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A lawsuit filed Wednesday by six Billings residents seeks the elimination of the city's franchise fee on water, sewer and garbage service. The suit also seeks restitution for the more than 30,000 people who've been paying the fees.

Six Billings taxpayers have filed a lawsuit seeking a halt to the city of Billings’ franchise fee on water, sewer and garbage disposal services, and restitution for people who've been paying them for as many as eight years.

The six residents — Terry Houser, Terry Odegard, Roger Webb, Mae Woo, Kathryn Zurbuchen and Thomas Zurbuchen — ask District Court Judge Mary Jane Knisely to certify their lawsuit as a class action on behalf of what the filing says is more than 30,000 residents and business owners who have paid franchise fees to the city beginning eight years ago.

During the 2016-17 fiscal year, the franchise fees exceeded $2.3 million, according to attorneys Kristen G. Juras of Great Falls and Matthew G. Monforton of Bozeman, attorneys for the plaintiffs who filed the lawsuit Wednesday afternoon. The money was placed in the city’s general fund to support administrative costs, including the city council, and other city services, including parks, municipal court and public safety.

During recent budget presentations, City Administrator Bruce McCandless said the franchise fee has been removed from the proposed 2018-19 budget. In a Thursday morning email, he told The Gazette he hadn’t seen the lawsuit and declined comment until he had.

City Attorney Brent Brooks said in an email that the complaint has been turned over to the city's litigation attorneys.

The lawsuit labels franchise fees “illegal sales taxes” and calls on the city to refund the money paid by the plaintiffs and others similarly situated. Plaintiffs attorneys say the Montana Supreme Court in 2003 struck down a similar franchise fee that the city tried to collect on utility services provided by Montana-Dakota Utilities, Montana Power and Yellowstone Valley Electric.

Plaintiffs say they first contacted city administrators about the franchise fee in August 2017. They say they agreed not to sue before now to allow time for settlement negotiations “in the hopes of avoiding the significant costs in time and resources a lawsuit would entail," according to their lawyers' statement.

They say the city declined their offer to forego a lawsuit seeking a refund of past franchise fees in exchange for the city’s agreement not to impose the franchise fees in future years.

“None of us wanted to hurt our city financially by forcing the city to repay millions of illegally collected taxes,” Tom Zurbuchen said in a news release. ”We just wanted our great city to conduct its business according to established law! We were ignored as individuals.”

The lawsuit argues that the Montana Supreme Court ruled in 2003 that a franchise fee is payment for “the special privilege awarded by government to a person or corporation and conveys a valuable property right.” No conveyance of a valuable property right has occurred with the payment of the city's franchise fee, the suit argues, and neither are plaintiffs and other fee-payers “granted a right to occupy and use City property for those services.”

Franchise fees for water and sewer service amounted to 4 percent of annual gross revenues, and, since 2012, 5 percent of gross revenues for garbage disposal service.

The lawsuit seeks relief from franchise fee payment on behalf of the six plaintiffs and, if certified, the rest of the fee payers; reasonable attorneys fees and cost; and any other relief that the court deems “equitable or just under the circumstances.”



City Government Reporter

City reporter for The Billings Gazette.