In a written response to a lawsuit filed by Niles Charter Township, the City of Niles has denied claims it violated agreements with the township for use of the city’s sewer and water services, going on to say that the contracts “speak for themselves.”

They also denied the township’s allegation that the city’s recent increases to water and sewer rates constitute an “illegal disguised tax” — a violation of the Michigan state constitution.

The response, found here, was filed in the 2nd Circuit Court of Berrien County on Nov. 13.

Niles City Manager Ric Huff declined to comment Thursday about the lawsuit or the city’s response.

“For the time being the city will refrain from comment while the complaint is active with the court,” Huff wrote in an email.

Niles Township Treasurer Jim Ringler said no court date has been set regarding the lawsuit, which he said could take several months to get resolved.

He said the township’s attorney is in the process of seeking discovery documents from the city through the court system.

Ringler said he wasn’t surprised by the city’s response.

“They just didn’t say much in their response,” he said. “They just denied everything.”

 

Lawsuit background

The lawsuit, which you can read in its entirety here, stems from the Niles City Council’s decision in August 2013 to combat a budget shortfall by transferring money into the general fund from the city’s wastewater and water utilities divisions.

These transfers came in the form of 10 percent payments-in-lieu-of-taxes (PILOT) contributions from the city-owned sewer and water utility divisions.

In the lawsuit, the township argues that the PILOT transfers depleted the reserve funds of the water and wastewater utilities, causing the city to raise its water and sewer rates in order to make up for the shortfall.

This affects the township because some of its residents pay for and receive sewer and water supply services from the City of Niles under contracts that began in 2008 and 2012.

The lawsuit alleges that more than $774,000 has been transferred to the city’s general fund in the form of PILOT contributions from October 2013 to May 2015. 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 operations, such as hiring police and fire personnel, and funding capital projects.

In the suit, the township argues that the city’s PILOT transfers and subsequent rate increases are in violation of its 2008 sewer and 2012 water contracts with the city.

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.

The township is asking that the city cease taking money out of the water and sewer reserve funds through the form of PILOT transfers and to return any money that has already been transferred back into those funds.

The city received the township’s lawsuit Oct. 14.

 

City’s response

Throughout its 31-page response to the lawsuit, the city repeatedly states that its 2008 and 2012 contracts “speak for themselves and are the best evidence of their terms and conditions.”

The response also states numerous times that “current and past water and wastewater rates charged by the city to the plaintiffs have not funded any PILOT charges.”

The city is requesting the court dismiss the lawsuit and make the township pay for the city’s costs and attorney fees associated with the legal dispute.