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Returning with our second part on township law legal updates, we review decisions impacting township authority to regulate local concerns provided under constitutional and statutory authority. This authority is not always specific, however, and the Legislature and courts are frequently called upon to clarify municipal authority. This month’s E-letter focuses on decisions handed down by Michigan courts clarifying municipal authority, including authority to adopt and enforce ordinances, assess fire run fees, and defend zoning ordinances and defend against liability for sewer discharges.

Michigan Supreme Court Empowers Municipalities to Enact Prevailing Wage Ordinances

There has been a controversy over whether a municipality has the authority to enact prevailing-wage ordinances in the context of a municipal contract. Prevailing-wage ordinances are local government rules (modeled in part on state law) requiring municipalities, school districts, and public universities to pay the going rate of wages and benefits negotiated with contractors in the vicinity. In May of 2014, the Michigan Court of Appeals came down with a decision that allowed municipalities to enact a prevailing wage ordinance and held it to be a valid exercise of municipal power. On appeal to the Michigan Supreme Court, the ability to require a prevailing wage was affirmed, clarifying the rights of municipalities. Associated Builders and Contractors v City of Lansing, decided May 17, 2016 (Docket 149622).

The case began when the City of Lansing enacted an ordinance requiring contractors working on city construction projects to pay employees a prevailing wage. A trade association filed suit against the City of Lansing, arguing that the prevailing wage ordinance was unconstitutional because municipalities have no explicit authority to regulate the wages paid by third parties, even if the work is done for and paid by the municipality.

The Michigan Supreme Court clarified the local regulatory authority to adopt ordinances under the Michigan Constitution. In doing so, the Supreme Court changed the legal landscape in this area by overruling a 1923 Michigan Supreme Court case, Lennane v Detroit. The Court held that under the current state constitution, there was “no room for doubt about the expanded scope of authority of Michigan’s cities and villages.” Associated Builders, slip op at 8. The powers explicitly provided to municipalities, including townships, are to be liberally construed. Id. citing Const 1963, art 7, § 34. With this liberal interpretation of municipal power, the Court stated that if “a municipality has broad powers over local concerns, it certainly has the power to set terms for the contracts it enters into with third parties for its own municipal projects—including provisions relating to the wages paid to third-party employees.” Id. at 9. The Court reasoned that “the municipality controls its own money, and presumably expresses its citizens’ preference as to what those who work on public projects should be paid.” Id. (emphasis in original). Although the facts of this case involve a city, the liberal construction of municipal power by the Michigan Supreme Court indicates that even township powers will be liberally construed to allow “broad powers” to address local concerns.

Municipalities act pursuant to express grants of power, and those express grants must be construed liberally. This decision sets the stage for a positive and expansive reading of powers delegated to townships and other municipalities.

Funding Your Intergovernmental Fire Services

Many townships have found operating fire departments to be a hefty expenditure. The impact on township budgets is often minimized by dedicated millages for fire services or charging fire service fees. Townships also reduce the costs of fire departments by operating joint departments or contracting with townships, cities, and villages for fire service in order to save money and resources.

Those townships that have decided to charge fire service fees use a fire protection ordinance, charging owners of real or personal property a fee for certain types of fire runs. Enacting this type of ordinance is authorized by MCL 41.806a which provides, in pertinent part: “The legislative body of a municipality providing emergency police or fire service or the legislative bodies of municipalities acting jointly to provide such a service pursuant to this act may authorize by ordinance the collection of fees for the service.” The fee imposed by the township for fire services must be based on the service rendered by the fire department. The fee cannot be a disguised tax designed to raise revenue. Bolt v City of Lansing, 459 Mich 152, 161; 587 NW2d 264 (1998) (citation and quotation marks omitted).

The Michigan Court of Appeals recently reviewed a challenge where a corporate citizen refused to pay their fire run fees. The Michigan Court of Appeals upheld the township’s ordinance imposing fire run fees in Mayfield Twp v Detroit Edison Co., recently issued on May 24, 2016 (Docket No. 323774). Mayfield Township’s fire protection ordinance charged owners of real or personal property a fee for fire runs under four conditions:

1. allowing a fire to burn out of control;
2. turning in a false alarm;
3. failing to maintain an alarm system thereby resulting in a false alarm; and
4. if plaintiff attempted to protect real or personal property on a fire run.

Under the ordinance, the Township billed Detroit Edison (“Edison”) 25 times for fire protection services over two-year period. Edison did not pay those bills. The court found that each of the 25 fire runs billed involved Edison’s poles, power lines, and transformers in some way. The court stated that it is not misguided to find that Edison “received some benefit in the protection of its own property.” Id. The court ultimately ruled in the favor of the Township and its ordinance.

We note that one dissenting judge stated that “by enacting an ordinance that assesses a fee upon all beneficiaries of a service and then applying that ordinance in a given situation to exclude potential payers and channel responsibility to a single beneficiary, a township arbitrarily discriminates against the beneficiary in violation of his equal protection rights.” Id. at 3 (KRAUSE, J., dissenting). In other words, townships should be aware that, in situations where there existed a second beneficiary and a township or other municipality arbitrarily imposed the fee solely on one person or entity, the fee may be invalid. All beneficiaries must be treated the same or the township must have a good reason for charging a fee to one person, but not another. Townships must be cautious in enacting and enforcing their fire run ordinances.

Edison has appealed this case to the Supreme Court. Stay tuned for any future updates.

Township’s Duty to Prevent Sewage Discharge

Michigan is the Great Lakes State. Many townships have lakes within or touching their borders. Protecting our state’s greatest resources is why the Legislature saw fit to enact the Natural Resources and Environmental Protection Act, commonly known as “NREPA”. Many municipalities do not realize the liability that this act imposes on them. Under MCL 324.3109(2), the “discharge of any raw sewage of human origin, directly or indirectly, into any of the waters of the state shall be considered prima facie evidence of a violation of this part by the municipality in which the discharge originated” unless permitted by the DEQ. Most people would typically think that this section of statute means any discharge caused by the municipality. Unfortunately, under DEQ v Worth Twp, 491 Mich 227; 814 NW2d 646 (2012), a municipality was liable for all sewage discharge, even when the sewage is discharged by a private party on private property.

Worth Township did not have a central township sewage system but instead each cottage or cabin property had a private septic field to dispose of waste. The DEQ conducted surveys of water quality around Worth Township in 2003, 2006, and 2008, including observations of privately owned septic systems. The DEQ collected water samples to confirm and measure amounts of contaminating bacteria. The data demonstrated that both surface waters and Lake Huron were contaminated with fecal coliform and E. coli bacteria. And conditions were worsening. Worth Township agreed to construct a municipal sewer system as a remedy. The Township later realized it was unable to finance construction of the new system. The DEQ then brought action against the township seeking an injunctive order mandating the construction of a sewage system to cure the violations of NREPA.

In construing liability under the Act for townships, the Michigan Supreme Court found a municipality responsible for, and required to prevent, a discharge of raw sewage that originates within its borders. This is true even when the raw sewage is discharged by a private party and not directly discharged by the municipality itself. If there is a discharge of sewage within the township, the township itself is presumed in violation of the act “irrespective of who actually caused the discharge.” Id. at 241. The court did not state that the township was required to create a sewage system as originally contemplated, only that it must remedy the situation. This could mean creating the sewage system if funds became available, or simply repairing or replacing the septic systems on the properties causing the sewage discharge.

The Worth case is still applicable today but the Michigan Legislature saw fit to modify the act in question, MCL 324.3109. New language gives municipalities an exception to the statute. Under MCL 324.3109(3) there are now two exceptions. First, a municipality is not liable for the “unauthorized discharge from a sewerage system” that is “owned by a party other than the municipality.” MCL 324.3109(3)(a). Sewerage systems are defined under the act and do not include septic fields. Worth, 491 Mich at 246-247.

The Legislature also created a second exception: “The discharge is from 3 or fewer on-site wastewater treatment systems.” MCL 324.3109(3)(b). The phrase “on-site wastewater treatment system” is defined to cover a disposal system other than sewerage systems and is targeted at private septic fields. See MCL 324.3109(3)(b) and Worth, 491 Mich at 231 n 6 (describing septic systems). Essentially, the statutory modification takes a long winded way to say that problems from three or fewer private septic systems will not automatically trigger liability on the municipality. The amount of properties at issue in Worth was not stated, but if the problem stemmed from only three homes, the township might have been able to avoid liability if the new statutory amendments were in place at that time.

The best way for townships to avoid this type of liability is to stay ahead of it. Monitor current changes in the legislation and ensure proper septic systems are being used in the Township.

Court of Appeals Rules Composting Facility Not a “Farm” under Township Ordinance and Right to Farm Act

The Court of Appeals recently decided a case in which the Charter Township of White Lake brought action against a property owner, seeking to enjoin the owner’s operation of a large commercial composting facility in a zoned agricultural (AG) district. Charter Township of White Lake v Ciurlik Enterprises, issued May 12, 2016 (Docket No. 326514). The Township alleged that the commercial composting facility was not a permitted use in the zoning district, violated certain performance standards regarding noxious odors, and failed to conform to NREPA requirements for composting operations. In response, the property owner argued that the commercial composting facility was permitted as a “farm” under the zoning ordinance and protected by the Right to Farm Act (RTFA). The property owner further argued that the Township’s zoning ordinance completely prohibited composting facility as a use and thus enforcement of the township ordinance was prohibited.

The court rejected the property owner’s arguments, interpreting “farm” to require “bona fide farming,” which included production of plants or animals. The only activity on the property, however, was commercial composting. Since composting was not a process of producing crops or animals, the court rejected the property owner’s arguments completely. The court further held that the zoning ordinance did not violate exclusionary zoning statute because commercial composting was allowed as a light industrial use. Finally, the facility did not qualify as a “farm” or “farm operation” entitled to protection under the RTFA because farm products are limited to plants and animals under the statute. Again, commercial composting alone could not satisfy the definition.

This case points the significant of defining key terms in the zoning ordinance. Here, “farm” was defined in the Township zoning ordinance, and that definition made it clear that the property owner’s use was outside that scope. The definition of “farm” was also consistent with the definition of “farm” in the RTFA, thus the court could consistently apply the township’s zoning ordinance provisions with the RTFA. Township should have definitions of terms that may be ambiguous or vague to assist in enforceability. When a term is defined in a related state statute, adopting the definition in the state statute may be beneficial. Legal counsel and planners can also assist in reviewing and revising new ordinances and amendments.

— Christopher Patterson

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Fahey Schultz Burzych Rhodes PLC, Your Township Attorneys, is a Michigan law firm specializing in the representation of Michigan townships. Our lawyers have more than 150 years of experience in township law, and have represented more than 150 townships across the state of Michigan. This publication is intended for our clients and friends. This communication highlights specific areas of law, and is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation.