Opinion
No. 5-402 / 04-1629
Filed July 13, 2005
Appeal from the Iowa District Court for Clayton County, James L. Beeghly, Judge.
Plaintiffs appeal from adverse rulings of the district court. AFFIRMED.
Wallace L. Taylor, Cedar Rapids, for appellant.
Dennis W. Johnson of Dorsey Whitney LLP, Des Moines, for appellee.
Heard by Vogel, P.J., and Miller and Hecht, JJ.
Plaintiffs appeal from adverse rulings of the district court. We now affirm.
I. Background Facts and Proceedings.
This appeal concerns the Clayton County Board of Supervisors's (Board) decision to (1) amend the county's comprehensive plan, (2) adopt an urban renewal plan within the county, and (3) establish a Tax Increment Financing (TIF) district for the urban renewal area. The Board undertook these actions with the purpose of recruiting developers to the area surrounding the city of McGregor in order to build a high-end golf course, hotel, and water park resort, known as the River Bluff Project. In 2001, representatives from the county and the city of McGregor approached Vision Iowa about obtaining grant monies for the River Bluff Project. The city put out a request for grant proposals and received proposals from four different vendors. The city eventually approved the grant proposal of MSA Professional Services (MSA), which was submitted to Vision Iowa. The grant proposal named MPC Development LLC (MPC) as the prospective developer for the project. The Vision Iowa Board initially approved the grant, but withdrew its support after conducting a due diligence investigation on both MSA and MPC. The due diligence report revealed significant construction problems with prior development projects undertaken by the respective organizations and their principals, resulting in protracted litigation.
Despite Vision Iowa's withdrawal of support for the River Bluff Project, the county forged ahead. A new entity, River Bluff Resort LLC (RBR), was named the developer of the planned River Bluff Project and discussions on how best to finance the project began between the Board and RBR's principal owner, James Daughtry. It was determined the Clayton County Comprehensive Plan that had remained unrevised since 1970 should be amended to provide a better fit for the River Bluff Project. As a result of this determination, the county contacted Upper Explorerland Regional Planning Commission (Explorerland) for advice on amending the comprehensive plan. A number of local meetings were held around Clayton County at which residents were encouraged to provide their views on future land use within the county without specific reference to the River Bluff Project. The county's planning commission subsequently recommended changes to the comprehensive plan. The revised comprehensive plan was adopted by the Board on November 19, 2002. While still emphasizing the county's agricultural, aesthetic, and environmental interests, the revised comprehensive plan included a new emphasis on promoting a "tourism and recreation-related economy," noting the county "has evolved beyond agricultural production as the economic engine for the area."
The Board also requested Explorerland prepare a River Bluff Urban Renewal Plan with Tax Increment Financing District to cover the proposed River Bluff Project. The plan authored by Explorerland was presented to the Board on June 11, 2003. Soon thereafter, Clayton County and RBR entered into a development agreement which provided: (1) Clayton County shall pass an ordinance establishing a Tax Increment Financing (TIF) district covering the proposed development area as part of the Board's approval of the River Bluff Urban Renewal Plan; (2) Clayton County shall issue a TIF bond in the principal amount of $20 million to RBR, bearing interest of eight percent per annum, and set to mature no more than twenty years after its issuance; (3) RBR shall develop an 18-hole "championship quality" golf course along with a 130-acre residential development, a 200-room hotel, and a water park; (4) RBR is obligated to substantially complete the golf course within five years of the agreement and obtain a binding operating agreement for the operation of the hotel and water resort; and (5) in the event RBR fails to comply with the five-year deadline, Clayton County will suspend all payments of principal and interest on the TIF bond until such time as RBR fulfills its obligations under the agreement. The agreement was structured to provide a twenty-year property tax rebate to RBR as an incentive to construct improvements that would not only generate tourism revenue and create new jobs within the county, but also significantly increase the county's property tax base after the bond matures.
A TIF bond is tied to and paid out from the increased property tax revenue generated in the TIF district. At the time of its issuance, the property values in the district are "frozen" and any future increases in property values are designated the "increment." Under the plan adopted in this case, the base or "frozen" property tax inures to Clayton County, and any increase in property taxes generated from the improvements made on the property is placed in a special fund from which payments of principal and interest on the TIF bond issued to RBR will be paid. Payments of principal and accrued interest are to be made every six months to RBR out of the increment, being applied first to principal. If the principal payment is not met, the interest accrued during the period is rolled into the principal. The TIF bond is not considered a general obligation of the county, and in the event the property tax increases from the improvements made in the district do not permit full payment of the bond, the county is not obligated to pay the shortfall.
The agreement states, "substantial completion is defined as the time when the property can be occupied and used for the intended purpose as a golf course and suitable for opening to the public."
A public meeting on the proposed urban renewal plan was held on August 27, 2003, at which the public were encouraged to voice their support or concerns for the plan. Following public comment, the Board passed a resolution of necessity for the River Bluff Urban Renewal Plan in which the Board noted its finding that the urban renewal plan conformed to the county's newly revised comprehensive plan. In response to the Board's action, the plaintiffs filed suit in district court seeking injunctive and declaratory relief against the Board. Their petition asserted (1) the River Bluff Urban Renewal Plan did not conform to the requirements of Iowa Code chapter 403 (2003), and was therefore illegal, and (2) the designation of the TIF district providing the incentive for the development was illegal, arbitrary and capricious, and an abuse of discretion.
At trial, Clayton County supervisor Robert Walke testified the River Bluff Project alone was estimated to increase the county's current property tax base of $679 million by $139 million. Walke noted Clayton County suffered an unemployment rate of 10.3%, the highest rate of any county in Iowa. In Walke's opinion, the proposed River Bluff Project would provide many temporary construction jobs and create many more permanent jobs necessary to operate the new facilities. The Board also defended the River Bluff Project's economic viability by pointing to a consulting firm's study which indicated general market characteristics and trends in the development area, given its aesthetic quality, were generally favorable for the proposed project. The Board noted the construction, ownership, and operation of the facilities would be private, and the TIF bond issued to the developer would only be paid to the extent property values in the TIF district increased as a consequence of the expected development.
The district court ruled in favor of the Board and dismissed the plaintiffs' petition for declaratory and injunctive relief. In its ruling, the district court found the Board had "given consideration to the policies and requirements of an urban renewal plan," and "to potential financial consequences to Clayton County resulting from the River Bluff Development Project." The district court found substantial evidence supporting the Board's finding concerning the economic benefits anticipated from the River Bluff Project and the Board's conclusion that the proposed urban renewal plan comported with the county's comprehensive plan. Finding the decision to go forward was a "uniquely legislative decision of the type that boards of supervisors are elected to decide," the district court refused to substitute its judgment for that of the duly elected Board.
The appellants assert on appeal that (1) the adoption of the urban renewal plan violated Iowa law, (2) the urban renewal plan does not comport with the comprehensive plan, and (3) the approval of the urban renewal plan was otherwise illegal, arbitrary and capricious, and constituted an abuse of discretion.
II. Scope and Standard of Review.
Our review of the district court's denial of declaratory and injunctive relief, as with all matters tried in equity, is de novo. Opat v. Ludeking, 666 N.W.2d 597, 603 (Iowa 2003). While we give appropriate weight to the findings of the district court, we are not bound by them. Id. III. Discussion. A. Compliance with Iowa Code Chapter 403.
Iowa Code Chapter 403 grants authority to the Board to create urban renewal projects in areas the Board deems to be in need of economic development. Iowa Code § 403.2(3) (2003). Among the factors to be considered when the Board designates an urban renewal area are (1) alleviation of unemployment and housing shortages, and (2) encouragement the relocation of new commercial enterprises in the area. Id. §§ 403.2(3), 403.4(2).
Our supreme court has previously held the decisions of counties and municipalities under chapter 403 are legislative in nature. McMurray v. City Council of City of West Des Moines, 642 N.W.2d 273, 277 (Iowa 2002). In making legislative decisions, the Board exercises considerable discretion and its findings are entitled to significant deference. Id. Courts generally will not interfere with a legislative body's decision unless it is arbitrary and capricious, unreasonable, or an abuse of the body's considerable discretion. Id.; see also Dilley v. City of Des Moines, 247 N.W.2d 187, 192 (Iowa 1976) (finding courts may invalidate the findings of a legislative body only if they are arbitrary, capricious, or unreasonable). We will therefore presume the Board, comprised of duly elected officials, acted in the overall best interests of the public. McMurray, 642 N.W.2d at 277.
Appellants have not pointed to any particular failure in the Board's procedure leading up to its passage of the resolution of necessity on the River Bluff Urban Renewal Plan. In reviewing the procedures and considerations under chapter 403, we find no misstep on the part of the Board. The Board noted the problem of unemployment in Clayton County, and found the project would result in the creation of new jobs for residents. The Board also found the project, when completed, would increase the county's property tax base by $139 million and improve the economic conditions in the county as a whole. We are persuaded that the Board considered the policy goals of chapter 403 and found those policies will be furthered by approval of the River Bluff Urban Renewal Plan and development of the River Bluff project.
The Board has also complied with the procedural requirements mandated in chapter 403. The urban renewal plan was submitted to the county's planning commission. Iowa Code § 403.5(2). Although the commission members noted some negative features of the plan, a preponderance of the members' responses to the plan were positive. Regardless of how the plan was received by the planning commission, we note it is the Board and not the commission that is granted authority to make findings. Id. As such, even if the commission had been overwhelmingly against the proposed development plan, we would not find the Board's decision arbitrary based on that fact alone. The Board also complied with the public hearing requirement, and the record reveals appellants were given an opportunity to express their opinions on the undesirability of the proposed development plan. We therefore agree with the district court that substantial evidence supports the conclusion that the River Bluff Urban Renewal Plan and its adoption by the Board are consistent with the policy considerations and procedural requirements of chapter 403.
B. Compliance with the Comprehensive Plan.
The Appellants next claim the River Bluff Urban Renewal Plan "does not comply with a properly created comprehensive plan." (Emphasis supplied). In making this claim, the appellants assert not only that the urban renewal plan violates the comprehensive plan as revised by Clayton County in 2002, but also maintain the revision of the comprehensive plan itself was an arbitrary and capricious exercise of the Board's authority.
As was mentioned earlier, the comprehensive plan was amended to reflect a general desire among the county's residents to broaden the economic focus of Clayton County to include revenues generated from recreation and tourism, and in this regard the design of the River Bluff Urban Renewal Plan is consistent with the revised comprehensive plan. The appellants, however, claim a number of other development goals and policies in the revised comprehensive plan cannot be reconciled with the proposed development plan. We note many of the guidelines contained within the revised comprehensive plan are in natural tension with each other, and as such, it is unlikely a particular development project will be found to strictly comply with each of the more than sixty-five individual policy considerations found in the comprehensive plan. The legislature, in ceding authority to the Board, sensibly authorized the Board to "approve an urban renewal plan if it finds that the urban renewal plan conforms to the general plan of the [county] as a whole." Iowa Code § 403.17(24)(a) (emphasis supplied). We read this section as authorizing the Board to adopt an urban renewal plan that generally conforms to the county's comprehensive plan. In finding the River Bluff Urban Renewal Plan does conform to the revised comprehensive plan in its resolution of necessity, the elected Board members made a legislative judgment which was theirs to make. The appellants have a heavy burden to show the Board's legislative judgment was exercised in an arbitrary and capricious manner. McMurray, 642 N.W.2d at 277. In making their assertion that the urban renewal plan does not conform to the revised comprehensive plan, appellants have provided very few concrete examples of how the urban renewal plan actually conflicts with specific guidelines within the comprehensive plan. We conclude the appellants have failed to meet their burden to establish the Board's actions and decisions were arbitrary or capricious.
In the appellants' brief, they list the seven areas of guidelines for development within Clayton County revised comprehensive plan and assert each guideline area is somehow violated by the River Bluff Urban Renewal Plan. These guidelines advise the Board to (1) promote tourism utilizing natural resources, (2) improve the appearance of rural county areas, (3) promote economic growth while maintaining environmental quality, (4) ensure development is compatible with its surrounding, including public services, (5) promote the diversity of types and location of housing within the county, (6) promote the retention of open space for recreation, and (7) protect existing agricultural land while encouraging the development of land already taken out of agricultural production. Many of these guidelines are subdivided into more specific policy considerations and development goals. With the exception of noting the River Bluff Project might have some negative impact on a popular trout stream, the appellants appear to assume specific conflicts with the guidelines will become obvious to us following our review of the revised comprehensive plan. However, the conflicts claimed by the appellants do not so easily spring forth when the impact of the River Bluff Project is viewed in conjunction with the comprehensive plan, and we therefore conclude the appellants have not met their considerable burden.
The appellants next attack the wisdom of and motivation behind the revisions to the county's comprehensive plan. The appellants' brief on appeal stresses the fact the Board undertook revisions to the comprehensive plan simply to accommodate a specific project. This motivation, they stress, is contrary to the intended purpose of a comprehensive plan, which is designed to unify the development and land use goals of a county or municipality and prevent "piecemeal and haphazard" decisions. See Wolf v. City of Ely, 493 N.W.2d 846, 849 (Iowa 1992).
The appellants have likewise leveled an attack on the urban renewal plan itself because it was adopted with a specific development project in mind. We find no authority for the proposition that a specific, as opposed to a general, plan for economic development is arbitrary and capricious as a matter of law. In fact, Iowa Code section 403.5(2) contemplates the submission of urban renewal plans to the Board by both public and private entities. Private entities are likely to have a specific development project in mind when submitting plans to the Board. As such, we conclude the legislature, in ceding the Board authority to create urban renewal plans, did not intend to prohibit or even discourage plans encompassing a specific development project.
We cannot agree with the appellants' criticism of the revision of the comprehensive plan for the county. Planners are encouraged to create comprehensive plans to direct the development of their respective municipalities or counties. Id. Such planning involves the exercise of legislative decision-making. McMurray, 642 N.W.2d at 277. As such, we will not interpose our judgment on the Board's findings unless those findings are patently arbitrary. Id. Clayton County's prior comprehensive plan had not been updated since the 1970s, and given the enormous changes in the economic dynamics of rural Iowa since that time, it is clear the plan was in need of revision. See Anderson v. City of Cedar Rapids, 168 N.W.2d 739, 743 (Iowa 1969) (noting that regulations of land use are not static, but rather require revision to accommodate "changing community conditions and needs as they appear"). The Board sought and received public comment on the future plan for the county's development without reference to the River Bluff Project. Those public comments were incorporated into the revised comprehensive plan. Because of the circumstances surrounding the Board's decision, and the open discussion resulting in the revisions, we cannot construe the decision to update the county's comprehensive plan as arbitrary, capricious, unreasonable, or an abuse of discretion. And because we agree with the Board's conclusion in its resolution of necessity that the River Bluff Urban Renewal Plan is consistent with the comprehensive plan now in effect for Clayton County, we reject appellants' attack on the propriety of the Board's decision to adopt the urban renewal plan, and affirm on this issue.
C. TIF District as an Incentive to Develop.
The appellants' final challenge to the propriety of the River Bluff Urban Renewal Plan involves the creation of the TIF district covering the area on which the project will be constructed. The TIF district and the TIF bond issued to the developer served as a tax rebate vehicle and an incentive to construct and operate the project. Appellants contend the record reveals the Board failed to consider the negative consequences suffered by the county resulting from the TIF district.
Appellants' expert Dr. Thomas Pogue testified the increased tax base anticipated within the TIF district will most likely result in a decrease in the tax bases in the surrounding area. Pogue also indicated the county will be required to expend additional monies in providing necessary public services within the TIF district at the same time the increased property tax revenue within the district is diverted in order to pay off the $20 million bond held by the developer — creating strain on the county's coffers. Finally, Pogue indicated the twenty-year diversion of the increased property tax revenue within the TIF district will harm the county's public schools. Pogue, however, did acknowledge the State does reimburse to the schools a portion of the diverted property tax.
We note the legislature has authorized counties to create TIF districts covering designated urban renewal areas. Iowa Code § 403.19. The decision to create a TIF district, like the decision to designate an urban renewal area, is legislative in nature, and will not be disturbed unless it is arbitrary and capricious. McMurray, 642 N.W.2d at 277. While diversion of property tax revenue from the TIF district might be viewed as a negative consequence in the short-run, reasonable legislative decision-makers could conclude that successful development of the River Bluff Project will, in the long-run, create a positive economic outcome for the county, its residents, and its school systems. Given the substantial deference owed to legislative bodies and their political choices, we cannot conclude on this record that the adoption of the River Bluff Urban Renewal Plan was arbitrary and capricious.
IV. Conclusion.
The appellants failed to prove the Board's decision to adopt the River Bluff Urban Renewal Plan was arbitrary and capricious. Any arguments raised by the appellants but not specifically discussed in this opinion are deemed to be without merit. The district court's denial of the appellants' petition for declaratory and injunctive relief against the Board is hereby affirmed.