§ 31 of the Headlee Amendment (1963 Const., art. 9, § 31); Whether the defendant-city's storm water management charge was a tax or a fee; Bolt v. City of Lansing; Effect of the ordinance's "lack of a significant element of regulation"; Lack of correspondence "between the charge imposed and any particularized benefit conferred by the charge"; USA Cash #1, Inc. v. City of Saginaw; "Proportionality" of the charge; Kircher v. City of Ypsilanti; Graham v. Kochville Twp.; Westlake Transp., Inc. v. Public Serv. Comm'n
Holding that the defendant-city's storm water management charge was a tax and its imposition violated § 31 of the Headlee Amendment, the court ruled that the charge was null and void. Thus, the court entered a declaratory judgment for the plaintiffs in these consolidated cases. It ordered the city to stop collecting the charge and to reimburse "only plaintiffs for any charges paid to date." The City Council adopted Ordinance 2011.02, pursuant to which the city created a storm water utility and imposed a storm water management charge on all property owners in the city to generate revenue to pay for the services provided by the utility, including, inter alia, street sweeping, catch basin cleaning, and leaf pickup and mulching. The court noted that the "seminal - and only - case addressing the distinction between a fee and a tax, in the context of storm water management," is the Michigan Supreme Court's decision in Bolt, in which the Supreme Court set forth the three primary criteria of a fee - "(1) a fee serves a regulatory purpose, (2) a fee is proportionate to the necessary costs of that service, and (3) a fee is voluntary." The court found that the documents it was provided showed that the management charge served a dual purpose. It furthered "a regulatory purpose by financing a portion of the means by which the city protects local waterways" from solid pollutants carried in storm and surface water runoff, as required by state and federal regulations. It also served "a general revenue-raising purpose by shifting the funding of certain pre-existing government activities from the city's declining general and street fund revenues to a charge-based method of revenue generation." The court concluded that "the minimal regulatory purpose served by the ordinance and the related management charge is convincingly outweighed by the revenue raising purpose of the ordinance." The ordinance suffered "from the same lack of a significant element of regulation as the Lansing ordinance did." Further, the documents clearly showed "that the desire to protect the city's general and street funds from the costs of operating and maintaining the existing storm water management system constituted the most significant motivation for adopting the Ordinance and management fee." Also, "the lack of correspondence between the charge imposed and any particularized benefit conferred by the charge supports a conclusion that the charge is a tax and not a utility user fee." The court also concluded that "the actual use of the storm water sewer system by each parcel is not accounted for with the requisite level of precision necessary to support a conclusion that the charge is proportionate to the costs of the services provided." Finally, the court's conclusion that the management charge was a tax was "bolstered by the fact that Ordinance 2011.02, like Lansing Ordinance 925, is effectively compulsory."
Full Text Opinion
State Bar of Michigan
306 Townsend St
Lansing, MI 48933-2012