An unwanted benefit and bill: A recent special assessment case

Ben Bruner Iowa Real Estate & Land Use Iowa Taxation Law Dickinson Law Firm Des Moines Iowa

Posted on 06/24/2011 at 12:46 PM by Benjamin Bruner

In Gray v. City of Indianola (May 6, 2011), the Iowa Supreme Court examined the fairness of special assessments levied upon certain property owners.  The district court had found that the property owners had been assessed in excess of the special benefits received from the project and reduced the assessments.  The city appealed the district court's decision and the Supreme Court ultimately determined that the method, manner and amounts of the special assessment were (for the most part) proper, and upheld the bulk of the assessment. In this case, several property owners sued the city of Indianola, Iowa, challenging the special assessments specifically levied for the paving a gravel road abutting their property and installing a sidewalk along the road.  The plaintiffs owned residential acreages on the west edge of Indianola along a gravel road.  The school board decided to build an elementary school along the road and the city council decided to pave it. Said paving project included expanding and paving the road, reconfiguring ditches, and installing sidewalks on both sides.  The city council's decision to pave was based on the location of the school, and it may be worth noting that none of the owners of the residential acreages had requested that the road be paved.  Iowa Code section 384.61 addresses the assessment of costs incurred by municipalities in the development of public improvements, and in pertinent part sets forth the following: 

The total cost of a public improvement, except for paving that portion of a street lying between railroad tracks and one foot outside the tracks, or which is to be otherwise paid, must be assessed against all lots in the assessment district in accordance with the special benefits conferred upon the property, and not in excess of such benefits.  Iowa Code section 384.61

The Code states that a special assessment cannot exceed 25% of the value of the property.   The statutory scheme also provides limitations to 'ensure that individual property owners are not subsidizing the general benefits enjoyed by the public resulting from the improvements, particularly when street improvements are at issue' Horak Prairie Farm, 748 N.W.2d at 507.  In this particular case, the controversy centered on whether the property owners were assessed in excess of the special benefits they received from the improvement.  Specifically, the plaintiffs contended that the city inappropriately relied on a purely mathematically formula, the Flint formula, to spread the costs of the street paving project among the abutting landowners resulting in assessments which were higher than the special benefit conferred upon their properties. The owners contended that the city should have engaged in an individualized assessment of each parcel to gauge the benefits conferred upon the property, to ensure that they were not subsidizing the general benefits enjoyed by the public resulting from the improvements.  The court concluded that the substantial benefits derived by the general public from the paving project did not render the special assessment excessive, as the city did not assess the full cost of the project against the properties within the assessment district. Instead, (despite using the mathematical Flint formula as a starting point) at several points in the assessment process, the city reduced the assessment against the private landowners to balance the general benefits conferred upon the public with the special benefits conferred upon the abutting properties. The Supreme Court noted that property owners naturally are not happy about sharing the cost of public improvements through special assessments, particularly ones that they did not ask for. The court seems to marginalize the property owners' arguments of detriment caused by the project when it quoted the previous case,  Chicago R.I. & P. Ry. V. City of Centerville, stating 'it is natural for the average property owner to resent the burden thus laid upon him, and he easily persuades himself that the thing for which he is asked to pay is a detriment, rather than a benefit, to his land, and ordinarily it is not difficult for him to find plenty of sympathizing neighbors who will unite in supporting his contention.' 153 N.W. 106, 108 (1915). It should be noted that the court did, however, partially reduce the cost of the assessment for the sidewalk, ruling that the assessments for the same failed to account for the significant public benefit occasioned by the sidewalks.  Thus, you may not ask for it, but you may still very well be liable for a portion of the bill related to certain city improvements, as these costs and expenses are regularly assessed against the 'benefitted' property owners.

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