Bolt v. City of Lansing

• Citation: 459 Mich. 152,587 N.W.2d 264
• Decision Date: 28 December 1998
• Docket Number: No. 4,Docket No. 108511,4
• Parties: Alexander BOLT, Plaintiff-Appellant, v. CITY OF LANSING, Defendant-Appellee. Calendar
• Court: Supreme Court of Michigan

Page 264

587 N.W.2d 264

459 Mich. 152

Alexander BOLT, Plaintiff-Appellant, v. CITY OF LANSING, Defendant-Appellee.

Docket No. 108511.

Calendar No. 4.

Supreme Court of Michigan.

Argued Oct. 6, 1998.

Decided Dec. 28, 1998.

Rehearing Denied Feb. 24, 1999.

[459 Mich. 154] Honigman, Miller, Schwartz & Cohn (by Frederick M. Baker, Jr.), Lansing, MI, and Witzel & Zoeller, P.C. (by Jeffrey Zoeller ), East Lansing, MI, for the plaintiff-appellant.

James D. Smiertka, City Attorney, and Jack C. Jordan, Chief Deputy City Attorney, Lansing, MI, for the defendant-appellee.

R. Bruce Laidlaw, Ann Arbor, MI and Abigail Elias, Ann Arbor, MI, amici curiae for Michigan Municipal League and City of Ann Arbor.

Dykema, Gossett, P.L.L.C. (by Stewart L. Mandell and Angela R. White ), Detroit, MI, amici curiae, for Lansing Regional Chamber of Commerce.

William R. Wingard, East Lansing, MI, amicus curiae for Citizens to Abolish the Rain Tax Ordinance.

OPINION

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. 202, ----, 591N.W.2d 52, 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 N.W.2d 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 N.W.2d 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 N.W.2d 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 N.W.2d 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 N.W.2d 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, ---N.W.2d ----; Vernor v. Secretary of State, 179 Mich. 157, 164, 167-169, 146 N.W. 338 (1914). A "tax," on the other hand,...