In an opinion released yesterday, the Michigan Supreme Court reviewed the question of whether monies paid for building permits could be incorporated into the city's general fund. The city has a contract with a third party to handle most of its building inspection and permitting and the city's fees that exceed the costs of its contract with the third party generated revenues that were transferred to the city's general fund. The Michigan Supreme Court remanded the case for trial because 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.
As part of its decision the court recognized that fee setting did not require precision so as to require an exact cost to revenue ratio and also spent quite a bit of time addressing standing. A Michigan statute required that fees bear a reasonable relationship to the costs of the services including overhead. Many states either have similar constitutional or statutory requirements that fees act to offset costs as opposed to act as revenue generating opportunities.
Troy's use of a third party to handle its permitting process and inspections seems a very smart move as it increases the breadth of its expertise while recovering its costs of the contract. (and then some)
To the extent that I may have misread the case or through this snippet erroneously stated the conclusion, the case is available at the Michigan Supreme Court:
156737 MICHIGAN ASSOCIATION OF HOME BUILDERS V CITY OF TROY
Author(s): BKZ [COA Case #: 331708]
Lower Court: OAKLAND CIRCUIT COURT, No. 2010-115620-CZ
Opinion on Application - Reverse CoA
156737_81_01.pdfhttps://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbXNpZD0mYXVpZD0mbWFpbGluZ2lkPTIwMTkwNzEyLjc5NzE1NjEmbWVzc2FnZWlkPU1EQi1QUkQtQlVMLTIwMTkwNzEyLjc5NzE1NjEmZGF0YWJhc2VpZD0xMDAxJnNlcmlhbD0xNjc4MDYyOCZlbWFpbGlkPWN0aG9tcHNvbkBpbWxhLm9yZyZ1c2VyaWQ9Y3Rob21wc29uQGltbGEub3JnJnRhcmdldGlkPSZmbD0mbXZpZD0mZXh0cmE9JiYm&&&105&&&http://publicdocs.courts.mi.gov/OPINIONS/FINAL/SCT/156737_81_01.pdf
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