East Lansing to settle lawsuit with $7.8 million payout for BWL customers’ illegal fee

Following nearly five years of legal battles, the city of East Lansing has agreed to a substantial $7.8 million settlement to resolve a lawsuit concerning a 5% franchise fee imposed on Lansing Board of Water and Light customers since 2017. The litigation, which commenced in 2020 when East Lansing resident Jim Heos challenged the fee, concluded after a State Supreme Court decision in February this year deemed the fee to be a tax requiring voter approval. However, East Lansing had failed to secure such consent as mandated by a provision in the state constitution since 1978.

In response to the ruling, the City Council approved a tentative $7.8 million settlement on June 17, with the agreement pending final approval from Ingham County Circuit Court Judge Wanda Stokes. Expressing disappointment over the Supreme Court’s decision, City Manager Robert Belleman emphasized the council’s commitment to resolving the matter through negotiation and complying with the terms of the settlement upon court approval.

The settlement predicates the establishment of individual refunds based on a formula that must also receive Judge Stokes’ endorsement before enactment. Significantly, the municipality clarifies that it will not oversee the distribution of refunds. This responsibility falls under the court’s jurisdiction, with specific details regarding the refund process yet to be disclosed by the city.

Andrew Abood, one of the legal representatives involved in the lawsuit, refrained from immediate comments following the settlement announcement. While previously addressing the issue in April, Abood anticipated the refund total to approximate $9 million. The State Supreme Court’s decision exhibited a split opinion on whether Heos possessed legal standing to litigate the matter, yet unanimously underscored the fee’s classification as a tax.

Looking ahead, East Lansing remains committed to addressing the settlement terms amicably and resolving the dispute to ensure compliance with legal obligations. The municipality’s endeavor to attain voter approval for the 5% franchise fee, retrospectively seen as an illegal tax, underscores its commitment to abiding by statutory requirements and judicial mandates. The substantial financial settlement seeks to rectify any errors and reimburse impacted parties in line with the judge’s validated refund formula. Although the precise mechanism for refund distribution remains undisclosed, pending the court’s assessment, the city anticipates concluding this chapter of legal contention in a fair and lawful manner as per the prescribed settlement conditions.