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STATE OF MICHIGAN

COURT OF APPEALS

NICOLA BINNS, JAYNE CARVER, SUSAN 

MCDONALD, GOAT YARD, LLC, and END OF 

THE ROAD MINISTRIES, LLC,

Plaintiffs,

UNPUBLISHED

November 6, 2018

v No. 337609

Original Action

CITY OF DETROIT, CITY OF DETROIT 

WATER AND SEWAGE DEPARTMENT, 

DETROIT BOARD OF WATER 

COMMISSIONERS, and GREAT LAKES 

WATER AUTHORITY,

(Headlee Amendment)

Defendants.

DETROIT ALLIANCE AGAINST THE RAIN 

TAX, DETROIT IRON & METAL COMPANY, 

AMERICAN IRON & METAL COMPANY, 

MCNICHOLS SCRAP IRON & METAL 

COMPANY, MONIER KHALIL LIVING 

TRUST, and BAGLEY PROPERTIES, LLC,

Plaintiffs,

v No. 339176

Original Action

CITY OF DETROIT, DETROIT WATER AND 

SEWAGE DEPARTMENT, and DETROIT 

BOARD OF WATER COMMISSIONERS,

(Headlee Amendment)

Defendants.

Before: RIORDAN, P.J., and MURPHY and BOONSTRA, JJ.

PER CURIAM.
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In Docket No. 337609, plaintiffs, Nicola Binns, Jayne Carver, Susan McDonald, Goat 

Yard, LLC, and End of the Road Ministries, LLC (referred to collectively as the Binns 

plaintiffs), filed this original action under Const 1963, art 9, §§ 25-34, popularly known as the 

Headlee Amendment.1

 In Docket No. 339176, plaintiffs, Detroit Alliance Against the Rain Tax 

(DAART), Detroit Iron & Metal Company, American Iron & Metal Company, McNichols Scrap 

Iron & Metal Company, the Monier Khalil Living Trust, and Bagley Properties, LLC (referred to 

collectively as the DAART plaintiffs),2 likewise filed an original action under the Headlee 

Amendment. This Court consolidated these original actions. Detroit Alliance Against the Rain 

Tax v Detroit, unpublished order of the Court of Appeals, entered October 24, 2017 (Docket No. 

339176). In accordance with MCR 7.206(E)(3)(b), we now deny plaintiffs’ requests for relief.

I. FACTUAL AND PROCEDURAL HISTORY

In both cases, plaintiffs,3 all of whom are property owners in the city of Detroit or, in the 

case of DAART, an unincorporated voluntary association of property owners in the city of 

Detroit, allege that a drainage charge assessed by the city of Detroit and its agencies, the Detroit 

Water and Sewage Department (DWSD) and the Detroit Board of Water Commissioners (BWC) 

 1 The Headlee Amendment “grants this Court original jurisdiction to hear and decide Headlee 

Amendment claims[.]” City of Riverview v Michigan, 292 Mich App 516, 520; 808 NW2d 532 

(2011); see also Const 1963, art 9, § 32 (“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 . . . .”); MCL 600.308a(1) (“An action under section 32 of article 9 of 

the state constitution of 1963 may be commenced in the court of appeals, or in the circuit court in 

the county in which venue is proper, at the option of the party commencing the action.”).

2 The original plaintiffs other than DAART in Docket No. 339176 were Galilee Missionary 

Baptist Church, Danto Furniture Company, Central Avenue Auto Parts, and Judith Sale, but 

pursuant to a stipulation of the parties, those plaintiffs were dismissed, and the other plaintiffs 

identified above were substituted into the case “as DAART Representative and Named Plaintiffs 

in place of the dismissed parties.” Detroit Alliance Against the Rain Tax v Detroit, unpublished 

order of the Court of Appeals, entered March 27, 2018 (Docket No. 339176). We also note that 

on May 31, 2018, a stipulation was filed in the DAART case to add Belmont Shopping Center, 

LLC, as an additional representative plaintiff. We deny this request as moot in light of our 

conclusion in this opinion that plaintiffs are not entitled to relief in these cases. See B P 7 v 

Bureau of State Lottery, 231 Mich App 356, 359; 586 NW2d 117 (1998) (“As a general rule, an 

appellate court will not decide moot issues. A case is moot when it presents only abstract 

questions of law that do not rest upon existing facts or rights. An issue is deemed moot when an 

event occurs that renders it impossible for a reviewing court to grant relief.”) (citations omitted).

3 We will use the general term “plaintiffs” when referring collectively to both the Binns plaintiffs 

and the DAART plaintiffs.
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(referred to collectively as the Detroit defendants),4 constitutes a tax for which voter approval 

has not been obtained as required by the Headlee Amendment. In each case, the Detroit 

defendants seek dismissal or a judgment in their favor on multiple grounds, including: this Court 

lacks subject-matter jurisdiction because plaintiffs’ actions are preempted by federal regulations; 

plaintiffs have failed to state a claim because the drainage charge was preauthorized by the 

Detroit Charter and is thus exempt from the strictures of the Headlee Amendment; and the 

drainage charge constitutes a user fee, rather than a tax, and is thus not subject to the Headlee 

Amendment.

The pertinent facts concerning the Detroit drainage charge are derived by the parties 

largely from documents published by the Detroit defendants. As with many older cities, Detroit 

has a combined sewer system, meaning that storm water runoff flows into the same pipes as 

unsanitary wastewater, i.e., sewage. Every year, billions of gallons of storm water flow into 

Detroit’s combined sewer system from impervious surfaces, i.e., hard surfaces that limit the 

ability of storm water to soak into the ground. Impervious surfaces include roofs, driveways, 

parking lots, and compacted gravel and soil. This storm water is contaminated with dirt and 

debris. The combined sewage is treated at Detroit’s wastewater treatment plant (WTP) and 

combined sewer overflow (CSO) facilities before being released back into the environment. 

Federal and state regulations have required the DWSD to invest more than $1 billion in CSO 

control facilities in order to prevent untreated CSOs from spilling into Michigan waterways. The 

DWSD has instituted drainage charges that pay for capital, operations, and maintenance costs for 

the WTP, CSO control facilities, and combined sewer system components.5

As of January 2016, the DWSD no longer provides services to wholesale suburban 

customers; that function is now performed by defendant, the Great Lakes Water Authority 

(GLWA). The GLWA is a regional water, sewer, and storm water authority established through 

a September 9, 2014 memorandum of understanding (MOU) executed between the city of 

Detroit, Oakland County, Wayne County, Macomb County, and the state of Michigan, pursuant 

to 1955 PA 233. United States v Detroit, unpublished order of the United States District Court 

for the Eastern District of Michigan, entered December 15, 2015 (Docket No. 77-71100), p 1. 

Under the MOU, the GLWA operates, controls, and improves the regional water and sewage 

assets owned by the city of Detroit – which were previously operated by the DWSD – under 

lease agreements for an initial term of 40 years, and the city of Detroit continues to manage and 

operate its own local water and sewer infrastructure. Id. at 1-2. In short, the city of Detroit and 

its agencies continue to manage the supply of water, drainage, and sewage services to retail 

customers of the city of Detroit. Id. at 4. Pursuant to a December 15, 2015 order entered in a 

 4 The city of Detroit is a municipal corporation that, through the DWSD, provides water, sewer, 

and drainage services to its customers. The BWC is a seven-member board whose members are 

appointed by the Detroit Mayor; the BWC oversees the DWSD. 

5 There is no plan to separate Detroit’s sewer system. The DWSD explains: “Detroit’s combined 

sewer system includes nearly 3,000 miles of sewer collection piping. The costs to effectively 

separate the sewer system would be highly cost prohibitive. While selective sewer separation 

may be an option in some parts of the City, widespread implementation is not anticipated.” 
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decades-old federal lawsuit concerning efforts to ensure the city of Detroit’s compliance with 

federal requirements pertaining to its combined sewer system,6 the city of Detroit’s BWC must 

establish retail rates for the city’s water, drainage, and sewer services, in order to satisfy revenue 

requirements established by the GLWA for water, sewer, and drainage services in addition to the 

expenses of operating the city of Detroit’s local water and sewer infrastructure. Id. The city of 

Detroit is authorized by the federal district court’s order to continue or modify its customary 

practices regarding the establishment of rates for water, sewage, and drainage charges. Id. The 

federal district court’s order further provides, in part:

The [BWC] shall continue to exercise its existing authority under the City Charter 

to assess drainage fees, charges, or assessments to the users of the City’s local 

water and combined sewer and drainage infrastructure because these charges are 

necessary and critical to ensure that the City is able to comply with (i) its 

regulatory requirements under NPDES [National Pollutant Discharge Elimination 

System7

] Permit No. MI0022802 to treat and dispose of the City’s combined 

sewage overflows and (ii) its obligations under the Clean Water Act. The City 

may set these drainage charges based, in part, on the impervious area of each 

parcel of land assessed a drainage charge, or on some other legally acceptable 

method for assessing the charge, in order to provide each user with a transparent 

and equitable method for calculating the drainage charge associated with 

managing, operating and improving the combined sewer and drainage 

infrastructure respectively allocable to each user. [Id. at 5-6.]

DWSD customers have been paying some form of a drainage charge as part of their water 

and sewer bills since 1975. Effective beginning in October 2016, the DWSD revised or updated 

its method of calculating the drainage charge for property owners in Detroit.8 On the basis of 

flyover views and aerial photography conducted in 2015 to determine impervious areas, as well 

as city assessor data, the DWSD identified 22,000 parcels that had not previously been charged 

for drainage, including parcels that did not have a water account and thus were not in the DWSD 

billing system. The DWSD determined that these parcels, except those owned by faith-based 

institutions, would be charged $750 per impervious acre beginning in October 2016.9 All 

customers would be charged on the basis of impervious surface area by 2018. In particular, the 

new impervious surface rate would apply to industrial properties beginning in January 2017, 

commercial properties in April 2017, tax-exempt properties (other than faith-based) in June 

2017, residential properties in October 2017, and faith-based properties in January 2018. 

 6 Some of the procedural history concerning this federal litigation, which commenced in 1977, is 

recounted in Detroit v Michigan, 803 F2d 1411, 1412-1413 (CA 6, 1986).

7 The NPDES is “a federal permit program designed to regulate the discharge of polluting 

effluents.” Int’l Paper Co v Ouellette, 479 US 481, 489; 107 S Ct 805; 93 L Ed 2d 883 (1987).

8 Detroit ordinances set forth the authority of the Detroit defendants to levy such charges. See 

Detroit Ordinances, §§ 56-3-2 and 56-3-12.

9 This amount was later lowered in varying degrees as part of a phase-in plan discussed later.
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Transition credits would apply for two fiscal years. The DWSD adopted its phased-in approach 

to the updated drainage charge in order to afford customers time to prepare for the new rate and 

to avoid overwhelming the DWSD billing system. The DWSD has asserted that it possesses 

various options if a customer refuses to pay the drainage charge, including termination of water 

service for the property, the imposition of a lien on the property, a legal action to recover unpaid 

fees, and the suspension or revocation of a license to do business in the city of Detroit. 

No drainage charge will be imposed for parcels containing fewer than .02 impervious 

acres because that is the margin of error from flyover views. Further, if a property owner 

verifies that storm water runoff flows directly into the Detroit River or the Rouge River and that 

the parcel is disconnected from the DWSD system, there is no charge. The DWSD provides 

procedures whereby customers may dispute the measurement of the impervious acreage for a 

parcel or may seek an adjustment in billing on the basis of a modification to the impervious 

surface area or the direct discharge of surface waters to one of the above-mentioned rivers. The 

DWSD provided the following explanation in a publication: “By simply reducing the impervious 

cover on a property, customers reduce the amount of storm water leaving their property and thus 

reduce their drainage charge. Examples of impervious cover reduction include removal of 

asphalt or concrete parking spaces and replacing the impervious cover.” The DWSD also 

permits drainage credits of up to 80% for customers who use green infrastructure systems or 

practices that reduce the amount of storm water flowing from the property into the DWSD’s 

combined sewer system. “Green infrastructure examples include disconnecting downspouts, rain 

gardens, bioretention practices, installing permeable pavement, green roof designs, detention and 

subsurface detention and other practices that manage storm water volume.” 

The DWSD indicated that its drainage revenue requirement would exceed $151 million 

for fiscal year 2017, including more than $125 million in operation and implementation costs as 

well as drainage credits. The DWSD’s expense for debt service is $59.8 million; this expense is 

comprised essentially of a GLWA-held mortgage payment for facilities that are in place to 

address wet weather flows. The DWSD notes that “[t]his debt service expense relates to both 

municipal bond issues and to state revolving fund loans.” Bad debt in the form of uncollectible 

bills must be recovered from the DWSD’s other remaining customers. In compliance with 

federal Environmental Protection Agency (EPA) regulations to prevent excessive pollution into 

waterways, the DWSD invested more than $1 billion in CSO control facilities. “The cost was 

financed almost entirely through bonds which are being repaid by the drainage fee. Direct CSO 

costs have two components: $25.7 million for annual CSO bond debt, and $6.2 million in annual 

operating costs specific to the control facilities.” The DWSD expects the rate of the drainage 

charge to decrease by 32% through fiscal year 2019.

The DWSD does not charge the city of Detroit itself a drainage fee for storm water 

flowing from city streets into the combined sewer system. The DWSD explains: “City streets, 

which are lower than parcels, are part of the conveyance infrastructure for facilitating the flow of 

storm water from Detroit properties into the catch basins, then into the combined sewer system, 

and then finally terminating at the [WTP].” However, “[c]ity owned parcels will not be 

characterized as conveyance. This term only applies to city streets, i.e., areas common to all that 

serve as storm water conveyance.” 
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Effective in April 2017, and applied retroactively to October 2016, the DWSD has 

revised its drainage charge policy to provide transition credits for properties that were not 

previously billed for drainage services or that were previously billed on the basis of meter size 

and are now converted to the drainage rate based on impervious area. Under this revised policy, 

full implementation of the uniform impervious area based drainage charge is to be phased in over 

five years. Further, residential parcels received an automatic credit of 25% to reflect the flow 

characteristics of such parcels. The DWSD also indicated that it would provide a property owner 

with up to 50% of the cost, with a maximum payment of $50,000, for eligible green storm water 

infrastructure measures installed and maintained by the property owner.

In Docket No. 337609, the Binns plaintiffs commenced this original action under the 

Headlee Amendment by filing a complaint on March 27, 2017, and filed a first amended 

complaint one day later. The Binns plaintiffs asserted that the Detroit drainage charge 

constitutes a disguised tax for which voter approval has not been obtained as purportedly 

required by the Headlee Amendment. The Binns plaintiffs requested “declaratory relief that the 

‘drainage charge’ is a tax, injunctive relief to stop the unconstitutional collection of this tax, and 

monetary relief in the form of return of tax payments, costs, and attorney fees.” The Binns 

plaintiffs sought to pursue this action as representatives of a proposed class consisting of all 

persons who have been charged the drainage fee and who own property in Detroit. 

On May 2, 2017, the Detroit defendants filed an answer and affirmative defenses to the 

Binns plaintiffs’ complaint. The Detroit defendants sought dismissal of the complaint, a finding 

of no cause of action, or denial of the Binns plaintiffs’ requested relief. The Detroit defendants 

asserted numerous affirmative defenses, including: this Court lacks subject-matter jurisdiction 

because the Binns plaintiffs’ claims are preempted by federal law, regulations, or orders 

mandating assessment of the drainage charge; the Binns plaintiffs have failed to state a claim 

because the drainage charge was authorized by the Detroit Charter before the Headlee 

Amendment was ratified such that voter approval is not required under the Headlee Amendment; 

the Binns plaintiffs’ claims are barred by the Revenue Bond Act of 1933, MCL 141.101 et seq.; 

and the drainage charge constitutes a valid user fee, rather than a tax that is subject to the 

Headlee Amendment.

On May 3, 2017, the Binns plaintiffs filed a motion for a preliminary injunction to 

preclude assessment or enforcement of the drainage charge until it is approved by voters. The 

Detroit defendants filed an answer opposing the Binns plaintiffs’ motion for a preliminary 

injunction. On June 20, 2017, this Court entered an order denying the Binns plaintiffs’ motion 

for a preliminary injunction. Binns v Detroit, unpublished order of the Court of Appeals, entered 

June 20, 2017 (Docket No. 337609).

On June 26, 2017, the Binns plaintiffs filed a motion for class certification. On June 29, 

2017, the Detroit defendants filed a motion seeking permission to extend the due date for 

responding to the Binns plaintiffs’ motion for class certification to 90 days after this Court rules 

on the Detroit defendants’ request for peremptory dismissal of plaintiffs’ claim; the Detroit 

defendants asserted that the Binns plaintiffs’ motion for class certification was premature 

because the Detroit defendants’ request for peremptory dismissal of plaintiffs’ complaint on 

multiple grounds was still pending and because discovery had not yet occurred in this case. The 

Binns plaintiffs filed an answer to the Detroit defendants’ motion for extension of the due date 
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for responding to the Binns plaintiffs’ motion for class certification; the Binns plaintiffs noted 

that there was no properly filed motion to dismiss pending and that the Detroit defendants had 

not requested discovery when the Binns plaintiffs filed the class certification motion. 

On August 4, 2017, the Binns plaintiffs filed a request for entry of default against the 

GLWA, which had been named as a defendant in the Binns plaintiffs’ action but had not yet filed 

a pleading or otherwise asserted a defense. On August 10, 2017, an attorney filed a notice of 

appearance on behalf of the GLWA. On the same date, the GLWA filed a motion to strike or set 

aside the request for default and for leave to answer or otherwise respond to the Binns plaintiffs’ 

first amended complaint. The GLWA stated that it had not been served with the Binns plaintiffs’ 

original complaint and that no proof of service had been filed regarding the first amended 

complaint, although the GLWA acknowledged that the first amended complaint had been 

delivered to the offices of the GLWA on June 26, 2017, and that a courtesy copy of the first 

amended complaint had been previously provided to the GLWA sometime in the spring of 2017. 

The GLWA stated that the request for default was not notarized or supported by affidavit. The 

GLWA has not received any notice that the Clerk of this Court has entered a default, and the 

Binns plaintiffs have not moved for the entry of a default judgment. Further, the GLWA stated 

that it possesses a meritorious defense. The GLWA does not set storm water rates for properties 

located in Detroit, the properties owned by the Binns plaintiffs are located in Detroit, and the 

purported class that the Binns plaintiffs seek to represent consists of persons who own property 

in Detroit. The GLWA does not operate the combined sewer system in Detroit. 

On August 23, 2017, this Court entered an order in the Binns plaintiffs’ case stating as 

follows:

The Court DIRECTS the parties to file supplemental briefs within 28 days 

of the date of this order addressing the following:

(1) Does the pre-existing authority exemption of the Headlee Amendment, 

Const 1963, art 9, § 31 (no voter approval for taxes is needed if the taxes were 

“authorized by law or charter” when the amendment was ratified in 1978), apply 

in light of the fact that the City’s charter had been revised/replaced twice since 

1974, with the City’s actual authority for levying the at-issue drainage charge 

deriving from the latest 2012 charter? See Streat v Vermilya, 268 Mich 1, 5; 255 

NW 604 (1934) (stating that an adopted new charter “will entirely supersede the 

former charter”).

(2) Applying the factors articulated in Bolt v City of Lansing, 459 Mich 

152; 587 NW2d 264 (1998), use documentary evidence to support your position 

that the drainage charge is either a tax or a fee.

The motions that have been filed remain pending. [Binns v Detroit, 

unpublished order of the Court of Appeals, entered August 23, 2017 (Docket No. 

337609).]

The parties subsequently filed supplemental briefs in accordance with this Court’s order.
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Meanwhile, on July 11, 2017, the DAART plaintiffs commenced their original action 

under the Headlee Amendment by filing a complaint. Like the Binns plaintiffs, the DAART 

plaintiffs asserted that the drainage charge constituted a tax such that the imposition of the 

drainage charge without the approval of the voters constituted a Headlee Amendment violation. 

The DAART plaintiffs requested certification as a class action. The DAART plaintiffs asked for 

a declaration that the drainage charge is a tax that is void because it has not been approved by 

voters as required by the Headlee Amendment, a refund of all drainage charges collected since 

October 1, 2016, the dissolution of any DWSD liens against properties for an owner’s failure to 

pay the drainage charge, and an award of costs and attorney fees.10

On August 29, 2017, the Detroit defendants filed an answer and affirmative defenses in 

the DAART case. The Detroit defendants requested peremptory dismissal of the complaint or a 

finding of no cause of action. The Detroit defendants asserted the same pertinent affirmative 

defenses as summarized above in connection with the Binns case.

On September 28, 2017, the DAART plaintiffs filed a motion to consolidate the DAART 

case with the Binns case. On October 5, 2017, the Detroit defendants filed a response indicating 

that they did not oppose consolidation in general but suggesting that the DAART plaintiffs had 

improperly delayed seeking consolidation until after the submission of supplemental briefs in the 

Binns case in order to obtain an unfair advantage in briefing. On October 24, 2017, this Court 

entered an order granting the motion to consolidate and directing the parties to file supplemental 

briefs addressing the questions set forth in this Court’s August 23, 2017 order in the Binns case. 

Detroit Alliance Against the Rain Tax v Detroit, unpublished order of the Court of Appeals, 

entered October 24, 2017 (Docket No. 339176). The parties in the DAART case filed 

supplemental briefs in accordance with this Court’s order.

Meanwhile, on October 9, 2017, the DAART plaintiffs filed a motion for class 

certification. On October 16, 2017, the Detroit defendants filed a motion for an extension of 

time to respond to the DAART plaintiffs’ class certification motion, for essentially the same 

reasons they sought such an extension in the Binns case. 

On January 5, 2018, a motion for leave to file an amici-curiae brief was filed by entities 

that own commercial property in Detroit; those entities are Trappers Properties, LLC, Atheneum 

Hotel Corporation, Helicon Development, LLC, Pegasus Greektown, LLC, PF Investments, 

LLC, and Foreman Properties, LLC. On February 13, 2018, this Court granted the motion for 

leave to file an amici-curiae brief. Detroit Alliance Against the Rain Tax v Detroit, unpublished 

order of the Court of Appeals, entered February 13, 2018 (Docket No. 339176). The amicicuriae brief was subsequently filed in this Court. The Detroit defendants and the DAART 

plaintiffs filed briefs responding to the amici-curiae brief.11

 10 The DAART plaintiffs sued only the Detroit defendants; the GLWA was not named as a 

defendant in the DAART plaintiffs’ action.

11 Amici curiae filed a motion for leave to participate in oral argument. That motion is denied as 

moot in light of our disposition of these cases without oral argument pursuant to MCR 
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II. WHETHER THE DRAINAGE CHARGE IS A USER FEE OR A TAX

Plaintiffs argue that the drainage charge constitutes a tax that is subject to the Headlee 

Amendment, while the Detroit defendants contend that the drainage charge constitutes a valid 

user fee that is not subject to the Headlee Amendment. We agree with the Detroit defendants.

Whether the drainage charge constitutes a tax or a user fee is a question of law that this 

Court reviews de novo. Bolt, 459 Mich at 158. Plaintiffs have the burden of establishing the 

unconstitutionality of the drainage charge. Jackson Co v City of Jackson, 302 Mich App 90, 98; 

836 NW2d 903 (2013). 

We are deciding these cases without oral argument pursuant to MCR 7.206(E)(3)(b). 

Referral to a judicial circuit pursuant to MCR 7.206(E)(3)(d) for discovery or fact-finding is not 

necessary in these cases. As explained earlier, this Court’s order directing supplemental briefing 

instructed the parties to use documentary evidence to support their respective positions regarding 

whether the drainage charge is a tax or a user fee. The parties thereafter filed supplemental 

briefs, and plaintiffs in both cases submitted extensive documentary evidence. Plaintiffs in 

neither case have suggested that there is a need for referral to a judicial circuit for discovery or 

fact-finding proceedings. In fact, the DAART plaintiffs have specifically stated that the case can 

be decided as a matter of law on the basis of the factual background provided by the pleadings, 

briefs, and exhibits submitted to this Court, without referral to a judicial circuit for discovery. 

We conclude that the record is sufficiently complete for this Court to rule as a matter of law.

The relevant provision of the Headlee Amendment, Const 1963, art 9, § 31, states as 

follows:

Units of Local Government are hereby prohibited from levying any tax not 

authorized by law or charter when this section is ratified or from increasing the 

rate of an existing tax above that rate authorized by law or charter when this 

section is ratified, without the approval of a majority of the qualified electors of 

that unit of Local Government voting thereon. . . .

“An application of § 31 is triggered by the levying of a tax.” Jackson Co, 302 Mich App at 98, 

citing Bolt, 459 Mich at 158-159. The levying of a new tax without voter approval violates § 31. 

Jackson Co, 302 Mich App at 99, citing Bolt, 459 Mich at 158. However, a charge that 

constitutes a user fee is not subject to the Headlee Amendment. Jackson Co, 302 Mich App at 

99, citing Bolt, 459 Mich at 159.

“There is no bright-line test for distinguishing between a valid user fee and a tax that 

violates the Headlee Amendment.” Bolt, 459 Mich at 160. In general, “a fee is exchanged for a 

service rendered or a benefit conferred, and some reasonable relationship exists between the 

amount of the fee and the value of the service or benefit. A tax, on the other hand, is designed to 

 

7.206(E)(3)(b). See generally, B P 7 v Bureau of State Lottery, 231 Mich App 356, 359; 586 

NW2d 117 (1998).
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raise revenue.” Id. at 161 (quotation marks and citations omitted). In Bolt, our Supreme Court 

identified three key criteria to use in distinguishing between a user fee and a tax: (1) a user fee 

serves a regulatory purpose rather than a revenue-raising purpose; (2) a user fee is proportionate 

to the necessary costs of the service; and (3) a user fee is voluntary in that property owners are 

able to refuse or limit their use of the service. Id. at 161-162. “These criteria are not to be 

considered in isolation, but rather in their totality, such that a weakness in one area would not 

necessarily mandate a finding that the charge is not a fee.” Wheeler v Shelby Charter Twp, 265 

Mich App 657, 665; 697 NW2d 180 (2005) (brackets, quotation marks, and citations omitted).

In Bolt, 459 Mich at 154, our Supreme Court held that the city of Lansing’s storm water 

service charge was a tax for which voter approval was required under the Headlee Amendment, 

and because the city of Lansing did not obtain voter approval, the storm water service charge 

was unconstitutional and thus void. The pertinent facts of Bolt are as follows. The city of 

Lansing decided to separate the remaining portion of its combined sanitary and storm sewer 

systems; approximately 75% of the property owners were already served by a separated storm 

and sewer system. Id. at 154-155, 155 n 3. The cost of this project was $176 million over 30 

years. Id. at 155. In order to fund the storm water share of this project, the city of Lansing 

created a storm water enterprise fund and imposed the storm water service charge on each parcel 

of real property, using a formula to estimate each parcel’s storm water runoff. Id. The storm 

water enterprise fund replaced funding previously provided “by general fund revenues secured 

through property and income taxes.” Id. at 155 n 4. Estimated storm water runoff was 

calculated by equivalent hydraulic area (EHA), which was based on “the amount of pervious and 

impervious areas within the parcel multiplied by the runoff factors applicable to each.” Id. at 

155-156. However, a flat rate was charged for residential parcels of two acres or less. Id. at 156. 

Our Supreme Court noted in Bolt that approximately 63% of the cost of the project was 

for capital expenditures. Id. at 163. “This constitutes an investment in infrastructure as opposed 

to a fee designed simply to defray the costs of a regulatory activity.” Id. Our Supreme Court 

quoted with approval the analysis of the dissenting Court of Appeals judge on that point:

No effort has been made to allocate even that portion of the capital costs 

that will have a useful life in excess of thirty years to the general fund. This is an 

investment in infrastructure that will substantially outlast the current “mortgage” 

that the storm water charge requires property owners to amortize. At the end of 

thirty years, property owners will have fully paid for a tangible asset that will 

serve the city for many years thereafter. Accordingly, the “fee” is not structured 

to simply defray the costs of a “regulatory” activity, but rather to fund a public 

improvement designed to provide a long-term benefit to the city and all its 

citizens. The revenue to be derived from the charge is clearly in excess of the 

direct and indirect costs of actually using the storm water system over the next 

thirty years and, being thus disproportionate to the costs of the services provided 

and the benefits rendered, constitutes a tax. 

I do not believe that the capital investment component of a true fee may be 

designed to amortize such an expense, and to enable the city to fully recoup its 

investment, in a period significantly shorter than the actual useful service life of 

the particular public improvement. This fundamental principle of basic 
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accountancy guides public utility regulators, as well as tax assessors. It ought to 

apply equally here.

This is not to say that a city can never implement a storm water or sewer 

charge without running afoul of art 9, § 31. A proper fee must reflect the 

bestowal of a corresponding benefit on the person paying the charge, which 

benefit is not generally shared by other members of society. Where the charge for 

either storm or sanitary sewers reflects the actual costs of use, metered with 

relative precision in accordance with available technology, including some capital 

investment component, sewerage may properly be viewed as a utility service for 

which usage-based charges are permissible, and not as a disguised tax. [Id. at 

163-165 (brackets and citations omitted).]

Our Supreme Court in Bolt further stated that the first two factors for determining 

whether a charge constitutes a user fee were not satisfied because “the charges imposed do not 

correspond to the benefits conferred.” Id. at 165. The Court noted that approximately 75% “of 

the property owners in the city were already served by a separated storm and sanitary sewer 

system.” Id. Many of those property owners had already “paid for such separation through 

special assessments.” Id. Yet they were “charged the same amount for storm water service as 

the [25%] of the property owners who will enjoy the full benefits of the new construction.” Id. 

“The appeal process and available credits do not make the charge proportionate to the necessary 

costs of the service because there is no credit for the [75%] of the property owners who are 

already served by a separated sewer system.” Id. at 165 n 15. “[T]he charge applies to all 

property owners, rather than only to those who actually benefit. A true ‘fee,’ however, is not 

designed to confer benefits on the general public, but rather to benefit the particular person on 

whom it is imposed.” Id. at 165. In short, “the lack of correspondence between the charges and 

the benefit conferred demonstrates that the city has failed to differentiate any particularized 

benefits to property owners from the general benefits conferred on the public.” Id. at 166. This 

conclusion was buttressed by the fact that the acknowledged goal of the storm water service 

charge was to address environmental concerns regarding water quality. Id.

Further supporting the conclusion in Bolt that the first two factors were not satisfied was 

the absence of a significant element of regulation. Id. Only the amount of rainfall shed from a 

parcel as surface runoff was regulated; there was no consideration of “the presence of pollutants 

on each parcel that contaminate such runoff and contribute to the need for treatment before 

discharge into navigable waters.” Id. at 166-167. Nor was there any effort “to distinguish 

between those responsible for greater and lesser levels of runoff[,]” and street rights of way were 

excluded from the charge. Id. at 167. “Moreover, there is no end-of-pipe treatment for the storm 

water runoff. Rather, the storm water is discharged into the river untreated.” Id.

The third factor – voluntariness – was also unsatisfied in Bolt. Id. A tax is compulsory 

by law, whereas user fees are compulsory only “for those who use the service, have the ability to 

choose how much of the service to use, and whether to use it at all.” Id. (quotation marks and 

citation omitted). The charge in Bolt was “effectively compulsory. The property owner has no 

choice whether to use the service and is unable to control the extent to which the service is 

used.” Id. at 167-168. Suggesting that a property owner may control the amount of the charge 

by building less on the property is not “a legitimate method for controlling the amount of the fee 
-12-

because it is tantamount to requiring property owners to relinquish their rights of ownership to 

their property by declining to build on the property.” Id. at 168. 

Finally, the Bolt Court noted additional factors that were not dispositive but that further 

supported the conclusion that the storm water service charge was a tax. Id. The storm water 

enterprise fund replaced a portion of a program that was previously funded by general fund 

revenues from income and property taxes. Id. Also, a lien could be placed on property for 

failing to pay the storm water service charge. Id. “While ordinarily the fact that a lien may be 

imposed does not transform an otherwise proper fee into a tax, this fact buttresses the conclusion 

that the charge is a tax in the present case, where the charges imposed are disproportionate to the 

costs of operating the system and to the value of the benefit conferred, and the charge lacks an 

element of volition.” Id. That the storm water charge was billed through the city assessor’s

office and the bill was sent with property tax statements was also significant. Id. at 168-169.

This Court applied the Bolt test to a similar storm water charge in Jackson Co. In 

Jackson Co, 302 Mich App at 93, the city of Jackson “created a storm water utility and imposed 

a storm water management charge on all property owners within the city to generate revenue to 

pay for the services provided by the utility, which include, among others, street sweeping, catch 

basin cleaning, and leaf pickup and mulching.” In so doing, the city of Jackson “shift[ed] the 

method of funding certain preexisting government activities from tax revenues to a utility 

charge[.]” Id. This Court held that “the city’s storm water management charge is a tax, the 

imposition of which violates the Headlee Amendment because the city did not submit [the 

ordinance creating the charge] to a vote of the qualified electors of the city.” Id.

The pertinent facts of Jackson Co are as follows. The city of Jackson maintained 

separate storm water and waste water systems. Id. at 94. The city of Jackson historically funded 

the operation of the storm water management system through general and street funds, including 

ad valorem property taxes, gasoline taxes, and vehicle registration fees. Id. In 2011, however, 

the city of Jackson adopted an ordinance funding the storm water management program through 

a storm water management charge imposed on each parcel of real property in the city. Id. at 95. 

The charge was computed through a formula developed to roughly estimate the amount of storm 

water runoff from each parcel. Id. In particular, the EHA was used to estimate the amount of 

storm water running off each parcel on the basis of the impervious and pervious surface areas of 

each parcel. Id. at 95-96. For residential parcels of two acres or less, a flat rate was used in lieu 

of individual measurements. Id. at 96. A property owner could receive credits for actions taken 

to reduce storm water runoff. Id. at 97. An administrative appeal was available to challenge the 

estimate of impervious area or the amount of credit awarded against the charge. Id. 

Applying the Bolt factors, this Court in Jackson Co stated that the storm water charge 

served dual purposes. Id. at 105. A regulatory purpose was furthered by financing the protection 

of local waterways from solid pollutants carried in storm water discharged from properties, and a 

general revenue-raising purpose was served by shifting the funding of preexisting government

activities from declining general and street fund revenues to a storm water charge. Id. “This 

latter method of revenue generation raises revenue for general public purposes by augmenting 

the city’s general and street funds in an amount equal to the revenue previously used to fund the 

activities . . . now . . . assigned to the storm water utility.” Id. at 106. This Court concluded that 

“the minimal regulatory purpose served by the ordinance and the related management charge is 
-13-

convincingly outweighed by the revenue-raising purpose of the ordinance.” Id. The ordinance 

“contain[ed] few provisions of regulation and no provisions that truly regulate the discharge of 

storm and surface water runoff, with the exception of the provision that allows for credits against 

the management charge for the use of city-approved storm water best management practices.” 

Id. Like in Bolt, the ordinance in Jackson Co “fail[ed] to require either the city or the property 

owner to identify, monitor, and treat contaminated storm and surface water runoff and allow[ed] 

untreated storm water to be discharged into the Grand River.” Id. This constituted a regulatory 

weakness akin to that of the city of Lansing ordinance deemed unconstitutional in Bolt.

Further, there was evidence in Jackson Co that “the desire to protect the city’s general 

and street funds from the costs of operating and maintaining the existing storm water 

management system constituted the most significant motivation for adopting the ordinance and 

management fee.” Id. at 106-107. The city of Jackson admitted “that budgetary pressures, 

including declining general fund revenue, necessitated the tapping of new sources of funding for 

the maintenance of the storm water system.” Id. at 107. This Court thus concluded that there 

was “an overriding revenue-generating purpose that outweighs the minimal regulatory purpose 

of the charge and, therefore, that the charge is a tax, not a utility user fee.” Id.

In addition, “the lack of a correspondence between the charge imposed and any 

particularized benefit conferred by the charge supports a conclusion that the charge is a tax and 

not a utility user fee.” Id. at 108. This Court could not “identify any particularized benefit the 

charge confers on the property owners that is not also conferred upon the general public.” Id. 

The city of Jackson indicated that the storm water charge helped to protect public health and 

safety, reduce the likelihood of flooding, reduce land erosion, and prevent sewer overflows. Id. 

But this Court held that addressing such concerns “benefit[s] not only the property owners 

subject to the management charge, but also everyone in the city in roughly equal measure, as 

well as” persons operating motor vehicles in the city and persons who use the Grand River 

downriver from the city. Id. at 109. “This lack of a correspondence between the management 

charge and a particularized benefit conferred to the parcels supports our conclusion that the 

management charge is a tax.” Id.

With respect to the proportionality of the storm water charge, this Court noted that 

“residential parcels measuring two acres or less are charged a flat rate based on the average EHA 

of all single family parcels, and not on the individual measurements of each parcel’s impervious 

and pervious areas.” Id. at 110. Single-family residential parcels comprised 83% of the parcels 

within the city. Id. By contrast, residential parcels in excess of two acres, as well as 

commercial, industrial, and institutional parcels of all sizes, were charged on the basis of 

individual measurements of each parcel’s impervious and pervious areas. Id. 

This method of apportioning the management charges among all urban properties 

emphasizes administrative convenience and ease of measurement and, thereby, 

suggests an absence of a close proportional relationship between the amount of 

runoff attributable to a particular parcel and the management charge, as does the 

fact that the method of calculating the charge fails to consider property 

characteristics relevant to runoff generation, such as a parcel’s location in 

reference to storm gutters and drains and soil grade. This lack of proportionality 

is further demonstrated by the fact that the charge generates sufficient revenue to 
-14-

allow the city to maintain a working capital reserve of 25 to 30 percent of the 

storm water utility’s total expenses. Although maintaining a capital reserve is a 

common practice amongst rate-based public utilities that provides a degree of 

fiscal stability to utilities, those reserves are funded by true user fees closely 

calibrated to the actual use of the service or a price paid for a commodity. The 

management charge at issue in these cases in not such a fee. For these reasons, 

the actual use of the storm water sewer system by each parcel is not accounted for 

with the requisite level of precision necessary to support a conclusion that the 

charge is proportionate to the costs of the services provided. [Id. at 110-111

(citation omitted).]

This Court further concluded that the storm water charge was effectively compulsory. Id. 

at 11. Although property owners could receive credits for actions taken to reduce runoff, there 

was no guarantee that all property owners would receive a 100% credit. Id. Allowing a 100% 

credit for all property owners would undermine the purpose of the storm water charge, which 

was to generate funding for the water management system. Id. Also, to obtain credits, property 

owners must pay for improvements to their respective properties. Id. at 111-112. “In other 

words, property owners have no means by which to escape the financial demands of the 

ordinance.” Id. at 112. Delinquency in payment of the charge may result in discontinuation of 

water service, and past-due charges could be collected through the imposition of a lien and the 

filing of a civil action, further demonstrating an absence of volition. Id. The lack of volition 

supported the conclusion that the storm water charge was a tax. Id.

The application of the Bolt criteria to the facts of the present case leads to the conclusion 

that the city of Detroit’s drainage charge is a user fee rather than a tax and that the charge is 

therefore not subject to the Headlee Amendment. With respect to the first factor, the drainage 

charge serves a regulatory purpose rather than a revenue-raising purpose. Again, “a fee is 

exchanged for a service rendered or a benefit conferred, and some reasonable relationship exists 

between the amount of the fee and the value of the service or benefit. A tax, on the other hand, is 

designed to raise revenue.” Bolt, 459 Mich at 161 (quotation marks and citations omitted). 

Here, a service is rendered in the form of removal and treatment of storm water runoff. The 

present case differs from Bolt and Jackson Co in that, unlike the separated storm water and sewer 

systems being created and maintained respectively in Bolt and Jackson Co, the city of Detroit has 

a combined sewer system, meaning that storm water runoff flows into the same pipes as 

unsanitary wastewater, i.e., sewage, and there is no plan to separate Detroit’s sewer system 

because it would be cost prohibitive to do so. The combined sewage is treated at Detroit’s WTP 

and CSO facilities before being released back into the environment. Federal and state 

regulations have required the DWSD to invest more than $1 billion in CSO control facilities in 

order to prevent untreated CSOs from spilling into Michigan waterways. As noted in Detroit v 

Michigan, 803 F2d 1411, 1421 (CA 6, 1986), the city of Detroit has been legally required since 

1977 to render full secondary treatment to storm water flows. The DWSD has instituted the 

present drainage charge to pay for capital, operations, and maintenance costs for the WTP, CSO 

control facilities, and combined sewer system components. Therefore, unlike in Bolt and 

Jackson Co, in which storm water was allowed to be released back into the environment 

untreated, Bolt, 459 Mich at 167; Jackson Co, 302 Mich App at 106, the DWSD provides full 

treatment to the combined sewage comprised of storm water and unsanitary waste water, as 
-15-

required by federal regulations and orders. This indicates the existence of a significant 

regulatory component in the present cases that was absent in Bolt and Jackson Co.

This federally mandated treatment of combined sewage that includes storm water runoff 

constitutes the provision of a service. This conclusion is supported by the persuasive analysis of 

a federal appellate court addressing Detroit’s combined sewer system in the context of a claim 

under the Revenue Bond Act of 1933.12 In Detroit, 803 F2d at 1418, the federal appellate court 

held that “the treatment of storm water runoff from [the Wayne County Road Commission’s 

(WCRC)] roads within the City of Detroit constitutes a ‘service rendered’ within the meaning of 

the Michigan Revenue Bond Act of 1933.” The court reasoned that a municipality has a right “to 

charge those who use a municipality’s sewer system for the disposal or treatment of storm water 

runoff.” Id. at 1419. “[A] municipality, acting pursuant to a proper delegation of authority, may 

charge those who use or otherwise benefit from its sewer system, even though such use or 

benefit is based upon the disposal or treatment of storm water running into the municipality’s

sewers.” Id. at 1420. The court determined that the “WCRC receives a benefit from the disposal 

and treatment of the storm water running off WCRC’s roads and into the City of Detroit’s sewer 

system, and as such, we believe that this is a ‘service rendered’ within the meaning of the 

Revenue Bond Act of 1933.” Id. 

Plainly, WCRC is benefitted by being relieved from the dangers and damages 

which may be occasioned by flooding from storm waters and which might, in the 

absence of drainage into the DWSD’s sewer system, result in liability, or at least 

in damage to WCRC’s roads. . . . Obviously, no one is responsible for this flow. 

The fact remains, however, that this water has to go somewhere, especially if 

WCRC is to keep its roads in reasonable repair and, for at least some of this 

water, WCRC has obtained drainage by tapping into the DWSD sewer system. 

[Id. at 1420-1421.]

The federal appellate court further reasoned:

The storm water which constitutes the runoff from WCRC’s roads may 

have come from God or nature in the first place, just as all water entering the 

DWSD’s sewer system must have at one time or another. Nevertheless, the refuse 

or foreign matter that water accumulates as it courses through WCRC’s roads 

must now be subjected by law to primary and secondary treatment to the extent 

such runoff enters Detroit’s sewage treatment system. And to that extent, at least, 

WCRC is a user of the facility provided by DWSD. [Id. at 1421.]

Accordingly, the court held that “[t]he drainage and treatment of storm water from WCRC’s 

roads into the City of Detroit’s sewer system constitutes a ‘service rendered’ within the meaning 

of section 18 of the Revenue Bond Act of 1933.” Id. (citation omitted).

 12 The opinions of lower federal courts are not binding but may be considered as persuasive. 

Abela v Gen Motors Corp, 469 Mich 603, 607; 677 NW2d 325 (2004).
-16-

Likewise, in the present cases, a service is provided to property owners by virtue of the 

drainage and treatment of storm water that enters Detroit’s combined sewer system from the 

property owners’ parcels. The regulatory weakness identified in Bolt and Jackson Co concerning 

the release of untreated storm water back into the environment is not present in the instant cases.

Further, there is an adequate correspondence in the present cases between the charges 

imposed and the benefits conferred. A lack of correspondence was found to exist in Bolt because 

approximately 75% of the property owners in the city of Lansing were already served by a 

separate storm and sanitary sewer system, many of those property owners had already paid 

special assessments to fund such separation, and yet those property owners were “charged the 

same amount for storm water service as the [25%] of the property owners who will enjoy the full 

benefits of the new construction.” Bolt, 459 Mich at 165. No such disparity exists here. The 

drainage charge is not being imposed to provide a service that benefits only some property 

owners. Rather, the charge is used to fund capital, operations, and maintenance costs for 

facilities treating all of the storm water entering Detroit’s combined sewage system. And for the 

reasons discussed below in connection with the proportionality factor, the city of Detroit’s 

method of assessing the drainage charge assures a higher degree of precision between the service 

provided and the benefits conferred than did the charges at issue in Bolt and Jackson Co.

13

Further distinguishing the present cases from Bolt and Jackson Co is the absence of any 

evidence of a revenue-generating purpose that outweighs the regulatory purpose of the drainage 

charge. “While a fee must serve a primary regulatory purpose, it can also raise money as long as 

it is in support of the underlying regulatory purpose.” Graham v Kochville Twp, 236 Mich App 

141, 151; 599 NW2d 793 (1999). In Bolt, 459 Mich at 168, our Supreme Court noted that the 

storm water enterprise fund replaced a portion of a program that was previously funded by 

general fund revenues from income and property taxes. Similarly, in Jackson Co, 302 Mich App 

at 105, the city of Jackson shifted the funding of preexisting government activities from 

declining general and street fund revenues to a storm water charge. This Court concluded that 

the revenue-raising purpose convincingly outweighed the minimal regulatory purpose of the 

charge. Id. at 106-107. The city of Jackson had admitted “that budgetary pressures, including 

declining general fund revenue, necessitated the tapping of new sources of funding for the 

maintenance of the storm water system.” Id. at 107. No such evidence or admission exists here. 

There is no indication that the city of Detroit has adopted the drainage charge to fund activities 

previously funded by general fund revenues, let alone that any such motivation outweighs the 

regulatory purpose of the drainage charge.14 Although the version of the drainage charge being 

challenged in these cases was adopted effective in October 2016, a drainage charge had already 

existed in Detroit in one form or another for many decades before that.15 Marcus D. Hudson, the 

 13 This Court has noted that the first two Bolt factors are closely related and may be analyzed 

together. Graham v Kochville Twp, 236 Mich App 141, 151; 599 NW2d 793 (1999).

14 And the regulatory purpose here is far from minimal because, unlike in Bolt and Jackson Co, 

the storm water is required to be treated before being released back into the environment.

15 DWSD customers have been paying some form of a drainage charge as part of their water and 

sewer bills since 1975, although it appears that a federally acceptable user charge system was not 
-17-

chief financial officer of the DWSD from August 2015 to August 2017, has averred without 

contradiction that “[t]he [c]ity has never used general fund expenses to pay for the costs of its 

combined sewer system treatment and disposal services.” The DAART plaintiffs present 

argument essentially speculating that the drainage charge is being used to replace revenue 

purportedly lost as a result of the city of Detroit’s bankruptcy and the formation of the GLWA, 

but the DAART plaintiffs have presented no evidence to support such a hypothesis. 

Accordingly, the lack of evidence of a significant revenue-generating purpose that outweighs the 

regulatory purpose leads to the conclusion that the drainage charge at issue primarily serves a 

regulatory purpose.

Next, the fact that the drainage charge is used in part to service debt incurred to pay for 

federally required capital investments does not by itself require the conclusion that the drainage 

charge constitutes a tax. See Bolt, 459 Mich at 164-165 (“Where the charge for either storm or 

sanitary sewers reflects the actual costs of use, metered with relative precision in accordance 

with available technology, including some capital investment component, sewerage may properly 

be viewed as a utility service for which usage-based charges are permissible, and not as a 

disguised tax.”) (emphasis added; citation omitted); Jackson Co, 302 Mich App at 111 (noting 

that “maintaining a capital reserve is a common practice among rate-based utilities that provides 

a degree of fiscal stability to utilities[]” but that such capital reserves must be “closely calibrated 

to the actual use of the service or a price paid for a commodity[]”). “[W]hile a utility fee must be 

reasonably proportionate to the direct and indirect costs of providing the service for which the 

fee is charged, mathematic precision is not required.” Trahey v City of Inskter, 311 Mich App 

582, 597; 876 NW2d 582 (2015), citing Jackson Co, 302 Mich App at 109. It is also beyond 

question that a utility’s costs may properly include a debt component. In particular, this Court 

has recognized that timely payment of a water and sewer department’s debt is necessary for that 

department’s continued operation and thus constitutes part of the actual cost of providing service. 

Trahey, 311 Mich App at 597. Further, a municipal utility’s rates are presumed to be reasonable, 

id. at 594, citing Novi v Detroit, 433 Mich 414, 428; 446 NW2d 118 (1989), and the burden is on 

the plaintiff to present evidence overcoming the presumption of reasonableness, Trahey, 311 

Mich App at 594, citing Novi, 433 Mich at 432-433, and Jackson Co, 302 Mich App at 109; see 

also Wheeler, 265 Mich App at 665-666 (“This Court presumes the amount of the fee to be 

reasonable, unless the contrary appears on the face of the law itself or is established by proper 

evidence[.]”). “Courts of law are ill-equipped to deal with the complex, technical processes 

required to evaluate the various cost factors and various methods of weighing those factors 

required in rate-making.” Novi, 433 Mich at 430.

Plaintiffs have presented no basis to conclude that the amount of the drainage charge in 

the instant cases is unreasonable merely because it is used in part to service debt incurred to 

finance capital improvements. It is true that in Bolt, our Supreme Court, in finding that the 

charge at issue was a tax, noted in relevant part that the charge was being used to fund “an 

investment in infrastructure that will substantially outlast the current ‘mortgage’ that the storm 

 

in place until 1980 pursuant to a consent judgment entered as part of federal litigation regarding 

the Detroit sewage system. See Detroit, 803 F2d at 1412-1413.
-18-

water charge requires property owners to amortize.” Bolt, 459 Mich at 164 (citation omitted). In 

Bolt, 459 Mich at 155, 165, however, the city of Lansing was using the storm water service 

charge to fund the costs over 30 years of a major project that would separate the remaining 

portion of the city’s combined sewer system and that would benefit only 25% of the property 

owners. Here, the city of Detroit uses the drainage charge in part to service debt incurred to 

finance federally mandated capital investments in the combined sewage system for the benefit of 

all property owners.16 The city of Detroit’s drainage charge is not used to fund future expenses 

for large-scale capital improvements; it is instead used to amortize present debt costs incurred to 

pay for capital improvements in conformance with accepted accounting principles.17 This 

payment method is consistent with the “fundamental principle of basic accountancy” identified 

in Bolt, 459 Mich at 164, that “ratepayers are charged for the amortization expense when it 

occurs and, therefore, rates coincide with the expense and are not retroactive[,]” id., quoting 

Ass’n of Businesses Advocating Tariff Equity v Pub Serv Comm, 208 Mich App 248, 261; 527 

NW2d 533 (1994). It thus appears that the capital expenses here were amortized in accordance 

with basic accounting principles and that the drainage charge is not a means of paying future 

expenses required to fund large-scale infrastructure improvements.

Turning to the second Bolt factor, the drainage charge is reasonably proportionate to the 

necessary costs of service. The charge is calculated on the basis of aerial photography as well as 

city assessor data to determine the amount of impervious area on each parcel.18 No drainage 

 16 The DWSD indicated that its drainage revenue requirement would exceed $151 million for 

fiscal year 2017, including more than $125 million in operation and implementation costs as well 

as drainage credits. The DWSD’s expense for debt service is $59.8 million; this expense is 

comprised essentially of a GLWA-held mortgage payment for facilities that are in place to 

address wet weather flows. The DWSD notes that “[t]his debt service expense relates to both 

municipal bond issues and to state revolving fund loans.” In compliance with EPA regulations to 

prevent excessive pollution into waterways, the DWSD invested more than $1 billion in CSO 

control facilities. The DWSD explains: “The cost was financed almost entirely through bonds 

which are being repaid by the drainage fee. Direct CSO costs have two components: $25.7 

million for annual CSO bond debt, and $6.2 million in annual operating costs specific to the 

control facilities.” The DWSD expects the rate of the drainage charge to decrease by 32% 

through fiscal year 2019.

17 In particular, Hudson’s affidavit avers, in relevant part:

The City’s drainage fee does not pay for large-scale capital improvements 

in the future. Rather, the fee covers costs of debt incurred to fund these capital 

improvements – costs that are properly amortized in accordance with 

governmental accounting principles. The fee only contemplates costs for 

necessary repairs to maintain infrastructure (which are included among GLWA’s 

allocated costs). 

18 The DWSD has indicated that it plans to update its 2015 aerial data with flyover imagery 

obtained in 2018.
-19-

charge will be imposed for parcels containing fewer than .02 impervious acres because that is the 

margin of error from flyover views. Further, if a property owner verifies that storm water runoff 

flows directly into the Detroit River or the Rouge River and that the parcel is disconnected from 

the DWSD system, there is no charge. The DWSD provides procedures whereby customers may 

dispute the measurement of the impervious acreage for a parcel or may seek an adjustment in 

billing on the basis of a modification to the impervious surface area or the direct discharge of 

surface waters to one of the above-mentioned rivers. The DWSD also permits drainage credits 

of up to 80% for customers who use green infrastructure systems or practices that reduce the 

amount of storm water flowing from the property into the DWSD’s combined sewer system. 

The Detroit defendants have provided studies and manuals supporting the conclusion that a 

parcel’s impervious area may be used as a way to measure or estimate the volume of storm water 

runoff from a parcel of property.19 This supports the conclusion that the amount of the charge is 

reasonably related to the costs of regulation. This Court is not required to determine whether 

that relationship is mathematically precise. See Jackson Co, 302 Mich App at 109, citing 

Graham, 236 Mich App at 154-155. The fact that parcels discharging storm water directly to a 

river or containing fewer than .02 acres of impervious surface are exempt reflects that the city 

has undertaken reasonable efforts to ensure that only parcels which discharge water into the 

combined sewer system are subject to the charge. Moreover, the individual measurements that 

are taken of each parcel further distinguishes the instant cases from Bolt and Jackson Co, in 

which flat rates were used for residential parcels of two acres or less. See Bolt, 459 Mich at 156; 

Jackson Co, 302 Mich App at 96. Also, Hudson’s affidavit states that for the fiscal year ending 

on June 30, 2016, the cash on hand was 5.4% of total receipts, which constituted approximately 

115 days of operating expenses, less than the industry standard of 250 days.20 This indicates that 

the city was not collecting more than it needed to operate the system.

The DAART plaintiffs and amici curiae suggest that the drainage charge is 

disproportionate because of the gradual phase-in of the new charge for various customers over 

five years. The DAART plaintiffs and amici curiae fail to establish that the use of a phase-in 

period, which is by definition temporary, is pertinent to determining the overall essence or 

character of a charge as a user fee or a tax. In an affidavit, Palencia Mobley, PE, the DWSD’s 

deputy director and chief engineer, explained the rationale for the phase-in period as follows:

5. DWSD ultimately decided to phase-in the uniform drainage rate as a 

way to mitigate the rate shock that was being experienced by all customers 

transitioning to the impervious acreage rate. Rate shock occurs when a customer 

experiences a rate increase that is much higher than the customer’s previous rate. 

 19 In addition, federal regulations permit the consideration of a user’s land area as a means to 

distribute costs in the context of a user charge system. See 40 CFR 35.2140(e)(2)(ii).

20 Hudson explained that cash on hand is critical to address unforeseen events such as 

“emergencies, unexpected drops in demand, seasonal expenditures (e.g. building cash in the 

winter to pay for large summer costs), and settlement of potential legal claims like flood claims.” 

It also is essential “to improving the City’s borrowing rate, since all of the ratings agencies 

consider cash-on-hand as a bellwether for organizational health.” 
-20-

Rate shock can lead to customers not paying their bills (which causes an increase 

in future bad debt expense).

6. For example, before DWSD decided to phase-in the drainage rate for 

new-to-world customers, 59.4% of its billings to these customers for the full 

amount of the drainage rate remained outstanding. After the implementation of 

the phase-in, the total percentage of outstanding billings decreased to 9.2%.

Indeed, it is well understood in the context of utility ratemaking that a phase-in period is a 

permissible administrative mechanism to ensure a gradual and orderly transition to a uniform 

rate in order to avoid rate shock. See, e.g., Citizens Action Coalition of Indiana, Inc v Northern 

Indiana Pub Serv Co, 76 NE3d 144, 153 (Ind App, 2017) (referring to the use of “gradualism” to 

“moderate any rate shock”) (quotation marks and citation omitted);21 Watergate East, Inc v Pub 

Serv Comm of Dist of Columbia, 665 A2d 943, 949 (DC, 1995) (describing a “policy of 

gradualism in the setting of utility rates, which dictates that utility customers generally should 

not be subjected to dramatic fluctuations in their rate payments[]”). Great deference is owed to 

the exercise of legislatively authorized ratemaking authority by municipal utility entities such as 

the DWSD. See Novi, 433 Mich at 425-426, 428, 430. The DAART plaintiffs and amici curiae 

have failed to establish that the phase-in period adopted here falls outside the DWSD’s 

ratemaking authority or affects the overall character of the drainage charge.

Further, the drainage charge is not rendered disproportionate by the DWSD’s failure to 

charge the city of Detroit itself a drainage fee for storm water flowing from city streets into the 

combined sewer system. Plaintiffs have presented no evidence to dispute the DWSD’s 

explanation that “[c]ity streets, which are lower than parcels, are part of the conveyance 

infrastructure for facilitating the flow of storm water from Detroit properties into the catch 

basins, then into the combined sewer system, and then finally terminating at the [WTP].” See 

Detroit, 803 F2d at 1416 (the city of Detroit’s failure to charge itself a drainage fee was not 

relevant to the city’s claim against the WCRC for treatment of storm water running off the 

WCRC’s roads within the city). Further, it is notable that city-owned parcels, as opposed to city 

streets, are not characterized by the DWSD as part of the conveyance infrastructure. Overall, the 

drainage charge is reasonably proportionate to the necessary costs of service.

Turning to the third factor, the drainage charge in the instant cases is effectively 

compulsory rather than voluntary. Property owners who have .02 or more impervious acres and 

whose storm water does not discharge directly into a river have essentially no control over 

whether to use the drainage service and pay the drainage charge. Although a green infrastructure 

credit system is available, it permits a credit only of up to 80% of the drainage charge. See 

Jackson Co, 302 Mich App at 111 (noting that the city of Jackson’s credit system did not 

guarantee property owners would receive a 100% credit and finding the city’s charge effectively 

compulsory). Moreover, property owners must either pay the drainage charge or pay at least 

 21 Although not binding on this Court, the decisions of the courts of other states may be 

considered persuasive. See K & K Constr, Inc v Dep’t of Environmental Quality, 267 Mich App 

523, 559 n 38; 705 NW2d 365 (2005).
-21-

some of the costs for making the green infrastructure improvements required to obtain a credit, 

thus making it impossible for property owners to escape the financial demands of the drainage 

charge. See id. at 111-112 (noting that property owners could not escape the financial demands 

of the city of Jackson ordinance because the property owners must either pay the charges 

assessed or pay for improvements to their respective properties). Although property owners are 

free to reduce the impervious areas on their properties, this is not “a legitimate method for 

controlling the amount of the fee because it is tantamount to requiring property owners to 

relinquish their rights of ownership to their property by declining to build on the property.” Bolt, 

459 Mich at 168. It is also notable that if a customer refuses to pay the drainage charge, the 

DWSD may terminate water service for the property, impose a lien on the property, commence a 

legal action to recover unpaid fees, and suspend or revoke a license to do business in the city of 

Detroit, which further indicates the effectively compulsory nature of the drainage charge. See 

Jackson Co, 302 Mich App at 112 (stating that the compulsory nature of the charge was 

demonstrated in part by the fact that delinquent payments could result in the discontinuation of 

water service, the imposition of a lien, and the filing of a civil action to collect past-due charges).

Overall, we determine that the application of the Bolt factors leads to the conclusion that 

the drainage charge in the present cases is a permissible user fee rather than a tax. The Bolt 

“criteria are not to be considered in isolation, but rather in their totality, such that a weakness in 

one area would not necessarily mandate a finding that the charge is not a fee.” Wheeler, 265 

Mich App at 665 (quotation marks and citation omitted). As discussed, the first two Bolt factors 

indicate that the drainage charge is a user fee because it serves a regulatory purpose and is 

proportionate to the necessary costs of the service. See Bolt, 459 Mich at 161-162. Although 

our analysis under the third Bolt factor indicates that the drainage charge is effectively 

compulsory rather than voluntary, “the lack of volition does not render a charge a tax, 

particularly where the other criteria indicate the challenged charge is a user fee and not a tax.” 

Wheeler, 265 Mich App at 666. Because the application of the first two Bolt criteria clearly 

demonstrates that the drainage charge is a proper user fee rather than a tax, the effectively 

compulsory nature of the drainage charge does not render the drainage charge a tax for the 

purpose of the Headlee Amendment. See id. at 667. Therefore, the drainage charge is a 

permissible user fee that is not subject to the Headlee Amendment.22

 22 The DAART plaintiffs’ discussion in their supplemental brief criticizing a settlement 

agreement reached in another Headlee Amendment lawsuit challenging the city of Detroit’s 

drainage charge, Mich Warehousing Group, LLC v Detroit, Wayne Circuit Court Case No. 15-

010165-CZ, has no relevance to the determination whether the drainage charge is a user fee or a 

tax. Moreover, the present cases are original actions and not appeals from any order issued in 

Mich Warehousing. The DAART plaintiffs may not use their original action here to collaterally 

attack any order entered in a separate case. See People v Howard, 212 Mich App 366, 369; 538 

NW2d 44 (1995) (“[A] collateral attack occurs whenever a challenge is made to a judgment in 

any manner other than through a direct appeal.”); SS Aircraft Co v Piper Aircraft Corp, 159 

Mich App 389, 393; 406 NW2d 304 (1987) (“The decision of a court having jurisdiction is final 

when not appealed and cannot be collaterally attacked.”).
-22-

Given our resolution of the above issue, we need not address the other issues raised and 

discussed in the parties’ original and supplemental briefs.

For the foregoing reasons, we deny plaintiffs’ requests for relief. MCR 7.206(E)(3)(b).

23

/s/ Michael J. Riordan 

/s/ William B. Murphy 

/s/ Mark T. Boonstra 

 23 In light of our decision to deny plaintiffs’ requests for relief, plaintiffs’ respective motions for 

class certification are denied because plaintiffs lack a cause of action. See Zine v Chrysler Corp, 

236 Mich App 261, 287; 600 NW2d 384 (1999) (holding that “[a] plaintiff who cannot maintain 

the cause of action as an individual is not qualified to represent the proposed class[]” and that 

because the plaintiff in Zine lacked a cause of action, he could not serve as a representative of the 

proposed class, making it proper to deny his motion for class certification on that basis alone), 

citing McGill v Auto Ass’n of Mich, 207 Mich App 402, 408; 526 NW2d 12 (1994) (finding no 

error in the refusal to certify the plaintiffs’ proposed class and explaining that “[b]ecause 

plaintiffs cannot maintain their individual causes of action, they are unqualified to represent the 

purported class[]”). The Detroit defendants’ motions seeking an extension of the due dates for 

responding to plaintiffs’ respective motions for class certification are denied as moot. See

generally, B P 7 v Bureau of State Lottery, 231 Mich App 356, 359; 586 NW2d 117 (1998).

Further, the Binns plaintiffs’ request for entry of default against the GLWA is denied 

because the request is not properly supported by an affidavit or otherwise. The “default request, 

affidavit, and entry” form filed by the Binns plaintiffs contained the signature of the Binns 

plaintiffs’ attorney in the “request and affidavit” section of the form, but the document was not 

notarized, the Binns plaintiffs offered no other support for their request, and no default has been 

entered by the Clerk of this Court in the “default entry” section of the form. See MCR 

2.603(A)(1) (“If a party against whom a judgment for affirmative relief is sought has failed to 

plead or otherwise defend as provided by these rules, and that fact is made to appear by affidavit 

or otherwise, the clerk must enter the default of that party.”) (emphasis added); Sherry v East 

Suburban Football League, 292 Mich App 23, 31; 807 NW2d 859 (2011) (“[A]n affidavit 

lacking notarization is invalid[.]”), citing Detroit Leasing Co v Detroit, 269 Mich App 233, 236; 

713 NW2d 269 (2005) (“[A] document that is not notarized is not a ‘valid affidavit.’ ”). Finally, 

the GLWA’s motion to strike or set aside the Binns plaintiffs’ request for default and for leave to 

answer or otherwise respond is denied as moot. See generally, B P 7, 231 Mich App at 359.