Opinion ID: 1837505
Heading Depth: 1
Heading Rank: 3

Heading: Dismissal of Defendants' Counterclaim For an Accounting.

Text: In their counterclaim, the defendants allege the company paid approximately $134,000 in real estate taxes from 1997 through 2002 specifically allocated to the TIF district on its property tax statements. See generally Iowa Code § 403.19 (allowing portion of property taxes to be allocated to tax increment financing). The defendants assert the City wrongly refused to account for these payments and credit this sum against the company's liability under the EDA. The district court concluded the EDA did not provide for such an offset, and therefore there was no legal basis upon which to require an accounting. Upon our de novo review, we think the trial court was correct. The EDA clearly evidences the City's intent to issue general obligation bonds to fund the economic development grants to the company. The contract documents also recite the City's plan to retire these bonds using the increased tax revenues generated by the improvements to the company's property and the assessment agreements. What is not present in the parties' agreement, however, is any express statement or implication that property taxes paid by the company and allocated to the TIF district would be credited against the company's liability under the EDA. The parties' clear intent that the tax revenues would be used to amortize the bonds does not reveal an intent that the tax revenues would be used to repay the grants. Retirement of the bonds and repayment of the grants are different obligations imposed on different parties. We also reject the defendants' argument that our decision in Norwest Credit, Inc. v. City of Davenport, 626 N.W.2d 153 (Iowa 2001), requires the requested offset. In that case the property owner, Brammer Company, LLC, had entered into an assessment agreement with the City of Davenport in exchange for a $500,000 economic development grant. Norwest Credit, 626 N.W.2d at 154. The issue in the case was whether this agreement was binding on the purchaser of the property upon the foreclosure of a mortgage recorded prior to the assessment agreement. Id. at 154-55. The defendants rely on the following general comments in that case: An assessment agreement is a way to finance improvements to local real estate, usually in blighted areas. See Black's Law Dictionary 111-12 (7th ed. 1999). These assessments are, in a certain sense, taxes. But an assessment differs from a general tax in that an assessment is levied only on property in the immediate vicinity of some local municipal improvement and is valid only where the property assessed receives some special benefit differing from the benefit that the general public enjoys. Robert Kratovil, Real Estate Law 465 (6th ed. 1974). The agreement is usually financed by the real estate holder assuming a bonded indebtedness. In the instant case, the amount of the bond covering the loan to Brammer was $500,000. The assessment on the real estate in question was then fixed at $2.5 million. The goal of this agreement was to amortize repayment of the $500,000 grant through the increased taxes Brammer would pay given the property's new taxable value. Id. (emphasis added). The defendants seize on this language to support their argument that an assessment agreement is designed to generate revenue for repayment of the grant made to the property owner through the property owner's increased tax payments. Based on this purpose, the defendants claim they are entitled to a credit in the amount of the increased taxes the company paid against the company's obligation to return the grant monies. Upon reviewing our discussion in Norwest Credit, we conclude this court simply misspoke when it said the goal of an assessment agreement is to amortize the grant. [1] The goal of an assessment agreement is to generate tax revenues to allow the municipality to amortize the bond, not the grant. This goal was clearly expressed in the contract documents at issue here. Thus, our unfortunate misstatement in Norwest Credit does not alter our conclusion here that the company is not entitled to offset its liability under the EDA for repayment of the grant monies by the TIF portion of its property tax payments. [2]