Questions and Answers:
Note: The following questions and answers are provided by counsel for the class members. The official notice that was provided to potential class members was reviewed and edited by the Washington County Water Conservancy District and then the Court. If you are a potential member of the class, the discussion below was prepared for you by your attorneys in this matter. It therefore provides, we believe, more candid information for those who may be part of the class.
What is this case really about?
The representative plaintiffs (builders) in this case have long been involved in an effort to ensure that impact fees imposed on new construction in Utah are legal and fair. They have worked with the state legislature and local officials both generally and specifically to iron out problems where new homes, for example, were being charged a disproportionate cost to connect to services.
These builders have only filed suit against three entities in the past 15 years. The first was a city in Utah County that refunded about $1,000,000 in inappropriate fees to all those who paid them – not just the builders. The second instance involved a sewer district in Northern Utah. As a result of that litigation, $33.25 million in refunds were issued to those who paid 14,000 separate impact fees. The builders have not sued any other entity except for this one case – against the Washington County Water Conservancy District, although these builders pay many hundreds of impact fees each year to other local government entities.
This case is about an isolated instance where the builders recognized a fee as being so unfair that some action must be taken and where the local jurisdiction refused to reconsider or adjust the fee for those builders.
So the WCWCD is still charging that disproportionate fee?
No. Although the dollar amount of the fee for a single home has increased, the WCWCD has revised the documents which calculated the fee and recalculated their impact fees, making changes in the calculations that this litigation argues should have been made in the first place. The builders have not brought a lawsuit against the current impact fees charged by the WCWCD. This case only applies to fees paid to the WCWCD between August of 2012 and December of 2017.
So how, for example?
The WCWCD no longer is basing impact fees on bonds that will never be issued for the Lake Powell Pipeline.
· It no longer demands that a new home reserve .89 acre foot of water to serve that home but now requires .59 acre foot of annual water resources per home. This is a 33% reduction in the anticipated water demand from a new home.
· It no longer anticipates that impact fees will be the only source of payment for the Lake Powell Pipeline Project.
· It is not basing 80% of the fee on one project that has not been permitted and may never be built. The WCWCD has recognized that it must seek other water sources as well as the LPP.
· The WCWCD used to charge 100% of the fee it imposed on a single-family home to apartment units. It no longer does so.
Is the WCWCD opposing the class members?
Yes. Vigorously. Although it is not clear exactly what the WCWCD is paying its lawyers to fight this case, it reported that for calendar year 2021 it spent $2,231,803 in legal fees, $1,468,135 out of its “capital projects fund”. This is $1 in legal fees for every $7 in project expenditures it made during that year. As a comparison, in 2013, the year this case was filed, the WCWCD spend only $389,141 in legal fees and charged none of that legal expense to the capital projects fund.
So the Builders do not want to pay impact fees?
The Builders pay impact fees all over the State of Utah. They do not challenge the ability of local governments to collect fair and legal fees to offset the cost of serving new development. Even in this case, the Builders have provided expert witnesses who calculated what the impact fees should have been between 2012 and 2017. The Builders only ask, on behalf of all class members, a partial refund between what they should have been charged and what they were charged. They also seek interest on funds paid and attorneys fees as allowed by the Utah Impact Fees Act.
Are the class members supposed to be against the Lake Powell Pipeline Project?
No. The issue here is not whether the LPP is needed and when it will be built. The issue is that impact fees paid to the WCWCD between 2006 and 2017 were based on the false premise that:
1. The 2006 calculations assumed that all the cost of the LPP should be charged only to impact fees.
2. The 2006 calculations assumed that WCWCD would bear the initial cost of the LPP. Since 2006, state law has provided by statute that the State, not the WCWCD, would pay for the initial cost of the project. The WCWCD would then be responsible to repay the cost over fifty years after the first delivery of water to Washington County.
3. The 2006 calculations assumed that WCWCD would have to issue bonds starting in 2018 to pay for the LPP.
4. The 2006 calculations assumed that Washington County would run out of water, based on growth projections, some years ago. This was based, in part, on the false assumption that a new home needs .89 acre foot of water each year and must be charged for the cost of reserving .89 acre foot of water to serve that home. The lack of water was therefore an artificial paper calculation, not a real world analysis. Since demand is not that high we have not run out of water yet.
The WCWCD has officially and formally changed its analysis of each of these factors in a manner consistent with what the lawyers for the class members have argued in this case. The WCWCD is not basing any of its current impact fees on those mistaken 2006 assumptions, but it still will not refund a part of the fees it collected based on those false assumptions.
How much will the potential refunds be?
In each notice to a potential class member there is an estimate of the total fees that are associated with that person or entity’s name. If that potential class member turns out to be the person entitled to a refund, the class experts are stating that the refund, plus five to nine years of interest and legal fees, could exceed the amount paid by the class member some years ago.
Who received the notices of the class action?
The WCWCD and the class attorneys suggested to the Court that the notice be sent to all persons or entities associated with the payment of each of more than 9500 impact fees. Notice was sent to:
· the applicant for the subdivision or building permit which triggered the fee;
· the owner of the land involved;
· the person shown on the WCWCD records as paying the fee; and,
· if the fee was paid by a bank or title company as the result of a real estate closing, each of the parties to that closing were sent a notice.
The 9,500 fees involve more than 2,700 individuals, many of whom paid a number of fees.
88% of the notices were mailed to Washington County or Iron County addresses.
The great majority of potential class members are individual homeowners who built their own home themselves or hired a builder to build the house for them. Overall they did not pay a majority of the fees at issue here, but there are hundreds of couples and individual homeowners who paid one or two impact fees and may join the home builders and others in receiving refunds.
Do all those individual potential class members share in any refund?
No. Notice was sent to all potential class members. The Court has not determined who should get the refund. The engineering firm who filed an application is probably not the entity who bore the financial burden of the fee. The landowner also may not have borne the burden because a subdivider may have paid the fee, not the landowner who sold the land to the subdivider. There are many hundreds of individuals who either built their own home, paid a contractor on a “cost plus” basis, or otherwise directly paid the fee to the WCWCD. Other homeowners acquired their home long after the fee was paid by the builder and did not pay the fee themselves. All this would need to be sorted out by the Court once it is determined that a refund is to be paid.
What is the position of the WCWCD on who should get a refund?
Attorneys for the WCWCD argued that the notices should also be sent to every person who bought any one of more than 9,500 new homes in Washington County built between 2012 and 2017 - for a period of more than five years. The Court did not accept that argument.
How much might the WCWCD have to pay if the class members win this case?
The total residential impact fees paid which are subject to this claim for a refund appears to be about $70,000,000. The builders did not sue for a total refund, but only that portion which was imposed disproportionately. Even though a refund would not be for that entire amount, the reluctance of the WCWCD to settle the case means that five to ten years interest and fees could be added. A final judgment could easily exceed that amount, perhaps totaling more than $100,000,000.
Would that bankrupt the WCWCD?
According to the 2021 Financial Statement, the WCWCD had more than $239 million in cash on hand on December 31, 2021. It collected more than $30 million in impact fees in 2019, $36 million in 2020, and $37 million in 2021.
Is the WCWCD taking this case seriously?
There is certainly a lot of money being spent by the WCWCD on legal fees. But in its 2021 financial statements, as in all years previous since 2013, attorneys for the WCWCD told its auditors that
“During the ordinary course of its operation, the district is a party to various claims, legal actions and complaints. In the opinion of the District’s management and legal counsel, it is not anticipated that these matters have a material impact on the District”.
This can only mean that the WCWCD has concluded that a) there is little chance that the class members could ever get a refund of these impact fees; b) is unwilling to tell its auditors or reveal to those relying on its financial statements to extend credit to the WCWCD that this case exists or that there is even a slight risk of a many million dollar judgment against it; or c) a judgment of many millions would, in fact, not have a “material impact” on the WCWCD.
Are legal counsel for the class members taking this seriously?
Yes, the attorneys working on behalf of class members are investing thousands of hours and hundreds of thousands of dollars in expenses to pursue a fair result for the class members. The expert witnesses who have testified on behalf of the class members in deposition and who have concluded, and stated under oath, that the WCWCD impact fees imposed were not fair or legal include:
· the author of national textbooks on impact fees, presidential professor of municipal planning and a Fellow of the American Institute of Planners;
· an attorney who was the author of many changes to the text of the state impact fee statute from 1995 going forward who served for a number of years as legislative representative for the Utah League of Cities and Towns;
· a seasoned regional water engineer; and
· a retired lead accountant from a Utah accounting firm which audits a number of municipalities on an annual basis.
Is a settlement possible?
Certainly. There even have been some discussions, but nothing has been resolved.
What is the current status of the litigation?
We are on hold while the Utah Court of Appeals hears an appeal from the WCWCD challenging the decision by the St. George trial court judge to appoint a Special Master to move the case along and more quickly get to resolution.
Why would the WCWCD delay this matter for more than a year by challenging the appointment of a Special Master to proceed immediately with trial?
We cannot say for sure. The argument in their original appeal was that the appointment would cost too much and delay the process. Counsel for class members responded that this is not a credible claim and note that the special master appointed was recommended by attorneys for the WCWCD. Class counsel argues that WCWCD’s appeal is the delay, not the appointment of the special master. The appeal set the case back perhaps a year or a year and a half and will impose significant time burdens on both the WCWCD and attorneys for the class members. Without the appeal, the special master had hoped to complete all testimony and make decisions on the merits by the end of 2022. This would have placed the case a couple of years ahead of where it will likely end up as a result of the appeal.
Who are the attorneys for the class members?
Three law firms are now involved. Kirton McConkie is the state’s largest law firm, with offices in Salt Lake City, St. George, Boise, and Lehi. Anderson Call & Wilkinson is a very small firm which includes an attorney who specializes in land use regulations and impact fees. Checketts Law is also a small firm whose principal attorney was with Kirton McConkie when it became involved in this litigation.
Will class members be obligated to pay attorney fees for their legal counsel?
Any fees paid to legal counsel and all expenses incurred to pursue the case will come from the proceeds of the litigation. After those costs and fees are paid, the balance of the refunds will be distributed to class members by the class administrator.
Will class members be obligated to pay attorney fees to the WCWCD if it wins this case?
In our opinion it is highly unlikely that the judge will charge attorney fees and costs to an individual class member. Here’s why. Utah’s Impact Fee statute says that if a person challenges an impact fee in court and loses, a judge may award reasonable attorney fees and costs to the prevailing party. That provision contemplates single challenges brought by single individuals against a service district. It does not address class actions.
We are not aware of any class action case brought under Utah’s Impact Fee Act where a class has sued and lost and then been charged as a class with the district’s attorney fees under this statute. We are also not aware of any theory of law which would obligate potential class members to any costs in a case where they did not originate any action against the district, have not contributed to the action in any way, and share a cause of action with hundreds of others who cannot even be identified. If a person is concerned about the remote possibility that legal fees may be awarded against anonymous class members, that person may simply not respond to the notice.
Even if WCWCD were to attempt to recover attorneys’ fees from individual class members under the statute, it is likely that the standards for awarding fees would align with standards in other cases against governmental entities with fee shifting statutes. In those cases, recognizing the statutes’ remedial purposes, fees have only been awarded to governmental entities where the claims were found to be “frivolous” or brought in “bad faith”. The present claims is far from “frivolous” or “bad faith.” But win or lose, it is ultimately up to the judge to decide whether or not to award fees, and if so, who is the ‘prevailing party’ and how much is a reasonable fee.”
Where can I get other information about the case?
Please send any questions to email@example.com. We will respond promptly to your inquiry.