HomeMy WebLinkAboutA030 - Legal Opinion dated December 8, 2000 � t
- City Attorney's Office
515 Clark Avenue,P.O.Box 811
Caring Pea Ames,IA 50010
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Fx ep ional.Service
December 8, 2000
The Honorable Ted Tedesco, Mayor, n 1
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and Members of the City Council r" � o��� � ;
of the City of Ames, Iowa
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Re: Somerset Urban Revitalization CITY OF ANdES,101AlA
Dear Mayor Tedesco and Council Members:
At the December 5 Council meeting the Mayor Pro Tern referred to me the question of a
concerned citizen as to whether the proposed property tax incentive for purchase of homes in
Somerset could be lawfully set at 100%for three years. The concern is based on a 1997 amendment
to the urban revitalization law that states at Section 404.3A, Code of Iowa:
"Notwithstanding the schedules provided for in section 404.3,all qualified real estate
assessed as residential property in an area designated under section 404.1,subsection
5,is eligible to receive an exemption from taxation on the first seventy-five thousand
dollars of actual value added by the improvements. The exemption is for a period of
five years."
That section operates only with respect to an urban revitalization area that is designated under section
404.1,subsection 5. It is not proposed that the City do that. In designating the new Somerset urban
revitalization area the City can place reliance on subsection 4 of section 404.1, i.e. the "economic
development area" provision, to accomplish what is proposed with respect to that area, without
making a designation under 404.1(5).
The goal of providing an exemption of 100% for three years only can be reached by
following a path discernable by a careful reading of the related provisions of Code of Iowa chapters
403 (Urban Renewal) and 404 (Urban Revitalization Tax Exemptions). The path begins at 404.1,
where it is stated that a city can designate an area of the city as a revitalization area if that area is any
of five listed kinds. One of those kinds listed is:
"4. An area which is appropriate as an economic development area as defined in
section 403.17."
Section 403.17 states, in pertinent port:
"9. `Economic development area'means an area of a municipality designated by the
local governing body as appropriate for..., public improvements related to housing
and residential development,..."
The City Council has, of course, by approving the development agreement for construction of the
Public Improvements related to development of Somerset, necessarily designated that area as
appropriate for public improvements related to residential development so the definition of
"economic development area"is met under 404.1(4).
The next step is to section 404.2 where the things a city must do to give revitalization area
tax exemptions are listed. At the top of the list, at subsection 404.2(1) is a resolution finding that
"economic development" of the area is necessary and the area substantially meets the criteria of
section 404.1. The City will do that if it decides to enact the proposal now before it. The second
item in 404.2 is a"plan"that includes,per 404.2(2)(h):
"Any tax exemption schedule that shall be used in lieu of the schedule set out in
section 404.3 subsection 1, 2, 3 or 4. This schedule shall not allow a greater
exemption, but may allow a smaller exemption, than allowed in the schedule
specified in the corresponding subsection of section 404.3"
The plan prepared for the Somerset area does contain a tax exemption schedule in lieu of the
schedule set out in 404.3. It is a schedule that allows only the 100%for three years exemption. The
corresponding subsection of 404.3 is subsection(3)thereof. Since the"in lieu"schedule is the same
as 404.3(3) it is no greater than that corresponding subsection.
However, in adopting a different schedule in lieu of the 404.3(1)(2)(3) and(4)options,it is
necessary to comply with section 404.3(6)which states:
"However, a city or county shall not adopt a different schedule unless every
revitalization area within the city or county has the same schedule applied to it,
except in areas of the city or county which have been designated as both urban
renewal and urban revitalization areas."
That is,in order to limit the tax exemption for Somerset to 100% for three years it is necessary that
the Somerset area be both an urban revitalization area and an urban renewal area. So,the path leads
us back to chapter 403 (Urban Renewal)to find a definition of urban renewal area. That definition
is found at section 403.17(23) as follows:
"23. `Urban renewal area'means a slum area,blighted area,economic development
area, or combination of the areas, which the local governing body designates as
appropriate for an urban renewal project. (emphasis supplied)
By returning to the definition of"economic development area"it is revealed that an urban renewal
area and an urban revitalization area are both any area designated as appropriate for public
improvements related to housing and residential development. Somerset is that. If the Council
adopts the proposed plan for revitalization area tax incentives in Somerset the resolution doing so
will recite that the area is also an urban renewal area for the purpose of meeting the requirement of
section 404.3(6). That is the end of the path to reach the goal of a tax exemption of 100%for three
years only. The path to a revitalization tax exemption provided by section 404.3A was presumably
thought necessary or useful under some other city's circumstances. It is not the path proposed for
Somerset. The resolutions proposed to amend the plan for URA#7, and the resolution to establish
the new Somerset URA are both attached.
Yours truly,
John R. Klaus
City Attorney
cc: Mark Reinig
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