SPECIAL ASSESSMENTS JIM WAINWRIGHT AHLERS & COONEY, P.C. 100 Court Avenue, Suite 600 Des Moines, IA April 4, 2014

What are special assessments? - charges to owners of real property by a governmental agency for street, sewer, water, or drainage improvements that benefit their property.

The underlying principle is that an assessment should be less than or equal to the “benefits” conferred on property from nearby improvements.

In practice, application of this principle is very difficult. Why? –the concept of "benefit" and –the government is bound to observe due process of law.

Special v. General Benefit If a public improvement directly benefits a property by providing a service, improving the appearance or increasing the value of that property, then the law provides that the property may be specially assessed at least for a part of the cost of the improvement.

A complex body of law has been written by the legislature and confirmed by the courts to assure that all affected property owners are treated equally and fairly. Recent cases suggest even the courts struggle with special assessment law

Iowa Code Chapter 384 permits a city to assess private properties for the cost of public improvements.

However, the costs assessed to a property must not exceed the special benefit conferred upon the property by the improvements.

the assessment may not exceed 25% of the value of the property.

These limitations ensure that individual property owners do not subsidize the general benefits enjoyed by the public resulting from the improvements.

Street paving projects –usually confer both general and special benefits –the abutting property owners are not required to pay for the general benefits accruing to the community at large.

What public improvements can be paid for by special assessments?

a. Sanitary, storm and combined sewers. b. Drainage conduits, channels and levees. c. Streets

d. Street lighting fixtures, connections and facilities. e. Sewage pumping stations, and disposal and treatment plants. And many others….

A city may assess the cost of the following 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.

How are special assessments initiated? 1. Petition and Waiver 2. Council action

PETITION AND WAIVER? Property owners may initiate a plan for a public improvement to be paid for in whole or in part by special assessments, by written contract to be approved by the city and signed by all of the owners of record of all property affected by the proposed assessment.

Council Action? The Council shall arrange for engineering services to prepare the plats, schedules, estimates of cost, plans, and specifications and to supervise construction of the proposed improvement.

How? Adopt a preliminary resolution by the vote of a majority of all the members of the council.

The preliminary resolution shall contain the following:

a. A description of the types or alternate types of improvement proposed. b. The beginning and terminal points or general location of the proposed improvement.

c. An order to the engineer to prepare preliminary plans and specifications, estimated total cost of the work, and a plat and schedule, and to file them with the clerk.

d. A general description of the property or a designation of the lots which the council believes will be specially benefited by the improvement.

3. The preliminary resolution may also contain the following: a. A statement of the proportion of the total cost which the council proposes to assess against specially benefited property. b. A short and convenient designation for the public improvement by which it may be referred to in all subsequent proceedings.

4. A preliminary resolution may include more than one improvement or class of improvement.

What property is subject to assessment? All property, public and private, which receives a benefit may be assessed, –except highways, streets and alleys and property owned by the United States

Schools, churches, county and state lands are normally subject to assessment. Railroads and railway property are also assessable with special provisions for track crossings.

The City Council with the aid of the Engineer. Who Determines which property to assess and the amount of the assessment?

The Council instructs the Engineer as to the boundary of the benefited district. This may be in the form of past policy such as assessing to the middle of a block or some other general policy.

In addition, the Council will also instruct the Engineer as to the costs which are to be assessed to these benefited property owners.

The City Council also values the property to be assessed. The Council may appoint a three member appraisal committee knowledgeable in real estate values within the City to aid them in appraising the property.

This valuation is reported to the Engineer and is shown on the Plat and Schedule (of assessments).

The valuation does not affect property tax valuations it does not affect the assessment, except to the extent that it places a ceiling on the assessment - which may not exceed 25% of the valuation fixed by the Council.

Property owners must be notified of pending public improvements to be assessed.

All Council meetings and proceedings are open to the public. All owners of property subject to assessment must be notified by certified mail at least fifteen days prior to the date of a public hearing.

Property owners and interested citizens may file written objection with the City Clerk, and/or may appear personally to make oral objection to the project, costs, or proposed assessments.

Failure to receive official notice does not nullify the assessment proceedings if an honest attempt has been made to notify the affected property owners.

How and when are the assessments paid?

If the Council adopts the "Resolution of Necessity" and later awards contracts for actual construction, then the assessments will be due and payable after construction is completed.

Property owners are again notified by certified mail, when the Council has levied the final assessments and that the assessments are due and payable for a 30 day period without penalty or interest at the office of the City Clerk.

Those assessments which are not paid during the thirty day period are then listed on the County Auditor's tax rolls and are collected in annual installments along with interest - at present not exceeding 9 % per annum. The Council determines the number of annual installments (not to exceed fifteen (15) years) in which the assessments are collected.

The assessments are collected with property taxes by the County Treasurer with the taxes payable July 1, and due by September 30 of each year. The unpaid assessments may be paid in full with accrued interest at anytime should the property owner wish to do so.

If the assessment installments are not paid when due, they are subject to collection with penalty the same as delinquent property taxes and are a lien on the property.

Legal Challenges

The Courts have established a number of presumptions to guide their review of a city's special assessment for public improvements.

The city council's determination that property will be specially benefited by an improvement is conclusive.

A property owner cannot generally argue that he has not received any benefit from a public improvement; rather, a property owner must show that the benefit received was not as great as that determined by the city.

Courts have traditionally presumed that the amount of the city's assessment is correct and does not exceed the special benefit conferred on the property by the improvement. Not anymore!

The burden is on the protesting property owner to show his assessment is excessive by evidence which includes proof of the actual benefit to his property. In the absence of such evidence, the assessment must stand.

If the property owner carries his burden, the court may reduce the amount of the assessment.

Mathematical and analytical certainty is usually impossible in these cases. Courts must rely on approximations to determine the correct amount of the assessment.

The ultimate question is whether the assessment “represents a fair proportional part of the total cost.”

A property can be assessed for improvements based on the benefit to the future use of the property. In considering the benefits flowing from a special improvement, Courts will consider future uses and expectations as well as the present use to which the property is put.

Agricultural properties do not receive the same immediate benefit from public improvements as does other land. It is for this reason the legislature created an agricultural deferment.

AGRICULTURAL DEFERMENT –agricultural landowners may defer payment of a special assessment until such time as the property is no longer classified as agricultural land.

Potential legislative changes In 2013, HF 588 was introduced. –It would radically change the manner in which Cities specially assess –Introduces a new 3 part “benefit” analysis –Individual, area, and community benefits –Requires additional notice, publication, and procedural steps –No activity this session

QUESTIONS? Contact Information: Jim Wainwright