A 35,000 member class action lawsuit against the City of Billings for allegedly imposing an illegal sales tax by way of what they have referred to as “franchise fees” on city water and sewer services and solid waste disposal is heating up. Plaintiffs argue that in an effort to raise revenue, the City of Billings has been collecting an illegal tax of 4% on water and sewer services and 5% on solid waste disposal amounting to roughly $2.2 million per year. They say that since it is the city providing these services, these additional fees are not in fact franchise fees but “an unlawful tax on the sale of goods or services,” according to Roger Webb, one of the first six Billings residents to file this suit against the City. Because of the statute of limitations in this type of case, the plaintiffs are attempting to recover only the previous eight years of fees paid by City water customers. This case is currently being heard in Great Falls, as all Yellowstone County judges have recused themselves.
This would not be the first time that the City of Billings was found to be collecting alternative sources of revenue using illegal sales taxes. In August 1982, the City Council enacted a “fee” on hotel rooms that was found to be illegal in Montana Innkeepers Assoc. v. City of Billings, and just months after that they enacted a tax on attorneys and other local businesses which was declared illegal in Bruegemann v. City of Billings. Two years after the Bruegemann decision, as the City was experiencing a decline in property tax revenue, former Assistant City Administrator Bruce McCandless described this “franchise fee” on water and sewer ratepayers as “one of the prime alternatives to increasing property taxes” and the City Council approved it later on in that meeting. Despite telling the public that these fees would only affect water and wastewater utilities, the City also imposed the fees on solid waste disposal without a single public hearing on the issue until after it had been in affect for twelve years. CLICK HERE TO READ MORE
