BILLINGS — Six Billings residents have filed a class action lawsuit against the City of Billings, claiming officials are illegally collecting franchise fees on city utility bills.
At issue is a practice used by City of Billings officials since 1993 that levies franchise fees as part of city utilities bills.
“It’s an illegal tax,” said Roger Webb, one of a group of six citizens that formed to oppose the franchise fee. “If it’s designated for a specific purpose, they could get by with it.”
The fee is 4 percent on water and sewer services and 5 percent on solid waste disposal. It goes into the city’s general fund, which is where Webb says the problem lies.
The group also includes Billings residents Terry Houser, Terry Odegard, Mae Woo, Kathryn Zurbuchen and Thomas Zurbuchen.
According to a press release from the group, these funds were transferred to the city’s general fund to support the city’s administrative costs and other City services, including parks, municipal city court and public safety.
They state in their complaint that they “have been forced to pay these illegal taxes to the city since they began receiving and paying for water, sewer and garbage disposal services from the city.” The plaintiffs add that “wrongful assessment, collection and use of water, sewer and garbage disposal ‘franchise fees’ by the city described herein have proximately caused damages” to the group, and by extension, other city customers that could be included in the class action suit.
City franchise fees add up to about $2.2 million per year, Webb said, money the group believes the city should refund. The group proposed a settlement agreement with the city, but when the Monday, April 30, deadline passed with no agreement, the group prepared to file a class action lawsuit on Wednesday against the City of Billings.
The group is represented by attorneys Kristen G. Juras of Great Falls and Matthew G. Monforton of Bozeman. The attorneys planned to file the class action lawsuit Wednesday in Yellowstone County 13th Judicial District Court.
Billings City Attorney Brent Brooks was out of the office Wednesday and did not return a call for comment by presstime.
Webb said that “the potential plaintiffs have advised the city of their intent to bring a class action against the city to enjoin the city from imposing the 4 percent franchise fee on water and sewer services and the 5 percent fee on solid waste disposal services on the basis that the franchise fees are an unlawful tax on the sale of goods or services” the group believes are prohibited by state law.
Because of a statute of limitations in this type of case, Webb said the group is attempting to recover franchise fees paid over the past eight years, estimated at $2.2 million per year.
The Billings City Council voted Monday night to increase utility rates within the city beginning July 1, which Webb believes is a reaction to the franchise fee dispute since those rate increases will generate about $2 million per year. The city budget had already been approved without the rate increases, he noted.
City offcials “will lose the lawsuit,” Webb said, but they “figured out a way to pay for it.”
He said the Billings City Council has discussed the issue. Webb believes if the city is forced to drop the franchise fees, another option officials may pursue is will raising the mill levy to cover the loss of income.
In the press release, the taxpayers who are filing the lawsuit state that “in 2003, the Montana Supreme Court struck down a ‘similar franchise’ fee the city attempted to collect on utility services provided by Montana Dakota Utilities, Montana Power and Yellowstone Valley Electric.”
The press release details the history of the group’s complaint: “The taxpayers first contacted the city in August 2017. At the city’s request, the taxpayers agreed not to sue prior to May 2018 to allow time for settlement negotiations in the hopes of avoiding the significant costs in time and resources a lawsuit would entail. The city did not … Read full story in print or by subscribing online here.
