Home Builders Ass'n v. West Des Moines

Citation644 N.W.2d 339
Decision Date08 May 2002
Docket Number No. 00-0351., No. 99-2025
CourtUnited States State Supreme Court of Iowa

Ivan T. Webber of Ahlers, Cooney, Dorweiler, Haynie, Smith & Allbee, P.C., Des Moines, for appellant.

Brent R. Appel of Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines, for appellee.

William F. Sueppel of Meardon, Sueppel & Downer, P.L.C., of Iowa City, for amicus curiae, Iowa League of Cities. TERNUS, Justice.

The appellee, Home Builders Association of Greater Des Moines, challenges the collection of fees by the appellant, City of West Des Moines, Iowa, pursuant to the City's Mandatory Park Dedication Fee Ordinance.1 The challenged fees are imposed on land developers and builders and are used by the City to pay for its neighborhood park system. The trial court declared that the fees are an illegal tax and enjoined the City from collecting such fees. The court also ruled that the ordinance violated the Takings Clause of the United States Constitution, the Equal Protection Clause of the Constitution, and substantive due process. Based on the constitutional violations, the court held that the plaintiff was entitled to recover its attorney fees under 42 U.S.C. §§ 1983 and 1988.

The City has appealed the trial court's decision granting declaratory relief, injunctive relief, and attorney fees, challenging its rulings on each claim asserted by the plaintiff. We review the court's ruling on the state law claim that the fee was an illegal tax for correction of errors of law. See Iowa R.App. P. 6.4. Under this scope of review, we are bound by the trial court's findings of fact if they are supported by substantial evidence. See Vincent v. Four M Paper Corp., 589 N.W.2d 55, 59 (Iowa 1999)

. Our review of the court's rulings on the plaintiff's constitutional claims is de novo. See Blumenthal Inv. Trusts v. City of West Des Moines, 636 N.W.2d 255, 260 (Iowa 2001).

I. Relevant Facts.

The City of West Des Moines is a municipal corporation organized and existing under the laws of the State of Iowa. In 1985 the City enacted Ordinance No. 777, the Mandatory Park Dedication Fee Ordinance, in an effort to ensure adequate funds for the purchase of suitable parklands to serve developing areas of the City. This ordinance, applicable citywide, provided for the imposition of a fee on developers and residential builders. Specifically, whenever a parcel of land within the City was "subdivided and presented to the City for residential development purposes, the developer [was] required to make a fee payment of $100.00 per acre."

In addition to the subdivision fee, the ordinance also imposed a fee on residential building permits. Upon application for a residential building permit, a builder was required to make the following payments under the ordinance: $200 per unit for a detached, single-family home; $150 per unit for an attached, single-family home; and $75 per apartment unit. In the case of private developments that provide facilities or amenities such as swimming pools, court game facilities and playground equipment for common use without a charge to residents in the development, the homebuilder was entitled to a credit not to exceed twenty-five percent of the fee otherwise required under the ordinance. The ordinance also provided that if, within a twelve-month period, "additions, improvements, alterations or repairs in excess of 50% of the current assessed fair market value" were made to a residence, a fee for park development would be collected. In a 1995 amendment to the ordinance, all fees were doubled.

The fees generated by the ordinance are deposited in a sub-fund of the City's general fund and, according to the ordinance, are to "be used exclusively for park site acquisition and/or physical improvement of the Neighborhood Park System." The "neighborhood park system" is defined under the ordinance as "a network of active and passive recreation areas including neighborhood parks, neighborhood mini parks and greenbelts which are designed and located to serve a surrounding neighborhood." Funds collected under the ordinance are used for land acquisition and initial site development, such as water hookup, seeding and grading. Any additional improvements such as shelters, playgrounds and other amenities are paid with general fund monies.

For purposes of planning, the City is divided into park districts. Although the ordinance does not prohibit the use of fees collected in one district from being spent on land and facilities in another district, in practice, funds have been segregated by district and the monies spent only within that district.

The City's master park plan contemplates each neighborhood park serving an area within a radius of ¼ to ½ mile in the newer areas of town and ¾ of a mile in established neighborhoods. Nonetheless, parks in new developments are often larger than the City's standard of 2.5 acres per 1000 population in order to accommodate larger facilities that will compensate for the deficiency of parks in older areas of the City.

Although fees have been collected throughout the City, no funds have been expended in two park districts. In addition, no park facilities are planned for a development known as Glen Oaks, even though the fees required by the ordinance have been assessed on residences in that neighborhood.

We turn now to the issues raised in this appeal.

II. Is the Fee an Illegal Tax?

The plaintiff claims that the parks fee is an illegal tax. The City asserts that the fee is a valid impact fee that is authorized under the City's broad home-rule power.

An impact fee is generally a monetary payment assessed as a condition of the issuance of a building permit or plat approval. Country Joe, Inc. v. City of Eagan, 560 N.W.2d 681, 685 (Minn.1997). It is typically used to finance "`large-scale, off-site public facilities and services necessary to serve new development.'" Id. (citation omitted). Courts concluding that such fees are valid have usually required that the fee be "`in an amount which is proportionate to the need for the public facilities generated by [the] new development.'" Id. (citation omitted); accord Hollywood, Inc. v. Broward County, 431 So.2d 606, 611 (Fla.Dist.Ct.App.1983)

. Such fees "have been lauded by local governments in recent years as a welcome means to `shift a portion of the cost of providing capital facilities to serve new growth from the general tax base to the new development generating the demand for the facilities.'" Country Joe, Inc.,

560 N.W.2d at 684-85 (citation omitted).

Although some states have enabling legislation authorizing local government to charge impact fees, e.g., Home Builders Ass'n v. City of Scottsdale, 187 Ariz. 479, 930 P.2d 993, 994 (1997)

; N. Ill. Home Builders Ass'n, Inc. v. County of DuPage, 165 Ill.2d 25, 208 Ill.Dec. 328, 649 N.E.2d 384, 387 (1995), Iowa does not. Therefore, the City must justify the parks fee at issue here as an exercise of its police power. We turn now to a review of Iowa law with respect to the police power of municipalities and the scope of their taxing authority.

A. Applicable legal principles.

In 1968 the State of Iowa amended its constitution to give municipalities home rule authority. See Iowa Const, art. Ill, § 38A. Under the home rule amendment, a city has the "power and authority, not inconsistent with the laws of the general assembly, to determine [its] local affairs and government, except that [it does] not have power to levy any tax unless expressly authorized by the general assembly." Id. (emphasis added); see also Iowa Code §§ 364.2(2) (1997) ("A city may exercise its general powers subject only to limitations expressly imposed by a state or city law."),.3(4) ("A city may not levy a tax unless specifically authorized by a state law."). The principle of home rule authority is further clarified in the Iowa Code, which provides:

A city may, except as expressly limited by the Constitution, and if not inconsistent with the laws of the general assembly, exercise any power and perform any function it deems appropriate ... to preserve and improve the peace, safety, health, welfare, comfort, and convenience of its residents.

Id. § 364.1. An action taken pursuant to this provision is an exercise of a city's police power. See Kelley v. Story County Sheriff, 611 N.W.2d 475, 481 (Iowa 2000)

; Gravert v. Nebergall, 539 N.W.2d 184, 186 (Iowa 1995). To summarize the scope of home rule authority in Iowa, a city has broad police powers, but it cannot impose taxes without express authorization from the legislature.

The City argues that its parks fee is an appropriate incident of the exercise of its police power to promote the public's health, comfort and welfare. The plaintiff does not challenge the City's authority to build parks; clearly, parks improve the welfare and comfort of city residents. Rather, the plaintiff claims that the financing for parks must come from the City's general fund and not through the imposition of an unauthorized tax on developers and homebuilders. See generally Iowa Code § 384.3 (requiring, in general, that "[a]ll moneys received for city government purposes from taxes and other sources must be credited to the general fund of the city"). In order to resolve this dispute, we must determine the nature of the parks fee. We begin by examining the differences between taxes and fees.

This court has defined a tax as "a charge to pay the cost of government without regard to special benefits conferred." In re Shurtz's Will, 242 Iowa 448, 454, 46 N.W.2d 559, 562 (1951); accord Newman v. City of Indianola, 232 N.W.2d 568, 573 (Iowa 1975)

. In other words, taxes are for the primary purpose of raising revenue. See City of Hawarden v. US W. Communications, Inc., 590 N.W.2d 504, 507 (Iowa 1999). If the fee at issue here is determined to be a tax, it would fall within the category of an excise tax—a...

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    ...fee instead of a tax, a charge must be "based on a special benefit conferred on the person paying the fee." (Home Builders Ass'n v. West Des Moines (Iowa 2002) 644 N.W.2d 339, 347, italics added; see American Council of Life Insurers v. DC Health (D.C.Cir.2016) 815 F.3d 17, 19 [whether char......
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