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![handle is hein.sag/sagia0002 and id is 1 raw text is: Office of the Attorney General
State of Iowa
*1 Opinion No. 98-1-2(L)
January 6, 1998
CITIES; TAXATION; CONSTITUTIONAL LAW: Tax increment financing; public purpose. Iowa Const. art. III,
31 (1857); Iowa Code 5§ 403.2, 403.5, 403.17 (1997). Assuming a city's urban renewal plan properly
provides for the demolition of a privately owned building and assures that the use of public funds will achieve
a public purpose, the state constitutional prohibition against using public funds for private purposes does not
necessarily preclude the city from expending funds from tax increment financing to demolish the building.
(Kempkes to Moreland, State Representative, 1-6-98)
The Honorable Michael J. Moreland
State Representative
2716 Clearview
Ottumwa, IA 52501
Dear Representative Moreland:
You have requested an opinion on public finance and urban renewal projects. You ask whether a city may
expend funds from tax increment financing to demolish a privately owned building apparently located within
an urban renewal area and unsuited for rehabilitation. Assuming the city's urban renewal plan properly
provides for such demolition and assures that the use of public funds will achieve a public purpose, we
conclude the city may do so.
I.
Iowa Code chapter 403 (1997) is entitled Urban Renewal. See generally Iowa Code ch. 403A (Municipal
Housing Projects), ch. 404 (Urban Revitalization Tax Exemptions); Cribbett, Changing Concepts in Land
Use, 50 Iowa L. Rev. 245, 270-72 (1965); Cunningham, Land-Use Control, 50 Iowa L. Rev. 367, 437-38,
443-45 (1965); Tomain, Land Use Controls in Iowa, 27 Drake L. Rev. 254, 257-59 (1977-78). Enacted in
1957, chapter 403 empowers Iowa cities to take specified steps 'to eliminate slums and prevent the
development or spread of slums and urban blight and to encourage needed urban rehabilitation.' Richards v.
City of Muscatine, 237 N.W.2d 48, 53 (Iowa 1975) (citation omitted). See Iowa Code q 403.2. See generally
1957 Iowa Acts, 57th G.A., ch. 197, § 1.
These steps included the power to issue bonds to pay for urban renewal projects. See Iowa Code § 403.9.
In 1969, the General Assembly amended chapter 403 to provide tax increment financing (TIF) as a new
method to pay for urban renewal projects: a city may thus allocate to a special fund the increment in state,
city, county, school, and other taxing district taxes resulting from the increase in valuation of an urban
renewal area brought about by an urban renewal project. Richards v. City of Muscatine, 237 N.W.2d at 53.
See 1969 Iowa Acts, 63rd G.A., ch. 237, § 2. Another amendment permitted a city to pay urban renewal
bonds with TIF funds. Richards v. City of Muscatine, 237 N.W.2d at 53. See 1969 Iowa Acts, 63rd G.A., ch.
237, § 1.
[A] tax increment plan appears to be a feasible method of financing [urban renewal] projects. It is more
advantageous to [a] city than ordinary general obligation bonds, since the plan places the direct burden on
the urban renewal property. Richards v. City of Muscatine, 237 N.W.2d at 58.
*2 Chapter 403 defines an urban renewal area as 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. Iowa Code 5 403.17(22). These descriptive phrases, in turn, also have legislative definitions. See
Iowa Code 5 403.17(4),(9), (21). For example, blighted area includes an area with a substantial number
of slum, deteriorated, or deteriorating structures . . . . Iowa Code 4 403.17(4).
Chapter 403 defines an urban renewal project to include the undertakings and activities of a municipality in
an urban renewal area for the elimination and for the prevention of the development or spread of slums and
blight, and such undertakings and activities may include the [d]emolition and removal of buildings . ...
Iowa Code q 403.17(24)(b).
Urban renewal projects stem from an urban renewal plan. Chapter 403 defines urban renewal plan as a
plan for the development, redevelopment, improvement, or rehabilitation of a designated urban renewal
area . . . . Iowa Code 5 403.17(23). Under section 403.5, a municipality must have an urban renewal plan in
order to implement urban renewal projects:
(1). A municipality shall not approve an urban renewal project for an urban renewal area unless the](ViewImageLocal?handle=hein.sag/sagia0002&div=1&collection=&method=preview&ext=.png&size=3)