By Alex Ebert
At least four Detroit-area municipalities are facing class actions alleging that their sewer or water fees are actually unconstitutional under state law.
In the coming weeks, all 26,000 Waterford Township water and sewer account holders will receive notice that they may apply for refunds for sewer fees between 2010 and this year, as part of a settlement reached between the township and a citizen alleging water and sewer charges were actually improper taxes. The $1.4 million settlement in Mason v. Chartered Twp. of Waterford is one of at least four within recent years, all regarding the same fees-as-illegal-taxes issue.
In addition to those settlements, similar lawsuits are pending against Detroit and three of its suburbs: Bloomfield Township and the cities of Oak Park and Westland. Although the legal theory behind the lawsuits is more than two decades old, Michigan municipal governments still grapple with how to properly fund infrastructure for public water and other utilities without running afoul of the state’s murky rule for new taxes.
The lawsuits allege that local governments have violated a part of the Michigan Constitution known as the Headlee Amendment. The amendment, effective since 1978, requires voter approval for any local tax increases or new taxes. Since a 1998 Michigan Supreme Court opinion, all municipalities have been aware of what is called the “Bolt Test,” which requires that fees serve a regulatory purpose, be reasonable and proportionate, and be voluntary. Yet, local governments still struggle with these requirements.
“It’s hard to figure out exactly what the Bolt decision means and how to apply it,” Mark Nettleton, attorney with Grand Rapids, Mich.-based Mika Myers Plc , told Bloomberg BNA.
Municipalities can violate the test by lacking reasoning for the price of water or sewer fees. For instance, local water fees can’t be based just on a neighboring municipality’s fees, but must be calculated to provide water and fund infrastructure improvements and repairs for the water system, Nettleton said.
Although courts generally side with municipalities, if a city’s water or sewer fund accumulates money, it must be intended for repairs or infrastructure improvements in some city plan. Without a plan those growing funds make a city vulnerable to suit.
In contrast to the Waterford case, a Michigan state court granted summary disposition for the City of Taylor against a water fees lawsuit June 8. In that ruling, the court found that the plaintiff hadn’t proved the city was overcharging for water beyond its sewer repair needs, and also did not prove that sewer fees were being used for improper purposes because Taylor had plans for how to use the fees to improve and repair its water infrastructure.
The recent series of class actions are brought by Kickham Hanley PLLC, based in Royal Oak, Mich. Gregory Hanley, managing partner with Kickham Hanley and the lead attorney on these lawsuits, declined to comment on this type of litigation.
To contact the reporter on this story: Alex Ebert in Columbus, Ohio, at firstname.lastname@example.org
To contact the editor responsible for this story: Rachael Daigle at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)