HOUSE BILL NO. 4821

A bill to amend 1968 PA 2, entitled

"Uniform budgeting and accounting act,"

(MCL 141.421 to 141.440a) by adding section 13b.

the people of the state of michigan enact:

Sec. 13b. (1) If a municipality imposes a drainage fee, and that drainage fee generates annual revenue for the municipality in excess of $10,000,000.00 or 5% of the municipality's general fund budget, whichever is less, the municipality shall create and maintain a separate, segregated account for all revenues collected from that drainage fee.

(2) Revenues maintained in a separate, segregated account created under subsection (1) must not be commingled with the municipality's general fund or any other revenue source.

(3) A municipality shall expend money from a separate, segregated account created under subsection (1) only for the costs directly related to the service or regulatory purpose for which the drainage fee was imposed.

(4) If a municipality is required to create and maintain a separate, segregated account under subsection (1), that municipality shall annually publish on the municipality's website a detailed report that includes, but is not limited to, all of the following:

(a) The total yearly revenue collected from drainage fees.

(b) A line-item breakdown of expenditures from the separate, segregated account created under subsection (1), including, but not limited to, any specific projects, services, or regulatory activities funded.

(c) Evidence that the drainage fee imposed is reasonably and demonstrably proportionate to the actual, itemized cost incurred by the municipality in providing stormwater or drainage-related services or regulatory activities. The evidence provided must include documentation of the methodology, calculations, and cost allocations used in determining the drainage fee.

(d) Any surplus or deficit in the separate, segregated account created under subsection (1) and the plans to address that surplus or deficit.

(5) A municipality that is required to annually publish a report under subsection (4) shall notify the residents of that municipality of the availability of the report by at least 1 public communication method, including, but not limited to, a utility bill insert, a municipal website announcement, or using the local news media. In addition, not later than 60 days after publishing the report required under subsection (4), the governing body of the municipality shall hold a public hearing to allow for verbal and written comments regarding the report. Not later than 30 days after the public hearing is held under this subsection, the governing body of the municipality must make a summary of the verbal and written comments and responses made during the public hearing available on the municipality's website.

(6) The department, in consultation with the auditor general, shall conduct random audits each year of not less than 5% of the municipalities that are required to create and maintain a separate, segregated account under subsection (1) to ensure compliance with this section. In addition, if the department receives a petition signed by not less than 1% of a municipality's registered electors, the department shall, not later than 6 months after receiving the petition, conduct an audit of that municipality's drainage fees and separate, segregated account created under subsection (1). The department shall publish on the department's website the findings of any audit conducted under this subsection and shall submit those findings to the municipality and to the legislature.

(7) After conducting an audit under subsection (6), if the department determines any of the following, the department shall recommend to the municipality that the drainage fee be classified as a tax and be subject to voter approval:

(a) The drainage fee is not proportionate to the service provided.

(b) Revenues maintained in a separate, segregated account created under subsection (1) are being commingled with the municipality's general fund or any other revenue source.

(c) Expenditures from a separate, segregated account created under subsection (1) are being used for purposes unrelated to the service or regulatory purpose for which the drainage fee was imposed.

(8) If a municipality violates subsection (1), (2), (3), (4), or (5), that municipality is subject to the following:

(a) For a first violation, a written warning from the department and a 60-day period to correct the violation.

(b) For a second violation that occurs within 3 years after a first violation, a civil fine of $50,000.00 or 1% of the municipality's annual revenue from the drainage fee, whichever is greater. The department shall deposit a civil fine imposed under this subdivision in the general fund.

(c) For a third or subsequent violation that occurs within 5 years after a first violation, the suspension of the municipality's authority to assess and collect a drainage fee until compliance with this section is verified by the department.

(9) If the department determines that a municipality willfully misclassified a drainage fee to evade voter approval of a tax, the municipality shall refund the amount of the drainage fee improperly collected to each affected payer of the drainage fee. Not later than 30 days after the department's determination under this subsection, the municipality must initiate the refund process to each affected payer of the drainage fee. The municipality must complete the refund process not later than 180 days after the refund process is initiated. The refunds must be issued to the original payer of the drainage fee using the same method by which the drainage fee was collected, if possible, or by mailed check if no electronic method is available. The municipality shall post a notice on the municipality's website, and send by mail to each affected payer of the drainage fee impacted by this subsection, regarding the eligibility for a refund and the refund process. If a municipality fails to complete the refund process as required in this subsection, the municipality is subject to a civil fine of $500.00 per day until the municipality completes the refund process. The department shall deposit a civil fine imposed under this subsection in the general fund.

(10) The department may promulgate rules to implement this section under the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328. The department shall not adopt any rule that expands or conflicts with the express limitations and authority established under this section.

(11) As used in this section:

(a) "Costs directly related" means, subject to subdivision (b), expenditures that are necessary and narrowly focused on the implementation, operation, or enforcement of drainage-related services or regulatory objectives and include, but are not limited to, any of the following:

(i) Maintenance, repair, or improvement of stormwater infrastructure, including catch basins, culverts, retention and detention basins, storm drains, and sewer systems used for drainage purposes.

(ii) Engineering, surveying, planning, or environmental studies directly tied to stormwater system improvements or regulatory compliance.

(iii) Salaries, benefits, or contract costs for personnel whose duties are primarily dedicated to stormwater system management, operation, or compliance enforcement.

(iv) Equipment, materials, or supplies used exclusively for drainage system operations or stormwater quality control.

(v) Public education, outreach, or signage specifically related to stormwater management, water quality, or drainage regulations.

(b) "Costs directly related" do not include any of the following:

(i) Local government administrative overhead.

(ii) Street repair or capital improvements not caused by or linked to stormwater needs.

(iii) Indirect personnel costs for employees not primarily assigned to stormwater or drainage activities.

(iv) Transfers to any other fund or program not connected to stormwater services.

(c) "Department" means the department of treasury.

(d) "Drainage fee" means a fee, charge, or assessment by a municipality that is based on the impervious surface area or runoff potential and that is used for stormwater services, regardless of whether the stormwater services are rendered separately or through combined sewer system operations.

(e) "Municipality" means a county, city, township, or village.

Enacting section 1. This amendatory act takes effect 180 days after the date it is enacted into law.