FRANCHISE FEE: Judge Cuts Legal Fees
A Polk County judge issued a ruling Thursday cutting the legal fees from the franchise fee lawsuit against the city of Des Moines.
Lawyers who argued the class action lawsuit originally filed by Lisa Kragnes in 2004 were, according to their contract, expected to claim 37-percent of the recovered amount. That adds up to about $15 million.
But Thursday morning, Judge Joel Novak cut that amount to $7 million.
“The attorneys are entitled to be well paid for their work, still this court knows it must strike a balance as to what is fair to the attorneys and what is fair to the residents of this city,” Judge Novak ruled.
Additionally, the lawyers will be reimbursed for $517,444 in expenses and paid $74,867.37 in court costs.
The Iowa Supreme Court ruled on the suit in 2012, saying that a fee the city was charging on utility bills was an illegal tax. Between 2004 and 2009 the city raised that fee from 1-percent to 5-percent, bringing in around $40 million.
The city appealed the Iowa Supreme Court’s decision to the U.S. Supreme Court but was denied.
Attorney Brad Shrayder says regardless of how much money he goes home with, the situation could have been prevented.
“This didn`t have to be in the first place; there would have been no refunds and no attorneys’ fees if the City of Des Moines would have just stopped in 2004 when we asked them to stop and they didn`t do it,” Shrayder said.
Judge Novak agrees things could have been handled differently saying the city council fell way short of the mark and calling the situation a “predicament.”
However, Des Moines City Manager Rick Clark says they did what they had to.
“To arbitrarily say we should have done something differently, you can only say that if you understand the consequences of that decision and the consequences of that decision would have been making big cuts in various essential services for our people and or increasing tax rates,” Clark says.
Clark admits he’s glad the case is nearing the finish line but realizes thousands of residents will still have to pay something before this officially over.
The city council has already approved issuing about $41 million in general obligation bonds. It has two options for paying off those bonds.
The first would increase property taxes by 41 cents per $1,000 in taxable value for the next 20 years. The second would raise the current franchise fee 2.5% for the next 7 years. That option requires voter approval.
The decision on which option to take does not need to be made until March of 2014 when they issue the budget for 2015.