A unanimous Idaho Supreme Court ruling issued today sharply faults the city of Pocatello for charging excess sewer and water fees in order to raise money for the city’s general fund, and suggests the city could be forced to refund millions it collected. The opinion, by retiring Justice Daniel Eismann, says, “In 2005, the city government decided that the city should be able to operate its water and sewer systems at a profit like private utilities. … The city wanted to obtain a profit in excess of the amounts necessary for the water and sewer systems to remain self-supporting. This profit was paid into the general fund.”

The city’s “rate of return” fee already was invalidated by a lower court in 2013; monthly sewer and water bills dropped by 10 percent. But then, different parties sued in 2014, seeking refunds of the earlier fees. The district court dismissed the refund claim, saying the court decision on the fee wasn’t retroactive and that the fee didn’t constitute a “taking” of private property without compensation. Those parties appealed to the Idaho Supreme Court.

Eismann cited a long list of cases on how government fees must be related to the cost of services provided, and “cannot be assessed purely as a revenue-generating scheme.” He also cited a 2006 letter from then-Pocatello Mayor Roger Chase to the Idaho Attorney General’s office, suggesting that fees are “a fairer way to generate revenue for the city,” and saying, “Relying on property taxes will not work in Pocatello due to the number of property tax exemptions given by the state.”

Eismann found that the city fee was “not a reasonable user fee to reimburse the city for the cost of government services.” He also found that only the Idaho Supreme Court could decide if a ruling was retroactive or not, and that the district court erred in its analysis of whether the fee constituted a taking. His decision remanded the case back to the lower court for further proceedings consistent with the SupCourt opinion.

You can read the 17-page opinion here.