Several years ago the Home Builders Association of Michigan (HBAM) filed suit against the City of Troy for violating both the Single State Construction Act and the Headlee Amendment for placing building department fees into the city’s general fund. We were joined in the suit by the Michigan Plumbers and Mechanical Contractors Association and Associated Builders and Contractors of Michigan.
Troy hired a private company to run its building department and the contract they signed called for the private company to return 25% of the fees collected by the building department to the city. The city then places these building department fees into its general fund were it is used to fund other city departments and activities. According to their own figures, from 2001 through 2016 Troy has overcharged its building department customers by $2,326,061.
Section 22 of the Single State Construction Code Act specifically requires that municipalities, like the City of Troy, establish “reasonable fees” for Building Department services which must “bear a reasonable relation to the cost” of providing those services. Section 22 also restricts the use of fees generated by a Building Department, as a municipality “shall only use fees generated under this section” for Building Department services and a Construction Board of Appeals and the city shall “not use the fees for any other purpose.” HBAM got this prohibition into law in 1999 to stop the all too common practice of local governments milking their “cash cow” building departments and then skimming off the cream to pay for other department’s costs.
Similarly, the Michigan Constitution restricts municipalities in their establishment of fees. Under the Headlee Amendment, units of local government are prohibited from levying any tax not authorized by law or charter without the approval of a majority of that unit of local government’s voters. The prohibition includes taxes disguised as fees.
The City of Troy says they are allowed to overcharge customers for today’s building permits because they created a “$6,500.000 deficit” when they made the political decision to undercharge yesterday’s permit holders. But, as Court of Appeals Judge Kathleen Jansen stated in her dissent “The record contains no evidence to support defendant’s claim that it actually ran a deficit during any previous budget years of explain what expenses the building department incurred during those years to create a more than $6 million shortfall. … (the) defendant relies solely on past Comprehensive Annual Financial Reports (CAFRs) …(which) simply report a building department deficit, they do not prove that one actually exists.”
When your state association started this litigation seven plus years ago, the city of Troy was the only municipality using a “kick-back” contract with a private company to place building department fees in their general fund. While no reliable tracking mechanism exists, over the ensuing years, we believe over a hundred municipalities have entered into these types of contracts putting you right back where you were in 1998, overpaying for permits to fund other areas of your local government. This lawsuit can help stop that.
We’re now on our second trip up to the Michigan Supreme Court. The first in 2015 overturned a ruling by the Circuit Court it did not have jurisdiction to hear the case because we didn’t file a complaint about the fees with the State Construction Code Commission we couldn’t sue. The Supreme Court unanimously rejected this line of reasoning and sent the case back to the Circuit Court to be heard.
The Circuit Court then ruled the city could overcharge current customers to repay the unproven “deficit” resulting from undercharging previous customers. Which brings us to today and our appeal to the Michigan Supreme Court.
While it pales in comparison to Troy’s $2.3 million and change overcharge “surplus,” not to mention the surpluses now being created by other building departments, the Home Builder Association has spent over a quarter of a million dollars on this lawsuit.
We’re in it to win but we need your help. Please consider making a donation to the HBAM Legal Fund of just 25% of the cost of one permit you pulled in 2017. Both corporate and individual funds can be donated and will be gratefully accepted. All money will be placed in the HBA Michigan Legal Action Fund. Not a penny will go to political uses. l