Judge Stewart: Owosso water, sewer connection fees are an unlawful tax

The City of Owosso's steep 2024 increases to its water and sewer connection fees are unconstitutional taxes, the Shiawassee County Circuit Court has ruled — a decision with direct consequences for what it costs to build a new home in the city.

The Home Builders Association of Michigan announced Wednesday that it prevailed in the lawsuit it filed against the city. Shiawassee County Circuit Judge Matthew J. Stewart ruled Friday, Aug. 7, that the fee increases violated the Michigan Constitution because the amounts collected went far beyond the city's cost of adding new users to its water and sewer systems, the association said.

Under the Headlee Amendment, local governments cannot levy new taxes without voter approval. Michigan courts distinguish a lawful user fee from a disguised tax largely by proportionality: a fee must be reasonably tied to the cost of the service provided. Owosso's connection charges were adopted by city council vote and were never placed before voters.

The fees at issue

The charges come from Resolution No. 79-2024, adopted by the Owosso city council May 20, 2024, and effective the next day. The resolution set a 1-inch single-family water service connection at $5,000, a 1.5-inch service at $9,500 and a 2-inch service at $12,500, plus a $5,000 charge for a 4- or 6-inch sewer service line. It also created separate “system charges” scaled by meter size — for in-town customers, from $487 to $104,705 on the water side and $598 to $128,570 on the sewer side — described in the resolution as covering reserve capacity provided for new customers.

Before the increase, Owosso's water tap-in fees generally ran from about $1,300 to $3,000, with sewer fees under $1,000, according to the lawsuit as described when it was filed. The association says the new structure pushed total tap-in costs from usually less than $3,000 per house to as much as $12,000.

How the case got here

The association filed suit in Shiawassee County Circuit Court in July 2025. It says records it obtained from the city through the Freedom of Information Act showed no study or analysis was performed to justify the increase, and its CEO, Bob Filka, has said the timing — shortly after several new housing developments were announced in Owosso — is what drew the group's attention. One development reported facing more than $100,000 in unexpected costs under the new fees. Those are the plaintiffs' characterizations; the city has defended the charges as lawfully adopted by council vote.

At the time of the filing, Owosso Mayor Robert Teich said the city was aware of the lawsuit and consulting its legal counsel, and declined to comment on the litigation directly. The fee fight has unfolded against the backdrop of a roughly $207 million city water and sewer investment program, under which residents' user rates were already expected to rise sharply.

What happens next

Filka called the outcome a win beyond this one case, saying “future homebuyers are the real winners.” The association has pointed to the ruling as part of a broader statewide pattern of successful challenges to local fee structures, including an earlier permit-fee case it brought against the City of Troy.

The court's written opinion was not yet publicly available Wednesday, and the city had posted no public statement on the ruling and has not said whether it will appeal. What remedies follow — including any refunds of fees already collected — will be shaped by proceedings still to come. The Current will follow the case record and report what the city decides.