On September 30, 2021, the Michigan Court of Appeals issued a decision that clarifies the scope of the state constitution’s voter-approval requirement for local governments to levy a new tax or increase the rate of an existing tax if such tax or increased rate was not already authorized by law at the time the Headlee Amendment, which added the requirement, was ratified. The decision was issued in the case of Oshtemo Charter Township v Kalamazoo County, which involved a municipality that was a general law township at the time of the Headlee Amendment’s ratification, but since then has incorporated as a charter township. The Court held that the Headlee Amendment does not require the township to obtain approval from a majority of voters in order to increase a millage to a rate that was authorized for charter townships at the time of the Headlee Amendment’s ratification, but not for general law townships.
The Headlee Amendment was ratified in 1978, and added several sections to Article 9 of the Michigan Constitution pertaining to finance and taxation. Oshtemo Charter Township concerns Section 31 of Article 9, which provides, in relevant part:
Units of Local Government are hereby prohibited from levying any tax not authorized by law or charter when this section is ratified or from increasing the rate of an existing tax above that rate authorized by law or charter when this section is ratified, without the approval of a majority of the qualified electors of that unit of Local Government voting thereon.
At the time of ratification, state law permitted general law townships to levy property taxes at a maximum rate of one mill, whereas the maximum rate charter townships could levy was five mills.
Oshtemo Township, located in Kalamazoo County, was a general law township until it incorporated as a charter township in 1979. In 2019, the County’s Board of Commissioners denied a request by the Township to increase its property tax rate to about 1.5 mills for general tax purposes. The Board’s denial was based on the belief that, without the approval of the Township’s voters, the Township was limited to the millage rate for general law townships because it was a general law township at the time the Headlee Amendment was ratified. The Township appealed the decision to the Michigan Tax Tribunal, which rejected the Township’s arguments for the same reason as the County Board of Commissioners.
The Michigan Court of Appeals reversed the Tax Tribunal’s decision, finding that the Headlee Amendment does not require voter approval for a tax or rate increase “if there was pre-Headlee authority for the tax and the local unit of government is eligible to levy the tax because of a post-Headlee change in circumstances.” Therefore, the Court reasoned, the Township could levy the requested property tax rate of about 1.5 mills without voter approval because charter townships were authorized to levy taxes up to five mills at the time the Headlee Amendment was ratified.
The Court’s decision seems to clarify that a municipality’s pre-Headlee status is not relevant to the analysis of whether the local unit of government may levy or increase a tax without voters’ approval. Instead, whether voter approval is required depends on whether the tax or rate increase is based on pre-Headlee authority. If you are a municipal official with questions about how the Headlee Amendment affects the taxes or rates that your local unit of government may levy, please feel free to reach out to a municipal law attorney at Mika Meyers for assistance.