Iowa Court Says Cost of Compliance is Irrelevant Factor in Assessing Drainage Costs

On June 16, 2021, the Iowa Court of Appeals issued a ruling involving the reclassification of drainage benefits and an assessment for repairs. The court ruled that the board of trustees improperly considered non-drainage benefits to shift some of the costs of repair to a railroad company to prevent painfully large assessments against some agricultural landowners.

Background

A railroad company built a railway on a right of way in Hardin County in 1913. Two years later Drainage District 67 (DD67) was established and the railroad company was assessed a 5.81 percent benefit rate. In 2018, the DD67 Board of Trustees learned through an engineer’s report that the main tile needed to be repaired, including a portion that ran under the railroad tracks.

To comply with federal regulations, the project would need sturdier materials to repair the portion of the main tile under the railroad company’s right of way. These materials would be more expensive than the materials normally used for agricultural land and would roughly double the cost of the project. Because some tracts of agricultural land receiving much of the benefit would be required to pay as much as $1,600 to $2,282 per acre for the repair, the board appointed a commission to reclassify the land in the district. A reclassification commission determines the percentage of actual benefits received by each tract of land and makes an equitable apportionment of the cost of repairs.

The commission determined that one-half of the costs of repair were due to the federal safety regulations requiring the railroad company to prevent erosion. As a result, it recommended that the railroad company be responsible for half the costs of the repair. At a hearing to discuss the commission’s finding, the railroad company objected, but the board approved the reclassification, finding that the railroad company received 100% of the benefit from the extra costs. The railroad company appealed to the district court and moved for summary judgment. The district court granted the railroad company’s motion and reinstated the original benefit classification.

Reclassification and Assessment

A drainage district is tasked with keeping the drainage system in good condition and paying for repairs. When a drainage district has insufficient funds to pay for needed repairs, it will assess the cost based on the benefit each land receives from the improvement. Iowa Code § 468.49(1). If the assessment is “generally inequitable,” the board may reassess the classification based on the benefits attributable to the repairs. Iowa Code § 468.65(1). Additionally, the court may adjust the assessment if there is prejudice, gross error, or mistake.

In this case, the board considered the extra costs to comply with federal regulation to be a benefit for the railroad. However, the cost of construction on a specific property has no bearing on that property’s benefit classification. Conklin v. City of Des Moines, 168 N.W. 874, 876 (Iowa 1918). Instead, the benefits that may be considered include drainage benefits directly related to the repair, such as decreased maintenance or increased longevity of materials. See Chi. & N.W. Ry. Co. v. Bd. of Supervisors of Hamilton Cnty., 153 N.W. 110, 111 (Iowa 1915). Without a repair of the tile under the right of way, the tile would collapse and become useless. In this way, the repair on the railroad company’s right of way benefited all landowners in the district. Additionally, the railroad received no drainage benefit from the increased cost of federal compliance.

The court also determined that the board wrongly considered how the reclassification created “painfully large assessments” for many of the landowners. As the district court noted, the notion that “a repair must be ‘reasonable and affordable’ for the landowners does not appear anywhere in the drainage code.” Therefore, court ruled that the board inequitably assessed benefits to the railroad company and ordered the railroad company’s property be assessed at the original 5.81 percent benefit rate.