Special Assessments for Public Improvements at Iowa League of Cities Annual Conference

IOWA LEAGUE OF CITIES ANNUAL CONFERENCE & EXHIBIT Special Assessments for Public Improvements John Danos, Dorsey & Whitney LLP Amy Bjork, Dorsey & Whitney LLP Emily Hammond, Dorsey & Whitney LLP HANDOUTS & PRESENTATIONS ARE AVAILABLE THROUGH THE EVENT APP 1

Special Assessments for Public Improvements Iowa League of Cities 2022 Annual Conference September 29, 2022 John Danos Emily Hammond Dorsey & Whitney LLP 801 Grand Avenue, Suite 4100 Des Moines, Iowa 50309 (515) 283-1000 Danos.john@Dorsey.com Hammond.emily@dorsey.com

Topics 1. Definition and Purpose 2. Legal Authority 3. Process 4. Limitations on special assessment power 5. Sidewalk Assessments 6. Questions? 3

Definition and Purpose 4

What is a special assessment Definition: A specific tax levied on private property to meet the cost of public improvements that enhance the value of the property (Merriam- Webster) A real property tax proportionately levied on homeowners and landowners to cover the costs of improvements that will be for the benefit of all upon whom it is imposed (Free Dictionary - Legal Dictionary) Purpose: Shifting cost from general public to benefitted property owners 5

Ad Valorem versus Special Assessment Ad Valorem: Imposed on uniform basis based on property ownership In Iowa, dollars per thousand as determined by taxing authorities General use Special Assessments: Imposed upon those who use improvement/infrastructure based on special benefit Avoid uniformity requirement of general taxation Used for specific project 6

Legal Authority 7

Legal Authority Fall under the tax umbrella Iowa Code Chapter 384 (City Finance); subchapter IV Iowa Code 384.38 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 8

Notable Definitions Iowa Code 384.37 Grade Grade ordinance requirement Lot Ability to combine contiguous parcels under common ownership and common improvements or assembled into single unit for use/development Property owner or owner As shown by transfer books in office of county auditor Public improvement Lists all improvements for which property owners can be assessed Total cost or cost of a public improvement Lists all assessable costs 9

Process 10

Voluntary versus Involuntary Voluntary - 384.41 Requires petition by all property owners Petition can be filed prior or subsequent to initiation of plan for public improvement More flexible; property owners can waive certain requirements Lien subordinate to perfected liens on property unless written consent from lienholders Involuntary Initiated by City Council Very rigid statutory requirements Assessments are lien on property with equal precedence to ordinary taxes 11

Involuntary Voluntary City arranges for engineering services* City arranges for engineering services Engineer prepares preliminary assessment plat & schedule Engineer prepares preliminary assessment plat & schedule* City Council adopts Preliminary Resolution, adopts plans/specs/estimate of cost, and sets date for hearing on proposed Resolution of Necessity All property owners affected by public improvement petition for public improvement and waive notice to property owners City gives notice to property owners by publication in newspaper and mailing to property owners N/A City Council adopts preliminary resolution; adopts, amends and adopts, or defers action on Resolution of Necessity; City Council orders preparation of detailed plans and specs City Council holds hearing on Resolution of Necessity and adopts, amends and adopts, or defers action; City Council orders preparation of detailed plans and specs City files Resolution of Necessity, plat, and schedule with County Treasurer (creates lien on properties, BUT subordinate to perfected liens unless lienholders consent) City files Resolution of Necessity, plat, and schedule with County Treasurer (creates lien on properties) Bid letting* and construction of project Bid letting* and construction of project 12

Plat & Schedule Plat Boundaries of district Location of each lot under separate ownership Location of improvement within district Type and general details of improvement Schedule Description and parcel number of each lot Name of property owner Valuation of each lot Proposed assessment for each lot Proportion of project cost allocated to each lot Amount of deficiency, if any 13

Lot Valuation Present fair market value of property with the proposed public improvement completed Generally, use valuation from County Assessor Council may appoint committee of three person skilled in knowledge or real estate values to appraise present fair market value of each lot within district Committee must file written report of appraisals with Council 14

Remonstrances Must be in writing and filed with city clerk Signed by owners subject to 75% of amount of proposed assessments for entire project 75% of amount of proposed assessments not 75% of property owners proposed to be assessed If remonstrance received, need unanimous vote on Resolution of Necessity Watch out for absent council members or council vacancies 15

After Construction Involuntary Voluntary Engineer inspects improvement and files certificate of completion with City Clerk Engineer inspects improvement and files certificate of completion with City Clerk City Council accepts work and levies assessments, including adoption of final assessment schedule City Council accepts work and levies assessments, including adoption of final assessment schedule City files final schedule of assessments with County Treasurer City files final schedule of assessments with County Treasurer City provides notice to property owners as set forth in statute or petition City gives notice to property owners by publication in newspaper and mailing to property owners After 30-day period for full payment of assessments, file list of unpaid assessments with County Treasurer* After 30-day period for full payment of assessments, file list of unpaid assessments with County Treasurer* 16

Limitations on Special Assessment Power (Involuntary Assessments) 17

25% Rule Special Assessment cannot exceed 25% of the value of the property (as set by Council) Except: connections to private property for gas, water, sewer, or electricity may be assessed for actual cost of connection Conditional Deficiencies: Certified to county treasurer and to city official in charge of building permits If property is improved raising valuation of property, city can assess pro rata portion of deficiency by resolution Improvement must be constructed during period of amortization; City only entitled to remaining assessment amount 18

Agricultural Property If property classified as agricultural property, owner may file request for deferment Request must be in writing at time of hearing on resolution of necessity or within 10 days following hearing Deferment remains until land is no longer assessed as agricultural property Deferment ends when property no longer classified as agricultural land by county assessor When deferment ends, entire assessment payable in same manner as if there was no deferment 19

Special Benefit Iowa Code 384.61 The total cost of a public improvement [. . .] 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 Balance between benefits to the community at large versus special, additional benefits to property owners within assessment district No mathematical precision for determining special benefit Subjective opinion of property owners irrelevant 20

How to calculate? Frontage alone not enough, but the use of a mathematical formula as a tool in the determination of assessments is allowed Flint formula commonly used as a starting point, but also need to consider (and record) other relevant factors Other considerations: Present and future use of abutting property Increase in market value due to improvement Size and shape of property Proximity of property to improvement Amount of property fronting improvement Needs of property owners served by improvement Primary purpose behind improvement 21

Special Benefit Cases Compare 2011 Cases Gray v. City of Indianola, 797 N.W.2d 112 (Iowa 2011) Belling v. City of Urbandale, 803 N.W.2d 672 (Iowa Ct. App. 2011) 22

Special Benefit Considerations Dust control Roadway noise Vehicle maintenance costs Aesthetic value Drainage Trash accumulation EMS access/response times Snow and ice removal Life expectancy of road Others? 23

Lessons Learned? Analyze special benefit at beginning of process Generally, shouldn t try to assess 100% of any particular cost (even if city ordinance would permit assessment of full cost) Exceptions: utility connections, possible sidewalk repair Can use mathematical formula as basis, but always best to consider and record case-by-case analysis of special benefit Record special benefit analysis - burden is on property owner to show that an assessment is excessive 24

Sidewalk Assessments

Authority - Involuntary Iowa Code 364.12 City may serve notice on abutting property owner requiring abutting property owner to repair, replace, or reconstruct sidewalks If abutting property owner does not perform within a reasonable time, city may perform the required action and assess the costs against abutting property Assessments collected in same manner as property tax Similar provisions in 364.12 related to public drainage or sewer connections and other nuisance-oriented items 26

West Union/420400-NEW Authority Voluntary A city may cause the repair and replacement of sidewalk improvements without prior determination and notice, if the property owner: Requests the repair and replacement; Waives the requirement of a prior finding by the city council that the condition of the public improvements constitutes a nuisance and the requirement of prior notice; and Consents to the repair of the public improvements and the assessment of the costs of repair 27

Implementation 28

Questions? 29

Contact John Danos Emily Hammond Dorsey & Whitney LLP 801 Grand Avenue, Suite 4100 Des Moines, Iowa 50309 (515) 283-1000 Danos.john@dorsey.com Hammond.emily@dorsey.com *This material and the presentation are for educational purposes only and does not constitute legal advice. 30