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Fee or tax? Detroit's controversial drainage rate faces legal challenge

Aug 13, 2018

UPDATED on 8/22/2018 at 10:25 am

On July 1, the Detroit Water and Sewerage Department completed its phase-in of a new drainage rate for residential properties.

The department expects to collect $153 million from the rate in 2019, roughly $30 million more than it will collect from water rates.


Known by opponents as the “rain tax,” the drainage rate’s rollout has been fiercely challenged by residents, business owners, and operators of faith-based institutions. They say the charge is unreasonably expensive and opaquely calculated. Some are even suing the city, claiming the charge is actually an unconstitutional tax in violation of Michigan’s Headlee Amendment.

But what is drainage, anyway?

Drainage refers to any surface water, like rain or snowmelt, that enters Detroit’s combined sewer system, where it mixes with raw sewage. Per the Clean Water Act, that combination of water and sewage must be treated before it is discharged into the Detroit and Rouge rivers. In cases of extreme wet weather, the city must hold the combined sewage in retention basins to prevent overflows of untreated waste into the rivers.

The city’s new drainage rate charges residents based on the amount of hard surfaces they have on their property, like driveways, roofs, or parking lots. The logic: Any water that isn’t soaked into the ground ends up in the combined sewer system.

Palencia Mobley, deputy director and chief engineer of the Detroit Water and Sewerage Department, said the new rate was designed to create a uniform system.

“The new rate actually is fair because every single customer is being charged based on their specific parcel’s impervious area,” she said.

But for Sylvia Orduño, there is nothing fair about water rates in Detroit. Orduño is an organizer for the Michigan Welfare Rights Organization, which advocates for an income-based water affordability plan in Detroit.  In the last four years, the water department has disconnected more than 100,000 residential accounts that are behind on their bills. The threshold for cutoff: 60 days behind or $150 overdue.

At a public hearing in June hosted by the Board of Water Commissioners, DWSD security officials and Detroit police restrained Orduño after the board attempted to cut public comments short. The public refused to stand down, however, and the board re-opened the public comment microphone. Orduño then spoke to the persistent issue of unaffordable rates in a city where two-thirds of the population is low-income.

“And now you’re telling me that on top of the water bills we’re already paying, because I happened to have gotten a house with a long driveway, that now I’m going to have to pay additional drainage charges? You have no right to ask us to pay any more.”

But as an enterprise fund, the only way the water department can cover its costs is by charging its ratepayers. That puts a huge burden on Detroit's now shrunken population, which must shoulder the cost of billions of dollars' worth of legacy debt and the present and future improvements for Detroit’s aging and outsized infrastructure.

The formation of the Great Lakes Water Authority as part of Detroit's 2014 bankruptcy proceedings complicates matters further. Now, instead of paying into their own city’s coffers, a large portion of Detroiters’ money goes to the regional body that acts as the wholesale provider of water and sewerage services. The authority also controls $3.8 billion of Detroit’s legacy debt.

Given the financial pressures the water department finds itself in, critics suspect that a fixed drainage rate was simply devised to fill a revenue gap.

It “really had nothing to do to correlate with drainage,” said Peter Hammer, director of the Damon J. Keith Center for Civil Rights at Wayne State University, “but was really just a crass calculation to say, how are we going to maintain our head above water?”

And this is where the ongoing legal challenge comes into play.

Opponents of the rate, like Russ Bellant, a former water plant operator, argue that the calculation is not only crass, it’s an unconstitutional tax.

“The drainage fee meets all three definitions of a tax, and if it met just one of them, it would be a tax,” Bellant said. “But it’s a tax, a tax, and a tax.”

According to a 1999 Michigan Supreme Court decision, Bolt v. Lansing, a fee is distinguishable from a tax based on three criteria: One, a fee serves a regulatory purpose, not a revenue-raising purpose; two, a fee must be proportional to the service it provides; and three, a customer must be able to decline or control their use of the service.

Like Bellant, plaintiffs in the case Detroit Alliance Against the Rain Tax v. City of Detroit argue that the drainage rate functions as a tax under all three criteria. That would put it in violation of Michigan’s Headlee Amendment, which requires a public vote for any new tax or tax increase.

Both Lansing and Jackson’s drainage rates have been overturned on similar arguments.

The case currently sits on the docket of the Michigan Court of Appeals. Neither attorney would comment for this story. 

This story comes from Outlier Media.

CORRECTION - An earlier version of this story said the threshold for water cutoff was 60 days or 150 days. It should read "60 days or $150." It is corrected above.