The city of Des Moines will not get its day before the U.S. Supreme Court on a state-court-ordered refund of an estimated $40 million in franchise fees that residents paid for nearly five years.
This is the ninth time that a court has ruled against the city after resident Lisa Kragnes discovered in 2004 that she was paying what has been called an illegal tax for utility service.
"It is time to stop delaying the inevitable and start returning the money illegally collected from Des Moines citizens and businesses," said Brad Schroeder, co-class counsel. "This case has been to the Iowa Supreme Court twice, and now the U.S. Supreme Court has determined that there is no outstanding legal question."
Des Moines initially charged a 1 percent franchise fee that was supposed to cover its costs of regulating gas and electric utilities. The city ultimately raised the fee to 5 percent and used the funds for a variety of purposes to offset a budget shortfall.
In 2006, a Polk County judge said the fee was an illegal tax. The Iowa Supreme Court agreed, to an extent, saying that any portion that was not used for regulating utilities was being assessed illegally. The court ordered a trial.
In 2009, Judge Joel Novak ruled that the city had overcharged residents about $9.3 million annually above the costs directly connected to regulating utilities that used public rights of way.
In its appeal to the U.S. Supreme Court, the city essentially argued that each resident affected by the state ruling should file a lawsuit to seek a refund. The case had been certified as a class-action lawsuit in Polk County District Court.
Later this week, the class will file a motion in Polk County District Court to lift the temporary stay granted while the city petitioned the U.S. Supreme Court. Attorneys will also submit a proposal to the court for adjudicating the claims and paying the refunds. That proposal was provided to the city last month.
Des Moines City Attorney Jeffrey Lester said a long list of issues remain to be litigated in state court.
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