Michigan Association of Home Builders v. City of Troy
331708
| Mich. Ct. App. | Sep 28, 2017Background
- Plaintiffs (trade associations and contractors) sued City of Troy claiming its building-permit fee practices violated MCL 125.1522(1) and the Headlee Amendment by collecting fees exceeding costs and placing excess into the general fund.
- Troy contracted with SAFEbuilt to perform most building-department functions and paid SAFEbuilt 75–80% of building-fee revenue; the city deposited the remainder into its general fund to cover prior building-department shortfalls.
- Trial court originally dismissed for failure to exhaust administrative remedies; Michigan Supreme Court held exhaustion under MCL 125.1509b was not required and remanded.
- On remand, plaintiffs moved for partial summary disposition and Troy moved for summary disposition; the trial court found Troy complied with MCL 125.1522(1) and the fees did not violate Headlee.
- Plaintiffs appealed; the Court of Appeals reviewed statutory interpretation and constitutional issues de novo and affirmed the trial court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MCL 125.1522(1) prohibits using surplus fees to cover past shortfalls | Statute requires fees be used only for current "operation" of building dept.; cannot be applied to past deficits | "Operation" and "performed" have no temporal limit; surplus used to cover prior operating shortfalls is within statute | Court: No temporal restriction; using surplus to offset past operating shortfalls complies with MCL 125.1522(1) |
| Whether existence of a surplus makes fees per se unreasonable under MCL 125.1522(1) | Surplus shows fees exceed reasonable relation to cost and thus are unlawful | Surplus can reflect overhead, indirect costs, or normal variation; must analyze fee-by-fee; plaintiffs offered no proof fees were systematically excessive | Court: Surplus alone insufficient; plaintiffs failed to show fees lacked reasonable relation to costs |
| Whether depositing surplus into general fund (without separate fund/loan docs) violates MCL 125.1522(1) | Placing fees into general fund and not documenting loans/subsidies violates prohibition on using fees for other purposes | Accounting shows building costs tracked within general fund and excess used to repay prior operating deficits—consistent with statute and Treasury guidance | Court: Permissible; Treasury guidance and municipal accounting practices allow carryover/offset of shortfalls if tied to operation |
| Whether the fees constitute a tax (Headlee) rather than a user fee | Fees raise revenue and compulsorily charge property owners to exercise rights; thus are a disguised tax | Fees are regulatory, proportionate to service, charged only to users, and any revenue used to support the building-department operation; not a tax | Court: Fees are user fees under Bolt factors (regulatory purpose, proportionality, volition); do not violate Headlee |
Key Cases Cited
- Mich Ass’n of Home Builders v. City of Troy, 497 Mich 281 (Mich. 2015) (Supreme Court decision remanding on exhaustion issue)
- Bolt v. City of Lansing, 459 Mich 152 (Mich. 1998) (articulated multi-factor test distinguishing fees from taxes)
- Trahey v. City of Inkster, 311 Mich App 582 (Mich. Ct. App. 2015) (municipal ratemaking and debt repayment can be part of service cost)
- Jackson Co. v. City of Jackson, 302 Mich App 90 (Mich. Ct. App. 2013) (municipality may generate reserves via user fees closely calibrated to service)
- Wheeler v. Charter Twp. of Shelby, 265 Mich App 657 (Mich. Ct. App. 2005) (fee presumptively reasonable; volition considered with other factors)
- USA Cash #1, Inc. v. City of Saginaw, 285 Mich App 262 (Mich. Ct. App. 2009) (revenue generation not preclusive if fee supports regulatory purpose)
- Blackburn v. Mayor of Cadillac, 306 Mich App 512 (Mich. Ct. App. 2014) (statutory and constitutional interpretation principles)
- Paschke v. Retool Indus., 445 Mich 502 (Mich. 1994) (plain-language statutory construction)
- Carson City Hosp. v. Dep’t of Community Health, 253 Mich App 444 (Mich. Ct. App. 2002) (legislative drafting and omission inference)
- Cotton v. Banks, 310 Mich App 104 (Mich. Ct. App. 2015) (de novo review standards for summary disposition)