Appeals panel rules in EL's favor in lawsuit over BWL franchise fee

EAST LANSING — An appellate panel has overturned a lower court finding that the franchise fee paid to East Lansing by the Lansing Board of Water & Light is illegal.

In a written opinion dated Thursday, the state Court of Appeals said Ingham County Circuit Judge Wanda Stokes erred in finding the franchise fee amounts to an illegal tax and should not have granted class-action status to resident James Heos' 2020 lawsuit against the city.

The judges remanded the case back to circuit court for dismissal.

“We are grateful that the Michigan Court of Appeals has issued its ruling in favor of the City of East Lansing this week,” Interim City Manager Randy Talifarro said in a news release. “The collection of this franchise fee helps to ensure that the City continues to provide a high-level of service to our residents.”

Heos contended the franchise fee amounted to a new local tax levied without voter approval and violated the Headlee Amendment and the Foote Act. The appeals panel said his claim under the Headlee Amendment was barred because it was not filed within a year after the franchise ordinance was adopted. They also rejected his arguments regarding the Foote Act, saying it applies only to electric utility providers.

An attorney for Heos could not immediately be reached for comment on Friday, and it was unclear if he will seek an appeal to the state Supreme Court.

East Lansing officials also did not respond to a request for comment but issued a brief news release on Friday afternoon.

BWL began collecting a 5% franchise fee from East Lansing customers in 2017 and passes the money on to the city to put in its general fund. The fees collectively amount to about $1.4 million a year.

It was unclear what impact the appeals court ruling might have outside of East Lansing.

BWL is owned by the city of Lansing and pays the city 6.1% of its total revenue in lieu of taxes. That amounted to about $25 million last year.

Besides East Lansing, the utility has franchise agreements with Lansing Township, Meridian Township, DeWitt Township and Watertown Township and pays various amounts back to those communities. BWL once paid a franchise fee to Delhi Township but no longer has a franchise agreement with the municpality.

In 2020, an Eaton County judge ruled that a franchise fee BWL charged customers in Delta Township was illegal. A class-action lawsuit was settled, and the township owed BWL customers more than $2 million.

BWL serves about 89% of East Lansing electicity customers, while Consumers Energy serves the remainder. Consumers declined to collect a fee from its customers after the city requested it in 2017.

Contact Ken Palmer at kpalmer@lsj.com. Follow him on Twitter @KBPalm_lsj.

This article originally appeared on Lansing State Journal: Appeals panel rules in EL's favor in lawsuit over BWL franchise fee