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East Lansing charged millions of dollars in illegal utility franchise fees, judge rules

electric utility pole
Eastman Childs
/
Unsplash
An electric pole.

An Ingham County judge is dealing a victory to East Lansing ratepayers who filed a class action lawsuit over fees the city tacked onto utility bills.

Since 2017, the city has collected about $1.4 million a year from franchise fees charged to Lansing Board of Water & Light users.

City officials said the 5% add-on to electric bills was necessary because it offset expenses for maintaining rights of way used by the BWL.

But Circuit Court Judge Wanda Stokes disagreed, when she ruled late last month that the fees amounted to an illegal tax.

Stokes notes the fees went to the city's general fund and says, instead of offsetting the costs of specific service, they were used to broadly raise revenue.

The suit remains open, but George Hanley, one of the attorneys behind the lawsuit, says the aim is to get East Lansing to stop charging the fees in the future and to reimburse thousands of ratepayers who were wrongly charged the fees in the past.

"I think that the judge followed the law," he said. "But I also don't think this is a close call. (It was), in our view, pretty apparent from the outset that it was illegal.”

East Lansing resident James Heos, who initiated the lawsuit, calls the ruling a victory. He expects the city to appeal, however, and that it will take time for ratepayers to get their money back.

"I expect the negotiations will not go quickly," he said. "I just want to citizens to get back part of the money that they were taxed without authority."

An amendment to the Michigan Constitution limits the ability of local governments to raise taxes without voter approval. In 2020,Delta Township agreed to reimburse ratepayers $2.3 millionafter a judge determined similar franchise fees were illegal.

Heos, an attorney, says he wrote to East Lansing years ago, warning officials the fees were illegal. He says he started the process of lawsuit after seeing that a similar case was successful.

An East Lansing spokeswoman says city officials are reviewing the latest decision and declined to comment further.

Sarah Lehr is a state government reporter for Wisconsin Public Radio.
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