Court Opinion

ID: 4250308
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:24:36.129066+00
Date Added: 2024-06-11T14:17:02.468302
License: Public Domain

IN THE SUPREME COURT OF IOWA
                              No. 40 /04-1914

                            Filed April 14, 2006

IOWA GROCERY INDUSTRY
ASSOCIATION,

      Appellee,

vs.

CITY OF DES MOINES,

      Appellant.
________________________________________________________________________
      Appeal from the Iowa District Court for Polk County, Robert L.

Blink, Judge.

      City   appeals   district   court   decision   declaring   a   municipal

ordinance which imposed administrative fees on liquor license and beer

and wine permits illegal. AFFIRMED.

      Mark Godwin, Des Moines, for appellant.

      John F. Lorentzen of Nyemaster, Goode, West, Hansell & O’Brien,

P.C., Des Moines, for appellee.
                                         2

STREIT, Justice.

      Arguments over government fees concerning liquor have swirled in

a cocktail of political debate since the Whiskey Rebellion in 1794. 1 Iowa
grocers complain the administrative fees being charged by Des Moines on

liquor licenses are illegal.      The defendant, the City of Des Moines,

appeals from the district court’s judgment declaring a municipal

ordinance imposing administrative fees on liquor licenses and beer and

wine permits illegal.     The City claims the district court erred when it

determined the Iowa Alcoholic Beverage Control Act conflicts with, and

thereby preempts the administrative fee ordinance. Because we find the

ordinance conflicts with the statutory scheme created for application

fees, we affirm.

      I. Facts and Prior Proceedings

      The plaintiff, the Iowa Grocery Industry Association (hereinafter

“IGIA”), is a group of grocers, some of which operate grocery stores within

the City of Des Moines. Pursuant to the statutory scheme provided by

the   Iowa Alcoholic Beverage         Control    Act   (hereinafter    “the   Act”),

applications for liquor licenses and beer and wine permits are filed with

the local authority, which in this case is the Des Moines City Council.
Iowa Code § 123.32(1) (2003). The local authority is authorized to make

an initial decision whether to approve or disapprove the application. Id.

§ 123.32(2). The application, endorsed by the local authority as either

approved or disapproved, is then forwarded to the Iowa Alcoholic

Beverage Division of the Iowa Department of Commerce (hereinafter

“Division”). Id. If the application is not approved by the local authority,

      1In  1794, President Washington mobilized an army of approximately 15,000 to
suppress an uprising of Pennsylvania farmers angered by an excise tax imposed by the
federal government on whiskey.         See generally Jason Mazzone, The Security
Constitution, 53 UCLA L. Rev. 29, 109-112 (2005).
                                            3

the Division notifies the applicant of the disapproval and informs the

applicant of its opportunity to appeal the decision to the administrator of

the Division.     Id. § 123.32(5)(a).      If the application is approved by the

local authority, the administrator makes any investigation it deems

necessary and then affirms, reverses, or modifies the local authority’s

decision. Id. § 123.32(5)(b).

       The Act assigns specific application fees for liquor licenses and

beer and wine permits. The local authority collects these fees. For beer

permit applications, the local authority forwards a certified receipt for the

fees to the Division, but retains all of the application fees for itself. Id.

§ 123.143(1).     In contrast, the fees on liquor licenses and wine permit

applications are not retained by the local authority. The local authority

sends these fees to the Division and then receives a percentage of the

fees back.     Id. § 123.36(8).       In Des Moines, the fees retained by, or

remitted back, to the City are placed in the City’s general fund.

       In 2003, the City of Des Moines adopted an ordinance requiring an

additional “administrative fee” on applications for liquor licenses and

beer and wine permits. Des Moines City Ordinance § 10-54(3) (2004).

Although the City is already reimbursed for its role in the application
process, 2 the City passed this ordinance to cover its costs in processing
and investigating the applications. The additional administrative fee for

new permit applicants is a minimum of $420 for “on-premises”

consumption permits (bars and restaurants) and a minimum of $320 for

       2The  local authority is not compensated for every type of application, but it does
receive varying amounts of compensation based upon the type of application. For
example, the local authority keeps all fees it collects for beer permit applications. Iowa
Code § 123.143(1). For Class A, B, and C liquor licenses the local authority receives
65% of the application fee. Id. § 123.36(8). The State keeps all fees for temporary or
seasonal licenses, Class A and B wine permits, and Class D and E liquor licenses. See
id. §§ 123.36, .143, .179.
                                         4

“off-premises” consumption permits (grocery stores and convenience

stores). Unlike the state statutory license fee, the ordinance provides no

mechanism to refund the administrative fee if the license application is

not approved. See id.; Iowa Code § 123.32(5)(a).

      The IGIA filed the present declaratory judgment action claiming the

ordinance is illegal because the State regulation of liquor licensing under

the Iowa Alcoholic Beverages Control Act preempts the imposition of

additional fees.     Before trial, IGIA and the City agreed upon a joint

statement of facts, and then both filed motions for summary judgment.

The court granted IGIA’s motion for summary judgment, and the City

filed this appeal.

      II. Standard of Review

      When reviewing a district court’s decision to grant summary

judgment, our task is to determine whether a genuine issue of material

fact exists and whether the law was correctly applied.         Junkins v.

Branstad, 421 N.W.2d 130, 132 (Iowa 1988). In this case, the parties

agree there is no dispute with respect to the material facts of the case;

the disagreement centers on the interpretation of state law. Our role is

to decide whether we agree with the district court’s application of the law
to the undisputed facts before us. Therefore, our review is for correction

of errors at law. Campbell v. Delbridge, 670 N.W.2d 108, 110 (Iowa 2003)

(“The standard of review of a district court’s grant of summary judgment

is for correction of errors at law.”).

      III. Merits

      A.   Home Rule Authority

      The City argues the ordinance is valid because, under the “Home

Rule Amendment,” the City has the power to determine its own local
                                      5

affairs and government. In essence, the City argues it can charge the fee

because the Act does not explicitly limit its right to do so.

      Article III, section 38A of the Iowa Constitution provides:

      Municipal corporations are granted home rule power and
      authority, not inconsistent with the laws of the general
      assembly, to determine their local affairs and government,
      except that they shall not have power to levy any tax unless
      expressly authorized by the general assembly.

      The rule or proposition of law that a municipal corporation
      possesses and can exercise only those powers granted in
      express words is not a part of the law of this state.

This provision of the Iowa Constitution, known as the “Home Rule

Amendment,” grants municipal corporations broad authority to regulate

matters of local concern. City of Des Moines v. Gruen, 457 N.W.2d 340,

341 (Iowa 1990). However, this authority is limited by the fact that a

city’s exercise of power must not “be inconsistent with the laws of the

general assembly.” Iowa Const. art. III, § 38A.

      “A municipal ordinance is inconsistent with a law of the general

assembly and, therefore, preempted by it, when the ordinance prohibits

an act permitted by statute, or permits an act prohibited by a statute.”

Gruen, 457 N.W.2d at 342 (internal quotations and citations omitted). A
municipal ordinance is also preempted by state law when the ordinance

invades an area of law the legislature reserved to itself.      Id.   Stated

another way, municipalities do not have authority to act if a particular

power has been denied them by statute.         Goodell v. Humboldt County,

575 N.W.2d 486, 492 (Iowa 1998); see also Sam F. Scheidler,

Implementation of Constitutional Home Rule in Iowa, 22 Drake L. Rev.

294, 305 (1973).

      The district court concluded the Act preempted the City’s authority

to charge the administrative fee because the fee conflicted with the
                                      6

general assembly’s specific directions for governance in the area of

alcoholic beverage permits. After reviewing the controlling statutes, we

agree with the district court.

      B. The Iowa Alcoholic Beverages Control Act

      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:
                                     7
            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,
                                     8

247 N.W.2d 187, 190 (Iowa 1976), we simply cannot avoid the following

conflicts between the Act and the ordinance.

      1. Transfer Fees

      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.
                                       9

       2. Compliance with Existing Statutory Procedure

       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.

       i. Uniformity

       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
                                       10

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.

      ii. Existing Repayment Mechanism

      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
                                           11

appreciated and accounted for any additional costs involved in

investigating and processing applications in larger cities. 3

       iii. Additional Requirement

       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, 9
N.W.2d 885, 888 (Mich. 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.

       3For  example, the application fee for a Class B liquor license in a city of 10,000
or more people is $1300. The fee for the same permit in a city with a population of
3000 or less is only $800. Iowa Code § 123.36(3). The local authority receives 65% of
this application fee. Id. § 123.36(8).
                                    12

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.

       iv. Accountability

       The Act outlines procedures for local authorities to collect the

“necessary fee” prescribed by statute and to either forward that fee on to
                                         13

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

       IV. Conclusion

       The general assembly has established a comprehensive and

uniform procedure for controlling the fees surrounding the issuance and

transfer of alcoholic beverage permits or licenses. This procedure clearly

defines the local authority’s role in the application process and

compensates the local authority for its responsibilities. The Des Moines

ordinance conflicts with this statutory scheme. We therefore affirm the

district court’s decision to declare the ordinance invalid.

       AFFIRMED.

       4Iowa   Code section 123.18 expressly prohibits a “person responsible for the
administration or enforcement of this chapter” from accepting or soliciting donations,
gratuities, political advertising, gifts, or other favors from any applicant.