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Franchise-fee settlement agreement reached in lawsuit against Billings

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Posted at 6:13 PM, Mar 22, 2023
and last updated 2023-03-22 20:13:26-04

BILLINGS — It’s a case that dates back decades, one that led to a class action lawsuits and for people who live or lived in Billings from 2015 to 2018, some money could be headed their way.

In 2018, a group of Billings residents sued the city, centered around franchise fees the city charged residents during that time for water, sewer and trash services. Charges they alleged were illegal.

On Tuesday, thecity agreed to pay $3.6 millionto settle the lawsuit.

"The city of Billings started imposing these sales taxed on utility customers, way back in 1992 and almost immediately after 1992, a number of citizens protested these sales taxes, they called them what they were, they were sales taxes. The city of Billings described them as franchise fees, which they weren’t they were simply sales taxes and therefore they were illegal under Montana law," said Matthew Monforton, the plantiffs' attorney, said Wednesday.

Monforton represents those residents and claims the city collected nearly $2.5 million each year from those fees, from 1992 to 2018.

In 2022, a judge agreed that the franchise fees were indeed illegal.

"It was really a shell game that the city of Billings had been running for years. And really what it was designed to do is hide the fact that these were sales taxes being imposed on the ratepayers of the city of Billings and those kinds of sales taxes are illegal under Montana law," added Monforton.

MTN reached out the city for this story – but our requests for comment were denied.

The city had argued previously that it had the right to charge for the use of a public right of way, something municipalities can do for utility providers. But unlike a utility like NorthWestern Energy, the city already owned the right of way.

"In this case, the city was itself the provider of the utilities, and under state law, it couldn’t in essence, tax itself and then impose those taxes on the city residents. Which is what the city had been doing for years. It was an illegal scheme and that’s why our clients challenged it on behalf of other city residents and ultimately, we were successful," Monforton added.

The $3.6-million settlement needs to be approved by the Billings City Council but will come out of the city’s general fund. Around 25% of that, or $900,000 will be a settlement fee for the attorneys, with the rest paid out to residents as a rebate.

"We would’ve liked to have gotten all of the sales taxes that had been collected for the past 25 years but the statute of limitations limited us to going back only to February of 2015," Monforton said.