Richards v. City of Muscatine, 2--58012

• Citation: 237 N.W.2d 48
• Decision Date: 12 November 1975
• Docket Number: No. 2--58012,2--58012
• Parties: John T. RICHARDS et al., Appellants, v. CITY OF MUSCATINE, Iowa, Appellee.
• Court: United States State Supreme Court of Iowa

Page 48

237 N.W.2d 48

John T. RICHARDS et al., Appellants, v. CITY OF MUSCATINE, Iowa, Appellee.

No. 2--58012.

Supreme Court of Iowa.

Nov. 12, 1975.

Rosenberger, Petersen & Conway, Muscatine, for appellants.

Eckhardt, Goedken, Hintermeister & Ryan, Muscatine, and Herrick, Langdon, Belin, Harris, Langdon & Helmick, Des Moines, for appellee.

En banc.

UHLENHOPP, Justice.

In this appeal we pass upon the validity of the tax increment plan for urban renewal which the legislature authorized in §§ 403.9 and 403.19 of the Iowa Code.

Chapter 403 of the Code, the urban renewal law, empowers Iowa cities to take specified steps 'to eliminate slums and prevent the development or spread of slums and urban blight and to encourage needed urban rehabilitation. . . .' § 403.3. In 1969, the General Assembly amended the urban renewal law to provide a new method of financing urban renewal projects; it added § 403.19 to allow a city to allocate to a special fund the increment in state, city county, school, and other taxing district taxes resulting from the increase in valuation of an urban renewal area brought about by an urban renewal project. 63 G.A. ch. 237, § 2. In addition, the General Assembly amended § 403.9 to provide for the payment of urban renewal bonds out of the tax increment fund. Id. § 1. The portions of amended § 403.9 relevant to our inquiry provide:

1. A municipality shall have power to periodically issue bonds in its discretion to pay the cost of carrying out the purposes and provisions of this chapter, including, but not limited to, the payment of principal and interest upon any advances for surveys and planning, and the payment of interest on bonds, herein authorized, not to exceed three years from the date the bonds are issued. The municipality shall have power to issue refunding bonds for the payment or retirement of such bonds previously issued by it. Said bonds shall be payable solely from the income and proceeds of the fund and portion of taxes referred to in subsection two of section two (2) of this Act, and revenues and other funds of the municipality derived from or held in connection with the undertaking and carrying out of urban renewal projects under this chapter. The municipality may pledge to the payment of the bonds the fund and portion of taxes referred to in subsection two (2) of section two (2) of this Act, and may further secure the bonds by a pledge of any loan, grant or contribution from the federal government or other source in aid of any urban renewal projects of the municipality under this chapter, or by a mortgage of any such urban renewal projects, or any part thereof, title which is vested in the municipality.

2. Bonds issued under this section shall not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction, and shall not be subject to the provisions of any other law or charter relating to the authorization, issuance or sale of bonds. Bonds issued under the provisions of this chapter are declared to be issued for an essential public and governmental purpose, and, together with interest thereon and income therefrom, shall be exempted from all taxes.

3. Bonds issued under this section shall be authorized by resolution or ordinance of the local governing body and may be issued in one or more series and shall bear such date or dates, be payable upon demand or mature at such time or times, bear interest at such rate or rates not exceeding seven per centum per annum, be in such denomination or denominations, be in such form either coupon or registered, carry such conversion or registration privileges, have such rank or priority, be executed in such manner, be payable in such medium of payment, at such place or places, and be subject to such terms of redemption, with or without premium, be secured in such manner, and have such other characteristics, as may be provided by such resolution or trust indenture or mortgage issued pursuant thereto.

4. Such bonds may be sold at not less than par at public or private sale, or may be exchanged for other bonds on the basis of par.

Section 403.19 provides:

A municipality may provide by ordinance that taxes levied on taxable property in an urban renewal project each year by or for the benefit of the state, city or town, county, school district, or other taxing district after the effective date of such ordinance, shall be divided as follows:

1. That portion of the taxes which would be produced by the rate at which the tax is levied each year by or for each of the taxing districts upon the total sum of the assessed value of the taxable property in the urban renewal project, as shown on the assessment roll used in connection with the taxation of property by the taxing district, last equalized prior to the effective date of the ordinance, or the assessment roll last equalized prior to the date of initial adoption of the urban renewal plan in the case of projects commenced prior to July 1, 1972, shall be allocated to and when collected be paid into the fund for the respective taxing district as taxes by or for said taxing district into which all other property taxes are paid. For the purpose of allocating taxes levied by or for any taxing district which did not include the territory in an urban renewal project on the effective date of the ordinance or initial adoption of the plan, but to which the territory has been annexed or otherwise included after the effective date, the assessment roll of the county last equalized on the effective date of the ordinance or initial adoption of the plan shall be used in determining the assessed valuation of the taxable property in the project on the effective date.

2. That portion of the taxes each year in excess of such amount shall be allocated to and when collected be paid into a special fund of the municipality to pay the principal of and interest on loans, moneys advanced to, or indebtedness, whether funded, refunded, assumed, or otherwise, including bonds issued under the authority of section 403.9, subsection 1, incurred by the municipality to finance or refinance, in whole or in part, the redevelopment project, except that taxes for the payment of bonds and interest of each taxing district must be collected against all taxable property with the taxing district without limitation by the provisions of this subsection. Unless and until the total assessed valuation of the taxable property in an urban renewal project exceeds the total assessed value of the taxable property in such project as shown by the last equalized assessment roll referred to in subsection 1 of this section, all of the taxes levied and collected upon the taxable property in the urban renewal project shall be paid into the funds for the respective taxing districts as taxes by or for said taxing districts in the same manner as all other property taxes. When such loans, advances, indebtedness, and bonds, if any, and interest thereon, have been paid, all moneys thereafter received from taxes upon the taxable property in such urban renewal project shall be paid into the funds for the respective taxing districts in the same manner as taxes on all other property.

3. The portion of taxes mentioned in subsection two (2) of this section and the special fund into which they shall be paid, may be irrevocably pledged by a municipality for the payment of the principal and interest on loans, advances, bonds issued under the authority of section four hundred three point nine (409.9), subsection one (1) of the Code, or indebtedness, incurred by a municipality to finance or refinance, in whole or in part, the urban renewal project.

4. As used in this section the word 'taxes' includes, but is not limited to, all levies on an ad valorem basis upon land or real property.

On July 18, 1974, acting under chapter 403 of the Code, the City of Muscatine, Iowa, adopted Resolution 74067 which approved an urban renewal plan for a one-block downtown area as Urban Renewal Project No. 2. (The present litigation does not involve Muscatine's Project No. 1, which was federally funded.) The plan called for acquisition and clearance of this area and redevelopment into a multi-story office building. Also on that date, Muscatine adopted Ordinance 74070 which directed the division and allocation of the taxes levied on the property within Project No. 2 in the manner provided by § 403.19. On August 15, 1974, Muscatine adopted Resolution No. 74185 which authorized issuance under § 403.9 of $800,000 of urban renewal bonds, to be paid from the tax increment fund created by Ordinance 74070.

On October 1, 1974, plaintiffs commenced the present action for a declaration that the resolutions, the ordinance, and §§ 403.9 and 403.19 of the Code are invalid. On February 5, 1975, the trial court upheld the validity of the resolutions, ordinance, and sections in all respects. Plaintiffs appealed and in this court attack the validity of §§ 403.9 and 403.19 and Muscatine's actions thereunder on a number of grounds. We consider the grounds in a different order than plaintiff's present them.

I. Procedural Due Process. In divisions I and IX of their brief, plaintifs argue that §§ 403.9 and 403.19 are unconstitutional in failing to require the city to give to the various other affected taxing districts, and the property owners therein, notice and opportunity to be heard prior to the city's decision to proceed under § 403.9 and § 403.19.

Plaintiffs appear to be correct that chapter 403 does not provide for notice and hearing prior to a city's taking action to divide tax revenue under § 403.19 or to issue bonds under § 403.9. Section 403.5(3), with which Muscatine complied, does state, 'The local governing body shall hold a public hearing on an urban renewal project after public notice thereof by publication . . ..' Section 403.17(10), however, defines 'urban renewal project' as 'includ(ing) undertakings and activities of a municipality...