June 13, 2016 03:54 PM

A Lafayette restaurateur has joined two other local residents in filing a lawsuit against Lafayette Utilities System seeking refunds for thousands of current and former LUS customers. Nidal Balbeisi, owner of Agave Mexican Cantina and the Zeus chain of middle-eastern restaurants is the lead plaintiff in the suit challenging LUS’s annual payments to Lafayette Consolidated Government known as in lieu of tax, or ILOT, payments.

Because it is a municipally owned utility, LUS is not subject to property and/or sales taxes, but in lieu of those taxes that would otherwise be paid to local government, LUS makes annual ILOT payments to LCG. The most recent amount was roughly $22 million. The lawsuit alleges that LUS is illegally levying an extra fee on its 65,000 customers to cover the payments to LCG.

Although the suit does not seek specified damages, LUS has made more than $400 million in ILOT payments to the city of Lafayette since 1976. The suit seeks class action status for the many thousands of current and former LUS customers who are Louisiana residents and not employed by local government.

LUS Director Terry Huval told The Advocate, which was first to report the suit filed June 6, that ILOT payments have “legally been in use for many decades.” According to The Advocate, there appear to be no similar legal challenges in Louisiana to ILOTs, which are not uncommon for municipal utility systems.

Because LCG and likely LUS enjoy sovereign immunity — they are immune as government entities from civil or criminal prosecution — it’s unlikely such a suit, even if granted class action status and successful, would result in a monetary judgement against LUS and/or LCG. But it could, if successful, force LUS to stop making ILOT payments to LCG (and charging any additional fees to customers to cover those costs), which would represent a crippling hit to Lafayette Consolidated Government’s revenue stream in an era of plummeting sales tax collections.

Read more about the lawsuit at The Advocate.