Detroit Water & Sewerage Division Has Colluded With Trial Lawyers To Avoid A Constitutional Test Of Their Outrageous 'Stormwater Fee'

The Detroit Water & Sewerage Department’s Non Residential Drainage Rate became a political hot potato in 2013 when the City finally started applying this breathtaking, disguised tax to all non residential properties within the City.  Mayor Duggan is scraping the bottom of the barrel for every revenue dollar he can find.

Prior to 2013, the City of Detroit only extracted this rate from 12,000 non residential property owners, although 41,237 non residential property owners should have been paying it. They also extracted this rate from the State of Michigan and Wayne County for roads in Detroit, after a lengthy appeals process which ended in the U.S. Sixth Circuit Court of Appeals.  Detroit shielded politically preferred and connected property owners from this tax for 35 years, notably the politically powerful black churches.  But that ended in 2013 when the City of Detroit “discovered….that there are some errors with respect to our billing of stormwater charges”.

This rate, which is often referred to as a stormwater fee or the rain tax, is not inconsequential. It is now $ 660 – $ 750 per acre, per month. Run of the mill churches with on site parking were rudely surprised with $ 3,500 monthly charges in 2015, on top of their already expensive water bills. They thought as religious entities they were tax exempt. Tee-hee.  No one in Michigan is truly tax exempt!  Michigan Public Act 178 of 1939 (MCL 123.161 et seq.) converts unpaid DW&SD stormwater fees into a property lien, same as unpaid property taxes, so these fees quickly result in property foreclosures.

Ever wonder why Detroit has such a problem with commercial property blight? Now church blight is in the offing.

Non residential property owners in Detroit have just received a legal notice in the mail announcing a proposed settlement of a Wayne County Circuit Court class action case filed by Michigan Warehousing Group LLC and Midwest Valve and Fitting Company against the Detroit Water & Sewerage Department over the DW&SD’s outrageous stormwater fee. This case is identified in the Wayne County Circuit Court as 15-010165-CZ. The parties reached a settlement agreement which is carefully constructed to cripple legal challenges to the constitutionality of the stormwater fee in higher courts and handsomely pay off the trial bar.

The settlement notice fails to inform non residential property owners that another, far more comprehensive class action law suit is progressing in the Michigan Court of Appeals. Detroit Alliance Against The Rain Tax v. City Of Detroit in the Michigan Court of Appeals, Case Number 339176, just got consolidated with a similar suit on 24 October and appears ready for litigation – also as a class action.

The basis of the Michigan Warehousing Group et al v. City of Detroit law suit is an equal protection claim, not a Headlee claim. This was a deliberate attempt to keep the stormwater fee’s constitutionality from being challenged, despite the City’s lawyers specifically mentioning the Headlee issue in the settlement notice. This also keeps the law suit in Wayne County Circuit Court, which is far friendlier to Detroit than the statewide, higher courts.

DW&SD is proposing a nebulous, partial refund of some per acre stormwater fees, subject to acceptance of the stormwater fee’s legal validity by the class. Participating in the class prevents one from challenging the validity of the stormwater fee on Headlee grounds at a later date. Why the City’s lawyers mentioned the Headlee issue in the settlement notice. The City of Detroit is attempting to use this settlement to frustrate more fundamental litigation now in the Michigan Court of Appeals.

The settlement creates a $ 29.5 million ‘Net Settlement Fund’ which will not be sufficient to meet all claims filed, but caps DW&SD’s upper limit of liability. The only parties which are guaranteed full recovery are the lawyers. They get $ 7.75 million for selling out their clients’ best interests, skimmed right off the top of the Net Settlement Fund. The settlement is structured as a typical trial lawyer sell out which requires class members to include themselves or exclude themselves affirmatively, or else disappear into a legal void (becoming foreclosed).

Time is of the essence here. Non residential property owners in Detroit have to file a claim or notice of exclusion with the Administrator by 06 December, or else they get foreclosed. Claimants can also request to appear at the Settlement Hearing on 05 January 2018, however those wishing to appear have to file a notice with the Court Clerk (along with all attorneys involved), also by 06 December.  And those notices to the lawyers? You have to disclose to them your legal arguments, so they can be prepared to savage you in open court.

DAART v. City Of Detroit challenges the constitutionality of the stormwater fee as a disguised tax which was never approved by the voters of Detroit. This law suit should end the stormwater fee entirely, a far better outcome for non residential property owners, especially churches.  By comparison, the Michigan Warehousing Group et al v. City of Detroit settlement provides a partial refund for four years of this surreptitious tax, but then allows its reimposition unimpeded next year.

The DW&SD Non Residential Drainage Rate was first adopted by DW&SD in a rate plan the Detroit City Council approved on 19 September 1979. This rate plan was adopted as part of the City of Detroit’s 1977 – 1979 negotiations with the U.S. EPA over pollution emanating from DW&SD facilities which exceeded federal limits. The rate plan was affirmed by Judge Feikens in U.S. v. City of Detroit on 26 August 1980 and all challenges were rejected (77-71100). The challenges filed were mostly under the Michigan Revenue Bond Act of 1933 (MCL 141.101 et seq.). No Headlee Amendment objections were cited back then.

Judge Feikens was dumb enough to think that the fee was being collected from all non residential property owners. But then again he also thought no one was stealing from DW&SD, either.  He even thought that DW&SD was actually using the stormwater fee to address stormwater issues.  No such luck.  He got played for a fool by Coleman and Kwame, along with a lot of other Detroit government thieves.

The Headlee Amendments established a requirement that all new taxes require a vote of the constituency, from the time it became effective in November 1978. Fees do not require such votes, and pre November 1978 taxes are grandfathered in. Since the DW&SD Non Residential Drainage Rate was first adopted by the Detroit City Council in a rate plan approved on 19 September 1979, after Headlee took effect, it should not have been grandfathered in. And every annual increase should have been voted upon. But Judge Feikens used the authority of the U.S. Government to override the Michigan Constitution.

Judge Feikens is now dead and DW&SD is no longer protected by Federal oversight, which ended (not coincidentally) in 2013, so it is long past time that the authority of the Michigan Constitution be restored.

Other Michigan cities have attempted to end run Headlee with their own stormwater fees, but their efforts were found unconstitutional by the Michigan Supreme Court. Bolt v. City of Lansing [459 Mich 152, 158; 587 NW2d 264 (1998)] is the watershed case regarding stormwater fees in Michigan. The Michigan Supreme Court overturned the Michigan Court of Appeals’ creative definition of a fee. The Michigan Supreme Court held that the Lansing stormwater fee was enacted to raise revenue, was raised arbitrarily to produce desired revenues unrelated to any identifiable costs, did not accurately distribute costs amongst city residents/landowners, was not voluntary, and replaced tax revenues which previously paid for such ‘services’. It was a tax, not a fee. Every aspect of the DW&SD Non Residential Drainage Rate is virtually identical to the Lansing stormwater fee.

The next relevant case was Laurence G. Wolf v City of Detroit, MSC 140679. In this case, the City of Detroit lost the right to assess a square footage based waste disposal fee on non residential properties. This 2006 fee was held to be a tax which violated the Headlee Amendment. Very similar to the stormwater fee cases, just involving garbage. And no Judge Feikens to defend the indefensible.

Then came the Jackson County v. Jackson City case, MCoA 307685 / 307843. The City of Jackson created a far more elaborate scheme than Lansing involving the creation of a ‘stormwater utility’ in an attempt to circumvent Bolt v. Lansing. The Michigan Supreme Court acknowledged the City of Jackson’s creativity, but still found the scheme a violation of the Headlee Amendments. Their ruling followed the clear logic of the Bolt case and reached the same conclusions.  A tax is a tax, even when it is called a fee.

Now it is up to non residential property owners and the churches of Detroit to fish or cut bait. Non residential property owners must file their request for exclusion, or prove a claim with:

Kickham Hanley PLLC
32121 Woodward Avenue, Suite 300
Royal Oak, Michigan 48073

Either the request or the proof must be postmarked by 06 December 2017, or you are foreclosed forever.

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