Grosse Pointe News | October 26th, 2017
Public Safety Authority proposal to be drafted By Melissa Walsh
Grosse Pointe Woods – During a Commission of the Whole meeting Monday evening, Woods City Council approved commissioning Steve Duchane in a consulting role for developing a proposal to establish a Public Safety Authority, an incorporated “taxing entity” to levy financing for public safety services.
On 2015, while serving as city manager of Eastpointe, Duchane faced a 52 percent drop in property value that led him to form an emergency response authority with Hazel Park, which, with taxpayer approval, generated a new millage to fund the fire and EMS services of each community.
Aiming to have its own public safety authority proposal on the August 2018 ballot, Woods City Council authorized Duchane to assist the city in drafting the proposal at the rate $115 per hour for ten hours. To start, the council will determine which Michigan municipalities the Woods should partner with and also the number of years the authority would operate and number of mills the entity would collect from taxpayers.
Public Act 57, put into effect in 1988, allowed for such an authority between two or more cities of over 15,000 residents operating at the same tax rate. The model functions as a separate incorporated entity that contracts with two or more municipalities, each functioning as separate incorporated municipal entities. The municipalities contracted with the authority to collect the tax (the millage) and then they contracted with the authority to receive their specified voter-approved funding for public safety services. Because the tax is collected as a common millage, the municipalities cannot have differing tax rates. An appointed board manages the authority and its employees, if any, who are not employed by the municipalities. City employees continue to be managed and paid by the municipalities.
A public safety authority would not manage the combination or sharing of public safety officers and assets between cities. It only manages the collection of taxes for financing the public safety resources and assets of each city.
The public safety authority established between Eastpointe and Hazel Park in 2015 became the first time the act was applied to noncontiguous cities in Michigan. If Woods voters approve a proposal to set up a public safety authority with one or more municipal partners in the state, this would be the second time that PA 57 is applied in such a manner.
Duchane called PA 57 “one of the most underutilized statutes” in the state.
“The system’s broken,” he said. “You can’t break ahead in Michigan as a municipality unless you have new growth. If you don’t have new growth, you’re limited by your taxable value changes. And worse than that in 2008 we experienced an unprecedented loss in property values.”
It could take communities over 30 years to regain what they lost in taxable value, he said. With Michigan’s current model, local governments – subject to the Headlee Amendment, rollbacks, and limitations initiated by Proposal A in 1994 – Duchane said that applying PA 57 offers relief to aging municipalities lacking enough new construction to generate new tax growth.
Headlee and Proposal A limitations
Sections 25 through 33 of Article IX of the Michigan Constitution is known as the Headlee Amendment, passed by Michigan voters in 1978. Section 31 initiated laws for local government taxing. Voters must approve any local tax increase. If the assessed value of total property tax revenue increases by more than the inflation rate, then the maximum property tax millage must be decreased so that total taxable property yields the same gross revenue, with factoring in inflation. This limits collected revenue to the amount the millage was projected to create.
Until Proposal A in 1994, the Headlee Amendment limited growth of state equalized value for a tax unit’s jurisdiction, meaning that individual parcels with a state equalize value (SEV) of half of the property’s cash value may be imposed a tax increase greater than inflation.
The millage is the amount per $1,000 of taxable property value. A home assessed at $100,000 with a 1 mill tax rate would owe $100 in taxes.
Or $100,000 SEV x 1 mill x 0.001 = $100.
A “Headlee rollback” reduces the millage if the local tax base increases more than the tax rate, thereby protecting homeowners from tax increases, but limiting local government revenue.
Proposal A in 1994 further limited local government revenue by limiting taxable value of property to increase at the rate of inflation.