Oshtemo Charter Township v. Kalamazoo County

339 Mich.App. 87

981 N.W.2d 176

OSHTEMO CHARTER TOWNSHIP, Petitioner-Appellant,

v.KALAMAZOO COUNTY & Kalamazoo County Board of Commissioners, Respondents-Appellees.

No. 355634

Court of Appeals of Michigan.

Submitted September 15, 2021, at Lansing.

Decided September 30, 2021, 9:00 a.m.

James W. Porter, Kalamazoo, and Emily E. Westervelt for Oshtemo Charter Township.

Cohl, Stoker & Toskey, PC, Lansing (by Timothy M. Perrone ) for Kalamazoo County and the Kalamazoo County Board of Commissioners.

Bauckham, Sparks, Thall, Seeber & Kaufman, PC, Portage (by Robert E. Thall ) for the Michigan Townships Association, Amicus Curiae.

Before: Beckering, P.J., and Shapiro and Swartzle, JJ.

Shapiro, J.

The Headlee Amendment provides that a local unit of government may not levy a tax without voter approval unless the tax was authorized at the time of Headlee's ratification in 1978. At that time, Michigan law permitted general-law townships to levy property taxes at a rate not greater than one mill, while charter townships were permitted to levy property taxes up to five mills.¹ When Headlee was adopted, petitioner was a general-law township, but in 1979 it became a charter township by resolution of the township board.²

In 2019, petitioner determined that its property tax rate, which was 0.9703 mills, was insufficient to service the needs of its 24,000 residents, and its board passed a resolution requesting that the Kalamazoo County Board of Commissioners allow it to levy an additional 0.5 mills for general tax purposes.³ The Board of Commissioners denied the request, relying on an opinion from the Attorney General, OAG, 1985-1986, No. 6,285, p. 46 (April 17, 1985), concluding that charter townships that were incorporated after the Headlee Amendment was ratified remain limited to the millage rate for general-law townships as provided by the Property Tax Limitation Act, MCL 211.201 et seq. , unless a higher tax rate was approved by a vote of the township electors. Petitioner appealed to the Michigan Tax Tribunal (the MTT), seeking a ruling that it could levy up to five mills for general tax purposes pursuant to MCL 42.27(2) of the Charter Township Act, MCL 42.1 et seq. The MTT, relying primarily on the Attorney General opinion, rejected petitioner's arguments, and petitioner appealed in this Court.⁴

The question before us, therefore, is whether petitioner remains limited to the tax rate for general-law townships because it was a general-law township at the time Headlee was adopted or whether, having later become a charter township, the relevant limit on its taxing authority is the limit applicable to charter townships at the time Headlee was adopted. We conclude that the Attorney General opinion is inconsistent with later-decided caselaw from the Michigan Supreme Court and that petitioner may levy the charter township millage rate. Accordingly, we conclude that the MTT made an error of law and reverse its judgment.⁵

I. ANALYSIS

The primary objective when interpreting constitutional provisions "is to realize the intent of the people by whom and for whom the constitution was ratified."

Toll Northville Ltd. v. Northville Twp. , 480 Mich. 6, 11, 743 N.W.2d 902 (2008) (quotation marks and citation omitted). The "common understanding" of a constitutional provision is typically discerned "by applying each term's plain meaning at the time of ratification." Wayne Co. v. Hathcock , 471 Mich. 445, 468-469, 684 N.W.2d 765 (2004). Courts "may also consider the circumstances surrounding the adoption of the provision and the purpose sought to be accomplished by the provision." Taxpayers for Mich. Constitutional Gov't v. Michigan , 508 Mich. 48, 61, 972 N.W.2d 738 (2021).

"The Headlee Amendment added §§ 25 through 34 to Article 9 of the Michigan Constitution." Mich. Ass'n of Home Builders v. Troy , 504 Mich. 204, 208 n. 3, 934 N.W.2d 713 (2019). This case specifically concerns § 31 of the Headlee Amendment, 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. [ Const. 1963, art. 9, § 31.]

"The plain language of art 9, § 31, excludes from its scope the levying of a tax, or an increased rate of an existing tax, that was authorized by law when that section was ratified." American Axle & Mfg., Inc. v. Hamtramck , 461 Mich. 352, 362, 604 N.W.2d 330 (2000).

In American Axle , 461 Mich. at 357, 604 N.W.2d 330, the Supreme Court approved a line of § 31 cases from this Court standing for the proposition "that the Headlee exemption of taxes authorized by law when the section was ratified permits the levying of previously authorized taxes even where they were not being levied at the time Headlee was ratified and even though the circumstances making the tax or rate applicable did not exist before that date." Petitioner argues that this case falls squarely within this formulation of the "authorized by law" exemption. We agree.

American Axle observed that "[i]n several cases, changes in circumstances after the ratification of Headlee have been found to make levy of taxes constitutional where, without those changed circumstances, the increases would have been forbidden." Id. For our purposes, the most instructive case is Saginaw Co. v. Buena Vista Sch. Dist. , 196 Mich. App. 363, 493 N.W.2d 437 (1993). In that case, the county voters had approved property tax limitations in 1974 generally limiting school districts to 9.05 mills but allowing districts located entirely within one city or charter township to levy an additional mill. Id. at 364, 493 N.W.2d 437. In 1990, the defendant school district redrew its borders so that it was located entirely within one charter township. Id. at 364-365, 493 N.W.2d 437. This Court held that the district could levy the higher millage without voter approval:

The Headlee Amendment requires voter approval only if a unit of local government wants to impose taxes at a rate higher than that authorized by law at the time of its adoption. Const. 1963, art. 9, § 31. In 1978, school districts in Saginaw County located entirely within a charter township were authorized by law to levy taxes at a rate of 10.05 mills. We find that, because it is now located entirely within Buena Vista Charter Township, defendant's tax rate of 10.05 mills is not above the rate authorized by law at the time the Headlee Amendment was ratified. The category of school district into which defendant now fits existed in 1978, the tax in question was authorized by law (it was not a new kind of tax), and the rate (10.05 mills) was an authorized rate. When defendant's geographical configuration changed, it then became eligible to tax according to the applicable preexisting tax structure. Furthermore, before the Headlee Amendment, a simple rearrangement of boundaries would have empowered the defendant to increase the tax from 9.05 to 10.05 mills. That is all that occurred post-Headlee. Therefore, no voter approval was required for defendant to raise its millage to 10.05 mills.

[ Id. at 366, 493 N.W.2d 437 (emphasis added), quoted in American Axle , 461 Mich. at 358-359, 604 N.W.2d 330.]

We agree with petitioner that Saginaw County is highly analogous to the instant case. As in Saginaw County , the tax in question was authorized by law when Headlee was ratified. Further, townships were able to incorporate as charter townships by resolution in 1978, and had petitioner's resolution to incorporate become final before Headlee was ratified, it could have levied a charter millage without voter approval. But, like Saginaw County , the necessary change in circumstances for petitioner to levy the disputed tax did not occur until after 1978. When that change occurred, the charter township millage rate was not a "new" tax but a previously authorized one that petitioner was now eligible to levy.

Respondents argue that Saginaw County does not control the outcome here because there is a difference between changing the boundaries of a school district (which authorized an additional mill in taxes) and a change of structure from a general-law township to a charter township (which allows a tax increase of about four mills). Respondents fail to explain, however, why these are material distinctions such that a different result is warranted.⁶ The question is simply whether the tax was authorized by law when Headlee was ratified; the amount of the tax and the nature of the changed circumstances making it applicable are not relevant to that inquiry.

Similarly, the MTT did not adequately explain its conclusion that this case is distinguishable because a township incorporating as a charter township by resolution is not a "mere" change in circumstances. We agree with the amicus brief that this creates an arbitrary standard to determine whether the requirement of voter approval applies in these types of § 31 cases. More importantly, it deviates from the clear standard established by American Axle that a tax is exempt from the requirement of voter approval 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. See American Axle , 461 Mich. at 357, 604 N.W.2d 330. Any other consideration is not relevant to whether the tax was authorized by law when Headlee was ratified, which is all that the exemption requires.

The MTT also relied on the fact that Saginaw County distinguished that case from the Attorney General opinion addressing the question at issue in this case:

The two opinions of the Attorney General plaintiff cites, OAG, 1985-1986, No 6285, p. 46 (April 17, 1985), and OAG, 1989-1990, No 6588, p. 149 (June 16, 1989),^{[7 ]} deal with a quite different

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