Michigan Supreme Court
Lansing, Michigan
Syllabus
Chief Justice: Justices:
Bridget M. McCormack Stephen J. Markman
Brian K. Zahra
Chief Justice Pro Tem:
Richard H. Bernstein
David F. Viviano Elizabeth T. Clement
Megan K. Cavanagh
This syllabus constitutes no part of the opinion of the Court but has been Reporter of Decisions:
prepared by the Reporter of Decisions for the convenience of the reader. Kathryn L. Loomis
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and SHAPIRO, JJ., agreed and affirmed in an unpublished per curiam opinion issued March 13,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:
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
Michigan Supreme Court
Lansing, Michigan
OPINION
Chief Justice: Justices:
Bridget M. McCormack Stephen J. Markman
Brian K. Zahra
Chief Justice Pro Tem: Richard H. Bernstein
David F. Viviano Elizabeth T. Clement
Megan K. Cavanagh
FILED July 11, 2019
STATE OF MICHIGAN
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
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.
2
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.
3
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.
4
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).
5
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).
6
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).
7
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,
8
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.
9
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.
10
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.
11
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).
12
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.
13
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
14
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.
15
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).
16
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
17
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).
18
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.”
19
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).
20
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?
21
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—
22
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.
23
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
24
Michigan Association of Home Builders v. City of Troy
Combined Opinion