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After spending $800K on attorneys, Billings wants to send franchise fees case to mediation – Daily Montanan

['Darrell Ehrlick', 'More From Author', '- April']

Date: 2022-04-20 00:00:00

The City of Billings wants a judge to force class-action litigants into mediation to potentially settle a battle about “franchise fees,” which the city illegally charged homeowners and residents for decades in the case that has been ongoing for nearly five years.

The city discontinued the practice shortly after the lawsuit began, but the fees were charged to every residence in the city.

Earlier this year, Judge Michael Salvagni ruled that the franchise fees were an illegal sales tax. Because of that, Doug James, the attorney representing the City of Billings, said it’s proper to send the case to mediation to work out a settlement because the matter of law has been settled, and it will cost taxpayers less.

The pressure to settle now comes as the City of Billings has racked up more than $800,000 in attorneys’ fees since it began the lawsuit in August 2017. Moreover, the court record shows that originally, the plaintiffs in the case were willing to settle the matter for $20,000, plus attorneys’ fees and the promise that the city would never again adopt franchise fees, something the city said, at the time, it was unwilling to do.

Lawyer Matthew Monforton, who represents the residents, has argued that it’s too premature to send the case to mediation because not all residents have been certified as class participants. In other words, the judge is still deciding how residences incorporated into the city after 1992 fit into the franchise fees case.

Originally, the city had said it was charging residents for using the public’s right of way for water and service lines, but the Montana Supreme Court had already ruled such fees illegal before the city adopted the policy. Moreover, franchise fees did not go back to the water and wastewater funds, rather they were deposited into the city’s general fund, also a violation of the separation between a general city fund and an enterprise fund. Montana law prohibits cities from charging more than the cost of service, delivery and capital improvements in enterprise funds — or those services that cities provide but act as a sort of business, for example, garbage or water. Because of that, the city cannot treat those departments like a business or as a profit center to help fund other services, like more police.

The City of Billings and the class litigants, which include the majority of the city’s residents, have agreed to a “class notice” that will come in the mail or with city services bills that spell out the terms of the case and give residents the choice of opting-out. Another group, called “the McDaniel” class, which consists of all subdivisions that were incorporated since 1992, are awaiting the decision of Salvagni for possible certification. Subdivisions that were brought into Billings after 1992 required, as part of their annexation and development agreements, that residents would pay for franchise fees. Homes built prior to 1992 in Billings were mandated to pay by City Council action – the only effective difference between the two classes, which may ultimately involve nearly every household in Montana’s largest city.

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