State Tax Dollars Pay For Cost of Public’s Portion of Improvement Costs, Not Those of Private Landowners

It’s a fundamental rule of law – state tax dollars can be used to pay for improvements that benefit the public at large, but they can’t be used to pay for improvements that benefit private landowners.  Private landowners must pay for the assessed cost of the improvement that adds value to their property, and recover the extra cost upon eventual sale of the property.  That principle was at issue in this case.

Here, two property owners protested the special assessments against their farmland (located in a prime development area) for improvements to an intersection near Cedar Rapids.  The trial court held that the City’s use of Revitalize Iowa’s Sound Economy (RISE) grant funds could be used to only fund the public’s cost of the improvements.  The plaintiffs claimed that RISE funds should be applied to the total cost of the project, not just the public’s share of the project’s cost.  On appeal, the Supreme Court affirmed, noting that the underlying statute and administrative regulation were clear on the matter as to how RISE funds were to be used.  To hold otherwise, the Court noted, would be inconsistent with the underlying goal behind special assessments – to ensure that private landowners pay their fare share of improvement specially benefitting their properties. 

The plaintiffs also claimed that the project costs assessed to their properties were excessive.  But, the Court upheld the trial court’s ruling that properties abutting the intersection, on a combined basis, received 50 percent of the benefit of the new traffic lights and that each owner received an equal share of the benefit of the new turn lanes on their property.  But, the Court reversed and remanded the ruling that the grading and drainage work needed to complete the intersection were 100 percent assessable to the plaintiffs.  The Court noted that the public benefit of the newly installed turn lanes and traffic signals was fifty percent, and that it was those improvements that required the grading and drainage work, that the grading and drainage improvements should also be assessed at only 50 percent to the plaintiffs.  Horak Prairie Farm, L.P. v. City of Cedar Rapids, 748 N.W.2d 504 (Iowa Sup. Ct. 2008).