By Des Moines Register
The Iowa Legislature offered a potentially easy way for Des Moines to pay a court-ordered refund to its citizens, but Gov. Terry Branstad struck it down with his veto last week. Now it’s back to square one as the city figures out how refund roughly $40 million illegally collected from Des Moines utility customers.
The city faces the costly refund after losing a lawsuit over the collection of a franchise fee on gas and electric utility bills for four years beginning in 2005. Although the Legislature has since authorized the franchise fee, a Polk County judge ruled that the city must refund with interest the amount illegally collected before the Legislature acted.
There are no good options for the city.
The Legislature offered another alternative in a bill passed late in the just-concluded session that would have allowed the city, with voter approval, to temporarily raise the same utility franchise fee that triggered this marathon legal case. But Branstad vetoed the bill.
Still, this option is worth reconsidering.
The city is still fighting this case. It plans an appeal to the U.S. Supreme Court.
It is a near certainty that Des Moines taxpayers will eventually have to pay the refund. When that happens, taxpayers might wonder what was accomplished. Raising property taxes to pay for the refund means transferring money from the owners of real estate who pay both property taxes and franchise fees to owners of tax-exempt property who pay only the franchise fee. Think big hospitals, for example.
Besides, the people of Des Moines received tangible benefits from the franchise fee. Asking taxpayers to dig into one pocket to put a refund in another pocket raises questions about whether the Iowa Supreme Court should have approved this as a class action in the first place.
Des Moines eventually must figure out how to pay for the refund. The most equitable solution would be to temporarily raise the franchise fee because it would be collected from the same utility customers who will receive a refund. After legal and financial questions are resolved, that case should again be presented to the Legislature and governor.
Des Moines Register