The unconstitutionality of the nuclear plant bill

By James C. Larew

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One of the fundamental principles of popular government is that the power of taxation and of the expenditure of taxes shall not be exercised for private benefit. Iowa's founders recognized this principle when they required that for any payment or promise of public funds there had to be a consideration in the nature of a defined public benefit.

Senate File 390 violates this fundamental principle by setting forth an unprecedented scheme for forcibly transferring private citizen money and public taxpayer funds to MidAmerican Energy Co., a privately owned for-profit utility corporation, for the purpose of subsidizing the possible construction of one or more nuclear power plants of indeterminate sizes, of undefined costs, at undisclosed locations and at some indefinite time(s) in the future - if at all.

The law further provides that if MidAmerican fails to get its plans approved or simply changes its mind, Iowa's ratepayers and taxpayers will have no recourse to get their money back.

The “taking” of citizen property for this private purpose would come from so-called “riders” that would be assessed on a monthly basis on the bills of each utility customer served by MidAmerican for such time as the utility's owners aspire to build one or more nuclear power plants.

The proposed rider costs will be staggering. In addition to the billions of dollars to be transferred from private citizens, businesses and industries to MidAmerican, it is estimated that governmental jurisdictions will be assessed up to $10 million annually for the next 40 years for each $1 billion in nuclear project investment.

In short, the bill palpably violates at least two provisions of the Iowa Constitution: Article III, Section 31, which prohibits the use of tax funds for private purposes except upon a two-thirds vote of both the Iowa House and Senate; and Article 1, Section 18, which prohibits a utility company from taking private property without first paying just compensation.

According to the Iowa Supreme Court, Article III, Section 31's prohibition against appropriating tax funds for private purposes applies to all state and local governmental jurisdictions. There can be no public benefit or purpose when a private corporation receives taxpayer funds but has no legal obligation to construct any project.

The only exception to the constitutional prohibition against using public funds for a private purpose can occur only when an appropriation passes both the Iowa House and Senate by a two-thirds margin then and in every successive fiscal year.

SF 390, if passed into law, would place all of Iowa's governmental jurisdictions that are located in MidAmerican's service territories at constitutional risk. All of these jurisdictions use taxpayer money to pay their utility bills. And, as a result, the elected leaders of all of these local governments would be required to draw upon taxpayer funds to pay surcharges for the unrealized nuclear power dream of MidAmerican's managers (thereby effectively twice charging taxpayers who are also MidAmerican customers for these surcharges).

However, unlike the Iowa General Assembly, elected leaders of local jurisdictions have no such constitutional fail-safe routes to bypass the constitution.

Under Iowa Code, sections 478.6 and 6B2B confer upon Iowa's privately owned utility companies eminent domain powers that are similar to those exercised by the government. Those powers are constrained, however, by Article I, Section 18, of the Iowa Constitution, which prevents the taking of private property for any public use “without just compensation first being made, or secured to be made.”

Just compensation means fair market value. SF 390 would allow MidAmerican, by assessing surcharges on utility bills, to take personal property (money directly from taxpayers; and their general tax funds directly from their local and state governments) without compensation before there is any ascertainable public benefit: nuclear power plants that might never be built and operated.

State senators ought to take to heart the hard-earned wisdom of our forefathers and reject MidAmerican's unconstitutional proposal.

James C. Larew, an Iowa City attorney, served as then-Gov. Chet Culver's chief legal counsel in 2007. Comments: larewlaw@aol.com