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Published September 20 2013

Despite state law, West Fargo defends $10 late fee on water bill

WEST FARGO – West Fargo’s city attorney says the city’s $10 late fee on delinquent water bills is legal, despite a state law that limits how much cities can charge in late fees to 1¾ percent of the amount past due.

As The Forum reported last week, West Fargo resident Kevin Rod complained that the $10 late fee on his $30 bill was “outrageous.” He was surprised to learn the city had collected more than $137,000 in water bill penalties last year, the majority of it from late fees.

A subsequent tip from a Forum reader questioned whether the late fee was legal. A North Dakota Attorney General’s opinion issued in 2000 stated the city of Linton couldn’t charge a 10 percent late fee on the amount of a quarterly water bill that was 10 days past due.

West Fargo City Attorney Brian Neugebauer said Linton’s home rule charter, which allowed the city to supersede state law only to impose a retail sales and use tax, didn’t provide for broad authority like West Fargo’s charter, which gives the city the power “to levy and collect taxes, excises, fees, charges and special assessments.”

“We have the authorization under our home rule charter and the authority to do it, whereas Linton did not. It’s a clear distinction,” he said.

Harwood City Attorney John Shockley also cited the city’s home rule charter, which is similar to West Fargo’s, as its authority for imposing a $200 penalty on residents who fail to submit their water meter readings for billing purposes after a three-month warning period. The penalty, which the city informed residents about this week, takes effect in November.

The 2000 opinion, requested by then-state Sen. Lawrence “Pete” Naaden of Braddock, asked whether Linton could charge a 10 percent late fee on the amount of a quarterly water bill that was 10 days past due. Naaden also asked whether the city had the power to charge more than the late fee allowed under Section 13-01-14 of the North Dakota Century Code.

In her opinion, then-Attorney General Heidi Heitkamp referenced an opinion issued by the Attorney General’s office in 1986 in noting that a city may not assess a late charge of more than 1¾ percent per month. No state law authorizes a city “as an unregulated lender” to charge a higher rate for late fees on a utility bill, the opinion stated.

Prior to 1985, state law exempted residential utility bills from the 1¾ percent limit on late fees. But the Legislature terminated the exemption in 1985, “and therefore city residential water utility bills are subject to the provisions” of the law, Heitkamp wrote.

Among those provisions is that the late payment fee can’t be charged until 30 days after the water bill has been imposed. West Fargo’s ordinance defines late payment of a utility bill as “payment after the 15th of each month or carrying a past due balance.”

The West Fargo City Commission approved the ordinance establishing the $10 late fee in 2011 in an attempt to encourage water users to pay their bills on time. In October 2011, the month the fee went into effect, there were 1,625 late fees charged among the city’s 8,295 water customers; last month, the city charged 1,174 late fees among 9,071 customers.

Money collected from the late fee isn’t budgeted for any specific purpose but rather is comingled with other revenue in the city’s water and sewer fund, city Finance Director Tina Gustafson said. The funds are used to pay for everyday expenditures such as water and sewer upkeep and water tower maintenance, as well as projects such as water meter replacement and revamping of the city’s lagoons, she said.

In 2008, the North Dakota Supreme Court found in favor of a West Fargo resident who had challenged that Fargo’s traffic fines illegally exceeded those allowed under state law. The high court agreed, referring to a state law providing that “Crimes defined by state law shall not be superseded by city or county ordinance or by home rule city’s or county’s charter or ordinance.”

Fargo ultimately agreed to pay up to $1.5 million in claims to settle a federal class-action lawsuit over the fines.

Neugebauer, who said he disagreed with the Supreme Court’s ruling, said he doesn’t believe West Fargo’s $10 late fee would be open to a similar legal challenge because it doesn’t contravene any section of state law.

“We have the authority to supersede state law in this area,” he said. “There isn’t any state law that says home rule cities can’t charge fees.”

Readers can reach Forum reporter

Mike Nowatzki at (701) 241-5528