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East Lansing could pay BWL customers up to $6.6 million thanks to lawsuit

Board of Water and Light
Posted at 5:28 PM, Apr 07, 2022

EAST LANSING, Mich. — The City of East Lansing might have to pay Board of Water and Light customers in the city around $6.6 million thanks to a judge ruling a tax fee by the company as illegal.

In 2017, Board of Water and Light began collecting a five percent franchise fee from East Lansing customers. The company collected about $1.4 million a year and passed it on to the city to put in the general fund to be used how the city saw fit.

Jim Heos, an East Lansing resident, sued the city in April of 2020 claiming the tax was unlawful. Greg Hanley, lead counsel in this case, said this isn't the first time a tax like this has been taken to court in mid-Michigan.

“We started looking at this issue years ago, and brought a suit against Delta Township, which had a franchise agreement that was for all intents and purposes, identical to the one that East Lansing has implemented," Hanley said. "And in matter of fact, that judge in Eaton County Judge John Maurer ruled two months before we filed the suit that the Delta Township fee was an unlawful tax.”

Hanley said the law limits what kinds of taxes municipalities can impose.

“There are limitations in the law on taxes that can be imposed by municipalities typically requiring voter approval or certain types of taxes or just unlawful regardless," Hanley said. "A regulatory fee is not a tax, and therefore, these cases turn on the question of whether the charge add issue is a tax under the law or a proper fee.”

On March 31, Ingham County Judge Wanda Stokes ruled that the tax fee is illegal.

“The judge has to apply what are called the bolt factors and the bolt factors come from a Supreme Court case that was 25 years ago, called Bolt versus City of Lansing," Hanley said. "So the judge is required to look at certain factors and decide whether on balance, the charge is a tax, or is a fee.”

Stokes wrote that although the fee is going back into the city's general fund, eleven percent of the city are not Board of Water and Light customers and do not have to pay for the fee.

“If you're only charging part of the citizens for something that's benefiting all of the citizens, that's an indication of a tax,” Hanley said.

Hanley said they're happy with the ruling.

“We think that it was the judge properly following the law, but we also don't think this was a close call," Hanley said. "I mean, back as early as 2016, the Board of Water and Light was expressing concerns that it was going to be illegal, and they didn't want to act as anything other than a collection agent.”

“BWL does not impose franchise fees on its customers living in these government jurisdictions, the governments themselves impose the fee," Board of Water and Light Spokesperson Breina Pugh wrote. "BWL simply collects the franchise fees as a pass through back to the government jurisdiction.”

Pugh went on to say Board of Water and Light will abide by all court rulings. City of East Lansing Communication Specialist Quinn Alexander said the city is reviewing the courts decision with its attorneys, but couldn't provide further comment.

Hanley said the next step is to get the city and Board of Water and Light to stop imposing the tax and issue a refund to those who have paid the tax so far.

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