Title: Michigan Association of Home Builders v. City of Troy (Opinion on Application)

State: michigan

Issuer: Michigan Supreme Court

Document:

MICHIGAN ASSOCIATION OF HOME BUILDERS v CITY OF TROY 
 
Docket No. 156737.  Argued on application for leave to appeal March 7, 2019.  Decided 
July 11, 2019. 
 
 
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, MCL 125.1501 et seq., and the Headlee 
Amendment, Const 1963, art 9, §§ 25 through 34.  Specifically, plaintiffs alleged that this practice 
violated MCL 125.1522(1), which requires that fees be reasonable, intended to bear a reasonable 
relation to the cost of building department services, and used only for the operation of the building 
department.  Following discovery, plaintiffs moved for summary disposition under MCR 
2.116(C)(10), and defendant sought summary disposition under MCR 2.116(I)(2).  After a hearing, 
the trial court, Shalina D. Kumar, J., granted summary disposition to defendant, ruling that the 
court did not have jurisdiction over plaintiffs’ lawsuit because plaintiffs had failed to exhaust their 
administrative remedies under MCL 125.1509b.  The Court of Appeals, JANSEN, P.J., and OWENS 
and SHAPIRO, JJ., agreed and affirmed in an unpublished per curiam opinion issued March 13, 
2014 (Docket No. 313688).  Plaintiffs were granted leave to appeal in the Supreme Court, which 
reversed the lower courts’ decisions, held that the administrative procedure referred to in MCL 
125.1509b did not apply, and remanded the case to the trial court for further proceedings.  497 
Mich 281 (2015).  On remand, after additional discovery, the parties filed cross-motions for 
summary disposition.  The court granted defendant’s motion, ruling that defendant’s practice of 
depositing the fees it had retained into the general fund did not violate MCL 125.1522(1) because 
that money repaid loans from the general fund that were used to operate the building department 
in times of shortfalls.  Plaintiffs appealed.  The Court of Appeals, O’BRIEN, P.J., and MURRAY, J. 
(JANSEN, J., dissenting), agreed with the trial court and affirmed its decision in an unpublished per 
curiam opinion issued September 28, 2017 (Docket No. 331708).  Plaintiffs again applied for leave 
to appeal in the Supreme Court, which ordered and heard oral argument on whether to grant the 
application or take other action.  502 Mich 878 (2019). 
 
 
In a unanimous opinion by Justice ZAHRA, in lieu of granting leave to appeal, the Supreme 
Court held: 
 
Michigan Supreme Court 
Lansing, Michigan 
Syllabus 
 
Chief Justice: 
Bridget M. McCormack 
Chief Justice Pro Tem: 
David F. Viviano 
 
 
 
Justices: 
Stephen J. Markman 
Brian K. Zahra 
Richard H. Bernstein 
Elizabeth T. Clement 
Megan K. Cavanagh 
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. 
Reporter of Decisions: 
Kathryn L. Loomis 
 
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) because 
it was not reasonably related to the cost of acts and services provided by the building department.  
However, because defendant presented evidence to justify the retention of a portion of these fees, 
the case was remanded for further proceedings.  On remand, plaintiffs may attempt to establish 
representational standing to maintain a claim under the Headlee Amendment. 
 
 
1.  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 in MCL 125.1522(1) 
because neither “overhead” nor the “cost . . . to the governmental subdivision” encompasses 
paying a general fund for a historical shortfall.  Unlike MCL 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. 
 
 
2.  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. 
 
 
3.  Generally, 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.  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. 
 
 
 
 
 
©2019 State of Michigan 
 
 
 
 
 
 
 
 
FILED  July 11, 2019 
 
 
 
S T A T E  O F  M I C H I G A N 
 
SUPREME COURT 
 
 
MICHIGAN ASSOCIATION OF HOME 
BUILDERS, ASSOCIATED BUILDERS 
AND CONTRACTORS OF MICHIGAN, 
and MICHIGAN PLUMBING AND 
MECHANICAL CONTRACTOR 
ASSOCIATION, 
 
 
Plaintiffs-Appellants, 
 
 
v 
No. 156737 
 
CITY OF TROY, 
 
 
 
Defendant-Appellee. 
 
 
 
BEFORE THE ENTIRE BENCH       
 
ZAHRA, J. 
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 
 
Michigan Supreme Court 
Lansing, Michigan 
OPINION 
 
Chief Justice: 
Bridget M. McCormack  
 
Chief Justice Pro Tem: 
David F. Viviano 
 
 
Justices: 
Stephen J. Markman 
Brian K. Zahra 
Richard H. Bernstein 
Elizabeth T. Clement 
Megan K. Cavanagh 
 
 
 
 
 
2 
 
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 previous years violates MCL 125.1522(1).  While fees imposed to satisfy the 
alleged historical deficit may arguably be for “the operation of the enforcing agency or the 
construction board of appeals,” this does not mean that such fees “bear a reasonable 
relation” to the costs of acts and services provided by the Building Department.  Here, 
plaintiffs have presented sufficient evidence to conclude that the City established fees that 
were not intended to “bear a reasonable relation” to the costs of acts and services necessary 
to justify the City’s retention of 25% of all the fees collected.  We further conclude that 
there is no express or implied monetary remedy for a violation of MCL 125.1522(1).  
Nonetheless, we conclude that plaintiffs may seek declaratory and injunctive relief to 
redress present and future violations of MCL 125.1522(1).  Because the City has presented 
evidence to justify the retention of a portion of these fees, we remand to the trial court for 
further proceedings.  
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 
                                              
1 MCL 125.1522(1).   
2 MCL 125.1501 et seq. 
3 The Headlee Amendment added §§ 25 through 34 to Article 9 of the Michigan 
Constitution.  The provision relating to standing is found in § 32. 
 
 
 
3 
 
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 
                                              
4 Const 1963, art 9, § 31. 
 
 
 
4 
 
City’s contract with SAFEbuilt produced “significant monthly surpluses” that the City used 
to augment its general fund.  Plaintiffs alleged that this practice violates MCL 125.1522(1), 
which requires that fees (1) be reasonable, (2) “be intended to bear a reasonable relation to 
the cost” of Building Department services, and (3) be used only for operation of the 
Building Department.  They also claimed that the City’s fee practice is unconstitutional 
under the Headlee Amendment, which prohibits taxation by local units of government 
without voter approval.   
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 MCL 125.1509b before filing their complaint.  
The Court of Appeals agreed and affirmed.5  Plaintiffs applied for leave to appeal in this 
Court, and we ordered and heard oral argument on whether to grant plaintiffs’ application 
or take other preemptory action.6  In a memorandum opinion, we reversed the lower courts’ 
decisions and held that the administrative procedure referred to in MCL 125.1509b did not 
apply.7  We remanded to the trial court for further proceedings.8 
                                              
5 Mich Ass’n of Home Builders v City of Troy, unpublished per curiam opinion of the Court 
of Appeals, issued March 13, 2014 (Docket No. 313688).   
6 Mich Ass’n of Home Builders v City of Troy, 497 Mich 862 (2014).   
7 Mich Ass’n of Home Builders v City of Troy, 497 Mich 281, 288; 871 NW2d 1 (2015).  
8 Id. at 283. 
 
 
 
5 
 
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 MCL 125.1522(1) because that money repaid loans 
from the general fund that were used to operate the Building Department in times of 
shortfalls. 
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 violate the Headlee Amendment, Const 1963, art 9, § 31.[10] 
                                              
9 Mich Ass’n of Home Builders v City of Troy (After Remand), unpublished per curiam 
opinion of the Court of Appeals, issued September 28, 2017 (Docket No. 331708). 
10 Mich Ass’n of Home Builders v City of Troy, 502 Mich 878 (2019). 
 
 
 
6 
 
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 parties, 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 
                                              
11 Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d 817 (1999). 
12 Smith v Globe Life Ins Co, 460 Mich 446, 454; 597 NW2d 28 (1999). 
13 Quinto v Cross & Peters Co, 451 Mich 358, 362; 547 NW2d 314 (1996). 
14 MCR 2.116(C)(10). 
15 MCR 2.116(I)(1). 
16 Lee v Macomb Co Bd of Comm’rs, 464 Mich 726, 734; 629 NW2d 900 (2001), overruled 
on other grounds by Lansing Sch Ed Ass’n v Lansing Bd of Ed, 487 Mich 349 (2010).   
17 Badeen v PAR, Inc, 496 Mich 75, 81; 853 NW2d 303 (2014).   
 
 
 
7 
 
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] 
                                              
18 Hannay v Dep’t of Transp, 497 Mich 45, 57; 860 NW2d 67 (2014) (citation omitted). 
19 Badeen, 496 Mich at 81.  
20 McQueer v Perfect Fence Co, 502 Mich 276, 286; 917 NW2d 584 (2018) (citation 
omitted). 
21 Id., quoting Roberts v Mecosta Co Gen Hosp, 466 Mich 57, 63; 642 NW2d 663 (2002). 
22 DiBenedetto v West Shore Hosp, 461 Mich 394, 405; 605 NW2d 300 (2000).   
23 Bolt v City of Lansing, 459 Mich 152, 160; 587 NW2d 264 (1998). 
24 Traverse City Sch Dist v Attorney General, 384 Mich 390, 405; 185 NW2d 9 (1971), 
quoting Cooley, Constitutional Limitations (4th ed), p 81 (quotation marks and citation 
omitted). 
 
 
 
8 
 
III.  ANALYSIS 
A.  THE CITY’S FEES VIOLATE MCL 125.1522(1) 
MCL 125.1522(1) provides: 
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 subsection.  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 
of MCL 125.1522(1), indicating “[t]he legislative 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 of MCL 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, 
 
 
 
9 
 
currently or for past shortfalls incurred, [the City’s] conduct remains in 
conformance with MCL 125.1522(1).[25] 
The Court of Appeals 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 MCL 125.1522(1).”27  The Court of Appeals also 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.”28  The Court of 
Appeals majority opined, however, that this “has not been demonstrated.”29 
Judge JANSEN dissented, disagreeing with the majority’s interpretation of MCL 
125.1522(1).  In her view: 
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 
                                              
25 Mich Ass’n of Home Builders (After Remand), unpub op at 4. 
26 Id. at 5.   
27 Id. 
28 Id. 
29 Id.  
 
 
 
10 
 
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 MCL 125.1522(1) places three restrictions on a municipality’s 
authority to establish fees under the CCA.  One—the amount of the fee “shall” be 
reasonable.  Two—the amount of the fee “shall” be reasonably related to the cost of 
providing the service.  And three—the fees collected “shall” only be used for the operation 
of the enforcing agency or the construction board of appeals, or both, and “shall” not be 
used for any other purpose. 
We conclude that the City’s use of building inspection fees for the purpose of 
satisfying a historical deficit violates the second restriction in MCL 125.1522(1).  MCL 
125.1522(1) expressly ties fees to the “cost, including overhead, to the governmental 
subdivision of the acts and services . . . .”  It is the third restriction that requires the fees 
generated to be used for “the operation of the enforcing agency or the construction board 
of appeals.”  We view “the cost . . . to the governmental subdivision” as only a component 
of “the operation of the enforcing agency or the construction board of appeals.”31  So too 
is the Building Department’s “overhead,” which relates to “the general cost of running a 
business” or more specifically “the general, fixed costs of running a business as rent, 
                                              
30 Id. (JANSEN, J., dissenting) at 3. 
31 Further, the third restriction in MCL 125.1522(1) has nothing to do with the 
reasonableness of fees charged.  Indeed, that restriction refers to “fees generated,” which 
the municipality may only use “for the operation of the enforcing agency or the 
construction board of appeals, or both . . . .”  The third restriction is a limitation on the 
municipality’s use of fees generated under the CCA.   
 
 
 
11 
 
lighting, and heating expenses, that cannot be charged to a specific product,”32 a component 
of “the operation of the enforcing agency or the construction board of appeals.”  Neither 
“overhead” nor the “cost . . . to the governmental subdivision” encompasses paying a 
general fund for a historical shortfall.  While payments made to restore the historical deficit 
may arguably be for “the operation of the enforcing agency or the construction board of 
appeals,” this does not mean those fees are related to the costs to the governmental 
subdivision. 
Further, this reading is consistent with the notable differences between MCL 
125.1522(1) and MCL 125.1522(2).  Under the CCA, the director of the Department of 
Licensing and Regulatory Affairs (the Department) is initially vested with powers to 
enforce the CCA.  Municipal governments, such as the City, may assume responsibility for 
enforcement of the CAA.  MCL 125.1522(2) concerns the creation of the state construction 
code fund (the Fund) that allows the Department, with oversight by the Construction Code 
Commission (the Commission) and following a public hearing, to establish fees to be 
charged for acts and services performed by the Commission.33  The state treasurer is made 
custodian of the Fund and “may invest the surplus of the fund in investments as in the state 
treasurer’s judgment are in the best interest of the fund.”34  Earnings from those 
investments are credited to the Fund.   
                                              
32 Random House Webster’s College Dictionary (1997). 
33 MCL 125.1522(2).   
34 Id. 
 
 
 
12 
 
MCL 125.1522(1) requires that a municipality “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 . . . .”  Similarly, MCL 125.1522(2) 
requires that the Commission “shall establish reasonable fees to be charged by the 
commission for acts and services performed by the commission . . . .”  Further, MCL 
125.1522(1) and MCL 125.1522(2) both require that the “fees shall be intended to bear a 
reasonable relation to the cost, including overhead.”   
But MCL 125.1522(2) contains a provision that MCL 125.1522(1) does not.  MCL 
125.1522(2) states that “[t]he state treasurer shall be the custodian of the fund and may 
invest the surplus of the fund in investments as in the state treasurer’s judgment are in the 
best interest of the fund.”  MCL 125.1522(1) has no such “surplus” provision, but instead 
contains an express limitation on the use of funds—“for the operation of the enforcing 
agency or the construction board of appeals” and not “for any other purpose.”35  In 
plaintiffs’ view, the expression of a permissible “surplus” in MCL 125.1522(2) implies the 
exclusion of a permissible “surplus” in MCL 125.1522(1).   
In stark contrast to plaintiffs’ argument, the City maintains that “the fact [that] the 
legislature included specific duties in [MCL 125.1522(2)] that were not included in [MCL 
125.1522(1)] reveals . . . that the legislative intent was to provide local units of government 
broad discretion in deciding what constitutes ‘operation of the enforcing agency’ when 
establishing fees and how any fee surplus may be applied.”  Again, while payments made 
to restore the historical deficit may arguably be for “the operation of the enforcing agency 
                                              
35 MCL 125.1522(1). 
 
 
 
13 
 
or the construction board of appeals,” this does not mean those payments are related to the 
costs for building inspection services performed or overhead.  Further, the City’s discretion 
under MCL 125.1522(1) is not unfettered; it is subject to a reasonableness component that 
ensures payments are related to the costs for building inspection services performed or 
overhead, not the overall operation of the Building Department.  Accordingly, we agree 
with plaintiffs that MCL 125.1522(1) does not envision a “surplus” baked consistently into 
the fees.36   
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 account 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 
                                              
36 As later explained, exactitude is not required and occasional and incidental surplus would 
not run afoul of MCL 125.1522(1).   
37 As we address in more detail later, according to the City, it uses an 8% estimate, which 
is derived from a study, for indirect costs. 
 
 
 
14 
 
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 majority 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 
                                              
38 Mich Ass’n of Home Builders (After Remand) (opinion of the Court), unpub op at 5. 
39 Id. 
40 Id. (JANSEN, J., dissenting) at 2. 
41 We cannot reconcile the City’s claim that its retained fees are used to pay the Building 
Department’s historical deficit with the City’s claim that its retained fees are used to absorb 
the direct and indirect costs of the Building Department.  These claims are, in part, mutually 
exclusive as the City can either use the funds to pay its deficit or to pay direct and indirect 
costs of the Building Department.  The only potential for reconciling the two claims is if 
the City first pays direct and indirect costs of the Building Department and then uses the 
remaining funds to reduce its deficit.  But the City has not taken this position, and thus, we 
 
 
 
15 
 
Darling identified in detail the listing of expenses associated with the Building Department.  
Further, John Lamerato, the City’s former assistant manager for finance and 
administration, testified that the City incurs additional expenses for operation of the 
Building Department that exceed those attributable to SAFEbuilt that are “offset with the 
revenue” generated.  In the City’s answer to the application, it notes that “[t]here are also 
indirect costs to enforce the CCA, and MCL 125.1522 expressly allows for the inclusion 
of these costs in the required accounting and reporting.”  The City acknowledged that it 
“did not and does not have financial software that can separately record each of these 
indirect costs of CCA enforcement, and the act of individually tracking each such 
expenditure on a spreadsheet would require a significant amount of manual inputting.”  So 
“the City employed a conservative 8% overhead allocation to use as the indirect cost of 
enforcement of the CCA, which is a practice that is routinely used in construction 
contracts.”  Lamerato explained the City’s practice in his deposition as follows: 
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.  MCL 125.1522(1) expressly allows the City 
to establish fees that cover overhead, i.e., indirect costs.  But, because there is conflicting 
                                              
consider these two claims as alternative theories to justify the reasonableness of its fees 
charged.   
 
 
 
16 
 
evidence in regard to the amount of indirect costs incurred by the Building Department, we 
remand to the trial court for further proceedings.   
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, MCL 125.1522(1) requires only that the “fees shall be intended to bear a 
reasonable relation to the cost, including overhead.”  Exactitude is not required.  In sum, 
we agree with plaintiffs that the City cannot establish fees that result in surpluses to pay 
the historical deficits of its Building Department, but we remand to the trial court for further 
findings in regard to the amount of direct and indirect costs incurred by the Building 
Department for the services it has performed. 
B.  PRIVATE CAUSE OF ACTION TO REDRESS A VIOLATION OF  
MCL 125.1522(1) 
Having concluded that defendant’s use of the fees generated violates MCL 
125.1522(1), we next address whether plaintiffs may maintain a statutory cause of action 
to redress this violation.  As explained in Michigan Pleading & Practice:  
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 
                                              
42 Merrelli v City of St Clair Shores, 355 Mich 575, 588; 96 NW2d 144 (1959).   
 
 
 
17 
 
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 MCL 125.1522(1), which would allow them to seek monetary damages, 
because the statute does not explicitly provide for a private cause of action.44  Plaintiffs 
                                              
43 Michigan Pleading & Practice (2d ed), § 6.12, pp 452-453.  
44 The City first argues that only the Director may enforce MCL 125.1522(1).  The City 
states that “MCL 125.1508b(1) contains the only provision regarding enforcement of the 
statute.”  That provision states, in part, “Except as otherwise provided in this section, the 
director is responsible for administration and enforcement of this act and the code.”  
According to the City, “this statutory provision vests only the Director of the 
[Department of] Licensing and Regulatory Affairs with enforcement powers.”  But the City 
fails to consider the remainder of that provision: 
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 MCL 125.1522(1).  We acknowledge that the CCA does 
 
 
 
18 
 
instead argue that a cause of action should be inferred, because MCL 125.1522(1) merely 
codifies a common-law claim and remedy under Michigan law for unreasonable fees, fees 
that are not reasonably related to the cost of service, and fees that are not spent for the 
regulatory purpose claimed.  In support, plaintiffs cite Detroit Retail Druggists’ Ass’n v 
Detroit,45 Fletcher Oil Co v Bay City,46 and Vernor v Secretary of State.47  Plaintiffs 
conclude that because MCL 125.1522(1) does not create “a right or duty not found at 
common law,” a statutory cause of action may be implied.  We disagree.  Plaintiffs fail to 
appreciate that cases on which they rely all predate the enactment of the governmental tort 
liability act (GTLA),48 which was passed in 1964 and abrogated those common-law claims.   
Further, because the City is a “public employer,” which expressly includes cities 
under MCL 15.601(a), the City enjoys immunity from tort liability under the GTLA.49  That 
is, “without ‘express legislative authorization,’ a cause of action cannot be created ‘in 
                                              
provide that the Director “may conduct a performance evaluation of an enforcing agency 
to assure that the administration and enforcement of this act and the code is being done 
pursuant to either section 8a or 8b.”  MCL 125.1509b.  But the City’s establishment of fees 
under the CCA is not “done pursuant to either section 8a or 8b” but, rather, MCL 125.1522.  
While the Director may review the building inspection services that the City performs, 
there is no statutory basis for the Department to review the City’s fees for reasonableness.  
Thus, the City’s argument that only the Director is empowered to enforce MCL 125.1522 
lacks merit. 
45 Detroit Retail Druggists’ Ass’n v Detroit, 267 Mich 405; 255 NW 217 (1934). 
46 Fletcher Oil Co v Bay City, 247 Mich 572; 266 NW 248 (1929). 
47 Vernor v Secretary of State, 179 Mich 157; 146 NW 338 (1914). 
48 MCL 691.1401 et seq. 
49 Lash v Traverse City, 479 Mich 180, 194-195; 735 NW2d 628 (2007). 
 
 
 
19 
 
contravention of the broad scope of governmental immunity . . . .’ ”50  And here, not only 
is there no express legislative authorization, but there is simply no indication that the 
Legislature intended a monetary remedy for a violation of MCL 125.1522(1).  Thus, we 
conclude that plaintiffs cannot maintain an express or implied tort action under MCL 
125.1522(1). 
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’ 
                                              
50 Id. at 194 (citation omitted). 
51 Lash, 479 Mich at 196.   
52 Lash, 479 Mich at 196.  MCR 2.605(A)(1) provides the following remedy: “In a case of 
actual controversy within its jurisdiction, a Michigan court of record may declare the rights 
and other legal relations of an interested party seeking a declaratory judgment, whether or 
not other relief is or could be sought or granted.” 
 
 
 
20 
 
claim is that the City’s building inspection fees, which affect plaintiffs’ economic 
interests,53 were assessed in violation of MCL 125.1522(1).  Such a claim would constitute 
an “actual controversy” for the purposes of an action for a declaratory judgment.  
Therefore, although plaintiffs do not possess a private cause of action for monetary 
damages, they may maintain their cause of action for declaratory and equitable relief. 
C.  HEADLEE AMENDMENT 
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.  Const 1963, art 9, § 32 provides: 
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 
                                              
53 As later discussed, beyond counsel’s representation at oral argument that plaintiffs 
sometimes pay homeowners’ building inspection fees, there is no record evidence that 
plaintiffs themselves (or their members for that matter) are taxpayers in the City and have 
themselves actually paid the fees.  However, the City nonetheless requires that its fees be 
paid, and if those fees are excessive, we believe that plaintiffs’ economic interests would 
be adversely affected.  In other words, a genuine argument could be made that excessive 
building inspection fees are prohibitive to those providing construction-related goods and 
services.   
54 Inglis v Pub Sch Employees Retirement Bd, 374 Mich 10, 12; 131 NW2d 54 (1964). 
55 Waterford Sch Dist v State Bd of Ed, 98 Mich App 658, 662; 296 NW2d 328 (1980). 
 
 
 
21 
 
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, suppliers, 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 was given at that time that plaintiffs actually 
                                              
56 Macomb Co Taxpayers Ass’n v L’Anse Creuse Pub Sch, 455 Mich 1, 7; 564 NW2d 457 
(1997) (citation omitted).   
57 At the March 11, 2015 oral argument, the following was stated: 
Chief Justice YOUNG: Could I ask a simple question? 
 
 
 
22 
 
                                              
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— 
 
 
 
23 
 
paid the fees charged by the City, a very real question remained as to whether plaintiffs 
were nevertheless “taxpayers.”  As previously mentioned, this Court reversed the Court of 
Appeals and remanded for further proceedings.  The trial court allowed the parties to 
engage in further discovery.  After plaintiffs appealed in this Court, we then expressly 
asked the parties to address the issue.  The parties submitted briefs, amici filed briefs, and 
oral argument was held on the issue.  Yet plaintiffs still failed to provide any record 
evidence that plaintiffs (or their members for that matter) are taxpayers in the city of Troy 
and have actually paid the fees beyond the allegations in the complaint and counsel’s 
representation at oral argument that plaintiffs sometimes pay homeowners’ building 
inspection fees.  Therefore, we cannot at this time conclude that plaintiffs have established 
standing.58  
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 Department’s 
                                              
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. 
 
58 Because we cannot reach the conclusion on this record that plaintiffs are taxpayers, we 
do not address the unripe constitutional question whether the challenged fees violate the 
Headlee Amendment, Const 1963, art 9, § 31.  Nonetheless, some of plaintiffs’ individual 
members may be able to establish that they are indeed taxpayers.  Thus, we remand to 
allow plaintiffs to establish representational standing to maintain a claim under the Headlee 
Amendment.   
 
 
 
24 
 
budgetary shortfalls in previous years violates MCL 125.1522(1) because it is not 
reasonably related to the cost of acts and services provided by the Building Department.  
However, because the City has presented evidence to justify the retention of a portion of 
these fees, we remand to the trial court for further proceedings.  We also remand for further 
proceedings to allow plaintiffs to establish representational standing to maintain a claim 
under the Headlee Amendment.   
 
 
Brian K. Zahra 
 
Bridget M. McCormack 
 
Stephen J. Markman 
 
David F. Viviano 
 
Richard H. Bernstein 
 
Elizabeth T. Clement 
 
Megan K. Cavanagh