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Rauen & Rauen Development, LLC v. City of Farley

Court of Appeals of Iowa

November 21, 2018

RAUEN & RAUEN DEVELOPMENT, LLC, DENNIS J. RAUEN, VIRGINIA A. RAUEN, ERTL LIMITED PARTNERSHIP, and MOLO PETROLEUM, LLC, Plaintiffs-Appellees,
v.
CITY OF FARLEY, IOWA, Defendant-Appellant.

          Appeal from the Iowa District Court for Dubuque County, Monica L. Ackley, Judge.

         A city appeals the district court's reduction of special assessment values.

          AFFIRMED. William J. Miller and Kirk W. Schuler of Dorsey & Whitney LLP, Des Moines, for appellant.

          Todd J. Locher of Locher & Davis PLC, Farley, for appellees.

          Heard by Danilson, C.J., McDonald, J., and Blane, S.J. [*]

          MCDONALD, JUDGE.

         The City of Farley specially assessed certain property owners for the costs of road and storm sewer improvements made in the city's industrial-business district. The project included widening a roadway, adding a paved shoulder and curb to the roadway, and improving the storm sewer along the roadway. The city specially assessed the property owners abutting the roadway at a rate of fifty-five dollars per linear foot of property running along the improved roadway. Some property owners, including Ertl Limited Partnership, Rauen & Rauen Development LLC, Molo Petroleum, and Dennis and Virginia Rauen challenged the special assessment in district court. The district court found the property owners had been assessed in excess of the special benefits received from the project and reduced the assessments. The City timely filed this appeal.

         The Code governs special assessments. Iowa Code section 384.61 (2015) requires "[t]he total cost of a public improvement . . . be assessed against all lots within the assessment district in accordance with the special benefits conferred upon the property, and not in excess of such benefits." An assessment is capped at twenty-five percent of the value of the land improved. See Horak Prairie Farm, L.P. v. City of Cedar Rapids, 748 N.W.2d 504, 507 (Iowa 2008).

         Challenges to special assessments are reviewed de novo. See id. at 506. "We will give weight to, but we are not bound by, the district court's findings." Gray v. City of Indianola, 797 N.W.2d 112, 117 (Iowa 2011). We presume "assessments are correct and do not exceed the special benefit[s] received" by the assessed parties. See id. The property owners bear the burden of showing the special assessment is excessive. See id. However, "[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." Horak Prairie Farm, 748 N.W.2d at 507. Because mathematical certainty is not possible, "we must rely on approximations to determine the correct amount of the assessment." Gray, 797 N.W.2d at 117. Ultimately, the court must consider "whether the assessment 'represents a fair proportional part of the total cost.'" Horak Prairie Farm, 748 N.W.2d at 507 (quoting Rood v. City of Ames, 60 N.W.2d 227, 238 (Iowa 1953)).

         From the outset, according to the evidence, the project was ill-conceived. The industrial-business district is isolated on the outskirts of the city. The city did not initiate the project in response to any professional study, such as a water-drainage study or traffic study. Instead, the city initiated the project because of some concern the roadway was deteriorating. The city widened the road and added curb and gutter to match a small segment of the roadway in front of one of the businesses in the industrial-business area. Specifically, a construction company abutting the roadway had added a curb and gutter to the roadway immediately in front of its business.

         Given the genesis of the project, it is unsurprising the project generated very little, if any, benefit for assessed property owners. The property owners testified the project failed to provide them with meaningful improvements. None of the owners had any prior issue with tire rutting on their properties from vehicles turning in, therefore, the shoulder apron provided no benefit. None benefitted from the increased turning radius provided by the widened street. Those who had some water drainage issues received no relief upon the project's completion. The testimony shows the water drainage issues actually increased after the completion of the improvement.

         The property owners' testimony was bolstered by their expert witness, Harold Smith, a former city engineer of the City of Des Moines, who testifies regularly in these types of proceedings. See, e.g., Gray, 797 N.W.2d at 114. Smith testified the owners received only a de minimis benefit from the project. The project did not reduce noise. The project did not reduce roadway dust. The project did not improve police or fire access to the industrial-business district. The project did not improve the ability to remove snow or ice. The project did not improve water drainage. The project did not reduce ditch maintenance. The project did not improve street parking. The project widened the roadway, however, the widening was excessive and not useful because the city did not widen the road enough to add additional traffic lanes. Smith did testify the property owners received a minimal special benefit in the form of increased market value of the properties due to the aesthetic improvement from the added curb and gutter.

         Given the lack of benefits from the project, Smith opined the project was best classified as a curb and gutter installation. Smith testified the Flint formula is commonly used to determine the special benefits associated with a project of this type. See id. at 114 n.4. (discussing the Flint formula). Smith testified, without objection, the appropriate formula in this case as follows: "One-and-a-half feet of curb and gutter times the lineal feet of a frontage for the property . . . which gives you square feet, divided by nine, gives you square yards, times $44.50 a square yard." He again testified to the formula, without objection, describing it as "[th]e area, the frontage times one-and-a-half foot of curb and gutter times the $44.50 a yard." While Smith testified about the formula, he did not provide any testimony regarding the specific dollar amounts derived from applying the formula to the various properties in this case. The data regarding the amount of linear feet of frontage for each assessed property was admitted into evidence without objection.

         The city contends the court should not have considered Smith's formula because it was not disclosed prior to trial. However, the city did not object to Smith's testimony regarding the formula. Error is not preserved. See Van Iperen v. Van Bramer, 392 N.W.2d 480, 486 (Iowa 1986) (concluding challenge to expert testimony ...


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