Montana Settlement Leads to Millions in Refunds of Impact Fees
By Art Wittich

After six years of hard-fought litigation by the Southwest Montana Building Industry Association and the Montana Building Industry Association (with the support of the National Association of Home Builders), a class action settlement was reached between the Associations and impact fee payer Plaintiffs, and the Defendant City of Bozeman.  The Settlement represents the culmination of a court ordered pretrial mediation session lasting over 12 hours.

The terms of this settlement included:

• A five million dollar payment by the City of Bozeman to the Class for refunds to fee payers;
• An immediate 10% reduction in impact fee levels for street, water, waste water and fire impact fees; and
• The formation of an advisory group to analyze the current impact fees and recommend the proper fee levels.

Prior to mediation, the judge in the state district court action made a number of substantive rulings in favor of the fee payers on contested issues, including: (1) the Association had standing to bring the action, along with the representative fee payers; (2) that the increase in impact fee levels as a result of a citizen initiative was unconstitutional; (3) that the City did not have the requisite legal authority before adopting self governing (home rule) powers to charge impact fees; (4) that certification of the class was proper with over 20 representative plaintiffs and hundreds of fee payers; and (5) that an interlocutory appeal by the City on the above issues before a determination on damages was premature and dismissed by the Montana Supreme Court. 

However, the District Court also ruled that since the City enhanced its powers to self-govern (while the case was being litigated), and because the City raised the affirmative defenses of waiver, laches and estoppel, a trial was necessary on those affirmative defenses before refunds could be ordered, and to determine the appropriate constitutional level of the fee assessed under subsequent self-governing powers. 

As a result of the settlement, a lengthy trial has been avoided and allows refunds of 10-30% of fees paid by over 600 fee payers.  More importantly, the local building association will be allowed to participate in the new study to determine the proper level of the fee, given the City’s projected growth and anticipated capital spending.

Mr. Art Wittich served as Lead Counsel for the Plaintiffs in this case.  He is a LANDS Member and has offices in Bozeman, Montana.

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