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Kowalski v. City of Livonia
Citations: 705 N.W.2d 161; 267 Mich. App. 517Docket: Docket 255623
Court: Michigan Court of Appeals; October 26, 2005; Michigan; State Appellate Court
The Court of Appeals of Michigan affirmed the trial court's summary disposition favoring the City of Livonia, concluding that the cable franchise fees imposed by the city do not qualify as a "tax" under the Headlee Amendment. Plaintiffs, consisting of cable subscribers, challenged the five percent franchise fee, arguing it constituted a new local tax that required voter approval. The court ruled that franchise fees are contract prices for services rather than taxes, which aligns with the precedent established in Bolt v. City of Lansing. The court applied criteria for distinguishing between fees and taxes, noting that the fees serve a regulatory purpose, are proportionate to service costs, and are voluntary. Plaintiffs conceded the voluntary nature of the fees, as both cable providers and subscribers engage in exchanges for services. The court did not address the issues of standing or preemption by the federal Cable Communications Policy Act, as the classification of the fees as non-tax was deemed dispositive. The franchise fee is characterized as a voluntary payment made in exchange for a commodity. From 2001 to 2003, the defendant's budget indicated that franchise fees were inadequate to cover cable expenditures, resulting in annual losses for the cable fund. Plaintiffs contended that a surplus exceeding $1 million in 2001 indicated illegal collection of excess 'disguised tax' funds. However, the court noted that claims under the Headlee Amendment must be made within one year of the violation, and searching the entire history of the cable fund for surpluses would undermine this limitation. The plaintiffs failed to provide evidence linking the surplus to franchise fees or proving that current deficits would not be addressed by those fees. Furthermore, despite the claim that franchise fees contributed $30,416 to Livonia's general fund, the submitted financial documents did not support this assertion. The substantial expenses of the cable fund, which exceeded $700,000, contrasted with the franchise fee revenue of over $600,000, suggesting that the five percent charge did not constitute a 'tax.' The court affirmed the trial court's decision. Two judges concurred with the outcome, emphasizing the relevance of the one-year statute of limitations and referencing precedents that support the classification of governmentally owned commodities as contractual prices rather than taxes.