The Iowa Supreme Court says cities do not have to pay back cable fees collected illegally, but later approved by the legislature. Thomas Zaber, sued the City of Dubuque in September of 2006, claiming the city had collected an illegal tax from him and others in the form of franchise fees for gas, electric and cable TV in excess of the reasonable cost of regulating those industries.
Zaber sought a refund of the illegal taxes based on the Supreme Court’s decision in a case against the city of Des Moines where the court ruled franchise fees assessed by the city for gas and electric services constituted an illegal tax as the fees exceeded the reasonable costs of regulating the franchised activity.
The City of Dubuque argued that the cable fees were retroactively approved by the legislature in 2007 and they did not have to be refunded. Zabor argued his right to due process was violated by the legislature’s action. The district court agreed with the city.
The Iowa Supreme Court upheld the district court ruling on the cable fees, saying the legislature’s ratification of the city’s unauthorized tax was taken to cure a problem and to safeguard the financial stability of local municipalities, which is an exception allowed for retroactive laws.
Justice David Wiggins issued a dissent on the case, saying the “facts of this case illustrate why many ordinary citizens distrust their elected officials.” Wiggins says the actions of the legislature authorizing the collection of the illegal tax retrospectively, compounded the unfairness of the actions of the Dubuque City Council when it enacted the tax without legislative authority. Such conduct by these elected officials completely disregarded the political will of the general assembly at the time the Dubuque City Council imposed the franchise fee on cable services.
“These actions are as repugnant to the American system of taxation as the concept of taxation without representation.” Wiggins says the majority decision could authorize the unfettered retroactive application of an illegal tax so long as the purpose is to protect the public finances. But Wiggins says any time a city must pay out funds the public financial stability is at risk. He says under the majority’s decision a statute authorizing the imposition and retention of an illegal tax to prevent fiscal problems can never be subject to a due process challenge.
The High Court sent the case back to district court to rule on Zaber’s claim for a refund of gas and utility fees. The court issued similar rulings for Des Moines, Waterloo and Bettendorf — rejecting class-action lawsuits that had requested refunds for the thousands of people who had paid cable fees.
See the entire ruling here: Dubuque cable fee ruling PDF