Detroit has won the latest battle in a long-running dispute over its ability to collect a 5% utility tax that generates about $50 million in revenues to the cash-strapped city each year.
The Michigan Court of Appeals on Oct. 20 affirmed a lower court ruling upholding the constitutionality of the tax.
The suit had been brought against the city in 1990 by Taxpayers United for the Michigan Constitution, charging the retroactive validation of the tax by the state Legislature that year violated the due process clauses of the federal and state constitutions.
The lawsuit also charged that the tax was invalid under the so-called Headlee Amendment, made in 1978 to the Michigan Constitution, because the tax was not approved by voters.
Edward Rago, the city's budget director, said the city has been collecting the tax since 1970.
While the tax was due to expire in June 1988, various opinions on sunset clauses issued by the state attorney general led the city to believe the sunset clause on the utility tax was invalid, he explained. The city continued collecting the tax.
However, the statutory authority for the tax was invalidated by a Wayne County Circuit Court judge in early 1990. That action led to the Legislature's retroactive validation of the tax, prompting the taxpayers' group lawsuit.
Patrick Anderson, a director of the group, said the group was disappointed with the appeals court decision, but will probably not an appeal to the state Supreme Court.
