An Iowa Supreme Court ruling issued today said the City of Des Moines has to pay back franchise fees for electricity and gas that a district court ruling said were an illegal tax. Chief Justice Mark Cady wrote a dissent to the ruling that said allowing the case to become a class action suit increased the amount the city will have to pay and will require the city to raise the money in some other way from the very people it must pay back.
Des Moines City Attorney, Jeff Lester, says they had hoped more of the justices would side with Cady. “The city was deeply disappointed to get the ruling, and we believe Chief Justice Cady’s dissent was clearly the better reasoned approach and was more reflective of Iowa law,” Lester says.
The city had argued that it used the $40-million in fees for public services, so it should not have to pay the money back. But the attorney who represented those in the suit against the city, Brad Schroeder, says the issue goes beyond this case.
“The only alternative it to let them get away with it. And if they are emboldened in this case, when does this issue crop up again, when do they make the next money grab?,” Schroeder asked. “You know we are all taught at a young age, if you take something that doesn’t belong to you, the first thing you need to do is to pay it back.”
Lisa Kragnes brought the initial suit against the franchise fee. Kragnes says she won’t feel responsible if the city has to raise property taxes to pay back the franchise fees. “I would have to say no, the city is. When we initially started this in 2004 there was no money attached to it whatsoever. We said you can’t do this before they increased the fee,” Kragness explains.
“So if anybody is responsible for an increase in property taxes or a decrease in services, it would be the city leaders because they chose this action, I did not choose it, they did.”
The city could appeal the ruling to the U.S. Supreme Court — which is something Lester says is a possibility. “That decision hasn’t been made to this point. We’ll have some discussion with the client..in the very near future, and have the city council make that decision at some point,” Lester says.
The ruling impacts some 100,000 utility customers in Des Moines, and possibly other cities which adopted fees similar to those charged by Des Moines.