Cities ‘Double Dipping’ with Cost Recovery Fees

In the private marketplace, buyers and sellers make deals by agreeing on a price for a product or service. When the terms change, both sides renegotiate. 

That is not how it happens in the public sector when government bills for service twice. 

One of the most egregious examples is the practice of cost recovery fees. In particular, Michigan municipalities have found refuge in MCL 769, a statute written to address intoxicated drivers. The statute allows local government to seek reimbursement for costs associated with an “emergency response.” A natural assumption would be “extraordinary” costs but municipalities read it to mean all costs including wages, benefits, overtime, supervisory and administrative costs, the prosecutor’s time, lab work and the like. The list can be endless because many cost recovery ordinances include the blanket phrase, “not limited to.” Some cities have gone one step further by including cases that don’t meet the legal definition of impaired driving. In one ordinance, you can get billed without a conviction. It sounds attractive to bill people for government costs that apply to the few but taxpayers almost never see this money back in the form of rebates or lower taxes. As one police chief candidly put it, “that doesn’t happen.” 

Cities try to justify the fees by saying drunken driving arrests take hours to expedite and that the fees are a deterrent. But neither argument is compelling. There are any number of crimes that take hours to process and if the fees are a deterrent, the message isn’t getting out. Cities collect hundreds of thousands of dollars in cost recovery fees year after year. 

Oddly, collecting the fees creates its own expense. Grand Rapids backed off from enforcing its cost recovery ordinance until it could get the district judges to do the collecting for it. The judges eventually relented, but many hold reservation about the practice as a whole. A district judge in Holland spoke at a city commission meeting saying the extra fees are disproportionate to the offense (impaired drivers already pay some of the highest court fees and fines in the state). Judges and lawyers also question the legality of the fees. The statute says the fees can be issued as “part of sentence.” They view the fees as civil actions taken by a municipality outside of the bench. 

In any case, the practice raises red flags for taxpayers. Municipalities could expand fees to include a wide range of government service. Perhaps it may involve routine traffic stops, zoning code violations or civil infractions. Government would have no reason not to create onerous regulations and rules. Police would spend more time ticketing drivers for minor traffic violations and less time patrolling for crime. Government would have to hire more staff to issue and administer the fees. Cost recovery revenue won’t save taxpayers money, but would cost them in the form of government expansion and intrusion. 

In the private sector when times get tough, businesses cut expense, charge more or find ways to expand market share. Government can cut waste and inefficiency or support policies that increase growth and bring in more tax revenue. When there is little will for any of that, it resorts to practices like cost recovery fees and Lansing needs to put a stop to it. 

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Anne Schieber is senior investigative analyst at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.