The Iowa Supreme Court has weighed in on an ongoing financial dispute between a small city in southeast Iowa and an organization that helps rural communities build sewer systems. The justices ruled in favor of Mount Union over Regional Utility Service Systems (RUSS).
Mount Union is an incorporated city of about 100 people in rural Henry County. It worked with RUSS to secure state and federal funding to build a sanitary sewer system. RUSS owns and operates the system, but it is up to the city to repay the money borrowed for the project.
That is not exactly happening, though, because there are Mount Union residents who are not paying their sewer bills -- and have not done so for years. It's believed some are protesting construction of the system while others are upset about the cost. No matter the reason, the delinquent bills prompted RUSS to sue Mount Union, claiming a breach of contract.
District Court Judge John Wright ruled in June 2014 that Mount Union had breached its contract with RUSS, awarding the organization $27,862.10. Wright also ruled that Mount Union's primary bank account was not exempt from being garnished, allowing RUSS to receive $25,164.57 from the city.
Mount Union appealed that ruling to the Iowa Supreme Court, arguing the bank account is public property and exempt from garnishment. The city said the account was its primary mean for paying daily expenses.
The Iowa Supreme Court, in its 13-page ruling, said the district court was wrong in not exempting the bank account from being garnished. "We find the bank account was exempt from execution. Therefore, we reverse the judgment of the district court and remand the case for further proceedings consistent with this opinion."
The justices specifically cited a section of state law that reads "Public Property : Public buildings owned by the state, or any count, city, school district, or other municipal corporation or any other public property which is necessary and proper for carrying out the general purpose for which such corporation is organized, are exempt from execution."
"We conclude that regardless of the precise meaning of the term 'proper,' it is obvious the general funds were proper to carrying out the general purpose for which the city was organized... therefore, we conclude the general funds qualified as exempt from execution under Iowa Code 627.18.
The Supreme Court ruling means that Mount Union still owes RUSS more than $27,000 per the original lawsuit, but the money cannot come from the bank account. RUSS has tried to generate more revenue by doubling sewer rates in Mount Union, but the head of RUSS said that caused more people to stop paying their bills.