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Wednesday, May 15,2013

What about those 'fees?'

Bernero administration still unclear whether proposed fire hydrant and streetlight charges would be a fee or a tax

by Andy Balaskovitz

With less than a week to go before the Lansing City Council must adopt a new budget, the single biggest issue has yet to be resolved.

The question is whether Mayor Virg Bernero’s proposed charge for hydrants and streetlights is a fee or a tax. The Council can increase fees, but a tax would require a vote of the people. 

Bernero’s proposal to charge city BWL customers for streetlights and fire hydrants is projected to raise $5.5 million in the fiscal year that starts July 1. It is the central piece to balancing a $5 million deficit. Those costs are now built into the General Fund, which is largely fed by property and income tax revenue and state-shared revenues.

Some legal experts say it would be a tax. Lansing City Attorney Janene McIntyre is apparently still researching the city’s position.

A 1998 decision by the Michigan Supreme Court — in which a Lansing resident challenged whether a storm water service charge imposed by the city was a tax and won — established three criteria for differentiating fees and taxes: A fee must serve a regulatory, not a revenue-raising, purpose; the fee must be proportionate to the service costs; and the fee must be voluntary.

Randy Hannan, Bernero’s chief of staff, said Monday night that he was yet to discuss the city attorney’s findings with her. McIntyre could not be reached for comment on Tuesday.

The proposal has received virtually no attention in City Council budget hearings since BWL General Manager J. Peter Lark appeared before the Council on April 8 to give more details. At that meeting, Lark laid out two potential scenarios for how the charges could affect residential, commercial and industrial customers: A percentage increase based on electricity and water usage and a flat fee increase for both of those.

“In general, the flat rate advantages the larger users. I don’t know if you want to do that or not,” he said at the time. “The little guy would probably do a little better” with a percentage increase.

At that meeting, Lark said customers in six local jurisdictions are charged for hydrants. All jurisdictions served by BWL pay for streetlight services out of general funds.

City Councilman Brian Jeffries said the administration was “non-responsive” on a series of written questions, including whether it’d be a tax or a fee. He also said the Council has not seen a formal legal opinion on the matter.

Jeffries said he wants to see a “tiered system” for ratepayers, in which BWL customers outside of the city would pay higher rates if city customers have to pay for streetlights and fire hydrants.

BWL spokesman Steve Serkaian said the publicly owned utility would comply with whatever system is approved in a finalized budget. He said the tax/fee question is “not for BWL to determine. The city wouldn’t raise that matter with BWL.

“BWL will do whatever the budget process requires it to do.”

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