STATE OF MICHIGAN
SUPREME COURT
Michigan Supreme Court
Lansing, Michigan 48909
_____________________________________________________________________________
Syllabus
Chief Justice
Conrad L. Mallett, Jr.
Justices
James H. Brickley
Michael F. Cavanagh
Patricia J. Boyle
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
_____________________________________________________________________________
This syllabus was prepared by the Reporter of Decisions.
Reporter of Decisions
William F. Haggerty
_____________________________________________________________________________
BOLT v CITY OF LANSING
Docket No. 108511. Argued October 6, 1998 (Calendar No. 4). Decided December
28, 1998.
Court of Appeals, Saad, P.J., and Wahls, J. and Markman, J. (Docket No.
912944).
221 Mich App 79; 561 NW2d 423 (1997).
Michigan Supreme Court
Lansing, Michigan 48909
_____________________________________________________________________________
Opinion
Chief Justice
Conrad L. Mallett, Jr.
Justices
James H. Brickley
Michael F. Cavanagh
Patricia J. Boyle
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
_____________________________________________________________________________
FILED DECEMBER 28, 1998
ALEXANDER BOLT,
Plaintiff-Appellant,
v No. 108511
CITY OF LANSING,
Defendant-Appellee.
___________________________________
BEFORE THE ENTIRE BENCH
WEAVER, J.
We granted leave to appeal in this case to determine
whether the storm water service charge imposed by Lansing
Ordinance No. 925 is a valid user fee or a tax that violates
the Headlee Amendment, Const 1963, art 9, � 31.1 We hold
that the storm water service charge is a tax, for which
approval is required by a vote of the people. Because
Lansing did not submit Ordinance 925 to a vote of the people
as required by the Headlee Amendment, the storm water
service charge is unconstitutional and, therefore, null and
void.
I
Part of the Lansing wastewater disposal system combines
sanitary and storm sewers. During periods of heavy
precipitation, the combined system often overflows,
discharging combined storm water and untreated or partially
treated sewage into the Grand and Red Cedar Rivers. In an
effort to comply with the Clean Water Act (CWA) and the
National Pollutant Discharge Elimination Standards (NPDES)
permit-program requirement to control combined sewer
overflows,2 the city of Lansing elected to separate the
remaining combined sanitary and storm sewers.3
The estimated cost of implementing the combined sewer
overflow (CSO) control program is $176 million over the next
thirty years. In 1995, as a means of funding the
separation, the Lansing City Council adopted Ordinance 925,
which provides for the creation of a storm water enterprise
fund �to help defray the cost of the administration,
operation, maintenance, and construction of the stormwater
system . . . .�4 The ordinance provides that costs for the
storm water share of the CSO program (fifty percent of total
CSO costs, including administration, construction, and
engineering costs) will be financed through an annual storm
water service charge. This charge is imposed on each parcel
of real property located in the city using a formula that
attempts to roughly estimate each parcel�s storm water
runoff.
Estimated storm water runoff is calculated in terms of
equivalent hydraulic area (EHA). As defined by the
ordinance, EHA is �based upon the amount of pervious and
impervious areas within the parcel multiplied by the runoff
factors applicable to each.� Impervious land area, which
impedes water absorption, thus increasing storm water
runoff, is defined as
[t]he surface area within a parcel that is covered
by any material which retards or prevents the
entry of water into the soil. Impervious land
area includes, but is not limited to, surface
areas covered by buildings, porches, patios,
parking lots, driveways, walkways and other
structures. Generally, all non-vegetative land
areas shall be considered impervious.
Pervious land area is defined as �[a]ll surface area within
a parcel which is not impervious . . . .�
Residential parcels measuring two acres or less are not
assessed charges on the basis of individual measurements,
but, rather, are charged pursuant to flat rates set forth in
the ordinance.5 These rates are based on a predetermined
number of EHA units per one thousand square feet.6 For
residential parcels over two acres, commercial parcels, and
industrial parcels, the EHA for an individual parcel is
calculated by multiplying the parcel�s impervious area by a
runoff factor of 0.95 and pervious area by a runoff factor
of 0.15 and adding the two areas.7
Charges not paid by the deadline are considered
delinquent and subject to delayed payment charges, rebilling
charges, property liens (if the charge remains unpaid for
six months or more), and attorney fees if a civil suit is
filed to collect delinquent charges. The ordinance further
provides for a system of administrative appeals by property
owners contending that their properties have been unfairly
assessed. In April 1996, the director of public service
promulgated amended administrative rules that provide a
twenty-five percent credit for properties with no storm
water system service and a fifty percent credit for
properties with neither storm nor sanitary sewer service.8
The city began billing property owners for the storm
water service charge in December 1995, with payment being
due on March 15, 1996. Plaintiff was billed $59.83 for his
5,400 square-foot parcel. On March 4, 1996, plaintiff filed
his complaint, alleging that Ordinance 925 violates Const
1963, art 9, �� 25 and 31 (the Headlee Amendment).9 The
Court of Appeals, in a two to one decision, concluded that
the storm water service charge did not violate the Headlee
Amendment because it constituted a valid user fee.10
II
Whether the storm water service charge imposed by
Ordinance 925 is a �tax� or a �user fee� is a question of
law that this Court reviews de novo. Saginaw Co v John
Sexton Corp of Michigan, 232 Mich App ___, ___; ___ NW2d
___; 1998 WL 723881, * 3 (1998). If, as plaintiff contends,
the charge is a tax, it unquestionably violates the Headlee
Amendment, Const 1963, art 9, � 31, which provides in
relevant part:
Units of Local Government are hereby
prohibited from levying any tax not authorized by
law or charter when this section is ratified or
from increasing the rate of an existing tax above
that rate authorized by law or charter when this
section is ratified, without the approval of a
majority of the qualified electors of that unit of
Local Government voting thereon.
However, if the charge is a user fee, as the city maintains,
the charge is not affected by the Headlee Amendment.
The Court of Appeals majority ruled that the storm
water service charge was a valid user fee. In so holding,
the Court analogized to the case of Ripperger v Grand
Rapids, 338 Mich 682, 686-687; 62 NW2d 585 (1954), in which
this Court concluded that sewage disposal charges to
landowners were not a tax.11 The Court of Appeals stated:
From this analysis in Ripperger, we conclude
that, here, charges for storm water collection,
detention, and treatment (which even plaintiff
concedes was properly subject to a fee and not a
tax when combined with sewage disposal) do not
lose their character as a fee by virtue of being
separated from sewage collection and disposal.
Therefore, for the reasons stated in Ripperger, we
hold that the result does not change by separating
the systems�the charge here is a user fee, not a
tax. [221 Mich App 79, 87; 561 NW2d 423 (1997).]
There is no bright-line test for distinguishing between
a valid user fee and a tax that violates the Headlee
Amendment. As noted by the Court of Appeals, the difficulty
in resolving the issue is that the Headlee Amendment fails
to define either the term �tax� or �fee,� an omission that
the Headlee Blue Ribbon Commission urged the Legislature to
rectify. Headlee Blue Ribbon Commission, A Report to
Governor John Engler, Executive Summary, and � 5, pp 26-31
(September 1994). A primary rule in interpreting a
constitutional provision such as the Headlee Amendment is
the rule of �common understanding:�
�A constitution is made for the people and by
the people. The interpretation that should be
given it is that which reasonable minds, the great
mass of the people themselves, would give it.
�For as the Constitution does not derive its force
from the convention which framed, but from the
people who ratified it, the intent to be arrived
at is that of the people, and it is not to be
supposed that they have looked for any dark or
abstruse meaning in the words employed, but rather
that they have accepted them in the sense most
obvious to the common understanding, and ratified
the instrument in the belief that that was the
sense designed to be conveyed.�� [Traverse School
Dist v Attorney General, 384 Mich 390, 405; 185
NW2d 9 (1971), quoting Cooley�s Const Lim 81
(emphasis in original).]
In addition, to clarify meaning, the courts may consider the
circumstances leading to the adoption of the constitutional
provision and the purpose sought to be accomplished. Id.
The Headlee Amendment �grew out of the spirit of �tax
revolt� and was designed to place specific limitations on
state and local revenues. The ultimate purpose was to place
public spending under direct control.� Waterford School Dist
v State Bd of Ed, 98 Mich App 658, 663; 296 NW2d 328 (1980).
More recently, this Court has stated,
The Headlee Amendment was �part of a
nationwide �taxpayers revolt� . . . to limit
legislative expansion of requirements placed on
local government, to put a freeze on what they
perceived was excessive government spending, and
to lower their taxes both at the local and the
state level.� [Airlines Parking, Inc v Wayne Co,
452 Mich 527, 532; 550 NW2d 490 (1996).]
Determining whether the storm water service charge is
properly characterized as a fee or a tax involves
consideration of several factors. Generally, a �fee� is
�exchanged for a service rendered or a benefit conferred,
and some reasonable relationship exists between the amount
of the fee and the value of the service or benefit.�
Saginaw Co, supra at ___, * 7; Vernor v Secretary of State,
179 Mich 157, 164, 167-169; 146 NW 338 (1914). A �tax,� on
the other hand, is designed to raise revenue. Bray v Dep�t
of State, 418 Mich 149, 162; 341 NW2d 92 (1983).
�Exactions which are imposed primarily for
public rather than private purposes are taxes.
Revenue from taxes, therefore, must inure to the
benefit of all, as opposed to exactions from a few
for benefits that will inure to the persons or
group assessed.� [Citations omitted.]
In resolving this issue, this Court has articulated
three primary criteria to be considered when distinguishing
between a fee and a tax. The first criterion is that a user
fee must serve a regulatory purpose rather than a revenue-
raising purpose. Merrelli v St Clair Shores, 355 Mich 575,
583-584; 96 NW2d 144 (1959), quoting Vernor, supra at 167-
170. A second, and related, criterion is that user fees
must be proportionate to the necessary costs of the service.
Id.; Bray, supra at 160. As was summarized in Vernor,
To be sustained [as a regulatory fee], the
act we are here considering must be held to be one
for regulation only, and not as a means primarily
of producing revenue. Such a measure will be
upheld by the courts when plainly intended as a
police regulation, and the revenue derived
therefrom is not disproportionate to the cost of
issuing the license, and the regulation of the
business to which it applies. [Id. at 167.]
In Ripperger, this Court articulated a third criterion:
voluntariness. Quoting from Jones v Detroit Water Comm�rs,
34 Mich 273, 275 (1876), the Ripperger Court stated:
�The water rates paid by consumers are in no
sense taxes, but are nothing more than the price
paid for water as a commodity, just as similar
rates are payable to gas companies, or to private
water works, for their supply of gas or water. No
one can be compelled to take water unless he
chooses, and the lien, although enforced in the
same way as a lien for taxes, is really a lien for
an indebtedness, like that enforced on mechanics�
contracts, or against ships and vessels. The
price of water is left to be fixed by the board in
their discretion, and the citizens may take it or
not as the price does or does not suit them.�
We believe the same reasoning that was
applied to water charges in the above-mentioned
case should be applied to sewage charges in the
present case. [Id. at 686.]
Thus, one of the distinguishing factors in Ripperger was
that the property owners were able to refuse or limit their
use of the commodity or service.12
In instituting the storm water service charge, the city
of Lansing has sought to fund fifty percent of the $176
million dollar cost of implementing the CSO control program
over the next thirty years. A major portion of this cost
(approximately sixty-three percent) constitutes capital
expenditures.13 This constitutes an investment in
infrastructure as opposed to a fee designed simply to defray
the costs of a regulatory activity.14 Consequently, the
ordinance fails both the first and second criteria. We find
the analysis of the dissenting Court of Appeals judge on
this point persuasive:
[N]o effort has been made to allocate even
that portion of the capital costs that will have a
useful life in excess of thirty years to the
general fund. This is an investment in
infrastructure that will substantially outlast the
current �mortgage� that the storm water charge
requires property owners to amortize. At the end
of thirty years, property owners will have fully
paid for a tangible asset that will serve the city
for many years thereafter. Accordingly, the �fee�
is not structured to simply defray the costs of a
�regulatory� activity, but rather to fund a public
improvement designed to provide a long-term
benefit to the city and all its citizens. The
revenue to be derived from the charge is clearly
in excess of the direct and indirect costs of
actually using the storm water system over the
next thirty years and, being thus disproportionate
to the costs of the services provided and the
benefits rendered, constitutes a tax. See
Merrelli v St Clair Shores, 355 Mich 575, 585-588;
96 NW2d 144 (1959).
I do not believe that the capital investment
component of a true fee may be designed to
amortize such an expense, and to enable the city
to fully recoup its investment, in a period
significantly shorter than the actual useful
service life of the particular public improvement.
This fundamental principle of basic accountancy
guides public utility regulators, Ass�n of
Businesses Advocating Tariff Equity v Public
Service Comm, 208 Mich App 248, 261; 527 NW2d 533
(1994) (�[c]onceptually, ratepayers are charged
for the amortization expense when it occurs and,
therefore, rates coincide with the expense and are
not retroactive�), as well as tax assessors,
Consumers Power Co v Big Prairie Twp, 81 Mich App
120, 133-135; 265 NW2d 182 (1978). It ought to
apply equally here.
This is not to say that a city can never
implement a storm water or sewer charge without
running afoul of art 9, � 31. A proper fee must
reflect the bestowal of a corresponding benefit on
the person paying the charge, which benefit is not
generally shared by other members of society.
Nat�l Cable Television Ass�n v United States &
Federal Communications Comm, 415 US 336, 340-342;
94 S Ct 1146; 39 L Ed 2d 370 (1974). Where the
charge for either storm or sanitary sewers
reflects the actual costs of use, metered with
relative precision in accordance with available
technology, including some capital investment
component, sewerage may properly be viewed as a
utility service for which usage-based charges are
permissible, and not as a disguised tax. See
Ripperger v Grand Rapids, 338 Mich 682, 686-687;
62 NW2d 585 (1954). [221 Mich App 91-92.]
Two related failings of the ordinance support our
conclusion that the storm water service charge fails to
satisfy the first and second criteria. First, the charges
imposed do not correspond to the benefits conferred.
Approximately seventy-five percent of the property owners in
the city are already served by a separated storm and
sanitary sewer system. In fact, many of them have paid for
such separation through special assessments. Under the
ordinance, these property owners are charged the same amount
for storm water service as the twenty-five percent of the
property owners who will enjoy the full benefits of the new
construction.15 Moreover, the charge applies to all property
owners, rather than only to those who actually benefit. A
true �fee,� however, is not designed to confer benefits on
the general public, but rather to benefit the particular
person on whom it is imposed. Bray, supra at 162; Nat�l
Cable Television Ass�n v United States, supra at 340-342.
The distinction between a fee and a tax is
one that is not always observed with nicety in
judicial decisions, but according to some
authorities, any payment exacted by the state or
its municipal subdivisions as a contribution
toward the cost of maintaining governmental
functions, where the special benefits derived from
their performance is merged in the general
benefit, is a tax. [71 Am Jur 2d, State and Local
Taxation, � 15, p 352.]
In this case, the lack of correspondence between the charges
and the benefit conferred demonstrates that the city has
failed to differentiate any particularized benefits to
property owners from the general benefits conferred on the
public.
This conclusion is buttressed by the fact that the
acknowledged goal of the ordinance is to address
environmental concerns regarding water quality. Improved
water quality in the Grand and Red Cedar Rivers and the
avoidance of federal penalties for discharge violations are
goals that benefit everyone in the city, not only property
owners. As stated by the Court of Appeals dissent,
The extent of any particularized benefit to
property owners is considerably outweighed by the
general benefit to the citizenry of Lansing as a
whole in the form of enhanced environmental
quality. . . . When virtually every person in a
community is a �user� of a public improvement, a
municipal government�s tactic of augmenting its
budget by purporting to charge a �fee� for the
�service� rendered should be seen for what it is:
a subterfuge to evade constitutional limitations
on its power to raise taxes. [221 Mich App 96.]
The second failing that supports the conclusion that
the ordinance fails to satisfy the first two criteria is the
lack of a significant element of regulation. See Bray,
supra at 161-162; Vernor, supra at 167-169. The ordinance
only regulates the amount of rainfall shed from a parcel of
property as surface runoff; it does not consider the
presence of pollutants on each parcel that contaminate such
runoff and contribute to the need for treatment before
discharge into navigable waters. Additionally, the
ordinance fails to distinguish between those responsible for
greater and lesser levels of runoff and excludes street
rights of way from the properties covered by the ordinance.
Moreover, there is no end-of-pipe treatment for the storm
water runoff. Rather, the storm water is discharged into
the river untreated.
Ordinance 925 also fails to satisfy the third
criterion�voluntariness�because the change lacks any element
of volition. One of the distinguishing factors of a tax is
that it is compulsory by law, �whereas payments of user fees
are only compulsory for those who use the service, have the
ability to choose how much of the service to use, and
whether to use it at all.� Headlee Blue Ribbon Commission
Report, supra, � 5, p 29.16 The charge in the present case
is effectively compulsory. The property owner has no choice
whether to use the service and is unable to control the
extent to which the service is used. The dissent suggests
that property owners can control the amount of the fee they
pay by building less on their property. However, we do not
find that this is a legitimate method for controlling the
amount of the fee because it is tantamount to requiring
property owners to relinquish their rights of ownership to
their property by declining to build on the property.
Additional factors, while not dispositive, also support
the conclusion that the storm water charge in this case is a
tax. First, for purposes of the storm water share of the
CSO control program, the �storm water enterprise fund�
replaces the portion of the program that was previously
funded by the general fund revenues from property and income
taxes.17 Second, the fact that the storm water service
charge may be secured by placing a lien on property is
relevant. While ordinarily the fact that a lien may be
imposed does not transform an otherwise proper fee into a
tax,18 this fact buttresses the conclusion that the charge is
a tax in the present case, where the charges imposed are
disproportionate to the costs of operating the system and to
the value of the benefit conferred, and the charge lacks an
element of volition. Moreover, although allegedly chosen
because it was the most cost-effective method of billing, we
think it significant that the storm water charge is billed
through the city assessor�s office and that the bill may be
sent with the December property tax statements.
III. Conclusion
We conclude that the storm water service charge imposed
by Ordinance 925 is a tax and not a valid user fee. To
conclude otherwise would permit municipalities to
supplement existing revenues by redefining various
government activities as �services� and enacting a myriad of
�fees� for those services. To permit such a course of
action would effectively abrogate the constitutional
limitations on taxation and public spending imposed by the
Headlee Amendment, a constitutional provision ratified by
the people of this state. In fact, the imposition of
mandatory �user fees� by local units of government has been
characterized as one of the most frequent abridgments �of
the spirit, if not the letter,� of the amendment.
The danger to the taxpayer of this burgeoning
phenomenon [the imposition of mandatory user fees]
is as clear as are its attractions to local units
of government. The �mandatory user fee� has all
the compulsory attributes of a tax, in that it
must be paid by law without regard to the usage of
a service, and becomes a tax lien of the property.
However, it escapes the constitutional protections
afforded voters for taxes. It can be increased
any time without limit. This is precisely the
sort of abuse from which the Headlee Amendment was
intended to protect taxpayers. [Headlee Blue
Ribbon Commission Report, supra, � 5, pp 26-27.]
Therefore, we reverse the decision of the Court of Appeals
and remand this case to that Court for further proceedings
consistent with this opinion.
Brickley, Kelly, and Taylor, JJ., concurred with
Weaver, J.
S T A T E O F M I C H I G A N
SUPREME COURT
ALEXANDER BOLT,
Plaintiff-Appellant,
v No. 108511
CITY OF LANSING,
Defendant-Appellee.
_____________________________
BOYLE, J. (dissenting).
In its opinion today, the majority holds that the
Lansing �storm water service charge is a tax, for which
approval is required by a vote of the people,� slip op at 1.
I respectfully dissent. Because the storm water disposal
system benefits every landowner who uses the system and the
Lansing ordinance reasonably calculates the fee on the basis
of each landowner�s use, I find that the ordinance imposes a
fee, not a tax, on Lansing residents. I would affirm the
decision of the Court of Appeals.
I
A rather complex procedural quagmire spawned this case.
Section 301 of the Federal Water Pollution Control Act,
commonly known as the �Clean Water Act� (CWA), prohibits the
discharge of any pollutant by any person, including
municipalities, into navigable waters of the United States
and mandates compliance with water quality standards. 33 USC
1311, 1362. A person or municipality responsible for a
discharge of pollutants into any waters of the United State
from a point source is subject to the CWA, which prohibits
any discharge into United States waters without a permit.
In order to avoid sanctions for discharging the pollutants,
a discharger must obtain and comply with a permit under the
National Pollutant Discharge Elimination Standards (NPDES)
program. 33 USC 1342. Any discharge of pollutants without
a permit or in violation of a permit�s conditions is subject
to federal civil and criminal penalties and citizen suits.
The Michigan Department of Environmental Quality (DEQ),
formerly the Michigan Department of Natural Resources (DNR),
administers the NPDES permit program established under the
Federal Water Pollution Control Act. As a discharger of
pollutants, the city of Lansing previously had to obtain a
NPDES permit.19 According to the Federal Register, the
Environmental Protection Agency likely will force the city
to seek a new, specific �stormwater NPDES permit� from the
DEQ.20
The city of Lansing derives its authority to impose a
legitimate special assessment or user fee for storm water
detention, transportation, treatment, and disposal under the
home rule city act. MCL 117.1a-117.38; MSA 5.2071(1)-
5.2118.21 The Lansing City Charter also provides that the
city may take action to provide for the public welfare,
health and safety,22 and grants the city the authority to
impose special assessments to �make public improvements
within the city.�23 The Lansing City Charter also allows the
city to operate and maintain public utilities.24 To implement
and maintain the public utilities, the city of Lansing may
charge �just and reasonable rates� and �such other charges
as may be deemed advisable for supplying all other municipal
services to the inhabitants of the City and others.� Lansing
City Charter, � 8-303.
Although nothing in the city charter defines �public
improvement� or �public utilities,� the Revenue Bond Act
proves a useful guide. MCL 141.101 et seq; MSA 5.2731 et
seq. Under the Revenue Bond Act, the Legislature granted the
city of Lansing, like any public corporation, authority �to
purchase, acquire, construct, improve, enlarge, extend or
repair 1 or more public improvements and to own, operate and
maintain the same, within or without its corporate limits,
and to furnish the services, facilities and commodities of
any such public improvement to users within or without its
corporate limits.� MCL 141.104; MSA 5.2734. The statute
specifically states that the powers granted in the Revenue
Bond Act �may be exercised notwithstanding that no bonds are
issued hereunder.� MCL 141.104; MSA 5.2734. The Legislature
further defined, post-Headlee, �public improvements� as
including �storm water systems, including storm sewers,
plants, works, instrumentalities, and properties used or
useful in connection with the collection, treatment or
disposal of storm water.� MCL 141.103(b); MSA 5.2733. In
adding storm water language to the Revenue Bond Act in 1992,
the Legislature notably aligned storm water treatment and
disposal with other utilities listed under the term �public
improvement,� including the light, heat, and power
utilities, garbage collection and disposal, sewage treatment
and disposal, transportation systems, cable television
systems, stadiums, and other municipal activities that fall
within the traditional thinking of �public improvements� and
utilities. MCL 141.103(b); MSA 5.2733(b).
II
Determining whether a governmental exaction represents
a tax, fee, or special assessment presents unique problems.
This Court previously has addressed the distinction between
a fee and a tax. In Vernor v Secretary of State, 179 Mich
157; 146 NW 338 (1914), we focused on the �reasonableness�
of the motor vehicle regulation and found that licenses,
like regulations, �will be upheld by the courts when plainly
intended as a police regulation, and the revenue derived
therefrom is not disproportionate to the cost of issuing the
license, and the regulation of the business to which it
applies.� Id. at 167.
In Ripperger v Grand Rapids, 338 Mich 682; 62 NW2d 585
(1954), we determined that sewage charges for use of the
sewage system did not constitute a �tax� on individual
owners within the meaning of the Revenue Bond Act even
though �the payment of a fee for the use of the sewer is,
practically speaking, substantially like the enforced
obligation of a tax. Id. at 686-687. We observed that �[a]
public sewer system is a public utility the same as a water
system� and that ��[p]ayments by the users for the service
rendered [was] not a tax . . . .�� Id. at 687 (citations
omitted). We also stated that sewage fees are similar to
the consumer�s gas, water, or electric bills and that the
prices are set by various city boards and agencies, not
consumers. Id.
Subsequently, in Merrelli v St Clair Shores, 355 Mich
575; 96 NW2d 144 (1959), we examined building permits for
certain work performed in the construction of buildings and
again distinguished user fees from taxes:
In short, we have considered 2 sources of
municipal funds, differing in governmental theory,
each having inherent limitations resulting
therefrom. One involves an exercise of the
municipal power of taxation. Its purpose is to
raise money. The other is an exercise of the
police power of the community. Its purpose is the
protection of the public health, safety, and
welfare. True, certain moneys may be obtained in
connection therewith, but such moneys are
incidental to the accomplishment of the primary
purpose of guarding the public. [Id. at 583.
Accord Bray v Dep�t of State, 418 Mich 149, 162;
341 NW2d 92 (1983).]
The principles that emerge from this precedent identify
two factors that are the focus for determining whether an
exaction imposes a fee: the proportionality and
reasonableness of the fee to the benefit conferred and the
purpose of the regulation, specifically whether its purpose
is to charge the user and not simply to raise revenue.25 The
Court of Appeals recently considered this distinction in
Saginaw Co v John Sexton Corp, 232 Mich App ___, ___ NW2d
___ ; 1998 WL 723881, * 7, finding that �[a]lthough no
bright-line test exists for distinguishing one from the
other, a fee is generally exchanged for a service rendered
or a benefit conferred, and some reasonable relationship
exists between the amount of the fee and the value of the
service or benefit.� Citing Merrelli, supra at 582-584.
However, the majority proposes a three-part test to
distinguish a tax and a fee. Although I appreciate the
majority�s efforts to devise a valid test for this legal
conundrum, I remain unconvinced that the test the majority
proposes is accurate. Even if it is, Lansing Ordinance 925
meets all three parts of the majority�s test.
A
First, the majority states that a user fee �must serve
a regulatory purpose rather than a revenue-raising purpose.�
Slip op at 12. Lansing Ordinance 925 does not raise revenue
for a general revenue fund. The specific language of the
ordinance restricts the use of the funds raised by the storm
water fee:
All funds collected for storm water service
shall be placed in an enterprise fund and used
solely for the administration, construction,
operation, maintenance and replacement of the
stormwater system. [Lansing Ordinance 925, �
1043.11.]
The funds collected under the ordinance are earmarked
specifically for the storm water drainage system and do not
serve to benefit the state by sending money into its general
coffers. Even plaintiff acknowledges that the revenue
derived from the exaction does not flow into a general
revenue fund.26
Id.
Furthermore, this aspect of the tripartite test remains
vague. At first blush, the criterion seems straightforward.
Upon closer scrutiny, the test is problematic, leaving open
the question whether all the funding must serve a regulatory
purpose or whether only a portion of the funding used for
regulatory purposes will suffice. The storm water
management system at issue uses a significant portion of the
regulatory fee for capital expenditures to implement the
separated sewer system. However, the overall system will
benefit each landowner who uses the system by increasing
property values. The landowners here receive the benefit of
having their storm water flow from their land into the sewer
system, which prevents flooding in their basements.27 The
value of the landowner�s property increases in the same
manner that it does with a sewer or water system by
increasing the value of the property when sold and ensuring
that the landowner�s storm water will be properly disposed.
In this sense, the ordinance serves a regulatory purpose by
benefiting each parcel individually and, as part of the
larger picture, the community.
B
Second, the majority states that the user fee must be
proportionate to the necessary costs of the service. I
agree. Although the ordinance uses the term �flat rate,� it
does not impose a universal charge on all properties in the
city of Lansing. The ordinance imposes a fee structure
based entirely upon the amount of storm water runoff by
establishing a system for computing annual bills on the
basis of parcel size, pervious/impervious area, and parcel
development. To collect the annual revenue requirement, the
ordinance uses the equivalent hydraulic area (EHA). Flat-
rate parcels of land (residential parcels that are less than
two acres) have a predetermined EHA and landowners pay a
flat fee that varies according to the parcel�s size and its
development.
For commercial, industrial, or residential parcels over
two acres, the city determines the EHA on an individual
basis. For impervious areas, the ordinance states that out
of every one-hundred drops of rain, five drops are absorbed
and ninety- five drops run off, ultimately to the storm
water system. For pervious areas, eighty-five drops are
absorbed and fifteen drops run off to the storm water sewer
system. The city�s public service department calculates the
�total billable equivalent hydraulic area� for every parcel
in the city and divides the figure by 1,000 to determine the
parcel�s EHA, which is expressed in 1,000 square feet. These
rate classifications thus are based on the determination
that industrial, commercial, and residential properties of
more than two acres contribute more storm water runoff,
because of increased impervious surfaces, than do smaller,
usually single family residence parcels. The smaller
parcels pay a flat rate depending on the parcel size, to
compensate each owner proportionally for the runoff, and the
other properties pay according to the EHA formula that
applies equally to all properties in that category.
Additionally, the ordinance allows both developed and
undeveloped parcels to be billed on the basis of the
impervious/pervious area test.
The public service department then calculates the
annual storm water enterprise charge on the basis of an
initial rate of $24 per 1,000 square feet of EHA. This base
rate is used to calculate the rain fee for all individual
parcels in Lansing on the basis of whether the parcel is a
�flat rate� parcel that consists of residential property or
a �measured parcel,� consisting of commercial or industrial
property or residential property over two acres.
Considering the fee method as a whole, the city used a
logical system to compute the proportionate amount of runoff
that each parcel contributes to the overall system. This
established EHA scheme represents a system that is
proportional to each landowner�s �use� of storm water. The
majority attacks the ordinance by arguing that other methods
exist to better compute the quantity and quality of the
runoff. This view ignores the substantial evidence in the
record that consultants hired by the city proposed many
alternatives before recommending the impervious-area method.
The city considered three different alternatives for storm
water treatment and disposal and found the EHA method to be
the most cost-effective and efficient. Furthermore, an
analysis of the ordinance requires that the charges must be
fair and reasonable and bear a substantial relationship to
the cost of the services and the facilities. Vernor, supra
at 167 (Courts will uphold regulations �when plainly
intended as a police regulation, and the revenue derived
therefrom is not disproportionate to the cost of issuing the
license, and the regulation of the business to which it
applies�). This standard implies that the city must charge
the parcels proportionally, but that the parcels need not be
measured with exact precision, a requirement that is a near
impossibility.
C
Third, the majority claims that Ripperger established a
�voluntariness� criterion. Aside from some cursory language
quoted from an earlier case, nothing in Ripperger expressly
dictates that the �voluntariness� factor was decisive in
that case. Furthermore, our precedent does not establish
that voluntariness somehow constitutes a determinative
factor in considering a fee to be a tax.28 If this were the
case, then other fees, such as 9-1-1 emergency charges,
sewer charges, and recycling fees, would be open to attack.
Simply put, in some instances, the payment of a fee is
compulsory. Cincinnati v United States, 153 F3d 1375, 1378
(Fed, 1998) (�There may be some instances in which a
municipal assessment is involuntarily imposed but would
nonetheless be considered a permissible fee for services
rather than an impermissible tax�). As the United States
Court of Appeals for the Sixth Circuit stated in Detroit
Water & Sewage Dep�t v Michigan, 803 F2d 1411 (CA 6, 1986),
the federal government now mandates that cities maintain and
operate clean water systems and cities deserve some
flexibility and leniency when courts define �user� to
compensate for the storm water systems.29
The majority engages in distinctions without logical
significance by stating that sewage treatment constitutes a
fee because a property owner can control the amount of
sewage disposed, but the same property owner cannot control
the amount of rainwater that falls on the ground. Although
it is doubtful that most property owners think to control
their sewage disposal and treatment or their phone calls to
the emergency service, even assuming arguendo that
voluntariness is a factor, the fee imposed in this case
falls within the �voluntariness� definition. Landowners, if
they choose, may establish rainwater collection systems on
their land for catching the water. If they do so, then they
may appeal to the city appeal process to seek an exemption
from the annual fee payment. Evidence in the record
establishes that the city has granted one hundred percent
credits to some landowners who have shown that they
contribute no rainwater to the system.
Additionally, landowners can choose the amount of the
fee they will have to pay on the basis of whether they build
on the land. More buildings on the land contributes to an
increase in the fee. Thus, the initial rain fee imposed on
the residents is similar to the initial fee that landowners
must pay to hook up to the sanitary sewer. Once the initial
fee is paid in the periodic installment (every month,
annually), the user can �control� the amount of sewage
disposed, thus making the sewage disposal voluntary. The
same concept applies here. The landowner must pay an initial
fee and then voluntarily can control the rainwater that
flows from the property.
III
As additional support for their opinion, the majority
lists two other factors that purportedly show the fee to be
a disguised tax. First, the majority notes that ��the storm
water enterprise fund� replaces the portion of the program
that was previously funded by the general fund revenues from
property and income taxes.� Slip op at 21. Simply because
the storm water enterprise fund once was funded by property
taxes does not necessarily invalidate the imposition of a
regulatory fee now under Ordinance 925 and the Revenue Bond
Act that allows the city to implement a sewer system.30 The
majority makes much of the fact that the city funded the
first seventy-five percent of the storm water system�s
construction by using ad valorem taxes and special
assessments. Although true, this argument ignores the fact
that the question before this Court is the manner in which
the city has chosen to fund the remaining twenty-five
percent of the construction of the system and its
maintenance and operation costs. Simply because the city
may have improperly funded the construction earlier does not
provide a legitimate legal argument for holding that the
system in this present appeal is a tax rather than a user
fee.
As an extension of this argument, the majority asserts
that the seventy-five percent of the property owners who
already benefit from a separated sewer program should not
have to pay for the remainder of the construction that will
serve the remaining twenty-five percent. However, this
argument bifurcates the system into multiple parts, ignoring
consideration of the system as a whole. In order to comply
with the NPDES permit and ensure clean water in the future,
the city must complete the storm water system and have it
benefit all residents.
The majority also contends that �the fact that the
storm water service charge may be secured by placing a lien
on property is relevant.� Slip op at 21. I agree with the
rationale of the Court of Appeals that the observation is
not persuasive:
The manner by which the city has chosen to
enforce the fee does not establish that the fee is
a tax merely because an unpaid fee results in a
lien on property. Other Lansing ordinances provide
that the city�s municipally owned and operated
electric and drinking water distribution systems,
entrusted to the Lansing Board of Water & Light,
has the benefit of a lien on property for unpaid
utility charges. At common law, liens arise in
many situations in which a charge or fee remains
unpaid, and Michigan jurisprudence recognizes
mechanics liens, artisans liens, and garage
keepers liens, among others. [221 Mich App 79, n
6; 561 NW2d 423 (1997), citing Nickell v
Lambrecht, 29 Mich App 191; 185 NW2d 155 (1970).]
The majority fails to cite any authority for the proposition
that a lien somehow becomes relevant to this inquiry.
Indeed, Ripperger itself states that a lien on real property
in a sewage system context, although enforced in the same
manner as a tax lien, does not imply that a sewage rate is
tantamount to a tax.
IV
Storm water drainage systems are the wave of the
future, and many cities are implementing special assessments
and user fees to cope with the projected increasing cost and
demand of sanitizing storm water. As the Stormwater Utility
Ad Hoc Committee noted, �[t]he American Public Works
Association (APWA) has concluded that �The User Charge and
the Utility Concept are the most dependable and equitable
approaches available to local governments for financing
stormwater management.� City of Lansing Stormwater Utility
Ad Hoc Committee Report, Draft Report, August, 1994, p 2.
Michigan cities, from St. Clair Shores and Ann Arbor to
Marquette, have implemented or plan to implement storm water
service programs that employ user fees and the EHA method to
fund their programs. The majority�s holding subjects these
cities to future legal challenges and wreaks havoc with the
state�s water sewage and water disposal system.31
The majority ignores that the storm water treatment is
intimately related to the sewage fees that the residents
already pay. The storm water and the sewage travel through
one pipe and are eventually separated to comply with federal
law. As the Court of Appeals noted, �storm water collection,
detention, and treatment (which even plaintiff concedes was
properly subject to a fee and not a tax when combined with
sewage disposal), do not lose their character as a fee by
virtue of being separated from sewage collection and
disposal.� Bolt v Lansing, 221 Mich App 87. The storm
water service charge does not lose its status as a user fee
simply because the sewage and storm water flow through one
pipe, but are eventually separated into two individual
sewage pipes.32
When we examined the sewage charges at issue in
Ripperger, we noted that the act in that case
established beyond all doubt the principle that
the disposal of sewage into the streams of this
State is a matter of importance to the public
health, which concerns the health of the people of
the State at large, and is so essential that, if
the people of a city fail to meet their
responsibility by bond issue, drastic steps may be
taken. [Id. at 687.]
The storm water system here, like the sewage system at issue
in Ripperger, benefits both the public health of the city
and each resident. Every property owner in the area receives
increased property rates by being connected to a storm water
and sewage treatment and disposal system. I would join the
Court of Appeals and the courts of virtually every other
state that have addressed similar storm water charges and
classified them as �user fees� or �special assessments,�
thus facilitating the imperative of ensuring a clean water
supply.
In sum, the storm water drainage system at issue here
is a user fee because of its inherent connection to sewage
treatment and disposal. Any further attempts to define taxes
and user fees should be addressed to the Legislature.
For the stated reasons, I dissent, and I would affirm
the decision of the Court of Appeals.
Mallett, C.J., and Cavanagh, J., concurred with Boyle,
J.
Bolt v Lansing
Honigman, Miller, Schwartz & Cohn (by Frederick M.
Baker, Jr.) [222 N. Washington Square, Suite 400, Lansing,
MI 48933-1800] [(517) 377-0716], and Witzel & Zoeller, P.C.
(by Jeffrey Zoeller) [312 Woodland Pass, Suite 300, East
Lansing, MI 48823] [(517) 337-8324], for the plaintiff-
appellant.
James D. Smiertka, City Attorney, and Jack C. Jordan,
Chief Deputy City Attorney [5th Floor, City Hall, Lansing,
MI 48933] [(517) 483-4320], for the defendant-appellee.
Amici Curiae:
R. Bruce Laidlaw [2023 Vinewood, Ann Arbor, MI 48104]
[(734) 663-3481] and Abigail Elias [100 N. Fifth Ave., P.O.
Box 8647, Ann Arbor, MI 48107] [(734) 994-2670] for Michigan
Municipal League and City of Ann Arbor.
Dykema, Gossett, P.L.L.C. (by Stewart L. Mandell and
Angela R. White) [400 Renaissance Center, Detroit, MI 48243]
[(313) 568-6796] for Lansing Regional Chamber of Commerce.
William R. Wingard [321 Woodland Pass, Suite 300, East
Lansing, MI 48823] [(517) 337-8324] for Citizens to Abolish
the Rain Tax Ordinance.
_______________________________
1 456 Mich 946 (1998).
2 The CWA allows cities to obtain permits to discharge
specified levels of pollutants into navigable waterways.
3 Approximately seventy-five percent of the property
owners are already served by a separated storm and sanitary
sewer system.
4 The fund replaced that portion of the system that was
previously funded by general fund revenues secured through
property and income taxes.
5 Residential property is defined under the ordinance
as �[t]hose platted or unplatted parcels, either public or
private, with or without buildings, and located within the
city of Lansing, and those parcels which are used for, or
probably will be used for residential purposes.�
6 Under the ordinance, the annual flat rates applied to
residential parcels measuring less than two acres are as
follows:
PARCEL SIZE
DEVELOPED PARCEL
UNDEVELOPED PARCEL
* * *
< 3,500
$ 35.95
$ 7.34
3,500 - 7,000
$ 59.83
$18.43
7,000 - 10,500
$ 84.60
$31.06
10,50
0 - 2
acres
$120.
17
$88.2
0
7 Industrial property is defined as �[t]hose platted or
unplatted parcels used for manufacturing and processing
purposes with or without buildings; those parcels used for
utilities sites for generating plants, pumping stations,
switches, substations, compressing stations, warehouses and
right of way, flowage land and storage areas; and those
parcels used for removal or processing of gravel, stone, or
mineral ores, whether valued by the local assessor or by the
state geologist.� Commercial property is defined as
�[t]hose platted or unplatted parcels used for commercial
purposes, whether wholesale, retail, or service, with or
without buildings; those parcels used by fraternal
societies; those used for religious or governmental
purposes; schools; colleges; and those parcels used as golf
courses, boat clubs, ski areas, or apartment buildings with
more than 4 units.�
8 At some point, it appears that the rules issued by
the public service director were amended to include a one
hundred percent credit. The most recent version of the
rules regarding detention credits, which reflects a revision
date of March 3, 1998, provides for a twenty-five percent
credit to appealed properties �which do not front a curb and
guttered street and whose stormwater run-off did not reach
a; [sic] storm sewer, drainage ditch, or stream, directly or
by sheet flow through adjacent properties.� The rules
provide a fifty percent credit to appealed properties
�satisfying the criteria for a 25% credit, and who�s�s [sic]
residence was not connected to the City�s sanitary sewer
system.� The rules award one hundred percent credit to
appealed properties satisfying the criteria for twenty-five
percent credit and located �within a drainage district which
could not be served by an existing public storm sewer
outlet.� It also appears that credits were established
through the Lansing City Council Appeal Review, which awards
a twenty-five percent credit �to any property fronting a non-
curb and guttered street which did not have any storm sewer
on their block� and one hundred percent credit to �any
property which fronts a gravel street and does not have a
catch basin directly in front of their property or does not
have a storm sewer in their block� and to �a property with
no street frontage with no adjacent property fronting a
street with storm sewer in that block.�
9 Plaintiff filed his action in the Court of Appeals
pursuant to Const 1963, art 9, � 32, which provides in
pertinent part that �[a]ny taxpayer of the state shall have
standing to bring suit in the Michigan State Court of
Appeals to enforce the provisions of Sections 25 through 31,
inclusive, of this Article . . . .�
10 221 Mich App 79; 561 NW2d 423 (1997).
11 In Ripperger, a pre-Headlee case, the sewer service
charge was based on the metered water usage for the winter
quarter. In determining that the sewer charge was not a
tax, the Ripperger Court concluded with very little analysis
that the same reasoning that treated water rates paid by
consumers as the price paid for a commodity applied equally
to the sewage charges imposed by the city of Grand Rapids.
Ripperger, supra at 685-686.
12 The Ripperger Court also noted that the amount paid
reflected the price of the service received, thus
reiterating the second criterion that the fee must be
proportionate to the cost of the service. Accordingly,
rather than standing for the proposition that sewage charges
are always user fees, as the Court of Appeals majority
contended, 221 Mich App 86-87, Ripperger actually
articulated relevant criteria for determining whether a
charge is a fee or a tax.
13 The total estimated cost through the year 2038 is
$205,523,226. Of that total, $8,600,000 is for capital
improvement project/separated sewer costs, $85,991,953 is
for storm CSO costs through 2018 (i.e., fifty percent of the
total CSO control program costs), and $34,679,234 is for
storm NPDES permitting costs. Adding these three components
together, $129,271,187, or 62.89 percent of the costs
incurred, are for what can be termed capital improvements.
Approximately ten percent of the total cost, or $20,567,039,
is allocated to administration and billing costs. Operation
and maintenance costs are forecasted at $55,685,000. Table
1, Stormwater Utility Ad Hoc Committee Report (August,
1995).
14 The dissent makes much of the fact that the ordinance
does not raise revenue for the general revenue fund.
However, this does not preclude us from determining that the
purpose of the storm water charge is to generate revenue.
�[W]here revenue generated by a regulatory �fee� exceeds the
cost of regulation, the �fee� is actually a tax in
disguise.� Gorney v Madison Heights, 211 Mich App 265, 268;
535 NW2d 263 (1995). Additionally, the dissent would
conclude that the user fee is proportionate to the costs of
the service because the EHA method used to compute the
charge is �a logical system� that estimates �the
proportionate amount of runoff� that each parcel
contributes. However, this argument fails to address the
fact that a major portion of the costs constitutes capital
expenditures and, consequently, an investment in
infrastructure that will serve the city for many years after
property owners have paid for it.
15 The appeal process and available credits do not make
the charge proportionate to the necessary costs of the
service because there is no credit for the seventy-five
percent of the property owners who are already served by a
separated sewer system. As explained during oral arguments,
if the appeals process were to credit the seventy-five
percent already served by a separated system, it would
eviscerate the purpose of the ordinance. Thus, this appeal
process, however structured, simply cannot save the
ordinance from violating the Headlee Amendment.
16 The dissent disputes that voluntariness is a factor
to consider in determining whether the charge is a fee or a
tax. The dissent cites Cincinnati v United States, 153 F3d
1375, 1378 (Fed, 1998), to support its argument that a
municipal assessment is not an impermissible tax simply
because it is involuntarily imposed. First, we would note
that the criteria we have articulated are not to be
considered in isolation. The lack of volition in this case
is one of several factors supporting our conclusion that the
storm water charge is a tax. Second, we would note that the
court in Cincinnati declined to answer the question when an
involuntarily imposed assessment might be a permissible fee.
Id.
Further, we note that the Headlee Blue Ribbon
Commission�s definition of user fee, which the dissent
quotes in footnote 14 to support its argument that the storm
water charge in this case should be classified as a user
fee, explicitly mentions voluntariness:
A �fee for service� or �user fee� is a
payment made for the voluntary receipt of a
measured service, in which the revenue from the
fees are used only for the service provided.
[Headlee Blue Ribbon Commission Report, supra, �
5, p 30 (emphasis added).]
17 In response to this conclusion, the dissent notes
that the Revenue Bond Act permits the city to implement a
sewer system. However, whether the city was authorized
under the Revenue Bond Act to implement a sewer system is
not at issue in the present case. What is at issue is how
that system is to be funded. It stands to reason that even
though the city may be authorized to implement the system,
its method of funding the system may not violate the Headlee
Amendment.
18 See Jones, supra at 275.
19In 1977, the DNR (now the DEQ) issued the city of
Lansing�s first NPDES permit, but required the city to
submit a facilities plan by June 30, 1978, to the DNR Water
Resource Commission (WRC) to implement a combined sewer
overflow (CSO)control program. On September 27, 1978, the
WRC issued to the city a notice of non-compliance and order
to comply for failing to submit a complete facilities plan
that would address combined sewer overflows by the June 30,
1978, deadline. On May 10, 1979, the DNR agreed to draft a
NPDES permit that included submission dates for the city�s
final facilities plan, and on June 25, 1979, the city
submitted its draft of the facilities plan to the DNR for
review and comment.
On August 1, 1979, the DNR-WRC issued a notice of
violation and order to comply. Further, the DNR-WRC issued
a citation to the city for failure to control its combined
sewer overflows and submit its facilities plan addressing
the combined sewer overflows by June 30, 1978. In
conjunction with this notice, the DNR issued a notice of
intent to place a moratorium on sewer construction permits
within the city.
In response, the Lansing City Council passed a
resolution calling for public hearing on the draft
facilities plan, and in December, 1979, gave notice of
public hearing. Finally, on January 21, 1980, the Lansing
City Council passed a resolution authorizing submission of
the final facilities plan, and on January 23, 1980, a public
hearing was held on the facilities plan. The facilities plan
included a recommendation for a long-term CSO control plan,
which was to be implemented as phase II after certain
preliminary phase I sewer system improvements were
completed. Phase I of the facilities plan was implemented
between 1983 and 1989, bringing the city into compliance
under its original NPDES permit.
On August 14, 1987, the DNR-WRC issued public notice of
its intention to issue a revised NPDES permit, which it
issued on October 1, 1987, and later modified on August 17,
1989. The 1987 NPDES permit required the city to develop a
final CSO control plan before December 1, 1991, that would
eliminate or result in adequate treatment of combined sewage
discharges containing raw sewage. After a public hearing,
the Lansing City Council passed a resolution on April 25,
1991, adopted a CSO project plan, which called for the
separation of the city�s remaining combined sanitary and
storm sewers. The DNR ultimately approved the city�s CSO
final project plan on March 9, 1992, and the plan was
incorporated into the NPDES permit given to the city on May
20, 1993. This permit required that the city implement the
final plan in accordance with certain compliance dates set
forth in a six-phase construction schedule. In the absence
of any revisions or amendments, the city must adhere to the
plan.
In 1994, the city formed an ad hoc committee to assist
the city in establishing a system to fund the project. In
August, 1995, the committee recommended the creation of a
storm water enterprise fund as the means to finance the
plan. On October 9, 1995, the Lansing City Council, by
Ordinance No. 925, created the Stormwater Enterprise Fund,
presumably because the system proved the most cost-
effective to meet the federal requirements. The ordinance
provides that any person who owns a parcel of land within
the city that uses the city�s storm water system must pay a
user fee to support the cost of the storm water utility. The
money from these user fees proceeds directly into the
Stormwater Enterprise Fund, which the city uses to fund
fifty percent of the CSO separated sewer costs. A different
fund, the Sewage Enterprise Fund, supplies the revenue for
the remaining fifty percent.
20Although unclear, the parties state that, under
proposed EPA guidelines, once the city of Lansing implements
the separated storm water/sewer system, it will result in a
storm water system that serves more than 100,000 people and
the city must request and obtain a specific storm water
permit from the DEQ. See 40 CFR, parts 122 and 123.
In implementing its powers under this act, the city of
Lansing adopted the Lansing City Charter of 1978, which
provides:
The City has the comprehensive home rule
power conferred upon it by the Michigan
Constitution, subject only to the limitations on
the exercise of that power contained in the
Constitution or this Charter or imposed by
statute. The City also has all other powers which
a city may possess under the Constitution and the
laws of this state.[Lansing City Charter, � 1-
201.]
22
The city shall take such action, and adopt
such ordinances, as shall be necessary to provide
for the public peace and health and for the safety
of persons and property within the City.� [Lansing
City Charter, � 3-310.]
23Section 7-401 of the Lansing City Charter provides:
The City Council shall have the power to make
public improvements within the City and, as to
public improvements which are of such a nature as
to benefit especially any property or properties
within a district, the Council shall have the
power to determine, by resolution, that the whole
or any part of the expense of any public
improvement shall be defrayed by special
assessment upon the property in districts
especially benefitted, in proportion to the
benefits derived or to be derived.
24Section 8-301 of the Lansing City Charter provides:
The City shall have all the powers granted by
law to own, operate, improve, enlarge, extend,
repair, and maintain public utilities . . .
including, but not by way of limitation, public
utilities for supplying water and water treatment,
sewage disposal and treatment, electric light and
power, gas, steam, heat, public transportation, or
any similar service to the municipality and the
inhabitants thereof . . . .
25The Court of Appeals has reached similar results. In
Gorney v Madison Heights, 211 Mich App 265-268; 535 NW2d
263, 268 (1995), the Court of Appeals stated that �in order
for a fee to be deemed a tax, there must be no reasonable
relationship between the fee and the expense of the service
provided. . . . However, where revenue generated by a
regulatory �fee� exceeds the cost of regulation, the �fee�
is actually a tax in disguise.� Citing Dukesherer Farms,
Inc v Director, Dep�t of Agriculture, 405 Mich 1; 273 NW2d
877 (1979). 211 Mich App 269. See also Saginaw Co v John
Sexton Corp, 232 Mich App ___; ___ NW2d ___; 1998 WL 723881
(1998).
26In his brief, plaintiff Bolt states that he �readily
concedes that the revenues derived from the Rain Tax do not
flow into the City�s General Fund, but are segregated
cosmetically in a fund designed to finance the stormwater
share of the CSO Control Program and the costs (in the
future) of complying with the requirements of a storm water
NPDES permit.�
27This litigation began because the city�s sewage system
could not handle the combined overflow of storm water and
sewage flowing through the same pipes. After a heavy
rainfall, the sewage system would overflow, often into
landowners� basements. The CSO program, according to the
city, was implemented partly to resolve this problem.
28The Headlee Blue Ribbon Report implies that �[p]ayment
of a tax is compulsory by law; whereas payments of user fees
are only compulsory for those who use the service . . . .�
Id., � 5, p 29. The majority seemingly gleans support from
this report, even though it is not binding precedent.
Notably, this section of the report spawned a minority
report, which acknowledged that �a certain amount of
�tightening� is appropriate to insure that the fees
collected are used only to support the services provided,�
but still requested that the report recognize traditional
user fees, such as recycling and emergency telephone fees.
Id., � 5, p 42. The minority report �recommend[ed] that the
legislature define, in statute, �tax,� �special assessment,�
and �user fee,� but to do so in such a way that each of them
may continue to be used where it is appropriate to do so to
fund appropriate services and programs.� Id., � 5, p 43.
29In its opinion, the Sixth Circuit stated:
The storm water which constitutes the runoff
from WCRC�s roads may have come from God or nature
in the first place, just as all water entering the
DWSD�s sewer system must have at one time or
another. Nevertheless, the refuse or foreign
matter that water accumulates as it courses
through WCRC�s roads must now be subjected by law
to primary and secondary treatment to the extent
such runoff enters Detroit�s sewage treatment
system. And to that extent, at least, WCRC is a
user of the facility provided by DWSD. Any effort
somehow to rely upon a different definition of
�user� is essentially a matter of semantics more
than of substance, given the state statutory
scheme. [Id. at 1421.]
30See Sarasota Co v Sarasota Church of Christ, Inc, 667
So 2d 180, 186 (Fla, 1996) (�Although we do not find that
the previous funding of stormwater services through taxation
was inappropriate, we do find that the stormwater funding
through the special assessment at issue complies with the
dictates of chapter 403 and is a more appropriate funding
mechanism under the intent of that statute�); Vernor, supra
at 163-164 (finding the license fee for motor vehicles,
which was previously classified as a user fee, to be a tax
under the amended statute). See also Detroit, supra, in
which the United States Court of Appeals for the Sixth
Circuit approvingly quoted the following:
The rule of the above cited cases is that the
original construction of a sewerage system does
not bind the city to forever maintain it from
general taxation, nor may it be implied that a
citizen may forever use the sewerage system
without charge, and that a charge may therefore be
made for the use of the sewerage facility, �a
benefit distinct from that originally conferred by
building it.� The respondent city by heretofore
maintaining its sewerage system through taxation
did not impliedly or otherwise bind itself never
to charge for its use. Such sewerage charges are
but charges for a service rendered. . . . The 1951
Act . . . makes it the mandatory duty of a city
which issues such revenue bonds �to fix and
maintain rates and make and collect charges for
the use and services of the (sewerage) system,�
etc. and it is of no consequence whatever that the
city had theretofore exacted no service charge for
the use of such a system. This contention is
without merit and must be denied. [Id. at 1416-
1417, citing Maryville v Cushman, 363 Mo 87; 249
SW2d 347 (1952).]
31Additional authority supporting the proposition that
the storm water system in this case represents a true
regulatory fee includes: Long Run Baptist Ass�n, Inc v
Louisville & Jefferson Co Metropolitan Sewer Dist, 775 SW2d
520, 523 (Ky App, 1989) (rejecting the plaintiffs� argument
that the storm water system was an �indirect� benefit to
citizens and thus a tax); Smith Chapel Baptist Church v
Durham, 348 NC 632, __; 502 SE2d 364, 367 (1998) (holding
that the user fees, established by statute, were not based
on the service to landowners, and the statute in question
did not require proof of a benefit to the landowners);
Roseburg School Dist v City of Roseburg, 316 Or 374, 380-
381; 851 P2d 595 (1993) (finding that the storm water system
did not impose a �tax� under the Oregon Constitution
because the fee was not imposed against a specific property
owner, but rather on the user of the water service);
Twietmeyer v City of Hampton, 255 Va 387, 392; 497 SE2d 858,
861 (1998) (holding that the city of Hampton�s storm water
management fees system was not meant �to raise general
revenue� and thus the ordinance requiring payment of
stormwater fees was a legitimate �regulation� rather than a
�tax� on residents); Teter v Clark Co, 104 Wash 2d 227, 239;
704 P2d 1171 (1985) (holding the storm water control plan to
be �tools of regulation� rather than a tax).
32Notably, even the Headlee Blue Ribbon Commission
Report, which the majority mentions to support its claim
that �voluntariness� is a factor in this equation,
classified sewage treatment as a user fee:
A �fee for service� or �user fee� is a
payment made for the voluntary receipt of a
measured service, in which the revenue from the
fees are used only for the service provided.
Examples include municipal sewage charges . . . .
[Report, supra, � 5, p 30.]
I would contend that sewage and storm water runoff are
closely aligned and do not lose their characteristics by
being separated.