Hayden to appeal sewer ruling

HAYDEN — A five-year legal fight between Hayden and a builders group over sewer capitalization fees on new homes isn’t over yet.

The city plans to appeal a district court judge's decision in February that stated Hayden must refund builders and homeowners $729,403 due to what the North Idaho Building Contractors Association refers to as an illegal tax collected from April 10, 2010, to March 4, 2016, for 335 new homes built during that time.

Hayden City Administrator Brett Boyer said the city plans to file the appeal to the Idaho Supreme Court within the next two weeks after the City Council voted to move ahead with it.

"We know there's a risk, but we're also optimistic that we can be successful," Boyer said. "We were disappointed in the district court's decision. It would have a huge financial impact on the city."

Boyer said the city had multiple attorneys review the decision prior to the City Council deciding to appeal.

After the district court ruling, NIBCA pursued an additional $243,110 as reimbursement from the city for its attorney fees. A decision on that request is still pending.

The city has spent more than $800,000 in attorney fees on the case. It is making the appeal in an amount not to exceed $50,000.

Boyer said the city has spent so much fighting the suit because it believes it has a strong case and, if it did not defend itself, the city would have had to automatically refund about $900,000 in fees, most of which has already been spent on improving the system the builders and homeowners connected to.

Boyer said since the city has already invested a lot on research on the case, it made sense to appeal, especially since it is optimistic it can win.

"Most of the work is already done," he said. "Part of this is going back to the Supreme Court and looking for clarification on what it wants us to do. This has a huge impact not only to our city but other entities."

Shelly Donovan, NIBCA executive director, couldn't be reached for comment on Monday.

An earlier NIBCA press release stated both courts have repeatedly told the city it can't tax and spend without approval from its citizens.

"The tax imposed, assigned to raise $20 million to expand city sewer into every acre of Hayden's area of (city) impact, was imposed on the citizens without voter approval," the release states. "In order to try to circumvent the law, which requires voter approval, Hayden attempted to disguise the tax as an expansion fee."

District Judge Cynthia Meyer wrote in her conclusion that "[NIBCA was] denied just compensation at the time the impermissible tax was paid."

Hayden increased its cap fee from $774 to $2,280 in 2007. The city decreased the fee from $2,280 to $2,239 in 2012.

The new cap fee amount of $2,306 to bring it into compliance with state law was set during a City Council meeting in March 2016. At the same meeting, the council agreed to use a formula that calculates the fee based on the value of the wastewater facility rather than the estimated cost of future expansion of the plant.

Boyer said the challenged formula that was formerly used by the city is one commonly being used by other cities.

The original suit filed by NIBCA against the city in 2012 called into question the legality of Hayden’s sewer cap fees to cover the cost of Hayden’s wastewater disposal system. NIBCA contended the fee was illegal because its members paid for city services that are available to all residents of Hayden.

After the city was granted a judgment in its favor, NIBCA appealed it to the Idaho Supreme Court.

The Supreme Court vacated the District Court's decision and remanded it back to the District Court last year.

The Supreme Court ruled the city may charge a sewer cap fee and use the funds to pay for new infrastructure to expand the city's sewer capacity without burdening existing taxpayers. It also disagreed with the formula used by the city to calculate the cap fee.

"The city was charging a fee to be able to have the money to continue to add to the system so that there would be capacity for the builders when they wanted to hook on," Boyer said.

"We felt the builders had received the benefit of hooking on and the calculation following the Supreme Court decision substantiates that the fee charged actually should have been higher and so we believed we should not refund the fees paid."