UPDATE: The Minnesota Supreme Court has just announced it will hear a pivotal case concerning stormwater utility fees imposed by the city of Duluth, potentially affecting thousands of businesses. This legal battle, ignited by a class-action lawsuit filed in September 2021, could cost the city up to $14.85 million in refunds.
The lawsuit, brought forth by Moline Machinery LLC and Glass Merchant Inc. (operating as Walsh Windows), claims that Duluth’s fee system is inequitable and overcharges businesses based on the amount of impervious surface on their properties. The city’s current stormwater fee structure has come under fire for allegedly placing an unfair financial burden on businesses while offering discounts to select properties, including multifamily housing developments.
Judge Eric Hylden initially ruled in favor of the city in November 2024, stating that the utility charges were not designed for profit but merely to break even. However, the Minnesota Court of Appeals revived the dispute last month, asserting that there are unresolved factual questions that warrant further examination. This ruling raises the possibility of a jury or judge concluding that Duluth retains an unjust benefit from excessive fees.
The core issue revolves around how the city calculates stormwater fees based on the Equivalent Residential Unit (ERU) system, which determines charges based on the average impervious surface of a home. Businesses contend that the system unfairly burdens them, with Moline alleging overcharges between $28,818 and $32,569 annually.
In a significant move, the Supreme Court has granted partial review requests from both the plaintiffs and the city, indicating the case’s complexity and its potential implications for municipal financial practices statewide.
“A decision of this court will impact the abilities of cities to fund stormwater management programs,”
said attorney Paul Merwin, representing the League of Minnesota Cities, which is also submitting an amicus brief.
As the situation unfolds, the court has ordered a series of written briefs to be filed through May, with oral arguments expected to follow. The stakes are high not just for Duluth but for municipalities across Minnesota grappling with similar stormwater management challenges.
This case underscores a growing tension in how cities fund essential services amid rising climate challenges and infrastructure needs. With implications for nearly 1,500 businesses, this legal battle is not just about fees; it’s about fairness, accountability, and the future of municipal governance in Minnesota.
Stay tuned for live updates as the Minnesota Supreme Court prepares to deliberate on this urgent issue. The outcome could reshape stormwater fee structures and set a precedent for municipalities statewide.
