Stormy Weather: Ann Arbor is Facing Another Utilities Lawsuit

In a previous post, In Deep: Ann Arbor’s Water Troubles, we reported on a class-action lawsuit pending against the City of Ann Arbor in regard to water rate. That suit, which was housed in our local Circuit Court, petered out after Judge Archie Brown denied the motion for class certification. As we noted at the time (July 2021), a flaw in this suit was that it focused on water fees and water reserve funds, and only glancingly dealt with the more obvious case of Ann Arbor’s stormwater fee structure. In our Addendum to that post, we outline some of the issues with the stormwater fee (which I am now simply calling a tax).

Now the same law firm (Kickham Hanley) has filed a completely new suit, this time in the Court of Appeals (taking the action out of our local Circuit Court; they explain why they are able to do this). The new suit, Platt Convenience, Inc. v. City of Ann Arbor, is a straightforward complaint that the Headlee Amendment to the Michigan Constitution has been violated. Their case is so simple and factually based to demonstrate this that they state at the outset, that


This is in contrast to the previous suit, which involved extensive discovery (questions for the City to answer), many of which were batted away by the City’s hired lawyers. What the plaintiffs are doing is asking the judges to read their case, and decide on the basis of what is presented. Presumably the defendant (the City) will produce a defense, but that is all the action expected.

The Headlee Amendment and its implications were explained at some length in our previous post. Here is an excerpt:

Here in Michigan, as in many other locations, the tax revolt led by California’s Proposition 13 (1978) resulted in an amendment to the Michigan Constitution (the Headlee Amendment [1978]) that limited taxation by local governments. The intent was to protect citizens from new taxes unless they voted for them. It has several sections but the take-home message is: no new taxes without a vote!  This has severely limited municipalities (cities, townships, counties) in Michigan because the only available source of new revenue has been voter-approved property tax millages.

But municipalities also offer services that can legally be supported by fees. A fee is not considered a tax. It is simply the price of receiving the service. It is not, however, supposed to exceed the cost of providing the service. When is a fee a tax? When it is meant as a revenue source, not merely a compensation for the service.

What Kickham Hanley does with this new Class Action Complaint  is to focus efficiently on all the evidence (and the exhibits are almost exclusively the City’s own documents) that Ann Arbor’s stormwater fee is in fact a tax, and thus is illegal under the Michigan Constitution. These arguments follow the precepts laid down in the Bolt Decision, the Supreme Court decision that is taken to be the definitive word on this issue. It presents a case regarding a simple question:

Is the Stormwater Charge imposed and collected by the City of Ann Arbor, which has been assessed against Plaintiff and the putative class, a disguised tax in violation of the Headlee Amendment?

We will not try to reiterate their arguments and evidence here. Interested parties should read the brief, which is quite detailed and is 50 pages in length.  Brief in Support of Stormwater Charge Complaint October 22 2021 In addition to points on which Ann Arbor’s stormwater fee structure violates Headlee, the brief reviews a number of recent similar lawsuits. It seems a lot of Michigan municipalities run afoul of Headlee as defined by Bolt, and they usually lose. From my reading, Ann Arbor is likely to lose too.

One of the many failures under Bolt that the brief cites is that the stormwater fee is not voluntary. A utility fee is supposed to be voluntary, in that you can limit your usage of the utility. With the fee essentially being assessed against a quality of your parcel, there is no limitation available other than the minuscule amounts that a rain garden or rain barrel bring you. And the penalty for not paying is that the amount gets assessed as a lien against your property. That is a pretty good show of muscle. It almost looks like what the taxman might do.

UPDATE: (July 2022) As reported by MLive, the Court of Appeals has issued an order in this case. Evidently the City attempted to claim that this was just the same old case that had already been denied class status in Circuit Court, but this Court denied that. The plaintiff’s counsel asked the Court to rule on the case directly, but that was also denied. The case has now been sent back to Washtenaw County’s Circuit Court, where the Chief Judge is directed to appoint a Special Master (MLive reports that it will be Patrick Conlin), who will gather facts (both parties will issue lists for discovery) and produce a report. The parties then have an opportunity to object to the report. There are no fixed deadlines for the report to be completed, only for action after the report has been filed. Depending on how busy the Circuit Court is, this is likely to be several more months. (Note that Judge Archie Brown, who presided over the previous case, is retiring.)


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6 Comments on “Stormy Weather: Ann Arbor is Facing Another Utilities Lawsuit”

  1. Kitty B. Kahn Says:

    Well, this is concerning. Thanks, Vivienne, for letting us know.

  2. John Smith Says:

    The so-called “Anti” majority elected in 2018 got elected in no small measure due to disgust over Taylor’s imposition of massive water utility fees on homeowners in A2. The new majority really botched the political response to the fee hike and got snookered by the Taylor machine into hiring essentially the same kine of consultants the city had initially hired who recommended the fee hikes. These consultants never mentioned the surpluses being generated in the city’s water fund and the new majority bought the line that the surpluses were needed to pay for future expansion of the system; in direct violation of the Bolt Decision. Hurray for the law firm suing the city! They are making the case the 2018 new majority should have been making all along.

  3. Letitia Simmons Says:

    When I rented from McKinley (Manchester Flats) tenants paid for water, storm water, etc. for my 675 sq.ft. apartment I was charged $20 per month for sewer and about $8 for water. It just always seemed so upside down.

    • Water rates have always been mystifying and Ann Arbor has been very aggressive in getting every possible payment. Those “customer charges” are inscrutable. You’ll see that is what sends the sewer rate up. It is not based just on volume.

  4. John Smith Says:

    Since there is a dispute pending, can we put our water bill money into escrow until the matter is settled? Can a homeowner legitimately claim the city’s bill is not correct?

    • Ha! No. The lawsuit is somewhere on the docket of the Court of Appeals and probably will not be resolved for years. If it succeeds, you’ll maybe get a check several years from now. Note that this lawsuit is only about the stormwater utility. The Council has approved attorneys’ fees to defend it.

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