1. School Funding History
Proposal A
March 1994 Constitutional Amendment.
Simply stated: Proposal A requires 6 mills on homestead property and that businesses and second homes be designated as non-homestead property and taxed at 18 mills.
The State School Aid Fund: State levies a uniform rate of six mills on all property.
Locals district’s contribution: local districts levy 18 mills with voter approval on all non-homestead property.

2. Foundation Allowance
Foundation Allowance: The amount of money a school district receives per-pupil
The minimum State per-pupil Foundation Allowance for
$7085
This represents the major portion (89%) of Brown City Community Schools revenue and is funded from 2 sources
Local Revenue – 18 mills collected on non-homestead property
State Revenue

3. Revenue by Source

4. Foundation Allowance Funding Calculation
Student Count 1,124 students
x 7,085 per student
$7,963,540
Mills Collected on Non-Homestead
$459,708
(If 18 Mills were collected on Non-Homestead)
$483,691

5. BLENDED STUDENT COUNT
The Foundation grant money, which is projected by the State to be $7,085.00/student for the school year, is based on a Blended Count of Students.
The formula for the school year is:
25% x (K-12+Alt Ed Spring count)
+ 75% x (K-12+Alt Ed Fall count)
=Blended student count
The is an estimate.

6. Foundation Allowance Funding
By law, to obtain the total Foundation Allowance, Brown City Schools must collect a local “non-homestead” millage for this portion of its budget.
The State reduces its obligation to the districts by this amount and only pays the balance. Brown City Schools will lose $23,983 for the school year because it does not levy the full 18 mills.

7. Headlee Amendment
The Headlee Amendment was established by a vote of the MI people in 1979 as a constitutional amendment to limit the increases in property tax assessment.
If the value of all property taxed by a government unit exceeds the rate of inflation, millage rates are reduced so that the amount of taxes collected is no more than an inflationary increase.

8. Foundation Allowance Comparison

9. Two Purposes of Headlee
If property values (taxable value) increase faster than the rate of inflation, then millage tax rates must be reduced.
2. If the legislature mandates programming that must be implemented, they must pay for it.

10. County Equalization Department
Each year the County does an analysis of the increase in taxable value for each school district within that county.
If the increase in the taxable value is greater then the rate of inflation, the school district must roll back the amount that is levied on the non-homestead properties. This “rollback” is called the ‘Headlee Rollback’.

11. Headlee Rollback Affect
This rollback permanently reduces the 18 mills that is levied on non-homestead properties unless the voters approve a Headlee Override.
Brown City Schools current levy rate has been reduced by .89 mills.
State Aid reduction to Brown City Schools is $23,983.

12. What is non-homestead property?
Non-homestead property includes property within our school district that is not a primary resident or not used for agricultural purposes.

13. Who does non-homestead millage affect?
The measure will affect businesses, second homes and non-qualified agricultural property.
The Headlee override does not affect principal residents (primary homes that are owned by the dweller) covered under the Michigan Homestead Property Tax exemption.

14. Are you affected by the 18 mill non-homestead tax?
Please answer yes or no to the following statements:
Do you own commercial / industrial property in the Brown City School District?
Do you own vacation property in the Brown City School District?
Do you have agricultural property that is non-qualified? (not exempt for the 18 mills)
Do you own rental properties or a second home in the Brown City School District?
If you have answered no to all the above statements, the non-homestead property tax does not apply, and costs you nothing.

15. Brown City Community Schools Headlee Override Vote
Different Graphic

16. Projected Sources of Revenue for Per Pupil Foundation Allowance
$430.33
Local Non-Homestead Taxes
(18 Mills Times
Non-Homestead
Taxable Value
Divided by Student Count $
From the State $
Non-Homestead properties include:
apartment buildings, rental homes, vacation property,
vacant land, commercial / industrial property

17. Actual Sources of Revenue for Per Pupil Foundation Allowance
$408.99
Local Non-Homestead Taxes
( Mills Times
Non-Homestead
Taxable Value
Divided by Student Count) $
From the State $
State assumes all
Districts are levying
18 mills

18. 2006-07 Loss of Revenue to Brown City Community Schools

19. Potential Long Term Impact of Failure to Override Headlee

20. The Problem
A rollback in the 18 mills non-homestead tax occurs when property values increase faster than the rate of inflation.
It is triggered when property is sold and re-valued at a level much higher that the rate of inflation. This causes the 18 mills to be rolled back (currently at mills in Brown City).
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21. Example:
In Brown City when a 100 acre parcel of vacant (non-homestead) land is sold for $300,000 it may then come onto the tax rolls as 10 individual building sites valued at $60,000 each. New taxable value: $600,000.
This extra $300,000 of non-homestead property value (along with numerous other “similar” sales) triggers the “Headlee Rollback” of the 18 mills non-homestead millage.
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22. 2 Solutions Available
The Solution
To restore full foundation grant funding there are only two (2) available options.
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23. Option 1
The first option for school districts that have a Headlee Rollback is to simply hold an override vote.
If successful, this vote would restore the full 18 mills.
This option could require an override vote every year if property values continue to increase faster than the rate of inflation.
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24. Option 2
A second option that is being used by school districts is to request more mills than are needed to override Headlee. Districts are requesting authorization to levy 19 or 20 mills. The state law prohibits Districts from levying more that 18 mills. Headlee reduces the authorized millage rate, not the levied rate. If a rollback occurs, it is applied to the 19 or 20 mills, not the 18 mills levied. This means there is no impact on the 18 mills levy for a number of years.
This increase is rationalized by districts saying that it will eliminate the need to come back again and again to ask for the same 18 mill levy.
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Break this down – too much info on it!!

25. Example Calculation Option 2