ST. CLAIR SHORES — City Council approved a budget amendment for the fourth quarter of the 2019-20 fiscal year to account for the fact that it has been ordered to refund more than $3.4 million in stormwater charges to residents.
A lawsuit filed by resident Brad Patrick in 2017 alleges that a “stormwater utility fee” charged by the city is not a user fee but, instead, is a tax that raises revenue in violation of the Headlee Amendment to Michigan’s Constitution.
Represented by Kickham Hanley, the suit attained class action status and St. Clair Shores residents were notified that they were part of that class in December 2018.
The stormwater charges were fixed fees charged each quarter: $8.52 per single-family home and $4.26 per single-family home located on a waterfront or canal, for example. But the lawsuit alleged that the charges were being used to provide benefits for the city and all citizens, not just the users paying the fee. That is why the lawsuit alleged that the money collected is a tax not approved by voters, in violation of the Headlee Amendment.
Macomb County Circuit Court Judge Jennifer Faunce ruled that the stormwater fee was inappropriate and prohibited the city from further collection of the fee in June 2019.
The city has now been ordered to refund $3,483,800 in prior charges. St. Clair Shores Finance Director Laura Stowell said the money is sitting in an account for when the attorneys representing Patrick begin issuing settlements to those who have filed to be a part of the class-action lawsuit.
Because of that, the city had to amend its fourth-quarter budget to reflect the charge because it was so large.
City Manager Matthew Coppler said July 20 that the city was able to reduce the amount it would have to pay, but the money will now go to residents making a claim.
“Once the money is paid out to those that make a claim, the money is going to then come back to the city and … we will actually credit those accounts that haven’t been paid out for that.
“We were very fortunate to be able to work with the plaintiff (and) saved $700,000 from (having to be paid out of) the utility fund.”
He said St. Clair Shores will receive a list of properties that have not been refunded through the class-action lawsuit, and the money left will be divided among those properties as a credit to their water and sewer bill.
St. Clair Shores conducted a study in the late 1990s that provided equivalencies of the stormwater use for each parcel, but since there was not a way for a resident to appeal that charge and the way it was charged was seen more as a tax than a user fee, the court found that it was an improper charge, Coppler said.
“One of the things we’re doing right now is coming up with a process that addresses the size of the property, the amount of stormwater that comes off the property … and provides a way for residents to appeal that,” he said. “Because there wasn’t that mechanism (in the past), it was seen as a tax rather than a user fee.”
A new charge will be determined based upon the amount of permeable versus non-permeable space that is on a property, Coppler said.
Mayor Kip Walby stressed that residents shouldn’t get used to the lack of a stormwater charge on the bill.
“At the end of the day, it’s coming back in a different form. Because we use the money to take care of the stormwater in the community … we need the money,” he said. “It’s coming back, it’s just coming back in another form.”