Coins and a Lansing Board of Water and Light bill photographed on April 7, 2020.
Earlier this month, Ingham County Judge Wanda Stokes ruled a fee collected by the Lansing Board of Water and Light, or BWL, on behalf of East Lansing is illegal.
East Lansing resident James Heos filed a class action complaint against the city on April 13, 2020, challenging franchise fees imposed on residents whose properties receive electric service from the BWL, according to an East Lansing litigation status report from 2020.
BWL began collecting a 5% franchise fee from East Lansing customers in 2017 and collects around $1.4 million a year from East Lansing residents from this fee.
“While we're pleased with the outcome, we think the judge reached the right result, but I don't think this was a close call,” Greg Hanley, Heos’ attorney, said. “The city should have known. I believe the city should have known this was illegal at the time because the (BWL) had raised an issue about it, and expressly said that they were concerned that it was illegal, and they went forward anyway. The BWL is taking the position they'll do whatever the court tells them to do on that, they were just a collection agent. They weren't the ones imposing the tax.”
A provision in the Michigan Constitution requires local governments to have voter approval to implement a new tax, Hanley said.
“Whenever there's a new charge, there's a question of whether it's a fee, which is OK, or it's a tax, which is not OK,” Hanley said. “That’s what these cases turn to, whether it's an appropriate fee, which doesn't require voter approval, or whether it's a tax. The judge’s analysis of East Lansing’s charge was whether it satisfies the test for a tax, and she ultimately held that it did.”
The complaint sought a refund of all payments made, and an injunction to prevent the city from collecting the fees in the future.
“We believe a refund is required under the law,” Hanley said. “What's left to be decided is how much that is, but the city has records … so we'll be able to know down to the penny, what has been collected to date.”
Breina Pugh, a spokesperson for the BWL, said the BWL does not impose the fee.
“BWL does not impose franchise fees on its customers living in these government jurisdictions, the governments themselves impose the fee,” Pugh said in a statement. “BWL simply collects the franchise fees as a pass through back to the government jurisdiction.”
Pugh said BWL will abide by all court rulings.
East Lansing Communications Specialist Quinn Alexander said the City is reviewing the court’s decision with its attorneys and cannot comment further at this time.
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