Franchise-fee settlement agreement reached in lawsuit against Billings

Billings, Montana – For those who resided in Billings from 2015 to 2018, this matter extends back decades and resulted in class action lawsuits. As a result, some money may be coming their way.

A group of Billings citizens sued the city in 2018 over franchise fees the municipality had levied at the time for trash, sewage, and water services. They said the charges were unlawful.

The city consented to pay $3.6 million to settle the lawsuit on Tuesday.

“The city of Billings started imposing these sales taxes 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 plaintiff’s attorney, said Wednesday.

From 1992 to 2018, according to Monforton, who represents those residents, the city received close to $2.5 million annually from these fines.

A judge determined that the franchise fees were unconstitutional in 2022.

“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 contacted the city for this article, but they declined to respond.

The city had previously contended that, like with utility companies, it was within its rights to charge for the use of a public right of way. But the right of way belonged to the city, not a utility like NorthWestern Electricity.

“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 will be paid out of the city’s general money, but the Billings City Council must approve it. The attorneys will receive about 25% of that amount, or $900,000, and the remaining amount will be given to the locals 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.