it is not irrational for Interchange to contribute

to the drainage benefit for the entire area. Again, the district court turned to the

plain language of the statute, which states “each person whose property will be

served by connecting to the city sewer or water utility shall pay a connection fee to

the city.” Id. The district court undertook a benefits analysis of the properties

affected by the ordinance. See Horak Prairie Farm, 748 N.W.2d at 509 (“[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.”). The court

concluded there was no equitable apportionment based on benefits received by
 13

the landowners because the ordinance charged a fee only to land that could still

be developed. This reduced the amount of area subject to the assessment as the

remaining developable land bears the entire weight of the fee.5 Because the City

reduced the amount of the area subject to the assessment and because the

culverts benefited the district generally, Interchange was charged a

disproportionally high fee. Therefore, the district court did not err in its

determination that the fee is inequitable. See Iowa Code § 348.38(3)(a).

IV. Conclusion

Because the City’s connection fee has the effect of a special assessment

provided for in the Iowa Code, Interchange properly appealed the validity of the

ordinance to the district court and the district court had subject matter jurisdiction.

In addition, the planned culverts are not a city sewer utility, Interchange did not

apply for nor does the property have the required connection to a city sewer or

water utility, and the connection fee is inequitable because it benefits the district

generally while only charging certain landowners. We affirm the ruling of the

district court.

AFFIRMED.

5
The district court noted the “City reduced the area subject to the per acre assessment
from 2500 acres to approximately 1500 acres.”