Nathan Olsen

Nathan Olsen

POCATELLO — Following a Monday hearing, 6th District Judge Stephen S. Dunn is reviewing whether or not to accept terms of a $4.5 million settlement to a class-action lawsuit filed against the city for assessing illegal fees on water, sewer and sanitation services.

The case was originally filed in 2014 by Ricky G. and Logan Robinson, Hill-Vu Mobile Home Park and Ed Quinn.

The fees targeted by the lawsuit were collected from 2005 through the end of 2013, but the settlement covers only $3.4 million in fees collected during a 20-month period of 2012 and 2013, due to the statute of limitations.

Nathan Olsen, an Idaho Falls attorney representing the class, said he expects Dunn to approve the settlement, given that both sides agreed upon the terms.

“It will be decided pretty quickly here within the next few days,” Olsen said.

Current utility customers who had city services during the two-year settlement period and are covered by the class will not be required to file any paperwork to receive a reimbursement check from the city.

However, claims must be filed by any former customers who no longer receive city services but wish to receive settlement checks.

The city reported receiving 120 claims from former rate payers who were assessed the illegal fees. The city met the requirement to give eligible class members “reasonable notice” by publishing pleadings from the case on its website, publishing word of the settlement in the Idaho State Journal and by mailing notices to eligible current utility customers.

City officials said they sent out 15,637 notices. Attorneys for the city were not available for comment Monday afternoon.

The remainder of the settlement total would cover prejudgment interest, fees and costs, including attorney fees for the plaintiffs. Another hearing is scheduled for Oct. 15 to determine if the awarding of attorney fees as described in the settlement is appropriate.

None of the current city leaders were in office in 2005, when the city decided to operate its utilities as for-profit entities, like private utilities. The city added an extra charge on utility bills, which it called a “return on equity” fee, and moved the profits to its general fund, where they could be applied toward unrelated expenses.

The city generated additional funding through a tax on its own utilities which it called “payment in lieu of taxes,” or PILOT.

On Dec. 9, 2011, the Building Contractors Association of Southeast Idaho challenged the PILOT tax, and Judge Dunn ruled it was unlawful. Dunn prohibited the city from collecting the PILOT tax near the start of Fiscal Year 2014, resulting in a 10 percent decrease in utility bills, according to court documents.

On April 15, 2014, Logan Robinson, who was the owner of Hill-Vu Mobile Home Park in Pocatello, filed suit to force the city to refund both the PILOT tax and the “return on equity” fee. His attorneys, Olsen and Michael Gaffney, both of Idaho Falls, argued the city is legally allowed only to collect fees sufficient so that its services “shall be and always remain self-supporting,” which may include reserves but prohibits transfers for unrelated uses.

The Idaho Supreme Court, agreed with Olsen and Gaffney, finding the fees were illegal in a ruling rendered in September of 2017, reversing a prior decision by Dunn.