Attorneys for the city of Des Moines and resident Lisa Kragnes will meet in court Friday to work out the details of a $40 million refund of fees the city collected for five years as an alternative means to raise revenue.

Kragnes is the Beaverdale homeowner who filed a lawsuit in 2004 challenging the collection of what the city described as a franchise fee to cover the maintenance and administration of right of ways where utilities are located. Without the fee, the city warned, residents could face cuts in public services.

The city continued to collect the fee after repeated judicial determinations that it was an illegal tax by any other name. The city appealed, and lost, twice to the Iowa Supreme Court. The U.S. Supreme Court declined to hear the city’s appeal.

In 2009, the Iowa Legislature allowed cities to charge a franchise fee under a broad set of conditions. The legislation was not retroactive, but it did sanctify the “illegal tax.” Brad Schroeder, the lead attorney for Kragnes, had argued repeatedly that if the city had stopped collecting the fee over the course of the litigation it would not have accumulated a $40 million liability to gas and electric utility customers.

The city has issued bonds to cover the refund.

Last week, the Iowa Supreme Court declined to consider the case a third time, in this case on appeal by both sides of the dispute after Polk County District Judge Joel Novak refused to approve a request for nearly $15 million in fees by Kragnes’ attorneys. The Iowa Court of Appeals upheld the lower court ruling on a 2 to 1 vote.

Novak, after complimenting Schroeder and the Kragnes legal team, slashed the attorneys fees to about $7 million.

“We understood going into the appeal that it would be an uphill battle,” Schroeder said in a release. “At the same time, we knew that if we let the fee award stand without any action that others might decide it isn’t worth taking on City Hall if the standard for fees is different from other class cases where the defense, in this case the city, is proved to have broken the law for several years.”

Novak had said in his ruling that there should be a separate standard for fees collected in class action cases against public entities.

The hearing Friday is to work out the final details of sending refund notices to customers. It could be several months before refund checks are in the mail.