Niles Charter Township has filed a lawsuit against the City of Niles, alleging that the city violated contracts it has with the township for the use of the city’s sanitary sewer and water service.

The lawsuit alleges that the city was taking money from the city’s water and wastewater utilities in the form of PILOT (payment in lieu of taxes) transfers and using that money for general city purposes, rather than for purposes related to the city’s water and wastewater systems.

The township and some of its residents pay for and receive sanitary sewage treatment and disposal services and water supply services from the City of Niles under contracts entered in 2008 and 2012.

The lawsuit alleges that these PILOT transfers — which have totaled more than $774,000 from October 2013 to May 2015 — have required the city to raise sewer and water rates in order to avoid having the transfers deplete the cash balances in the water and wastewater funds.

The end result, the suit alleges, is that Niles Township and its residents are being required to pay increased water and sewer rates in order to fund general city purposes, such as hiring police and fire personnel, and funding capital projects.

“It’s pretty simple,” said Niles Township Treasurer Jim Ringler. “Township residents don’t want to pay for city services.”

The lawsuit alleges that those contracts do not authorize PILOT transfers or PILOT-based fees on the township or township customers for the purpose of funding the city’s general expenses.

Niles Administrator Ric Huff said he would not comment on pending litigation. He said the city received the lawsuit Oct. 14, and that city attorneys are in the process of determining how to respond to the complaint.

The suit also alleges that some of the rates attributable to the PILOT transfers constitute a disguised tax, rather than a valid user fee, and therefore violate the Headlee Amendment to the Michigan Constitution, which prohibits the imposition of a new or increased tax without prior voter approval.

Ringler said township officials have attempted to resolve this issue outside of court for the past year, but that those efforts were not successful.

“At this point in time we feel the city has breached both of those [contracts],” he said. “We don’t like suing our neighbors… but we aren’t going to be taken advantage of by the city.”

The township is ordering through the lawsuit that the city cease and desist from making these PILOT transfers in the future. Also, the township is demanding that the city return to the water and sewer funds all previous PILOT transfers to the extent that the funds came from the township or its residents.

The lawsuit was filed in the second circuit court of Berrien County.