Headlee Override Millage Request

Headlee Override Millage Request

I'd like to share my thoughts and answer some questions on the upcoming May 2nd Headlee Override Millage request.

In this article, I’m speaking only for myself. I’m a single voice on the seven-member City Council. While I’m laying out my vision here, it is up to City Council as a whole to make the final policy and spending decisions.

Why does the city need more money?

Because of “Headlee” and “Proposition A”, the increase you see in taxes each year rarely matches the increase it costs to provide the same services. That means over time cities must either defer maintenance, cut services, or ask for a tax increase known as a “Headlee Override.”

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How much will this cost me?

I developed a millage calculator that will give you a very close estimate of how much your increase will be if the millage passes.

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Why now?

This city has been delaying projects for a couple of years already while maintaining services. Things are starting to approach an urgent point.

By planning ahead, we can see the need for this increase before it becomes an emergency. Without it, we’ll have to start cutting back.

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What might get cut if the millage fails?

Again, these are my own views, but these are some of the more labor-intensive, yet optional, services that we provide that could give significant savings if we cut back on them.

  • Across-the-board cuts in every department.
  • No more raking leaves into the street. You will have to bag and pay for tags year-round.
  • Minimal overtime for snow removal. The main streets will get plowed overnight, but everything else will wait for the day shift, and in some circumstances may not be plowed at all.
  • Reduction in street sweeping.
  • Charge the teams using the ball fields for maintenance and improvements, even though this may price out some kids from being able to participate.

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What might we get if the millage passes?

Without the additional funding, these projects will be delayed or canceled altogether. Many of them have already been delayed at least once.

  • Replace Public Safety’s engine truck. Our other choice is to go into debt for it.
  • Replace two Public Safety cars.
  • Drainage for Lazenby Park.
  • Pocket park at Coolidge and Dorothea.
  • HVAC, roof, parking lot, and other repairs for the Community Center.
  • A new parking lot between Cummings and Thomas Avenues by Green Lantern.
  • Library study room.
  • Replace failing light poles around ball fields.
  • Carport to keep public safety cars out of the weather.
  • Replace the building where road salt is stored. Without it, we can’t buy in bulk ahead at significant savings.
  • Updates for voting computers and booths nearing end-of-life.

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What other things are being considered?

I cannot promise any of these things, but if we end up with more revenue and fewer expenses over the long term than expected, I’d like to consider looking at:

  • Resuming weekly chipper pickup without an appointment.
  • The city pays for all or part of sidewalk repairs.
  • Increase funding for road repairs.
  • Paying ahead on our pension obligations for significant long-term savings.
  • Using funds to pay for maintaining and operating a community center if we can find grant and/or bond money to build one.

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Why not keep services and cut back on building maintenance?

We are already doing that a little bit. But we can’t do that for very long.

While it’s popular and politically expedient to keep services up and sacrifice our buildings, in the long term it is fiscally foolish. It’s why we no longer have an ice arena. And it’s not a policy I would support.

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Could there be layoffs if the millage fails?

I hope not.

I would recommend that we first reduce or eliminate seasonal help. That includes park maintenance and leaf collection.

One option could be that as some employees leave, we may choose not to replace them. However, this can result in slower service for businesses, contractors, and residents. For our business community, time is money, and they may move their business elsewhere. For the employees who remain, it’s more work for them for the same pay, and they may choose to go somewhere less stressful.

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But I pay more in city taxes every year!

This simply isn't true.

You may be writing a larger check, but the city doesn't see all of that money. Your tax bill includes school, county, and other taxes.

In fact, the actual dollars you pay the city have decreased or stayed about the same 6 out of the last 10 years. 

Your taxes dropped significantly between 2014 and 2018. They increased in 2019 because of the 2 mill infrastructure milage but then dipped again in 2021. You paid a little less in 2022 than you did in 2020.

City Tax for $200,000 Home Purchased in 2013

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What is Headlee?

The 1978 Headlee amendment prevents a city from having its property tax increase faster than inflation. If home values go up too fast, then cities must lower their tax rate, also known as the millage rate.

What is Proposition A?

Here is a good video from the “Vote Yes For Berkley Millage 2023” committee explaining Headlee and Prop A.

With Headlee, a single property’s tax could increase faster than inflation. But with the addition of Prop A in 1994, a single property value can only increase the lesser of inflation or 5%.

Further, if someone sells their home, their taxable value “pops up” back to the full taxable value as if Prop A didn’t exist.

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Headlee and Prop A sound like a good thing. What’s the problem?

They both were well-intentioned with noble goals.

The millage rate decreases for every property owner almost every year. But this results in less buying power for the city and fewer services and repairs it can offer. 

The way the two interact, when a house is sold and the taxable value “pops up,” the city must lower its millage rate. The new homeowner pays more, everyone else's millage rate decreases, and in most years the city sees $0 in additional revenue. (If inflation is high, the city sees a modest increase in revenue from pop-ups.)

Further, when property values decline as they did in 2008, cities lose money. But as property values increase, it takes years for the city to make that money back.

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But if property taxes can increase at the rate of inflation, shouldn’t cities be okay?

The costs cities have to pay for building and construction is growing faster than the speed at which the state allows property taxes to go up. Over time, the city can't pay for as much work as it once could.

Between 2012 and 2022, the inflation used for taxes increased by 22%.

But cities build roads and buildings, not buy eggs and clothes. Government construction inflation over that same period has increased by 55%.

Although the city has higher revenue, it can buy less now than 10 years ago. This is why it becomes harder and harder for the City to keep up with infrastructure and building repairs.

Value of Tax Dollar with Inflation Since 2012

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What other costs do cities see?

Cities are often required to pay for “unfunded mandates.” These are things the State or Federal government says we must do but doesn’t give us funds to do them. This reduces the amount of money available to spend on other things.

The largest recent example of that is replacing lead service lines to many homes in our water system, a project that will cost Berkley millions of dollars.

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What about the money from sales tax?

The state used to give cities a large portion of the sales tax. But starting in 2002, the State kept more and more of that money for itself.

Between 2002 and 2022, the State has kept $11,596,914 of this revenue from Berkley. Currently, this is about $1,000,000 per year.

Source: SaveMICity and extrapolation from Michigan Treasury data.

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What about the new builds?

The city does get all the increases in new tax revenue for new buildings and additions. But over the past 3 years that has averaged 15 new homes a year, or a 0.23% increase per year. That does not bring in much additional revenue.

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Why doesn’t the city apply for grants?

The city is constantly looking for and applying for grants. Every dollar helps, but it’s not a reliable source of income. There are usually hundreds of other communities applying for the same dollars, so competition is fierce.

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What about all the marijuana money we’re going to get?

The state sets the payment rate each year based on sales and the number of retailers. The current amount is about $50,000 per store but keeps going down.

The Michigan marijuana industry is currently suffering a price crash and more stores are opening up, meaning there will be less money for each city.

While the money is nice, it is not money we can depend on until the market stabilizes. Until then, I’ve asked we use it to build up our rainy day fund or to pay down pension obligations.

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What’s a millage and a mill? How is Taxable Value calculated?

A millage is a tax on properties. It is measured in mills.

A mill is 1/1000th of a dollar. So if a tax is 2 mills, and your taxable value is $100,000, you compute your property tax with the formula $100,000 * 2 / 1000 = $200.

When you bought your house, the assessor calculated what they think the true cash value of your house is, which may not match what you paid. Then your starting taxable value is computed as 50% of the true cash value.

But because of Headlee and Prop A, over time the actual value of your property is likely to increase faster than your taxable value. If you’ve lived in your home a long time, this could result in significant savings on your taxes that newer homeowners don’t get.

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Why not do this in a November election?

Because of Michigan law, May is the only time we can hold an election and get the full amount before a Headlee Rollback goes into effect. For example, the voters approved 2.0 mills for road improvements in 2018, but because that vote was held in February, the most the city ever saw was 1.9612.

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Am I going to have to pay this on both my summer and winter taxes?

No. The tax increase is only for the summer taxes.

In fact, in most years your millage rate will decrease from the previous year.

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What about poor people and seniors?

If you or someone you know is struggling to pay their taxes, there are programs that can help. Contact the Berkley Treasury Department at 248–658–3360 or [email protected], or check with the County’s Tax Foreclosure Prevention Assistance.

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Why ask for so much all at once?

We could ask for a smaller amount, but we’d have to come back to the voters to ask for other Headlee Overrides more frequently. Since Headlee and Prop A eat away at our spending power, the money raised wouldn’t go as far. It’s also time-consuming for staff to prepare and share the related information.

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Why isn’t there a sunset clause?

Because Headlee and Prop A reduce the tax rate nearly every year, over the course of 10 to 15 years, much of this increase will be eroded away. This is a kind of built-in sunset clause.

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I don’t think the city should have bought X!

Not everyone is going to agree on every expense. Even on Council, there are expenditures I have voted against. However, I believe on the whole we are spending money wisely.

Something that you value, other people may not. And others may greatly value something you do not.

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I think the city is spending too much on X.

Running a single household budget is significantly different than the costs to support the 6,500 households, 500 businesses, and 50 miles of roads and water mains that the city is responsible for.

To make sure we’re paying the best price possible, projects go out to bid and our directors are always looking at new technologies for better ways to do things.

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Why hasn’t the city put this information out yet?

A lot of this information is from the city.

As I write this, our City department heads are working hard to finalize the first draft of their budgets. This year they are writing two – one assuming the millage passes and one if it doesn’t. Starting next week, they will be able to give more concrete information on the types of things they will be recommending that City Council cut if the millage fails.

Finally, because I’m speaking for myself, I have the luxury of saying what I want. City administration cannot speak on behalf of Council, which has the final decision-making authority. But I’m able to give my personal views on these topics.

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Why don’t we use the Downtown Development Authority’s (DDA) money on residents?

The DDA in Berkley was created with the purpose of improving and promoting our downtown businesses.

This is done through part of their property tax, an additional tax that only they pay, and through the capture of some tax money that would otherwise go to the County.

All the money for the DDA comes from the properties inside the district. No tax money from properties outside of the DDA are used to fund it.

The DDA money can only be spent in the DDA district. It can’t be spent elsewhere.

If the DDA was disbanded, less money would be coming in for use inside our city limits overall. We’d lose the extra tax they levied on themself (and that no one else pays) and that is captured from the County.

Further, it would then become the city government’s responsibility to invest in and promote our downtown.

We could choose to take the business tax and funnel all or most of the money to residents, but that would not make Berkley very attractive for businesses to locate in, likely leading to an eventual erosion of property values and even less money coming into the city.

In short, disbanding the DDA would leave less money for investing in the city and its residents, not more.

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Why don’t we stop holding all of these expensive downtown events?

Most of the events in the city are put on by private organizations. Berkley Days, Art Bash, Art Fest, and the Holiday Lights Parade are all done by outside organizations. Most other events are put on by the DDA which doesn’t use tax funds from outside the district. These organizations are responsible for their own setup, teardown, cleaning, and paid promotion.

In fact, in my time on Council, the City has denied an event a permit because they couldn’t demonstrate that it could be held without becoming a financial burden on the city.

For all of these events, the City pays only a minimal amount of staff time for safety and security, such as putting up safety barriers.

The largest City-run event is CruiseFest. It is also by far our most popular event, with 10–15,000 people attending each year. It is a great time to promote our downtown to thousands of visitors and to help our business community grow.

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Where can I get more information?

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