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Billings City Council approves $3.6 million franchise-fee settlement

Billings franchise fees.JPG
Posted at 9:48 PM, May 23, 2023
and last updated 2023-05-24 08:01:37-04

BILLINGS - The Billings City Council has officially accepted a $3.6 million settlement in a lawsuit filed by ratepayers overfranchise fees.

The plaintiffs said Tuesday the suit could have been resolved in 2018 for a lot less money, but the city disagrees.

Out of the seven people listed on the lawsuit, three have died and one dropped out of the suit.

After nearly five years in the courts, the lawsuit is finally resolved.

But it's a costly outcome for the city of Billings.

In addition to the $3.6 million settlement approved Monday night, the city agreed to pay $1 million to $2 million more in legal fees.

"The only winners in this deal were the people getting an hourly legal fee," said Chris Kukulski, Billings city administrator.

The settlement centers around a 4-5 percent fee the city charged for water, sewer and waste disposal, which a judge ruled was an illegal sales tax prohibited by state law.

"This is a sour win, but the franchise fee is gone," said Tom Zurbuchen, one of the original seven plaintiffs.

Zurbuchen is part of the class action suit challenging the approximately $50 million that the city collected from residents from 1992 to 2018.

Because of the statute of limitations, the city will pay for what it collected from 2015 to 2018 for about 35,000 who are affected by the franchise fees.

That money will have to be borrowed or come from a one-time property tax increase.

"The property taxpayers are refunding the utility users and for the most part, that's the same group of people," Kukulski said.

It's estimated by the city and the plaintiffs that the credit on the utility bills will be from $50 to $80.

"They called us a cheapskate for interfering with the city's taxing ability," Zurbuchen said. "Well, I'm a cheapskate but I can read state law and I like to follow the rules."

The plaintiffs argue this all could have been avoided in 2018 when they asked for $20,000 in attorney fees to settle.

"After several mediations, I and some elected officials spent no fewer than six small group meetings trying to see if we could get to a settlement," Kukulski said. "And couldn't get there until now."

The city agreed to stop the franchise fees but at the time, had not committed to stopping the practice completely.

"They still felt they had the legal authority to do that," Webb said about the city. "And that's where this thing went awry. We didn't go anywhere. It could have been done in a matter of minutes. But no. We didn't stop negotiating with anybody."

The fees went to pay for public safety and Kukulski said there was a perspective that public safety is a legitimate cost to water treatment and waste disposal.

"Utilities are very sizable entities providing service," Kukulski said. "And they too need the fire department to respond, law enforcement and things of that nature."

But the city and the citizens are happy it's finished.

"Yes, it was a sales tax," Webb said. "Can they do it again? No. That's in there. It won't happen again. So we accomplished what we set out to do."

"Certainly good to have this done," Kukulski said.

"It's civic duty," Zurbuchen said. "Sometimes you've got to stand up for what's right."