Utility "Franchise Fees" at center of complaint filed against City of Billings

As first reported by the Yellowstone County News, six Billings residents have filed a complaint in Yellowstone County District Court seeking class-action status against the City of Billings for "Franchise Fees" currently being collected through the City of Billings Public Works Utilities for water service and garbage collection.

The plaintiffs are identified as Terry Houser, Terry Odegard, Roger Webb, Mae Woo, Kathryn Zurbuchen, and Thomas Zurbuchen.

In a statement, attorney's Kristen Juras and Matthew Monforton explain:

The taxpayers have asked the Court to certify the lawsuit as a class action on behalf of more than 30,000 Billings residents and business owners who have paid water, sewer, or garbage collection franchise fees to the City over the past eight years.

The attorneys contend that the city generated $2,300,00 during the 2017 fiscal year.

The City of Billings outlined what the "Franchise Fees" are for and where they go in the "Rules and Regulation Governing Water and Wasterwater Services" published in February of 2009 

Section 16 - 11 states:

The utility shall pay all money collected from franchise fees to the City of Billings for use of its rights-of-way to install water/wastewater lines. Such money shall be deposited in the general fund.

The complaint takes issue with those fees being deposited into the general fund as the general fund pays out to multiple departments meaning that the fees collected are not specifically used for garbage and water access and maintenance.

The plaintiffs contend:

These “franchise fees” are, and have been, based upon gross revenue received by the City when providing water, sewer services, and garbage disposal services.

57. The City collects the “franchise fees” for purposes of generating revenues and places them in its general fund rather than a segregated or special account designated to be used to pay for the City’s cost of providing water, sewer and garbage disposal services.

58. The monies collected from the “franchise fees” are used to support the general administrative costs of the City and other services provided by the City, including but not limited to public safety, municipal court, parks, recreation and public lands, and City finance costs.

59. The City’s “franchise fees” are not reasonably related to the City’s cost of providing water, sewer, and garbage disposal services.

60. The City’s “franchise fees” are, therefore, taxes imposed upon Plaintiffs and other persons similarly situated in violation of Mont. Code Ann. § 7-1-112(1).

The complaint asks the court to 

For declaratory and injunctive relief, including enjoining the City from continuing to collect illegal taxes imposed upon persons relying upon the City for water, sewer services, and garbage disposal services;

C. For judgment on behalf of the class and subclasses as defined herein for the amount of any payments made to the City with interest thereon;

D. For reasonable attorneys fees and costs; and

E. For such other and further relief as this Court deems equitable or just under the circumstances.

KULR-8 spoke with City Administrator Bruce McCandless by phone Thursday. McCandless declined to speak to the specifics of the complaint as he had yet to see it. However, McCandless did state that council members had directed the "Franchise Fee" to be removed from utility bills starting with the 2019 fiscal year budget.

Attorney Kristen Juras explains that If the class-action status is granted and judgment is found in favor of the plaintiffs the City could be forced to pay as much as $15,000,000 back to its utility customers. More than 30,000 people have paid the franchise fee over the last 8-years.

Under the proposed agreement Juras and Matthew Monforton are seeking 1/3 of the judgment for their work on the case.

That fee would have to be approved by the judge in the case.

Juras explains that she and Monforton had been willing to settle for a substantially lower fee had the city agreed to a settlement last August.

Factoring in the number of potential plaintiffs and court fees the average utility customer could see a return in the neighborhood of $30.

Class-action cases typically take years to resolve. Making an educated guess Juras expected this cast to take roughly four years if it is appealed to the Montana Supreme Court.

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