After long, expensive lawsuit, Hayden and NIBCA meet in middle

After a seven-year back-and-forth about sewer capitalization fees, the city of Hayden opted last week to accept court-ordered mediation with the North Idaho Building Contractors Association.

The agreement, which includes a $350,000 settlement, will be reviewed by a First District Court judge who has the final say about the deal.

If accepted by Judge Cynthia K.C. Meyer, the agreement could mark the end of a lawsuit filed in 2012 by the contractors association. The group had argued Hayden’s fee schedule didn’t conform to state code.

The lawsuit was twice revisited by the Idaho Supreme Court. In January, justices sent the case back to Kootenai County district court for mediation. Justices denied attorney fees to the contractors association and the city but allowed the city to recoup other costs associated with the suit.

The case began in 2007 when the City of Hayden, after years of smaller, incremental fee increases, nearly tripled the fee builders pay to hook up to the city sewer system, raising the charge for residential and commercial structures to $2,280 from $774.

The contractors sued. The district court initially ruled in favor of the city and granted Hayden a summary judgment. The contractors association appealed to the Supreme Court, which remanded the case back to district court after justices found Hayden did not provide ample evidence that the fee hike was justified.

Calling the capitalization fee an unfair tax, the district court misinterpreted the Supreme Court’s decision and reversed its earlier decision, Supreme Court documents show. District court ruled in the contractors’ favor, disregarding proof from a consultant that substantiated the city’s capitalization fees. The judge awarded the contractors $950,000.

When the Supreme Court revisited the case for a second time, the justices concluded the district court had misinterpreted the higher court’s initial decision. Justices said state law authorized cities to charge capitalization or “buy in” fees that are not to be deemed taxes. Justices said the district court should have accepted evidence from the city’s consultant.

“Cities like Hayden can legally access buy-in fees when those fees are reasonably connected to the actual costs,” the court held.

Justices vacated the damages the district court awarded the contractors. They ordered that “the amount of damages to award, if any, will be an open question upon remand.”

Tuesday night’s agreement by the Hayden City Council settles that question. In a joint news release, the city and the contractors concluded that their agreement is beneficial to both parties.

“The parties believe they have reached a fair and equitable compromise of the dispute,” the statement said. “Under the terms of the negotiated settlement agreement, the City, in recognition of the fact that [the contractors] had expended funds in the litigation, has agreed to pay a monetary amount as part of the settlement.”

Contractors Association President Allen Dykes and Hayden Mayor Steve Griffitts said they maintain a good working relationship and that both sides agreed to a fair compromise.

“It was important for our community to reach a settlement of this litigation and it required difficult decisions and compromise by both parties,” Griffitts said. “The City has worked hard to provide infrastructure in a legal, fair and appropriate way for our current and future citizens where growth pays for itself.”

A hearing in which the court will consider the parties’ agreement has not yet been set. The court could reject the agreement, which would mean the case goes to trial, or the court could accept or modify the agreement.