Background
Woodward Manchester Company and Woodward Highland Park own approximately 82 acres of commercial property in Highland Park. They challenged stormwater charges imposed after June 28, 2022, alleging that the charges were an unlawful tax under Michigan’s Headlee Amendment and were unreasonable under state law and the city charter. The city counterclaimed for unpaid stormwater and other utility charges, including readiness-to-serve and industrial waste control charges.
The city sought summary disposition, relying on the presumptions that municipal utility charges are constitutional and reasonable. The property owners responded with expert analyses asserting, among other things, that the stormwater rate improperly incorporated dry-weather inflow and infiltration costs, included amounts billed but not paid to the regional wastewater authority, and failed to charge the city for runoff from its own roads. The trial court found that reasonableness should go to a jury, denied summary disposition, and declined to strike the owners’ experts as untimely disclosed.
The Court’s Holding
The Court of Appeals held that the city was entitled to summary disposition on the Headlee Amendment challenge and the claim that the stormwater charge was unreasonable. Applying the three-factor test from Bolt v. Lansing, the court concluded that the charge served a regulatory purpose and was proportionate to the stormwater services provided. Although the charge was effectively involuntary, that factor did not outweigh the other two. The owners’ expert evidence did not include a comprehensive cost-of-service study and therefore did not overcome the presumptions of constitutionality and reasonableness.
The court also held that the city was entitled to summary disposition on its counterclaim concerning the unpaid readiness-to-serve and industrial waste control charges because the owners had not produced sufficient evidence that those charges were unreasonable. But it affirmed the refusal to strike the owners’ experts, reasoning that the trial court acted within its discretion in finding the late disclosures justified by the city’s delayed production of rate-methodology documents. The case was remanded for further proceedings, including proceedings on portions of two unjust-enrichment counts that had not been resolved by the city’s motion.
Key Takeaways
- Whether a municipal charge is a tax or a user fee under the Headlee Amendment is a question of law, and there is no right to a jury trial on that claim.
- A ratepayer generally cannot overcome the presumptions favoring municipal utility rates through assumptions, extrapolation, or criticism of individual rate components without evidence addressing the rate’s overall relationship to the municipality’s direct and indirect costs.
- A court need not apply the factors governing dismissal-level discovery sanctions when it declines to impose sanctions, and late expert disclosure may be excused when the opposing party delayed producing information needed for the expert analysis.
Why It Matters
The decision reinforces the substantial evidentiary burden facing ratepayers who challenge Michigan municipal utility charges. Showing that a rate may contain a questionable component—or proposing a fairer methodology—is not enough; challengers ordinarily need a comprehensive rate study or comparable evidence demonstrating that the charge as a whole is excessive.
The opinion also confirms that an involuntary stormwater charge may still qualify as a user fee when its regulatory purpose and proportionality predominate. At the same time, the ruling preserves trial-court discretion to accommodate expert disclosures delayed by incomplete discovery.