The North Idaho Building Contractors Association is hailing a court ruling that found the City of Hayden’s sewer expansion fee structure is illegal.

Last week’s ruling in 1st District Court requires the city to refund sewer fees, with interest, in excess of $774 per building permit, the group said Monday. The fee applied to new homes and businesses and certain commercial expansions.

The decision by Judge Cynthia Meyer comes two years after the Idaho Supreme Court found the city had failed to establish legal grounds for the steep fee increase, intended to pay for future sewer expansion. The city in 2007 tripled its “sewer capitalization fee” to $2,280 to fund about $20 million in sewer projects related to anticipated growth.

The nonprofit builders group sued the city in 2010, arguing that the higher fee was in reality a tax imposed without required voter approval.

The city countered that it legally can collect capitalization fees to fund expansion of the sewer system, but that it needed to justify the amount using a different methodology.