IN THE IOWA DISTRICT COURT, IN AND FOR DUBUQUE COUNTY

Transcription

1 IN THE IOWA DISTRICT COURT, IN AND FOR DUBUQUE COUNTY RAUEN & RAUEN DEVELOPMENT, LLC, DENNIS J. RAUEN, VIRGINIA A. RAUEN, ERTL LIMITED PARTNERSHIP, and MOLO PETROLEUM, LLC, Plaintiffs, Vs. Case No EQCV JUDGMENT CITY OF FARLEY, IOWA, Defendant. This matter comes before the Court for trial pursuant to a petition in equity filed on July 28, Plaintiffs appeared personally with Attorney Todd Locher. Defendant appeared through representative and counsel Kirk Schueller. The issues were tried to the Court commencing September 20, The parties requested that the record remain open for purposes of filing post-trial briefs. The parties additionally requested that the transcript of the trial be prepared by the court reporter for purposes of submission with the post-trial motions. The Court established deadlines for the briefs to be filed. Subsequent thereto, a motion to strike was filed by the Defendant. The Court set a hearing on this matter, which occurred on March 2, The entry of this judgment will resolve the motion to strike and the relief requested in the petition. FINDINGS OF FACT Rauen & Rauen Development, LLC (Rauen) is an Iowa limited liability corporation owning real estate situated in Farley, Iowa, legally described as follows: Lot 2 (2) of Beck Industrial Subdivision, City of Farley, Iowa, according to the recorded plat thereof, subject to roadway and easements of record. Dennis Rauen and Virginia Rauen are residents of Dubuque County, Iowa, and own the following real estate situated in Farley, Iowa, legally described as follows: Lot 2 (2) of Farley Industrial Park No. 4 in the City of Farley, Iowa, according to the recorded plats thereof, subject to roadway and easements of record. Ertl Limited Partnership is an Iowa limited partnership owning the following real estate situated in Farley, Iowa, legally described as follows: Lot 1 of the west 1.90 acres of the South 18 acres of the SE ¼ of the NE ¼ of Section 12, Township 88 North, Range 2 West of the

2 5 th P.M., Dubuque County, Iowa, according to the recorded plat thereof; Vacated West Street Lot 2 of Vacated Alley in Block 20, Lot 2 of Vacated 3 rd Street, and Lot 1 of Lot 3, Lot 4, Lot 5, and Lot 1 of Lot 6, in Block 20, Lot 2 of Lot 3 of Block 21, and Lot 2 of Vacated 6 th Street, all in the City of Farley, Dubuque County, Iowa, according to the recorded plat thereof. Molo Petroleum, LLC, is an Iowa limited liability company which owns the following real estate situated in Farley, Iowa, legally described as follows: Lot 3 (3) of Farley Industrial Park, No. 6, in the City of Farley, Dubuque County, Iowa, according to the recorded plat thereof, subject to highway and easements of record. The Defendant, City of Farley, Iowa, is an Iowa municipal corporation. As such, it has the right to levy special assessments for public improvement projects. One such project was initiated as the 9 th Avenue NW and Jamesmeier Road Curb and Drainage Improvements Project (herein after Project ). The Project involved the construction of storm sewer pipe and structures, minor grading, pavement and turf reconstruction, and related subsidiary and incidental work along portions of 9 th Avenue NW and Jamesmeier Road in the Industrial Park of the City of Farley. The cost was estimated to be approximately $280, according to the January 15, 2015, preliminary schedule. There are ten landowners along the roadways. This is an industrial area with one street ending into a dirt road going into a field area. The city council had multiple discussions about the project commencing in 2014 and leading up to more detailed discussions in the early months of The road was experiencing a great deal of water run-off. The concern was that if the water was not properly channeled, the deterioration would continue and the concrete would be compromised to the point of the loss of the road. Initially the council had set aside $9, to insert another 36 pipe underground. The council also talked about putting in a ditch and seeding it to stabilize the area. One of the local farmers had experienced crop damage as a result of the water running into his field. As the discussion progressed, the idea to widen the street by 6 ½ feet 1 on each side and tie in all the intakes behind the curb came into the forefront. The initial costs for something like this had been previously thought to be $156, Then the discussion about adding curb and gutter was suggested. This project was not part of the city s capital improvement plan. The road was originally funded with RISE money and TIF subsidy for the property development. The industrial part expanded as a result of the road access. It was a good source of revenue for the city to have this area developed and presented a good opportunity to the businesses. 1 The standard width of a road is 30 per DOT and SUDA standards.

3 The original plan was only to perform the improvements to 9 th Avenue at a rough cost of $230, After discussion with some of the property owners, especially Mr. Ertl, the idea was that if you were doing one area, might as well do it all. So Jamesmeier Road was added to the project. The cost elevated to approximately $400, Top Grade was awarded the bid on the project. 2 At informal meetings, the property owners discussed the needs of the area. The mayor was attempting to obtain a gentlemen s agreement as to the expenses and what exactly needed to be accomplished. The mayor s thought was that if everyone was on board with what to do, the costs would remain low since the assessment process would have to be implemented. Soon, a few of the property owners came up with a laundry list of things that they perceived to be necessities to avoid further water run-off. Molo Petroleum was not involved at this point and according to the mayor, was not even a consideration for the assessment. 3 The discussions at council meetings focused on what was an appropriate level of assessment to each of the property owners. Comparisons were made with residential projects that the city had previously completed. The council s concern of course was the debt limit and the tax to the citizens of the community. Early on, the idea that the area had to be treated differently than residential was agreed on and the number of $55 per lineal foot surfaced. As time progressed, the city s engineering firm presented formulas that showed what the cost to the city would be at certain amount being assessed on each property owner s lineal foot. The city s attorney informed the council that the method of lineal foot assessment was not proper under the law. Discussions were tabled until such time as the members could conduct a work session to consider other options for the project. A financial advisor was consulted. The council finally agreed upon a $55.00 per lineal foot method for the assessment. On July 8, 2015, the City published notice of filing assessments against the Plaintiffs involved herein. The applicable numbers are listed as follows: PROPERTY OWNER ASSESSMENT ASSESSED VALUE FRONTAGE BY OF LAND LINEAL FEET Rauen & Rauen $24, $277, Dennis & Virginia Rauen $ 9, $487, Ertl Limited $33, $290, Molo Petroleum $20, $116, The assessments were calculated based on a frontage linear foot method instead of basing the assessment on an allocation of special benefit to the property owners versus the general benefit to the City at large. Innovative Ag owns property along Jamesmeier. It received 6 ½ feet of additional pavement and a driveway approach. It was not assessed. Top Grade was assessed 100 when it actually had an additional 150 of frontage on the road. Its benefit from the project 2 Top Grade improved 150 of its 250 of frontage with assistance from the City in Reviewing the aerial map, the Molo Petroleum property is a long grassy area that abuts the Jamesmeier Road on the east. It is an unmanned refueling and storage facility.

4 was great. The Behnke property was mostly paved and had the largest numbers of large equipment usage on and off its property. This was not considered. Mr. Ertl provided a historic perspective of the area. He owned 45 acres of land that included the Industrial Park. In 1993, he provided a 66 right of way on the street to the City. In 1997 the property owners including Mr. Ertl paid an assessment for the road development of Jamesmeier Road. He recalled the cost to be about $11, When this project was proposed, Mr. Ertl was opposed to the manner by which the assessment was calculated and how the project was to be accomplished. He agreed that rain water caused issues to the road stability and the management of the run-off was not handled by the current pipe and drainage system. But, after attending the council meetings, he retained counsel to raise his objections to the manner of implementation of the project and the price of the assessment. Mr. Ertl indicated that his property has not increased in value any since the project s completion. The drainage was adequate before and since the project. Although the street looks prettier with the curbs having been installed, nothing has changed from his perspective. The size of the street did nothing for his business operation as the street was a sufficient width prior to the increase. He did not have any concern with the ditches needing to be mowed and filled nor the dust off the side of the road. He did note, however, that there are cattails growing where before there were none. After all is said and done, he had no problem paying for what would have been based on his assessed value to add the curbs due to the aesthetic improvement. Mr. Molo purchased his property in It was formerly a hog operation and a small house. The footprint of the used space is actually smaller than it was previously. The majority of the square footage of the property is vegetation. There is a small building on the property that is leased to a biodiesel facility and Molo uses a small portion for electronics for its stand-alone dispenser tank. At the end of the day, Mr. Molo is not sure what he is paying for as he has no increased value to his property. He also has never had a drainage issue as a portion of the property is gravel. The road as improved does not provide for better access or different access to the property. Reviewing his truck s use of the roads versus other businesses use and the use by the school buses, Molo is only 1% of the usage. The assessment of the city made Molo responsible for 5% of the project costs when the property s assessed value is only 1% of the total of the land area. Mr. Rauen is the owner of several businesses in the area. One such business is Rauen Precision Machining which services heavy equipment coming and going on the property and the roadways. His property is the lowest in terms of elevation and it experiences the most water runoff during storms. His company installed private storm water sewers, consisting of inch plastic culvert that extends from Top Grade s property to R & R Development s property. When approached about the project, it was his understanding that the private sewers would be tied into the new main pipelines and sewers. This did not happen. The project did not satisfactorily deal with the water run-off at all from his perspective. In fact, he is of the opinion it made things worse. The water is not directed by the curbs; instead, the water runs right over them. Mr. Rauen has not experienced any positives from the project. His property has not increased in value, or if it has, it is very minimal. The wider road does not provide him with off-

5 street parking as parking is available on his property. The access to his property was more than adequate before the project. Most of the area on his property is covered in gravel. The curb cleaned things up a little but did nothing more. The Plaintiffs expert testified about the standards utilized for city street improvements. In order to make recommendations, one would have hired an engineer to conduct traffic counts and ascertain the necessity of on-street parking. Additionally, the engineer would have studied what width of the street would be most beneficial for purposes of usage of the street as well as necessary costs for widening. The Plaintiffs expert discussed different methods that are utilized in road construction. There is a Flint Formula that is considered a typical and standard assessment method where lineal frontage is only one factor. Also used in the Flint formula are setbacks of the properties, valuations of the properties, and the different kind of property which is the subject of the assessment. All factors combined become more fair and equitable in an assessment determination. Oftentimes, cities utilize sales tax revenue to offset improvement projects such as the one contemplated in Dyersville. In reviewing all of the documentation that was made available to him concerning the project, the Plaintiffs expert ascertained that the project was basically a street-widening project with the installation of new curb and new gutter as there were none prior to this project. He noted that the code requires that an assessment plat be prepared by a registered engineer. In this case, a land surveyor was used. The storm water run-off that was intended to be rectified by adding the sewers and the curbing actually ended up creating more surface water problems for the property owners than there had been in the past. There was not a comprehensive storm water study completed so a corrective measure could not fully be developed. The expert also analyzed the specific benefit that each of the property owners might have expected from this project. Road widening did not provide any benefit to any of the property owners. The street size was properly situated as an industrial road. Maintenance of the road for snow and ice was also not enhanced as this is the City s obligation regardless. Emergency access was not enhanced due to the widening of the street, either. The life expectancy of the street was a benefit only to the City. There was no pedestrian access, so therefore, no benefit to the City s citizens. There is a small argument that the increased size of the street and the installation of gutters increased the market value of the property to benefit the property owners, but widening of the street would not have the same impact. There was no beautification of the street as a result of the project. Lastly, the expert did not find any increased value for traffic capacity since 9 th Street dead-ends, and Jamesmeier is still a two-lane road. In conclusion, the expert determined that there was no benefit to the property owners and the usage of the lineal frontage was improperly implemented by the City of Farley. The cost per lineal foot was an arbitrary figure set by the City officials based on an improper analysis that did not include water drainage and traffic surveying. MSA, the city s engineering company, prepared all the details for the construction. It did not however, make recommendations as to the cost per owner for an assessment as it was clear from the city council meetings that $55 per lineal foot for assessment was the number to be used. The analysis provided was performed at the instruction of the council members. The discussions

6 did not look at other options such as the Flint Method to make a determination of benefits to be had by each property owner. CONCLUSIONS OF LAW Iowa Code Section titled Resolution of Necessity provides a procedure for the City Council to notify the public of a public improvement project. The resolution must have certain information contained therein, which includes notification to the property owners of the date, time, and place of public hearing, and a time within which the property owner may register an objection to the regularity of the proceeding and the legality of using the special assessment procedure. Section (3)(a) states as follows: To replace (emphasis added) curbing and gutters in cities with a population of less than 10,000, the council may adopt a preliminary resolution as provided in subsection (1). The description of the curbing and gutters to be replaced shall be prepared under the council s supervision. The council may, by resolution, provide for the computation of the assessments on the basis of original assessment or of the lineal footage of the curbing and gutters to be replaced. Subsection (b) provides the definition of replace, which means, to substitute new curb and gutter at the same location where old curb and gutter is located and being constructed due to deterioration or destruction. Replace does not include the reconstruction of curb and gutter to change the grade or reconstruction required because of a street widening project. The photographs submitted by the Plaintiffs show clearly that there were no curbs or gutters on 9 th Street NW or Jamesmeier Road. The City therefore cannot use the special assessment for the improvement project in the manner in which it was implemented as it violates Iowa Code Section Iowa Code Section regarding plats indicates that the plat for assessments must be prepared and filed by an engineer. The City of Farley did not retain the services of an engineer as that term is defined under Iowa Code Section The use of a land surveyor is in violation of the Code. Iowa Code Section Assessment of Benefits provides as follows: The total cost of a public improvement, except for paving that portion of the street lying between railroad tracks and one foot outside of the tracks, or which is to be otherwise paved, must be assessed against all lots within the assessment district in

7 accordance with the special benefits conferred upon the property, and not in excess of such benefits. The limitation insures 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, L.P. v. City of Cedar Rapids, 748 N.W.2d 504, 507 (Iowa 2008)(citations omitted). 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. Id. 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 absence of such evidence, the assessment must stand. Id. at 508. Mathematical certainty does not play a role in the difficult process of determining the amount of assessment. Thorson Revocable Estate Trust v. City of West Des Moines, 531 N.W.2d 647, 650 (Iowa App. 1995) (citations omitted). Instead, a pragmatic approach is followed, and approximation is all that is expected. Id. Many factors help delineate between special and general benefits. These include: the present and future use of the abutting property, the increase in the market value of the affected property, the size and shape of the abutting property, the proximity of the property to the improvement, the amount of property fronting the improvement, the needs of the property owners served by the improvement, and the primary purpose behind the construction of the improvement. Id. citing City of Clive v. Iowa Concrete Block & Material Co., 298 N.W.2d 585, 593 (Iowa 1980); Goodell, 193 N.W.2d at 93;Spencer Shopping Center, Inc. v. City of Spencer, 200 N.W.2d 513, (Iowa 1972); Camp v. City of Davenport, 151 Iowa 33, 36, 130 N.W. 137, 139 (1911). Some benefits may even be derived from intangible, aesthetic factors. Clearly, actual value embraces much more than market value. See Camp, 151 Iowa at 38, 130 N.W. at 139. The Flint Formula has been widely accepted as a proper method to determine an assessment. The formula focuses on the frontage size and depth of the abutting property, and assigned benefit points for each tract. The results of the formula are then examined independently to consider whether the assessments are reasonable as compared to past projects. Thorson, 531 N.W.2d at 650. The primary purpose for the project was to save long term. Adding the larger pipes and directing the flow of the water run-off would save the road from completely deteriorating. This would keep costs down for the future as the entire road would not need to be re-constructed due to the expected damage to the concrete if it was not repaired. There was no testimony offered to show any increase in value of any of the properties. There was some esthetic value added as a result of the curb. There is also value added by the curb and driveway openings that direct the heavy equipment to that areas as opposed to entering the properties at any spot that may have been causing damage to the road. The exception to this value would be to the Molo properties as it has no access on Jamesmeier Road. The future potential uses of the property have not changed. It is being used for its best use to wit: industrial and will remain industrial.

8 The considerations are not factored into the assessment and the cost reached by the council in its final analysis. Had there been such discussions, Molo would have been assessed the least. Top Grade and Behnke would have been assessed the most. See generally Spencer Shopping Center, Inc. v. City of Spencer, 200 N.W.2d 513 (Iowa 1972). The City Council should have heeded its attorney s advice and put its engineer to the task of making a better analysis of the benefits obtained by each parcel before just arbitrarily plucking $55 per lineal foot out of the air because the industrial area needed to be treated differently than the residential. There may not be a requirement for mathematical specificity, but there must be considerations to the benefits and adherence to the law. JUDGMENT The Plaintiffs have established the necessary burden to show that the street assessment for the 9 th Street and Jamesmeier Road Improvement Project was improperly calculated. The lineal foot method was not the proper measure by which to determine the amount of each property owner s share of the project. Additionally, the City of Farley neglected to make assessments to all property owners on the streets that would also receive a benefit from a municipal roadway improvement. Their actions were arbitrary and not the commonly used and accepted procedures. The Motion to Strike the exhibit offered by Plaintiffs as part of their closing argument is denied. The exhibit aids the Court in rendering a mathematical calculations as proposed by the Plaintiffs experts. It is not new evidence. IT IS THEREFORE ORDERED that the assessments are deemed in violation of the law and not properly calculated under standard and acceptable methods and exceed the benefits to the property owners. The formula offered in Exhibit A is adopted by the Court. The difference between what was assessed and what should have been assessed is set forth herein as judgment in favor of each of the Plaintiff. Judgment hereby renders in favor of each of the Plaintiffs as follows: Ertl Limited Partnership in the amount of $4,583.50; Molo Petroleum, LLC in the amount of $2,966.67; Dennis and Virginia Rauen in the amount of $1,260.83; and Rauen and Rauen Development, L.L.C. in the amount of $3, Judgments shall be paid in 45 days of the date of this order by the City of Farley.

9 State of Iowa Courts Type: Case Number EQCV OTHER ORDER Case Title RAUEN & RAUEN DEVELOPMENT ET AL V CITY OF FARLEY So Ordered Electronically signed on :21:32 page 9 of 9