The Whitefish City Council voted unanimously last week to approve a settlement agreement in a federal class-action lawsuit over impact fees.

The lawsuit filed in the U.S. District of Montana in 2022 alleged that the city overcharged for impact fees for new development. The dispute involved fixture counts for single-head, standalone showers.    

Under the settlement agreement, the city will contribute $400,000 for payments to members of the lawsuit and issuing refunds for those who paid the related impact fees. A consultant firm that helped calculate the fees will pay $1 million. 

According to city officials, the decision to settle the case was made, in part, to spare local taxpayers higher bills that would result should the case go to trial. 

“It is worthy to note that the settlement agreement and release is not an admission of liability. We have always admitted that we made a fixture count error,” Whitefish City Attorney Angela Jacobs said. “This is just risk management and protecting the rate payers at this point.” 

In the summer of 2021, the city discovered an error in the calculation of individual water and wastewater impact fees that occurred between the beginning of 2019 and summer 2021. The error involved fixture counts of single-head, standalone showers.  

The city publicly acknowledged the error and began an audit to determine what refunds were owed to those who had been overcharged. The city’s intent was to issue full refunds once the audit was completed. 

In early 2022, before the audit was finished, five individuals and two developers filed a putative class-action lawsuit against the city. In addition to the single-head shower error, the lawsuit alleged the city's impact fees as a whole were excessive. 

The fees at issue in the lawsuit were calculated by FCS Group, the city’s hired consultant, which joined as another defendant in the case.  

“We have always stood by the fact that FCS correctly calculated impact fees that was wholly supported by our expert testimony in this case.” Jacobs said. “I'm confident that we did everything right and FCS did everything right.” 

The plaintiffs sought over $3.8 million in damages. 

Last September, after a year and a half of litigation, the court granted the plaintiff’s motion to certify the class action, which means the case could move forward as a class action. 

In April, the court held a settlement conference, and it was recommended that the parties settle the case for $1.4 million. In return for the parties releasing all claims against each other, the FCS Group will pay $1 million and the city, $400,000.  

Under the terms of the settlement agreement, reached through mediation, there is no admission of wrongdoing by the city.  

After paying administrative expenses, the plaintiffs’ attorney’s fees, payment to the class members and their representatives, the net settlement amount is estimated to be about $744,000 that will be distributed to class members.  

Refunds due to the city’s fixture count error total $210,718.38.  

“They have not been reduced by attorney’s fees, so if you overpaid because of our error, you will receive your full amount of a refund back,” Jacobs said. 

The entire $400,000 will be paid from the water and wastewater impact fee funds.