Lawsuit Dismissed Against Village of Holly over Water and Sewer Fees

(Crystal A. Proxmire, Dec. 12, 2017)

Holly, MI – A lawsuit against the Village of Holly over water and sewer fees was dismissed Dec. 6 for the second time when the judge determined there was no evidence that fees had been used improperly.

The original lawsuit was filed June 9, 2017 by Heidi Gumbleton stating that the $5 water and $5 sewer fees charged by the Village of Holly violated the Headlee Amendment as an “impermissible tax,” and sought $1,000,000 in damages for herself and a class of plaintiffs being water and sewer customers of the Village of Holly, represented by Dale Smith and Peter Deahl who also live in the community.

That lawsuit was dismissed on Aug. 10.

On Aug. 23 Gumbleton filed an amended complaint with five charges, then stipulated to the dismissal of four of the charges, leaving only one argument – that the fees were a violation of the Revenue Bond Act of 1933.

The Revenue Bond Act of 1933 provides, among other things, that “rates shall be sufficient to provide for the payment of expenses of administration and operation and expenses for the maintenance of public improvement,” and “payment of the interest and the principle of bonds payable from the public improvements when the bonds become due and payable.” (MCL 141.21).

Gumbleton claimed that the Village “violated the Revenue Bond Act by collecting water and sewer capital charges and applying them to expenditures wholly unrelated to the payment of the bond.”

The Village responded that the use of funds was appropriate under the law.  Gumbleton could not provide any evidence of misappropriation of funds.

Her attorney argued that they should be allowed access to more records, but this was an insufficient argument to Judge Hala Jarbou of Oakland County Circuit Court, who quoted precedent from a previous case, stating “mere conjecture does not entitle a party to discovery because such discovery would be no more than a fishing expedition.”

Other communities have faced similar lawsuits with varying results.  In 2015 Royal Oak, Birmingham and Ferndale all faced lawsuits over fees that were being applied to infrastructure debt.  Ferndale and Birmingham settled their cases, with Ferndale agreeing to a $4.2 million settlement and Birmingham agreeing to $3 million.  Royal Oak took their chances in court and the lawsuit was dismissed.