HBA of Michigan's Legal Action Fund

HBA Members are encouraged to make a donation to the Legal Action Fund to allow our state association to continue their efforts on behalf of the housing industry against unlawful government action. We need to keep housing affordable and plentiful for tomorrow's home owners and your donation will help.

On December 21, 2020, HBA of Michigan's Lee Schwartz wrote:

 

"We’ve been in a decade-long fight over illegal permit fees and cities across the state are watching. Under the law building permit fees may only be used to operate the building department and the construction board of review. A case currently in the courts may reverse that prohibition and reopen using your building permit fees to help run the rest of your local government! We need your donation to continue to fight this case.

As such, we’re asking our members and those in the building industry across the state to help contribute to this precedent-setting fight. We’ve rarely asked for contributions to our legal action fund but, given the extraordinary effort and critical juncture we find ourselves in this case, your support is now needed.  Can you live with a 400% increase in your building permit fees next year or is it worth a $100 donation to the HBAM Legal Action Fund to stop this from happening? During a court hearing earlier this month, Troy claimed their indirect costs had gone from the 8% of the direct costs for running the building department ($187,636 in 2019) to more than 4 times that amount in 2020 – a total of $780,728.86. They also claimed they were now losing money on their privatized building department and that they could raise permit fees to cover the newly discovered “shortfall.” 

When the Single State Construction Code Act was passed in 1999, one of the changes your state association achieved was to end using building departments as cash cows to run other areas of local governments.  Under the law building permit fees may only be used to operate the building department and the construction board of review. A case currently in the courts may reverse that prohibition and reopen using your building permit fees to help run the rest of your local government!

More than 10 years ago the city of Troy signed a contract to privatize their building department. That contract required the private company to return between 20 to 25 percent of the building fees to the city which then placed them in their general fund with the excuse they were “paying back” previous deficits from the building department that had been covered by money from the general fund. HBAM filed suit on December 10, 2009 to stop this violation of the law and has twice won unanimous decisions at the Michigan Supreme Court on this issue. But the case is still ongoing.

By the end of 2019, the city had received $3,231,346 in excess building department fees all of which were used to run other areas of Troy’s government in violation of the law. They continue to collect that 25% surplus today.
 
Last year the Michigan Supreme Court unanimously rejected the city’s use of these funds for any purpose other than running the building department but did allow for the city to recover its indirect costs of running the department from the surplus. The Michigan Supreme Court defined indirect costs or “overhead” as “the general, fixed costs of running a business such as rent, lighting and heating expense, that cannot be charged to a specific product.” The case was returned to the Oakland Circuit Court to determine the proper amount of indirect costs the city could receive.

During a court hearing earlier this month, Troy claimed their indirect costs had gone from the 8% of the direct costs for running the building department ($187,636 in 2019) to more than 4 times that amount in 2020 – a total of $780,728.86. They also claimed they were now losing money on their privatized building department and that they could raise permit fees to cover the newly discovered “shortfall.”

How did their indirect costs in 2020 increase to four times those in 2019? Troy now claims, in court, a portion of the direct costs of other departments such as police, fire, zoning, planning, finance, the city clerk, the city treasurer, the city attorney, and the city manager are actually indirect costs attributable to the Building Department and building permit fees can be used to pay these “costs.” This is not now supported by the law but an unfavorable ruling from the court could change that.

Over the last 11 years your association has spent over $450,000 fighting these illegal fees. After every win we have, Troy returns to the courts and uses not only taxpayer money in an attempt to overturn our victories, but they now assert they can use the permit fees to pay their attorneys to fight against the same builders paying those fees.
  
Don’t fool yourself into thinking this will only affect contractors who build in Troy.  If the court agrees with Troy’s argument, we’ll see a return to the bad old days when local governments avoided raising taxes on residents by using permit fees to pay for operating other departments.

Can you live with a 400% increase in your building permit fees next year or it is worth a $100 donation to the HBAM Legal Action Fund to stop this from happening?"

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