"Virtual Reality Fee" Virtually Kills Development

The gallon of Pratt & Lambert paint that Dulce Fuller fancies for the wood trim of her Birmingham storefront retails for about $30. The permit required to apply a new coat of color would inflate the job cost by 2,400 percent—damning evidence of City Hall's apparent indifference toward its beleaguered business district.

The permit "fees" are more than just a costly nuisance to downtown entrepreneurs. Based on a plain reading of the Michigan Constitution, the City Commission appears to have violated state law by enacting a tax without voter consent.

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Article IX, Section 31 of the constitution, known as the Headlee Amendment, requires the state and local governments to win the approval of voters before imposing a new tax or increasing an existing one. Townships, cities and counties have repeatedly attempted to circumvent the law by masquerading new and higher taxes as "user fees." In striking down the practice, the Michigan Supreme Court has delineated the differences between the two. And while the outcome of any potential litigation can't be predicted, the Birmingham fee ordinance appears to flunk this legal test.  

From Mrs. Fuller and her downtown neighbors, the City Commission is demanding a minimum of $750 for permission to repaint a door or bit of window frame. The other permit regulations are equally onerous, including the required submission of material swatches, site photos, design plans drawn to scale (10 copies folded and stapled), colored renderings mounted on foam board, and a fully labeled brick-and-mortar site mock-up.

A multitude of dos and don'ts, ranging from the allowable letter size on signs to the style of garbage dumpster, have long forced business owners to jump seemingly unending bureaucratic hoops.

But what really rankles Birmingham's retailers these days is the so-called Virtual Reality "fee." Enacted by the City Commission, a minimum charge of $600 per façade per floor (or as much as $30,000 for a multi-story development). is levied against store owners when they undergo the "design review" required to paint a building exterior, add outdoor lighting, or hang an awning or a sign. This in addition to the $150 application fee.

This Virtual Reality fee is supposed to cover the cost of creating an electronic replica of downtown Birmingham for public access online. Contrary to the legal definition of a user fee, however, payment is mandatory whether or not a retailer wishes to participate.

Exacerbating matters, city officials acknowledge that the Virtual Reality project is more fantasy than reality. All that currently exists is an electronic file in a City Hall computer encoded with an incomplete inventory of downtown buildings. What will ultimately take shape is a "discussion that's still very fluid," city planner Jim Sabo conceded.

Moreover, the city is collecting the money on behalf of a private contractor that has never tested a similar project elsewhere. "We're just a pass-through," Sabo said, adding that Birmingham was picked for the experiment because "we're an affluent community."

Thus, there is no service being provided to those forced to pay the hefty "fee," nor is there any financial benchmark to determine whether the charge is proportionate to the supposed service rendered—as required of user fees under state law. That city officials evidently regard constituents' earnings as so easily expendable exposes a troubling disregard for property rights.

The vacancy rate in downtown Birmingham testifies to retailers' frustrations. "It's so hard to do business here," said Mrs. Fuller, whose curio shop Woodward and Maple will retain its pumpkin-hued trim so long as the city insists on levying the Virtual Reality tax. "City officials are absolutely anti-business, anti-development and anti-downtown. And by the day it's getting worse."

So widespread is opposition to the Virtual Reality "fee" that a good many other storeowners are likewise forgoing renovations. Interior Designer Joseph Keenan, for example, canceled plans to repaint his newly leased studio on Maple rather than submit to the $600 charge. The $7,000 he pays in city taxes is burden enough, he said.    

"I hope the paint falls off my building," Mr. Keenan said. "Their $600 tax will do nothing to enrich my business."

Ironically, then, the City Commission's scheme to reinvigorate downtown is producing the opposite effect. But that's typically the result when government micromanages the private sector instead of leaving the business of business to the people who have actually invested their hearts, minds and money in it. Rather than taxing shop owners to create a virtual downtown, the City Commission would do far better to eliminate the very real financial and bureaucratic obstacles that impede business growth.

"City officials acknowledge that the Virtual Reality project is more fantasy than reality."