Water affordability and access is a complex and contentious issue, even in regions that enjoy a relative abundance of freshwater. Widespread poverty, state tax policy, and years of infrastructure underinvestment have made water shut-offs a pressing challenge in Detroit. This guest post by Matthew Clark summarizes the legal issues and offers some suggestions for policy reform. Matt will be graduating from Wayne Law this spring, and his experience includes clerking with a local law firm, practicing as a student attorney with the Michigan Unemployment Insurance Project, and interning with the Sugar Law Center for Economic & Social Justice in Detroit. Prior to law school, Matthew worked for U.S. Senator Carl Levin. Matthew has assisted the Great Lakes Environmental Law Center through Wayne Law’s Transnational Environmental Law Clinic on many issues, including water affordability in Detroit, and has authored a research paper examining the legal issues and opportunities for policy reform.
Detroit, the largest city in a state surrounded by the world’s largest body of fresh water, faces a dire crisis of water access. Every year, tens of thousands of Detroit residents face water shut-offs in their homes because they cannot pay their bills. My research paper details the legal aspects of this crisis, as well as prospective solutions. Ultimately, a solution must come from the political process, not the courts. However, any solution must successfully navigate the law, which presents substantial challenges.
From the international to the local, the law provides no enforceable right to water access for those who cannot afford it. International law recognizes a human right to water but provides no binding enforcement mechanism. Federal law does not provide a right to access, or protection against shut-offs. Furthermore, Michigan law explicitly authorizes local units of government to shut off water services to residents delinquent in paying their bills, regardless of poverty or other hardships. This authorization was upheld by the Michigan Supreme Court in Ripperger v. City of Grand Rapids, 338 Mich. 682 (1954).
A solution must therefore come from the political process, and the state and local arenas present the most potential in this regard. Michigan could emulate Massachusetts, for instance, which provides substantial protection against shut-offs for households facing hardships. Detroit can also implement its own local solution. In fact, the city already approved the comprehensive Detroit Water Affordability Plan seven years ago. If implemented, this plan would subsidize low-income household water bills down to an “affordable burden,” so that they constitute no more than 2-3 percent of household income. To pay for these subsidies, the plan would impose an additional charge to each Detroit customer’s monthly water bill, ranging from $1 for residential customers to $275 for industrial customers.
The Detroit Water and Sewerage Department has refused to implement this plan. But even if implemented, the plan would face two principal legal challenges. The first is whether imposing extra costs on ratepayers to subsidize an economically poor class would violate DWSD’s duty, under Michigan law, to set water rates at a reasonable level that is not undue or excessive. This legal standard is largely undefined, and the issue is one of first impression in Michigan. However, other state judiciaries have dealt with the issue. States are split in how narrowly to construe what constitutes an unduly discriminatory utility rate. A narrow construction strikes down any plan that subsidizes one ratepayer class at the expense of another, absent explicit legislative authorization to do so. In contrast, a relaxed construction allows subsidized rates for disadvantaged classes, provided that the plan’s cost is not excessive, the subsidized class is sufficiently narrow, and similar factors are adequately balanced. It is unclear how Michigan courts would construe the “unreasonable, undue, and excessive” standard. However, the less the plan costs, and the narrower its subsidized class, the greater the chance it will pass judicial scrutiny.
The second legal challenge is whether the Plan would violate the Headlee Amendment to the Michigan Constitution, Art. IX, Sec. 31. The Headlee Amendment prohibits local government from raising taxes on its citizens above that already authorized by law, absent voter approval. The Headlee Amendment prohibits taxes, but not fees. Though the distinction between the two is not always clear-cut, taxes tend to serve a revenue-raising purpose, are out of proportion to the necessary cost of the service rendered, and are involuntary. Fees, in contrast, tend to serve a regulatory purpose, are proportionate to the service cost, and are more voluntary.
In this case, the Water Affordability Plan’s per-customer charges would likely be closer to a tax than a fee, and would thus not survive a Headlee Amendment challenge. The charges explicitly raise revenue solely for the subsidized class of customers, and not for a general regulatory purpose. For this same reason, the charges would not be proportionate to the general service rendered to ratepayers. Finally, paying the charge would not be voluntary; customers cannot realistically forego water services from DWSD. All of this points to the charge being a tax. A more unorthodox analysis, in contrast, would view the charge in context of the entire water bill, rather than in its separateness. Under this analysis, the plan’s relatively slight water bill increase would be a valid regulatory action under Detroit’s general police powers to promote the health, safety, and general welfare of its residents. The more typical Headlee Amendment analysis, however, views charges in their separateness. In any case, this challenge could be sidestepped by funding the plan through general volumetric water rate increases, rather than separate per-customer charges.