MICHIGAN ASSOCIATION OF HOME BUILDERS v CITY OF TROY
No. 156737
Michigan Supreme Court
July 11, 2019
504 Mich. 204
Argued on application for leave to appeal March 7, 2019.
Syllabus
This syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader.
The Michigan Association of Home Builders, Associated Builders and Contractors of Michigan, and the Michigan Plumbing and Mechanical Contractors Association filed a three-count complaint in the Oakland Circuit Court seeking declaratory and injunctive relief against the city of Troy, alleging that the building inspection fees generated under defendant’s contract with SAFEbuilt Michigan, Inc., under which SAFEbuilt assumed the duties of defendant’s building department, produced significant monthly surpluses that defendant used to augment its general fund in violation of the Construction Code Act,
In a unanimous opinion by Justice ZAHRA, in lieu of granting leave to appeal, the Supreme Court held:
The use of the revenue generated by defendant’s building inspection fees to pay the building department’s budgetary shortfalls in previous years violated
MCL 125.1522(1) places three restrictions on a municipality’s authority to establish fees under the Construction Code Act: the amount of the fee must be reasonable, the amount of the fee must be reasonably related to the cost of providing the service, and the fees collected must only be used for the operation of the enforcing agency or the construction board of appeals, or both, and may not be used for any other purpose. Defendant’s use of building inspection fees for the purpose of satisfying a historical deficit violated the second restriction inMCL 125.1522(1) because neither “overhead” nor the “cost . . . to the governmental subdivision” encompasses paying a general fund for a historical shortfall. UnlikeMCL 125.1522(2) , which concerns the creation of the state construction code fund,MCL 125.1522(1) does not expressly provide for a surplus. Further, there was evidence that defendant did not intend that the fees charged bear a reasonable relation to the cost of the services performed. While the law does not demand a precise correlation between costs and fees required, it does require a reasonable relation. Because defendant did present some evidence of direct and indirect costs incurred by the building department that may have been related to the services performed and overhead, the case was remanded to establish the amount of these costs.MCL 125.1522(1) does not explicitly provide for a private cause of action that would allow plaintiffs to seek monetary damages, and there was no basis on which to find an implied cause of action. The cases plaintiffs cited to the contrary all predated the enactment of the governmental tort liability act,MCL 691.1401 et seq., which abrogated the common-law claims on which plaintiffs relied and provided cities immunity from tort liability absent express legislative authorization. However, plaintiffs may maintain a cause of action for injunctive relief pursuant to MCR 3.310 or declaratory relief pursuant to MCR 2.605.- Generally, a taxpayer has nо standing to challenge the expenditure of public funds if the threatened injury to him or her is no different than that to taxpayers generally. However, standing to pursue violations of the Headlee Amendment is given to all taxpayers in the state by
Const 1963, art 9, § 32 . Although plaintiffs alleged that their members included residents of and taxpayers in defendant city of Troy, plaintiffs failed to provide any record evidence that plaintiffs or their members paid taxes in the city of Troy and actually paid the fees at issue. Therefore, it could not be determined whether plaintiffs established standing.
Reversed and remanded for further proceedings.
MICHIGAN ASSOCIATION OF HOME BUILDERS, ASSOCIATED BUILDERS AND CONTRACTORS OF MICHIGAN, and MICHIGAN PLUMBING AND MECHANICAL CONTRACTOR ASSOCIATION, Plaintiffs-Appellants, v. CITY OF TROY, Defendant-Appellee.
No. 156737
STATE OF MICHIGAN SUPREME COURT
FILED July 11, 2019
OPINION
BEFORE THE ENTIRE BENCH
The question presented in this case is whether the building inspection fees assessed by defendant, the city of Troy (the City), are “intended to bear a reasonable relation to the cost”1 of acts and services provided by the City’s Building Inspection Department (Building Department) under the Construction Code Act (CCA).2 We hold that the City’s use of the revenue generated by those fees to pay the Building Department’s budgetary shortfalls in
Lastly, we conclude that there is no record evidence establishing that plaintiffs are “taxpayer[s]” with standing to file suit pursuant to the Headlee Amendment.3 On remand, the trial court shall allow plaintiffs’ members an opportunity to establish representational standing on plaintiffs’ behalf. Accordingly, we reverse the Court of Appeals judgment and remand to the trial court for further proceedings not inconsistent with this opinion.
I. BASIC FACTS AND PROCEEDINGS
Since 2003, the Building Department allegedly had been operating with a yearly deficit which, in the aggregate, amounted to $6,707,216 in 2011. In July 2010, the City privatized the Building Department by entering into a contract with SAFEbuilt Michigan, Inc. (SAFEbuilt), under which SAFEbuilt assumed the duties of the Building Department. Under the terms of the contract, SAFEbuilt would receive 80% of the building inspection fees, and the City would retain the remaining 20% of the fees. The contract also provided that if the fees totaled more than $1,000,000 for any fiscal year, then SAFEbuilt would only receive 75% of the fees and the City would retain 25% of the fees. The City has retained over $250,000 in fees every year since 2011, indicating that the fees totaled more than $1,000,000 in each of those years. While the Building Department operated at a $47,354 deficit in 2011, the City retained $269,483 in fees in 2012, $488,922 in 2013, and $325,512 in 2014. Over these three years, the City retained $1,083,917 in fees and, by 2016, the City had retained $2,326,061.
On December 15, 2010, plaintiffs, Michigan Association of Home Builders, Associated Builders and Contractors of Michigan, and Michigan Plumbing and Mechanical Contractors Association, filed a three-count verified complaint against the City. Plaintiffs alleged violations of the CCA and the Headlee Amendment,4 and they sought declaratory and injunctive relief. They claimed that the building inspection fees generated under the City’s contract with SAFEbuilt produced “significant monthly surpluses” that the City used to augment its general fund. Plaintiffs alleged that this practice violates
Following discovery, plaintiffs moved for summary disposition under MCR 2.116(C)(10), and the City sought summary disposition under MCR 2.116(I)(2). After conducting a hearing, the trial court granted summary disposition to the City, ruling that the court did not have jurisdiction over plaintiffs’ lawsuit because plaintiffs had failed to exhaust their administrative remedies under
On remand, the trial court allowed additional discovery. The parties then filed cross-motions for summary disposition. The court granted the City’s motion. The court determined as a matter of law that the City’s practice of depositing the fees it had retained into the general fund does not violate
Plaintiffs appealed. The Court of Appeals agreed with the trial court and affirmed its decision in an unpublished opinion.9
Plaintiffs again applied for leave to appeal in this Court. We directed the Clerk of this Court to schedule oral argument on whether to grant the application or take other action, and we ordered the parties to file supplemental briefing on the following issues:
(1) whether the creation of a fee surplus generated by an enforcing agency under the Construction Code Act (CCA),
MCL 125.1501 et seq., and the use of that surplus to pay for shortfalls in previous years by transfer of the surplus into the city’s general fund, violates the constraints of § 22 that fees be reasonable, be intended to bear a reasonable relation to the cost of acts and services provided by the enforcing agency, and be used only for the operation of the enforcing agency or the construction board of appeals, or both; (2) if so, whether appellants have a private cause of action against a governmental subdivision for enforcement of the CCA,MCL 125.1508b(1) ; (3) whether appellants are “taxpayers” that have standing to file suit pursuant to the Headlee Amendment,Const 1963, art 9, § 32 ; and (4) if so, whether the challenged fees violatethe Headlee Amendment, Const 1963, art 9, § 31 .10
II. STANDARD OF REVIEW AND APPLICABLE RULES OF STATUTORY INTERPRETATION AND CONSTITUTIONAL INTERPRETATION
This Court reviews de novo a trial court’s decision on a motion for summary disposition.11 The parties brought their respective summary disposition motions under MCR 2.116(C)(10), which tests the factual sufficiency of a claim.12 “In reviewing a motion for summary disposition brought under MCR 2.116(C)(10), a trial court considers affidavits, pleadings, depositions, admissions, and documentary evidence filed in the action or submitted by the partiеs, MCR 2.116(G)(5), in the light most favorable to the party opposing the motion.”13 If, “[e]xcept as to the amount of damages, there is no genuine issue as to any material fact, . . . the moving party is entitled to judgment or partial judgment as a matter of law,”14 and the trial court must grant the motion without delay.15 Whether a party has standing is a question of law that is reviewed de novo.16
This Court also reviews de novo questions of statutory interpretation.17 “The role of this Court in interpreting statutory language is to ‘ascertain the legislative intent that may reasonably be inferred from the words in a statute.’ ”18 “The focus of our analysis must be the statute’s express language, which offers the most reliable evidence of the Legislature’s intent.”19 ” ‘[W]here the statutory language is clear and unambiguous, the statute must be applied as written.’ ”20 ” ‘[A] court may read nothing into an unambiguous statute that is not within the manifest intent of the Legislature as derived from the words of the statute itself.’ ”21 Neither will this Court “rewrite the plain statutory language and substitute our own policy decisions for those already made by the Legislature.”22
“A primary rule in interpreting a constitutional provision such as the Headlee Amendment is the rule of ‘common understanding[.]’ ”23 As this Court has explained:
A constitution is made for the people and by the people. The interpretation
that should be given it is that which reasonable minds, the great mass of people themselves, would give it. “For as the Constitution does not derive its force from the convention which framed, but from the people who ratified it, the intent to be arrived at is that of the people, and it is not to be supposed that they have looked for any dark or abstruse meaning in the words employed, but rather that they have accepted them in the sense most obvious to the common understanding, and ratified the instrument in the belief that that was the sense designed to be conveyed.”24
III. ANALYSIS
A. THE CITY’S FEES VIOLATE MCL 125.1522(1)
The legislative body of a governmental subdivision shall establish reasonable fees to be charged by the governmental subdivision for acts and services performed by the enforcing agency or construction board of appeals under this act, which fees shall be intended to bear a reasonable relation to the cost, including overhead, to the governmental subdivision of the acts and services, including, without limitation, those services and acts as, in case of an enforcing agency, issuance of building permits, examination of plans and specifications, inspection of construction undertaken pursuant to a building permit, and the issuance of certificates of use and occupancy, and, in case of a board of appeals, hearing appeals in accordance with this act. The enforcing agency shall collect the fees established under this subsеction. The legislative body of a governmental subdivision shall only use fees generated under this section for the operation of the enforcing agency or the construction board of appeals, or both, and shall not use the fees for any other purpose.
In interpreting this provision, the Court of Appeals majority wrote:
[T]he first sentence of
MCL 125.1522(1) provides for the establishment of fees “for acts and services performed . . . .” Our reading of the statutory language confirms that use of the term “performed” can be understood to mean future, current, and past services provided. We reach this conclusion where there is no restricting or limiting language preceding the word “performed” indicating a temporal constraint, such as “currently performed,” “to be performed,” or “previously performed.” Moreover, the final sentence ofMCL 125.1522(1) , indicating “[t]he legislativе body . . . shall only use fees generated under this section for the operation of the enforcing agency . . .” likewise fails to suggest a temporal restriction pertaining to the word “operation.” Thus, we agree with [the City] that “the operation” of [its] Building Department can denote a current, past, or future action. Although the final sentence ofMCL 125.1522(1) does restrict the use of “fees generated” to “the operation of the enforcing agency . . . and . . . not . . . for any other purpose[,]” we are not persuaded that [the City]’s action in applying surplus fees to past shortfalls is inconsistent with this language. Put another way, if the excess or surplus fees are used to cover expenses or costs incurred with the running or “operation” of the building department, currently orfor past shortfalls incurred, [the City’s] conduct remains in conformance with MCL 125.1522(1) .25
The Court of Appeаls majority acknowledged that “by indicating that the ‘reasonable fees’ are ‘to bear a reasonable relation to the cost, including overhead, . . . of the acts and services[ ]’ to be provided, there exists an implication that the fees should cover the cost of the services received in exchange for the fee being paid.”26 The Court of Appeals explained that “the existence of a surplus does not automatically result in a determination that the fees charged are unreasonable and, therefore, do not satisfy the dictates of
Judge JANSEN dissented, disagreeing with the majority’s interpretation of
The statute does not allow [the City] to charge current payers and permit applicants more than what is reasonable in order to make up for losses it chose to incur by failing to charge previous permit applicants appropriately under the statute. To hold that under
MCL 125.1522(1) , a city may engage in such creative budgeting would create a poor precedent. Under the majority’s interpretation of the statute, a city might permissibly choose to create a shortfall in any given year and unfairly charge unreasonable rates in subsequent years, completely defeating the goal of ensuring that each individual fee-payer pays for the acts and services he or she is provided.30
The parties agree that
We conclude that the City’s use of building inspection fees for the purpose of satisfying a historical deficit violates the second restriction in
Further, this reading is consistent with the notable differences between
But
In stark contrast to plaintiffs’ argument, the City maintains that “the fact [that] the legislature included specific duties in [
There is evidence that the City did not intend that the fees charged bear a reasonable relation to the cost of the services performed. Under the contract, the City retains at least 20% of the revenue from the building fees but allegedly retains only 8% of that amount to absorb the Building Department’s indirect costs.37 According to Thomas Darling, the City’s interim director of financial and administrative services, the City’s indirect costs include the salary of and the costs associated with the employment of one city employee, “the building code official.” Even assuming the City’s indirect costs amount to 8% of its revenue from its building fees, the City fails to accоunt for the remaining 12% of the inspection-fee revenue it retains. More problematic yet is that the contract allows the City to retain an additional 5% of the fees when more than $1 million in fees is collected in a fiscal year. This provision is vexing for two reasons. First, the City has collected $1 million in fees in every year but one following the inception of the contract and has offered no explanation of any additional costs to justify the 5% increase. Second, there is simply no explanation as to how this contractual provision can be squared with the statutory requirement that fees be reasonably related to the cost of the service. The increase is attributable only to the amount of fees collected in any given year and is completely unrelated to the cost of the services.
Even the Court of Appeals majоrity acknowledged that “[i]f the fees for a particular service consistently generate revenue exceeding the costs for the service, the reasonableness of the fee for that service would be suspect.”38 The majority, however, opined that “this has not been demonstrated.”39 We disagree. Rather, we agree with Judge JANSEN that
[the City] used its building department fees to raise $269,483 in surplus funds in 2012, $488,922 in 2013, and $325,512 in 2014, for a total of $1,083,917 deposited directly into [the City]’s general fund over the course of only three years. This “surplus” is not negligible. Common sense indicates that it is not incidental.40
With that said, we also recognize that the City has presented some evidence of direct and indirect costs that may be related to the services performed and overhead.41 Thomas Darling identified in detail
Walsh College and graduate students performed the study for the City a number of years ago, and they came up with a—normal, I would say, for cities is around 10 percent for direct and over administrative costs, and they came up with a figure of 8 percent as a number, and that’s what we’ve been using since it was done by an outside firm and outside agency.
We conclude that the City is entirely justified in retaining revenue to cover the direct and indirect costs of the services it provides.
Lastly, we agree with the City that “the State statute vests discretion with the City Council, and there is no mandate to set fees that exactly match the expenditures, especially since the fee setting process can only be a best estimate of what the future revenue and expenses will be in the coming year.” Indeed, “[t]he law does not demand a precise correlation between costs and fees required, but, rather, a reasonable relation.”42 More importantly,
B. PRIVATE CAUSE OF ACTION TO REDRESS A VIOLATION OF MCL 125.1522(1)
Having concluded thаt defendant’s use of the fees generated violates
Where a statute imposes on any person a specific duty for the protection or benefit of others, but a civil remedy for securing the beneficial right given is not specified, the common law provides a remedy, and if the neglect or refusal to perform the duty results in injury or detriment to another, that person has a cause of action, if the injury or detriment is of the kind that the statute was intended to prevent. On the other hand, even though an alleged violation of a statute constitutes a tort, a private cause of action does not exist where the statute provides a comprehensive, exclusive scheme of enforcement of the rights and duties it creates.43
Plaintiffs do not possess, nor do they claim to possess, an express private cause of action to enforce
Further, because the City is a “public employer,” which expressly includes cities under
Even though a statutory private cause of action for monetary damages does not exist, a plaintiff may nonetheless maintain a cause of action for declaratory and equitable relief. In Lash v Traverse City, this Court rejected the plaintiff’s claim that a private cause of action for monetary damages was the only mechanism by which the relevant statute could be enforced, noting that plaintiff could enforce the statute by seeking injunctive relief pursuant to MCR 3.310 or declaratory relief pursuant to MCR 2.605(A)(1).51 Here, as in Lash, plaintiffs could enforce the statute by seeking injunctive or declaratory relief. A preliminary injunction may be granted under MCR 3.310(A) if a plaintiff “can make a particularized showing of irreparable harm that will occur before the merits of the claim are considered.”52 Further, an “actual controversy” exists for the purposes of a declaratory judgment where a plaintiff pleads and proves facts demonstrating an adverse interest necessitating a judgment to preserve the plaintiff’s legal rights. In this case, plaintiffs’ claim is that the City’s building inspection fees, which affect plaintiffs’ economic interests,53 were assessed in violation of
Traditionally, a private citizen has no standing to vindicate a public wrong or enforce a public right if he or she has not been injured in a manner that is different from the public at large.54 Therefore, under general standing principles, a taxpayer has no standing to challenge the expenditure of public funds if the threatened injury to him or her is no different than that to taxpayers generally.55 Standing to pursue violations of the Headlee Amendment is given to all taxpayers in the state.
Any taxpayer of the state shall have standing to bring suit in the Michigan State Court of Appeals to enforce the provisions of Sections 25 through 31, inclusive, of this Article and, if the suit is sustained, shall receive from the applicable unit of government his costs incurred in maintaining such suit.
As stated by this Court:
[I]n enacting [the Headlee] amendment the voters “were . . . concerned with ensuring control of local funding and taxation by the people most affected, the local taxpayers. The Headlee Amendment is the voters’ effort to link funding, taxes, and control.” Specifically relevant to the case at bar, we held that § 32 is an explicit grant of standing to taxpayers to bring suits under the Headlee Amendment.56
According to plaintiffs’ complaint, plaintiffs are nonprofit organizations incorporated in the city of Lansing and “represent and count among their members numerous home builders, contractors, subcontractors, construction companies, construction laborers, suрpliers, building tradespeople, and supporting businesses such as attorneys, accountants, architects, banks and insurance professionals, that conduct business in, obtain permits from, seek building plan review in, request inspections by, and seek building and construction-related authorizations (such as plan approval, interim and final inspections and occupancy permits) from Defendant and its Building Department.” Plaintiffs allege that their “members also include taxpayers in this State, and residents of and taxpayers residing and doing business in the City of Troy.”
In plaintiffs’ previous appeal in this Court, the issue of standing was broached at oral argument.57 Although some assurance
IV. CONCLUSION
We reverse the lower courts’ decisions and hold that the use of the revenue generated by the City’s building inspection fees to pay the Building Dеpartment’s budgetary shortfalls in previous years violates
Brian K. Zahra
Bridget M. McCormack
Stephen J. Markman
David F. Viviano
Richard H. Bernstein
Elizabeth T. Clement
Megan K. Cavanagh
Notes
A governmental subdivision may by ordinance assume responsibility for administration and enforcement of this act within its political boundary. A county ordinance adopted pursuant to this act shall be adopted by the county board of commissioners and shall be signed by the chairperson of the county board of commissioners and certified by the county clerk.Troy Ordinances, Chapter 79, § 8.1, states, in relevant part, as follows:
Pursuant to the provisions of Section 3(k) of Act 270 of 1909, State of Michigan, as amended, Michigan Complied [sic] Laws 117.3(k) and Section 8a of Act 230 of 1972, State of Michigan, as amended, Michigan Complied [sic] Laws 125.1508a, the State of Michigan Building Code is hereby adopted by reference by the City of Troy for the purpose of regulating the erection, construction, alteration, addition, repair, removal, demolition, use, location, occupancy and maintenance of all buildings and structures, and shall apply to existing or proposed buildings and structures in the City of Troy.Here, the City expressly assumed responsibility for administration and enforcement of the CCA by enacting an ordinance. Since the City assumed this responsibility, the Director may no longer enforce
Chief Justice YOUNG: Could I ask a simple question?
Mr. McClelland: Certainly. I do best with those.
Chief Justice YOUNG: I’ll try and ask a simple one. Do your—I’ve not had a lot of building events in my life, I’ve had a couple—as I—as I recall, although the contractors pull the permits and pay the fees initially, I paid them as the owner, is that how this works?
Mr. McClelland: That’s the way it should work.
Chief Justice YOUNG: So in what sense are your clients taxpayers in this case?
Mr. McClelland: We paid the fees your honor and sometimes we get paid and sometimes we don’t. I don’t know that that’s an issue that’s currently before the Court, but—
Chief Justice YOUNG: Well, it’s a standing question.
Mr. McClelland: Certainly. Certainly.
Chief Justice YOUNG: And it just occurs to me that people who are the pass through may not be the person to have standing.
Mr. McClelland: Well, I will tell the Court that’s not a simple question.
Chief Justice YOUNG: Okay, I thought it might be.
Mr. McClelland: But I think as a matter of law they paid the fees and the fact that they do or do not receive reimbursement wouldn’t eliminate their standing since they’re required to pay the fees.
Chief Justice YOUNG: Okay.
Justice ZAHRA: When you pull the permit, is the permit in the name of the builder or is the permit in the name of the . . . homeowner?
Mr. McClelland: Typically it’s the name of the builder.
Justice ZAHRA: Okay.
Mr. McClelland: There are—
Justice ZAHRA: That’s a simple answer I think.
Mr. McClelland: Yeah. There are a few owners out there that want to take that responsibility among themselves, but it’s not general practice your honor.