By BRIAN WALKER

Staff Writer

HAYDEN — The beginning of the end of a five-year legal battle between the city of Hayden and North Idaho Building Contractors Association will come Tuesday when a First District Court judge will hear closing arguments in the case.

This last part of the case, a dispute over sewer capitalization fees on new growth, will sort out who the city owes refunds to and how much, if any.

The original suit filed by NIBCA called into question the legality of Hayden’s sewer capitalization 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.

The case is now in the damages phase to determine what Hayden has to do about the collected funds.

According to the city, the amount of money involved in the case is $907,725 in paid capitalization fees to the city from April 10, 2010, to March 4, 2016. There were about 335 new homes constructed during that timeframe.

The city earlier testified the fee it charged was, in fact, less than what it could have charged under the formula specified by the Idaho Supreme Court.

"Hence, the city's position is that the fee was lawful, even if it used the wrong formula, and, in any event, no refund is appropriate because no harm was suffered," according to a statement from the city.

The previous fee was $2,200. The new fee to bring it into compliance with state law was set at $2,350 during a 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.

Shelly Donovan, NIBCA's executive officer, said the organization declined to comment on the case until after the court issues a decision.

Meanwhile, Larry Spencer, executive director of the Idaho Property Owners Association, said he believes the property owners are entitled to the refund. He said he hopes the proceedings will be delayed until that question is answered by the court.

"One of the concerns the Supreme Court wanted answered by additional district court proceedings was who actually has standing to seek a refund," he said. "Is it the builder who wrote the city a check or is it the person who now owns the property and likely paid more because the builder passed the cost of the fee on when they sold the home to the buyer? This hasn't been addressed by the court."

Spencer said he believes the case will be precedent-setting, affecting an estimated $100 million to $170 million statewide. He cited the Illinois Appellate Court decision in the case of Bishop v. The Village of Brookfield in 1981 as a similar case that determined the property owners should be reimbursed.

Spencer spoke at Tuesday night's Hayden City Council meeting and asked that its attorney request the closing arguments to be postponed until the homeowner question is addressed. However, the city council did not take action on Spencer's request.

Hayden has spent $707,507 on attorney fees on the case so far.

The local case has caught the attention of some Hayden homeowners, including Jeff Bonacci.

"We paid for the $18,000-plus building-related fees to the city indirectly when we bought our home from the builder who initially paid the fees," said Bonacci, who has owned his home in Strawberry Fields for six years. "Why are we not parties in the lawsuit? If a window manufacturer was sued in a class action, the homeowners would be the class parties in the suit, not the builders.

"There are concerned citizens in the city of Hayden who are wondering where this money is going to go. It's alarming that the people who are actually paying these may not be getting a refund."

Christopher Meyer, an attorney with Givens Pursley who represents the city, responded to Spencer's concern.

"Intuitively, one would think that if a tax or fee is passed on to the purchaser through an increase in the sale price, the purchaser bears the incidence of the tax," Meyer wrote in a letter to the city. "That intuition is logical, but, when it comes to fees and taxes, the law does not follow that logic.

"The result would be different if there were a statute providing that the fee/tax payer must pass the fee/tax along to the purchaser or a statute expressly authorizing refunds to the purchaser or current property owner. Neither of those exceptions apply here."

NIBCA filed a suit in district court against the city in 2012. 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 February. After several motions and hearings since the remand, the court will hold closing arguments on Tuesday. A final ruling will follow the closing arguments.

The supreme court ruled the city may charge a sewer cap fee and used 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.