Opinion ID: 1790807
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Heading: The Iowa Alcoholic Beverages Control Act

Text: The first section of the Iowa Alcoholic Beverages Control Act establishes that the general assembly chose to reserve to itself the power to regulate the traffic of alcoholic beverages: This chapter shall . . . be deemed an exercise of the police power of the state, for the protection of the welfare, health, peace, morals, and safety of the people of the state, and all its provisions shall be liberally construed for the accomplishment of that purpose. It is declared to be public policy that the traffic in alcoholic liquors is so affected with a public interest that it should be regulated to the extent of prohibiting all traffic in them, except as provided in this chapter. Iowa Code § 123.1 (emphasis added). A subsequent section defining the term local authority also supports the conclusion that, subject to a handful of exceptions, the general assembly reserved in itself the power to regulate Iowa's alcoholic beverage industry. Section 123.3(21) states a local authority is empowered to approve or deny applications for retail beer or wine permits and liquor control licenses; empowered to recommend that such permits or licenses be granted and issued by the division; and empowered to take other actions reserved to them by this chapter. (Emphasis added.) More pertinent to the case at hand, the general assembly exclusively reserved in itself the power to establish [liquor] licenses and [beer and wine] permits and levy taxes as imposed in [the Act]. Id. § 123.37. While the general assembly reserved to itself the general authority to regulate the alcoholic beverage industry in Iowa, it also gave limited regulatory powers to local authorities. For example: Section 123.30(2) allows the local authority to refuse to issue a license or permit for premises which do not conform to applicable local laws. Section 123.32(3) allows the local authority to define . . . licensed premises for festivals, fairs and the like. Section 123.32(4) allows the local authority to require an applicant's security personnel to be trained and certified in security methods. Section 123.38 allows the local authority to authorize the transfer of existing permits from one location to another, so long as the location remains within the same city or county. Section 123.39(1) allows the local authority to suspend a license or permit for a period not to exceed one year or impose a civil penalty not to exceed one thousand dollars per violation. Section 123.39(2) allows the local authority to suspend any retail wine or beer permit or liquor control license for a violation of any ordinance or regulation adopted by the local authority. It also allows local authorities to adopt ordinances or regulations for the location of the premises of retail wine or beer and liquor control licensed establishments. Most important to the present case, the general assembly gave local authorities the authority to adopt ordinances which govern any other activities or matters which may affect the retail sale and consumption of beer, wine, and alcoholic liquor and the health, welfare and morals of the community involved. Id. § 123.39(2). The general assembly limited this authority to ordinances not in conflict with the Act and ordinances that do not diminish the hours during which beer, wine, or alcoholic beverages may be sold or consumed at retail. Id. While we attempt to interpret statutes and ordinances in a manner so as to render them harmonious, Green v. City of Cascade, 231 N.W.2d 882, 890 (Iowa 1975), and presume municipal ordinances are valid, Dilley v. City of Des Moines, 247 N.W.2d 187, 190 (Iowa 1976), we simply cannot avoid the following conflicts between the Act and the ordinance.
One patent inconsistency between the statutory process set forth by the ordinance and the process set forth by the Act relates to permit transfer fees. Under the current ordinance, an existing permittee or licensee seeking to transfer the permit or license to a different location within the jurisdiction of the city is required to pay an administrative fee ranging from $215 to $315. This fee is subject to change by resolution of the City Council. In contrast, Iowa Code section 123.38 states: The administrator [of the Iowa Alcoholic Beverages Division] may by rule establish a uniform transfer fee to be assessed by all local authorities upon licensees or permittees to cover the administrative costs of such transfers, such fee to be retained by the local authority involved. (Emphasis added.) The Act does not give local authorities the power to establish a transfer fee. Instead the general assembly has, under its exclusive right to establish licenses and [alcoholic beverage] permits, assigned the power to establish transfer fees to the administrator. The City usurps this power by establishing its own transfer fees. In addition, the City's mechanism for setting the amount of the transfer fee does not assure uniformity within the state. Under the ordinance, the City Council can set its own fees for transfer requests without any regard for a fee established by the administrator. Beyond the irreconcilable conflict pertaining to transfer fees, we also find inherent conflicts between the fee collection procedures established in the Act and those set forth in the ordinance.
Iowa Code section 364.6 states a city must substantially comply with a procedure established by a state law for exercising a city power. See also Iowa Code § 331.301(5) (stating same requirement for counties). For the reasons discussed below, we find the application of the disputed ordinance results in a procedure which does not substantially comply with, and therefore conflicts with the procedures established by state law.
The size of the statutory application fee for a particular applicant is based upon a myriad of factors. The application fee varies according to whether the applicant is located within corporate city limits, the type of applicant, the population of the city, the type of alcoholic beverage, and whether the alcoholic beverages are sold on Sundays. See, e.g., id. §§ 123.36, .134,.179. The only other fee addressed by the legislature pertaining to alcoholic beverage permits is the license transfer fee. As discussed above, only the Division administrator has the power to set this fee, and the administrator must set this fee so that it is uniform for all local authorities. Id. § 123.38. One effect of a uniform statutory application fee system is that it keeps local authorities from using license or permit application fees to curtail liquor establishments within their jurisdiction. Without a uniform application fee system, a local authority could charge a large application fee to discourage new liquor permit applicants or to discourage renewals of existing permits. For example, under the guidelines set forth by the general assembly, an applicant planning to open a liquor establishment in the greater Des Moines area would pay the same application fee in the City of Des Moines or in the nearby city of Urbandale. The cost of applying for such a permit (and the cost of reapplying for subsequent permits) would not factor into the proprietor's decision of where to locate its business. However, if local authorities were allowed to set their own license application fees, then one city could raise its application fees and push liquor establishments into a nearby jurisdiction. The imposition of additional administrative fees would circumvent the established procedure. The benefit of a standardized application fee would be lost because each local authority would be able to discourage the proliferation of liquor establishments based on administrative fees, rather than application fees. For this reason we find the disputed ordinance disturbs, and does not substantially comply with, the uniformity so meticulously established by the Act.
Normally, a municipal corporation can, as a home rule entity, impose license fees, permit fees, or franchise fees to cover the cost of inspecting, licensing, supervising, or otherwise regulating activities related to the exercise of its police power. Home Builders Ass'n v. City of West Des Moines, 644 N.W.2d 339, 347 (Iowa 2002). However, in the present case, an additional administrative fee is not appropriate because the City already receives compensation for these costs. Not only is the City already compensated for its role in the application process, but the City, with its large population, is compensated more for its application review process than other smaller cities or rural counties. The fact that the statutory fee schedule assures local authorities in larger cities larger application fees than local authorities in smaller cities or rural counties leads us to the conclusion that the general assembly appreciated and accounted for any additional costs involved in investigating and processing applications in larger cities. [3]
By adding extra fees, the City has increased its role in the licensing system  if the applicant does not pay the City its additional administrative fee, the City will not forward the application on to the Division. This extra hurdle violates the application procedure established by the Act. See generally Richards v. City of Pontiac, 305 Mich. 666, 9 N.W.2d 885, 888 (1943) (finding conflict where a city imposed a licensing fee for trailer camps when the State had already entered the field and imposed a similar licensing fee). The City argues this extra hurdle does not conflict with the Act. The City contends the present ordinance is analogous to an ordinance which survived a preemption challenge in the court of appeals. Drawing on language from BeeRite Tire Disposal/Recycling, Inc. v. City of Rhodes, 646 N.W.2d 857, 860 (Iowa Ct.App.2002), the City claims its administrative fee further promotes the underlying policy of the Act with greater force and merely increased the details of the existing regulation. In BeeRite, the city of Rhodes passed an ordinance regulating the disposal of old tires. 646 N.W.2d at 858. This ordinance imposed, among other things, a $100 annual permit fee payable to the city on top of the existing $850 state fee payable to the Department of Natural Resources. Id. The court of appeals compared the legislative agenda to regulate the regulation of tire disposal with our decision in Goodell v. Humboldt County , where we considered the legislative agenda regarding livestock confinement. Id. at 860-61 (citing Goodell, 575 N.W.2d at 503-07). Noting there was a clear legislative purpose to issue regulations intending to limit local over-regulation in the area of livestock confinement, the court of appeals concluded there was no similar legislative agenda to regulate the regulation of tire disposal. Id. at 861. Unlike the livestock confinement regulations in Goodell, there was no statutory scheme which would be either bypassed, contradicted, or overridden by the City of Rhodes's tire disposal regulations. Id. at 860. Because there was less need for uniform state regulations for tire disposal than there was for livestock confinement waste, the court of appeals concluded the Rhodes ordinance did not unduly modify the tire disposal statutory scheme established by the State and did not stand in opposition to regulations promulgated by the Iowa Legislature. See id. at 860-61. Without determining the validity of the distinction made by the court of appeals in BeeRite, we are confident the same conclusion cannot be drawn here. The general assembly's footprint covers the area of alcoholic beverage permits. The general assembly limits the ability of local authorities to regulate alcoholic beverages and exclusively reserves in itself the power to establish beer permits, wine permits, and liquor licenses. See Iowa Code §§ 123.1,.3(21), .37. In addition, the City's administrative fee disrupts the uniformity in the statutory scheme. The ordinance does more than merely increase the details of regulation.
The Act outlines procedures for local authorities to collect the necessary fee prescribed by statute and to either forward that fee on to the alcoholic beverage division or to keep the fee and submit a receipt to the Division. See id. § 123.32(2). Either way, the local authority is required to report any funds received with the application. See id. §§ 123.32(2),.36(8), .143. Under the Des Moines ordinance, the City does not have to account to the Division for the total amount collected for the application. It only accounts for the fees collected under the statutory guidelines. This violates the established procedure and frustrates the general assembly's intent to monitor the flow of funds from license/permit applicants to local authorities. [4]