City Council Vaguely Announces Agreement in BWL Franchise Fee Lawsuit

Following a closed-session at the end of last night’s (April 22) City Council meeting, council moved to approve a tentative settlement amount in a class action lawsuit related to the city collecting a “disguised tax” through Lansing Board of Water and Light bills.

Despite the city apparently reaching an agreement for what is assumed to be a multi-million dollar payout, the vaguely worded motion passed by council provides no clarity about how much the city will spend reimbursing BWL customers.

“I move for the tentative approval of the settlement amount, as presented by the city attorney in closed-session,” Councilmember Dana Watson motioned. “And further instruct the city attorney to negotiate with plaintiff class counsel towards a settlement agreement that will require subsequent council review and approval at a future meeting.”

The motion was approved unanimously, without discussion. Council then adjourned for the night.

Earlier this month, the Lansing State Journal reported that Andrew Abood, an attorney for James Heos, the East Lansing resident who initially brought the suit, said the city could have to repay about $9 million.

The lawsuit has roots in 2017, when the city instructed BWL to add a 5% franchise fee on to electric bills. While city officials sold the fee as a legitimate charge to maintain utilities, the roughly $1.4 million raised annually was rerouted to the city’s general fund – where it could be used on whatever city officials desired.

In 2021, thousands of East Lansing residents were notified they would be included in the lawsuit unless they opted out. The suit claimed the city was imposing an illegal tax on residents because roughly 90% of the city’s residents receive utilities through BWL, without an alternate provider available. A tax imposed by the city would require a vote of approval from the public.

Earlier this year, the state Supreme Court sided with Heos, calling the franchise fee a “disguised tax.” The city was ordered to stop collecting the fee and reimburse BWL customers.

The city is entering the thick of budget season facing significant financial challenges. The amount the city is required to pay back and the repayment timeline will be key, as officials try to balance a general fund budget that is already projected to run at a deficit.

ELi reached out to City Manager Robert Belleman, asking why the settlement amount agreed upon was not made clear in the motion. Belleman declined to comment, referring us to John Clark, one of the city’s attorneys. At the time of publication, Clark has not responded to an email or voicemail requesting comment.