Judge rules against Riverside in lawsuit

    Washington County has won its judgment against the city of Riverside over the repayment of TIF bonds. District Court Judge Joel Yates handed down the judgment Friday after deliberating for one month. The ruling asks that Riverside pay the county its two outstanding debts of $175,000 each ?as soon as practicable,? and that Riverside continue making such payments for the life of the agreement. Riverside has 30 days to appeal the decision to the Iowa Supreme Court.

    The agreement in question is the one signed by Riverside and the county in 2005. In 2005, Riverside was under orders from the Department of Natural Resources (DNR) to improve its water and sewage system. The city was also considering how to supply a water and sewer system to the Riverside Casino east of town. Riverside had inadequate constitutional debt to finance the project, so it turned to the county for help.

    The county agreed to issue $9.4 million in urban renewal tax increment revenue bonds to finance the water and sewer project. In return, Riverside would have to make payments of $175,000 to the county by July 1 of each year from 2008 to 2017. The city made its first payment in 2008 but did not make it in 2009 or 2010.

    Attorney Paul Burns of Iowa City represents Riverside and has argued that the agreement between the county and the city is void because it violates the city?s constitutional debt limitations. According to Article XI, Section 3 of the Iowa Constitution, no county or municipality is allowed to become indebted in an amount exceeding 5 percent of its taxable property.

    Riverside City Administrator Tina Thomas said the city council will likely meet with Burns to discuss the judgment. She said the council will probably not discuss the judgment at the council?s meeting Monday. Burns could not be reached for comment.

    Judge Yates found that Riverside?s repayment agreement falls outside the definition of ?constitutional debt? and is therefore enforceable. Yates wrote that there are two important factors that determine if an obligation creates constitutional debt: that the debt be legally enforceable by the creditor (the county, in this case); and that the legal enforcement must enable the creditor to reach the general tax revenues of a city. Yates found that the county had no recourse to the local taxes of Riverside nor to the city?s power to tax its citizens, and that the debt in question is therefore not constitutional debt and does not count toward the city?s constitutional debt limit. 

For more, see our Nov. 1 print edition.