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Billings seeking settlement talks after franchise-fee ruling

Posted at 3:10 PM, Mar 05, 2020
and last updated 2020-03-05 17:10:44-05

A day after the Montana Supreme Court ruled that 30,000 Billings residents can be part of a class-action lawsuit against the city over added taxes, both sides say they want to talk settlement.

Matthew Monforton, attorney for the six plaintiffs, and Billings City Administrator Chris Kukulski said Wednesday discussions could lead to a settlement.

"I don't know that it makes a lot of difference in our position or our risk," Kukulski said. "But the fact that we've stopped using the fee, the fact that the litigants had requested that that was really the prime thing that they were after, our hope is that that's what we can get into a room, have some expert help with a mediator, so that we can bring this to a resolution."

The fees, which brought the city millions annually, had been in place since 1992 and were repealed by the Billings City Council last year. The six plaintiffs, all Billings water and sewer customers, filed suit in 2018.

Last April, a district court judge ruled the suit could expand to class action. The city appealed that decision in November, and the state's high court sided with the plaintiffs Tuesday.

"This is very important because all litigation stopped after the city filed its appeal a few months ago to the Montana Supreme Court," Monforton said. "Now that their appeal has been denied, the case can now go forward and hopefully now sooner rather than later, the residents of Billings will get a refund of the illegal sales taxes that they've been charged by the city."

Franchise fees are imposed by businesses and governments on public services, such as water or sewer, as a way to recoup the full value of their property rights. The fees are limited by state law to have a direct relationship to the service.

Kukulski said he believes the franchise fees are legal.

"The city's position is that it was lawful to charge the fee," Kukulski said. "Ultimately though, as the opportunity came to avoid litigation, the decision was made to stop charging it."

Monforton said the city added 4 percent on what it charges for water and 5 percent on garbage charges.

"What the city has been referring to as franchise fees is nothing more than an illegal sales taxes," Monforton said.

Both Kukulski and Monforton talked about the future of franchise fees in Billings.

"The two issues that our clients want is one, to make sure there's a legal structure in place to make sure that the city cannot do this again," Monforton said. "And number two to make sure there's a refund on at least some of these illegal sales taxes."

"I don't believe you'll see the city charge the franchise unless the Legislature does something that expressly permits it," Kukulski said. "I would not anticipate the city the re-instituting a franchise fee."