Government - Ferndale

What is a Headlee override?

A Headlee override is when the community votes to bring back the original tax rate of 20.0000 mills set by the City Charter.

In 1978, the Headlee Amendment was passed to Michigan’s Constitution. In a nutshell, Headlee requires a local government to reduce its tax rates if property values increase faster than the rate of inflation. A “Headlee override,” then, is a vote by the community to restore the tax rate to its original level, helping to fund local services and projects.

How would the proposed millage increase of 4.3 mills be prioritized?

About 90% of the millage funding would be spent on constructing a proposed new public safety headquarters for our Police and Fire Departments, as well as on updating contracts with five unions— the largest being the Police and Fire Unions.

We expect about 10% of the proposed millage to be spent on the proposed Martin Road Park Recreation Facility, as well as funding for Parks & Recreation services. The table below shows the initial cost estimates for the proposed facilities provided by the City's architects.

Purpose	Cost estimate	Proportion of Proposed Millage	Annual Debt Payment	Loan Term
Public Safety Facilities	$40,000,000	2.5 mills	$2.4 million	30 years
Martin Rd. Recreation Facility	$7,000,000	.54 mills	$515,000	20 years
Union contract adjustments and Recreation operations	To be negotiated	1.25 mill
Total		4.3 mills	$2.9 million

The estimated millage amount is based on 2024 taxable value numbers provided by Oakland County
The proposed charter amendment would restrict the new funding for the proposed Facilities and police and fire operations.

Why would the City purchase the Comerica property before the outcome of the November ballots are known?

The City decided to purchase the Comerica property now because the opportunity won't wait for the election. Comerica listed the property for sale in March 2024, and they plan to finalize the sale by the end of the summer.

The City is buying the property for $1.325 million, using cash reserves from an OPEB (other post-employment benefits) trust fund to finance the purchase. This loan can be paid back over ten years at $163,000 per year, with interest benefiting the City's OPEB trust fund instead of a private lender. This purchase gives the City control over a key piece of real estate at Hilton and E. 9 Mile Roads. Even if the planned public safety headquarters doesn't move forward, the property remains a valuable asset that can be sold or redeveloped in the future.

I'm not against funding staff and services, but why didn't the City offer an option to renew only the expiring millage?

The current 2015 Headlee override millage is valued at 4.2808 mills. This millage will expire on December 31, 2025. The current millage supports existing operations, but staffing needs are evolving based on two driving factors: people and facilities. Our current millage would not sustain the status quo for staffing levels.

Union Contracts: Most City employees (80%) are covered by union contracts, which expire in 2025 and haven't been negotiated since 2021/22. With changes in the job market over the past four years, we will need to significantly increase wages to retain and attract staff. For example, the regional wage comparisons for police officer positions in the table below show that our pay scales are currently substantially lower than neighboring cities.

Police Officer Wages: Confirmed Via Job Ads, July 1, 2024

City	Low Wage	High Wage	Years to Top Pay
Ferndale	$56,725	$76,449	4
Madison Heights	$66,023	$91,729	1
Royal Oak	$76,202	$92,505	1
Troy	$75,946	$91,520
Oak Park Public Safety	$79,246	$92,700

2. Facilities: The City’s facilities, including police and fire stations built during the 1950's and early 60's, are aging and in need of repair. We frequently receive over $1 million in maintenance requests during the annual budget process, many of which are deferred due to budget constraints. Investing in new facilities will help us compete for the next generation of talent, reduce long-term costs, and improve operational efficiencies by consolidating the police, dispatch, and fire headquarters into one facility.

The 2022 Facilities Task Force report (page 40 bar chart demonstrates how facilities deferments inevitably impact the budget into the future unless they are addressed) and the 2024 Finance Committee Report (pages 5-9 include their letter to residents and summary) both highlighted the need to address these challenges. The recommended increase in millage would ensure that we can maintain current service levels and meet future needs effectively.

Their reports also noted woeful inequities between our male and female facilities in our Police and Fire Departments, along with health issues like locating our Fire Department living areas above a motor pool bay, a practice that is no longer acceptable for current firehouses.

I support Police and Fire, but an investment in a Recreation Facility feels excessive right now; why was recreation bundled with public safety?

Acting on a recreation facility makes sense now; here's why:

Access to competitive funding: At this unique moment in time, there are game-changing funding opportunities from federal and state governments specifically for community recreation projects. By taking advantage of these now, the City can restore a community facility with the help of other people's money and reduce the financial burden on local taxpayers into the future. During the pandemic, the American Rescue Plan Act provided funds to state, county, and local governments, creating grant opportunities, many of these keyed in on community recreation projects. Recreation is often the first area to face budget cuts, so these grants are crucial.
Returning community space: The Kulick Community Center was returned to the Ferndale Public School District during the pandemic. The costs to maintain and invest in the 100-year-old building were challenging for the City as a tenant. Unfortunately, this also means that our community has lost a valuable space for seniors, families, and community events. A new facility would restore what many residents called a "third place"— where people can gather, hold events, and enjoy recreational activities.

You can read more about the numerous financial challenges with our former lease of the Kulick Center from the School District in the Task Force Report (pages 20-23).

Secured grants for the Martin Road Park Recreation Facility:

In 2022, Ferndale received a federal grant for the recreation facility in the amount of $704,669
In 2023, the City received a State grant from Senator Mallory McMorrow and Representative Helena Scott in the amount of $500,000
Ferndale was awarded a grant by the Michigan Parks and Recreation Commission in the amount of $883,163

Martin Road Recreation Facility Millage Proportion: The estimated cost for the new facility is $9 million. We have already secured approximately $2 million in grants, some of which is being used to fund the current design process that you may have read about. To cover the remaining $7 million, we would need to use local property taxes.

The annual millage rate to cover construction costs is estimated at 0.54 mills. For a house with a taxable value of $100,000 (market value of $200,000), this would mean an additional $54 on the summer tax bill this year.

How do the Headlee Amendment and Proposal A work?

Proposal A

The taxable value of your home increases each year. The amount it increases is tied to the rate of inflation with a maximum annual increase of 5%. This is generally a good thing because it prevents people from being priced out of their homes by property taxes that rise faster than income. When homes are sold, the taxable value uncaps and is reassessed. This uncapping often causes significant jumps in annual property taxes for new homeowners. In this way, Proposal A incentivizes long-term homeownership.

Headlee Amendment

Because the taxable value of individual homes increases each year (either due to sale and uncapping, or annual inflation increases), Headlee mandates that the average increase city-wide cannot exceed the rate of inflation. If the increase exceeds the rate of inflation, then the millage rate must be reduced for all taxpayers so that the amount of money collected by the City is capped at the rate of inflation. (According to the Oakland County Equalization Office, annual inflation averaged 2.33% between 1995-2023; view their presentation to the Finance Committee). A reduction of the millage rate is commonly referred to as a Headlee rollback.

A common misconception is that due to the uncapping of recently sold properties, Michigan cities see a windfall of new tax dollars. However, because of Headlee limiting financial growth, this is not the case. Instead, the additional tax revenue collected from a newly uncapped property is often distributed to other property owners in the form of a millage reduction (“Headlee rollback”) rather than captured by the local government.

Proposal A + Headlee

On their own, both Proposal A and Headlee are reasonable ways to approach municipal taxation; however, there are challenges to the balancing act between them when there is a recession.

1. Prior to Proposal A, Headlee allowed tax rates to move up and down to try and provide revenue growth equal to inflation. When Proposal A was later implemented by the Legislature, they eliminated the ability for rates to move in both directions. As a result, rates can go down but not back up, eliminating any logical correction that was intended by the original Headlee Amendment. This makes communities and schools more vulnerable in a recession.

2. Home values pop up after a property is sold. However, conflicts between Proposal A and Headlee do not allow a community to benefit from this as they should. In fact, too much real estate activity can trigger a rollback (reduction) in a community’s tax rates. This is especially damaging following a recession. As a result, a community is never allowed to catch up and track with the economy during a recovery.

Why do cities like Ferndale need Headlee overrides?

Headlee overrides and voted operating millages are not specific to Ferndale—they're a reality throughout Michigan.

According to a 2024 State of Michigan Treasury report, 138 local governments rely on Headlee overrides, including 12 in Oakland County: the Cities of Hazel Park, Oak Park, Berkley, Clawson, Ferndale, Huntington Woods, Sylvan Lake, Lake Angelus, Lake Orion, Pontiac, Pleasant Ridge, and Wixom; and the Townships of Bloomfield, Novi, Royal Oak, and White Lake.

Most people would assume that increased property values = increased tax revenue for a city. However, the opposite is often true. The Headlee Amendment requires cities to roll back their millage rates when property values rise faster than inflation. For example, Ferndale’s median property values decreased by 45% between 2008 and 2013. As values began to recover in 2017, the Headlee Rollback prevented cities like Ferndale from fully benefiting from the increased property values, leading to reduced tax revenue.

The combination of reduced property values and the Headlee Rollback made it difficult for cities like Ferndale to recover financially. Even as property values rebounded, revenue growth remained capped by the rate of inflation. During those recovery years, the average annual rate of inflation was only 1.67%, which slowed the recovery of the budget and forced the City to be more reliant on a Headlee override to sustain staffing and service levels.

How did the City decide to pursue another Headlee override?

The decision to seek another Headlee override was made unanimously by City Council following extensive research and recommendations by the resident-led Facilities Task Force and Finance Review Committee.

In 2022, City Council appointed the nine-member Facilities Task Force to study and make recommendations for prioritizing investments in Ferndale’s facilities. Their work led to the determination that “City facilities fail to meet the size requirements needed to equitably accommodate the needs of a modern diverse workforce, they generate financial and environmental costs to the community, and in some cases, they pose a risk to the health of staff.” They delivered a Facilities Prioritization Plan and funding recommendations, including the suggestion of a Headlee Override and City Charter amendment.

In 2023, City Council appointed the ten-member Finance Review Committee to study and advise on how a renewal or non-renewal of the Headlee override would impact cost of living and City staffing and services. Their ultimate recommendation was to maintain the quality of the City’s services and address facilities maintenance issues by seeking a Headlee override millage for the November 2024 General Election to reset the City to its charter amount of 20 mills.

If the Headlee override is passed, when would we expect the next one to be needed? 

If the Headlee override millage proposal is passed, another override renewal may not be needed for a while. These proposals have no term limit and are meant to support:

The funding levels necessary to support existing services, staffing levels, and union contracts, and

New investments in Public Safety and Recreation facilities.

Future rollbacks will depend on property values and market conditions. If we are lucky not to experience any major recessions that diminish the value of Ferndale’s housing stock, funding should be sufficient for the foreseeable future.

Why is there no term limit on this Headlee override proposal?

There are a few reasons for this.

First, while the proposed Headlee override has no defined term limit, that doesn’t mean the millage amount is permanent. The way Proposal A and the Headlee Amendment work, Ferndale’s millage rate will decline over time.

Second, neither the recommendations of the Finance Committee, nor the goals of City Council, can be fully achieved without ongoing support. Staff and City Council have heard from residents that the safety and upkeep of our facilities are critically important; the second ballot proposal speaks to this by earmarking 4 mills for new public safety and recreation facilities. If the community passes these proposals and invests in modern, equitable spaces, City Council legally can’t defund them—the earmarked 4 mills can only be changed with voter consent. So, an ongoing commitment of support is necessary.

Finally, a permanent or “forever” Healdee override is nobody’s goal. City Council and leaders continue to advocate at the State level to change the laws that keep so many municipalities beholden to voter-approved support, as well as to fight for increased State revenue sharing.

What will the ballot look like?

There are two proposals. The first asks voters to authorize keeping the 4.2808 Headlee override millage that is set to expire in 2025, and add an additional 4 mills to be earmarked for Police, Fire, and Recreation. Draft ballot language:

HEADLEE OPERATING MILLAGE RESTORATION PROPOSAL
This proposal will restore the authority of the City to levy 20.00 mills for general operating purposes by restoring millage authority that has been reduced by operation of the Headlee Amendment and replacing the 5.4552 mills operating millage previously authorized by electors in 2015, which has been reduced to 4.2808 mills. If approved by electors, the restored millage would continue to be subject to annual reduction by application of the Headlee Amendment. Shall the limitation on the amount of taxes which may be imposed on taxable property in the City of Ferndale, County of Oakland, State of Michigan be increased by 8.5856 mills ($8.5856 per thousand dollars of taxable value) indefinitely beginning in 2025, as new additional millage in excess of the limitation imposed by Michigan Compiled Laws section 211.34d, to restore City Charter operating millage authorization previously approved by the electors as reduced by operation of the Headlee amendment, to provide funds for general operating purposes? It is estimated that 8.5856 mills would raise approximately $8,181,810 when first levied in 2025. YES NO

The second proposal is a City Charter amendment that would legally devote 4 of the mills from the first proposal for a new Police and Fire Headquarters facility; new Martin Rd. Park Recreation facility; and Police, Fire, and Recreation operations. This proposal takes effect only if the first proposal is approved. Draft ballot language:

PROPOSED AMENDMENT TO THE FERNDALE CHARTER TO DEDICATE A PORTION OF THE CITY OPERATING MILLAGE TO POLICE FACILITIES, FIRE FACILITIES, RECREATION FACILITIES, AND SECONDLY TO POLICE, FIRE, AND RECREATION OPERATIONS AND STAFFING
It is proposed that Chapter IX, Section 12 of the Charter be amended to provide for the dedicated use of four-tenths (4/10) of one per cent (4 mills) of the assessed value of all real and personal property subject to taxation in the city for the sole purpose of funding improvement, maintenance, and operation of police, fire, and recreation facilities with any excess revenues thereafter to be used for the sole purpose of funding police, fire, and recreation operations and staffing, effective when electors approve restoring the operating millage to 20 mills. Shall the proposed amendment be adopted? YES NO

Why are there two proposals?

The first proposal seeks to restore the City’s operating millage to 20.0000 mills—the maximum allowed by the City Charter. The second proposal is a charter amendment that earmarks 4 mills of the increase to fund a new combined Public Safety headquarters; new Recreation facility; and Police, Fire, and Recreation operations.

What is a City Charter?

A City Charter is a legal document that defines the organization, powers, functions, and essential procedures of a city government. It serves as the city's constitution, establishing the framework for local governance. The Charter outlines the roles of elected officials and city administration in a Council/Manager form of government, the structure of municipal departments, and the processes for enacting laws and ordinances.

What does a Charter Amendment do?

A Charter amendment can be used as a control for city operations by introducing specific guidelines or restrictions within the charter itself. This ensures that certain actions, such as earmarking 4 mills for Police, Fire, and Recreation, require voter approval.

City Council felt strongly about devoting a permanent portion of the City’s operating millage for public safety and recreation facilities and operations. This ensures that these facilities and operations will see continued maintenance and investment going forward.

Could City Hall staffing reductions eliminate the need for a Headlee override? Would Police, Fire, and DPW staffing really be impacted if the Headlee override were to end?

Nonessential City Hall staff make up a very small portion of the City's General Fund—even cutting them all wouldn't make more than a dent in the City's 4-mill shortfall at the expiration of the current Headlee override. Police, Fire, and Public Works jobs would indeed be impacted.

City Manager Gacioch delivered a presentation to City Council in April: "FYE '26 and FYE '27 Budget-cut Scenario Planning." In it, he offers an illustration of the budgeted program and departmental cuts that could be made if the current Headlee override millage—which is the City's most stable source of operating revenue, responsible for about 30% of property tax revenues—is not renewed. View the video presentation for a closer look.

There are several other staffing factors to understand and consider:

80% of the City’s workforce is union, including Police patrol, Police command, firefighters, clerical staff, and Public Works laborers. These union contracts will all expire and be renegotiated in 2025. Property tax revenue sources directly impact bargaining around competitive employee wages and benefits.

Annual pension and retiree obligations have increased by 100% since 2021. This is a reflection of the numerous retirements of public safety employees over the past five years.

Numerous retirements mean that our workforce is getting younger and less experienced. Nationally there are fewer candidates for local police and fire service than there are job openings—this makes recruitment competitive and also makes retaining experienced mid-career employees very important. Facilities and competitive wages for our union employees are more important than ever in providing high-level, stable local services.

Is the City doing anything to tighten its spending?

Yes. City Council and staff are always working to find efficiencies, save money, and make the most of the resources we have.

The City Manager's Office recently put out its first annual budget efficiency report, highlighting the City's efforts to achieve substantial cost savings. In it, they highlight two case studies:

The Fire Department found a way to make necessary updates to their fleet and eliminate a high-cost apparatus down the line. They’ll be replacing a fire engine at the end of its service life with a quintuple combination pumper, known as a quint—an apparatus that serves the dual purpose of pumper engine and ladder truck. When the Department’s ladder truck reaches its end-of-life, they won’t need to replace it, saving the City approximately $2 million.

Over the past two years, the HR Department has converted its retirees to a Medicare Advantage plan. The level of healthcare service remained consistent, and the change saved the City approximately $800,000.

We invite you to learn more; check out Budget Odyssey: A Journey of Cost Savings.

Who can I talk to if I have questions?

Members of the City Manager's Office would be happy to speak with you, understand your questions, and provide unbiased information.