When I use a word,’ Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’ — Lewis Carroll, Through the Looking Glass
As demands for city services increase, costs go up and tax revenues flatten or fall, what is a municipality to do? In most places in Michigan, politicians seem to have decided that even to suggest more taxes is the kiss of death. For example, everyone agrees the state’s roads need work. Gov. Rick Snyder proposed increasing the gas tax and registration fees some eight months ago and it has gone nowhere. More appalling is the lack of forward progress on some solution. Everyone agrees that better roads save lives, gas and money and yet there is no plan in place. Some legislators are talking about asking the voters to approve an increase in the state sales tax from 6 to 7 percent, yet there seems no sense of urgency now as the leaders in Lansing say this plan might come before the voters next year anyway.
So, when municipal governments try to fund environmental initiatives, like managing stormwater (required by federal law), what is a city to do? Well, the cities of Lansing, Jackson, and Detroit have all adopted stormwater “fees” which are based on the paved acreage of properties within their jurisdiction. To the municipalities, this seems like a good idea — otherwise, why would they keep doing it? Reportedly, nine Michigan communities have created stormwater utilities to impose such charges (Adrian, Ann Arbor, Berkley, Chelsea, Harper Woods, Jackson, Marquette, New Baltimore, and St. Clair Shores).
Unfortunately for them, the Michigan Courts keep striking them down as illegal taxes. In the recent case of Jackson County v. City of Jackson, the plaintiffs challenged a stormwater management charge imposed by the Jackson City Council. The Court of Appeals ruled that the charge was a tax imposed in violation of the Headlee Amendment to the Michigan Constitution.
The court held that the charge: (1) did not serve a regulatory purpose because it shifted funding of certain activities from the general fund to the charge; (2) was disproportionate to the benefits conferred upon the payor as there were no payor-specific benefits — the fee benefitted everyone equally; and (3) was not voluntary because there was no way to avoid the charge by doing, or not doing, something. The Court of Appeals cited the 1998 case of Bolt v. Lansing, which invalidated a similar stormwater charge on similar bases. Ultimately, both courts held these “charges” to be taxes subject to, and failing to meet, Headlee Amendment requirements.
Interestingly, in light of the Jackson case, the city of Adrian has reportedly already voted to refund the fees it collected.
Will Detroit’s “fee” fall to a similar challenge? Every case is different but the recent history would indicate yes. It seems that if the city wants to have a stormwater “charge” based on acreage, it will have to go to the voters and make the city’s case. Otherwise, the city will have to fund these expenses out of general funds. If it acts, sounds, and walks like a tax, then it is a tax and should be adopted as one — regardless of the desires of Humpty Dumptys on various city, county and township councils. Calling a tax a fee doesn’t necessarily make it so.
Arthur Siegal is a partner at Jaffe Raitt Heuer & Weiss. His Environmental blog is an engaging perspective of changing trends in environmental law and its impact on economic development in Michigan and across the country.
