ANN ARBOR, MI - Ann Arbor Public Schools will ask voters in May for approval to set the district's non-homestead operating millage at 18 mills each year for the next 20 years, effectively counteracting Headlee rollbacks to the millage rate as property values rise.

Non-homestead properties include industrial, commercial and rental properties as well as second homes.

The district also will ask voters to extend its "hold harmless" millage on principal residences of up to 12.3777 mills. The district levied 4.3564 mills for the hold harmless millage in 2017.

The board of education voted 6-1 on Wednesday, Jan. 17, to approve ballot language for the proposal that voters will decide in the May 8 election. Ann Arbor Public Schools' current operating millage is set to expire in 2019.

Operating millages are a fundamental source of funding for Michigan public schools, and the state assumes local districts will levy that revenue as part of the per pupil foundation allowance distributed to schools each year.

All Michigan property owners - unless their property is exempt from taxes - also pay a 6-mill State Education Tax that goes directly to the state.

Board Secretary Jeff Gaynor opposed the motion at Wednesday's meeting due to the cost to AAPS of putting the proposal on the ballot in May. Overall, Gaynor said he is in favor of seeking an extension of the school district's operating millage.

"Given the shortfall in funding from the state and given our school community's desire to support education, I am entirely in support of this proposal, which returns the 18-mill (levy) on non-homestead property," Gaynor said.

The trustees first considered seeking an increase and extension to the district's operating millage in December 2017. Their discussion at Wednesday's meeting centered on when to bring the proposal to voters and the length of the millage extension.

The operating millage proposal is likely to be the only item on the ballot in May in Washtenaw County, which means Ann Arbor Public Schools would cover the entire cost of the election - rather than splitting the expense with other entities with items on the ballot. The cost will be around $100,000, said Marios Demetriou, assistant superintendent of finance and operations.

Other options included the August election, when attorney Amanda Van Dusen said voter turnout tends to be lower and more partisan; or the November election, where the school's proposal would be at the end of a long ballot, Van Dusen said.

Ultimately, the trustees decided on the May election so if the proposal passes, AAPS could start levying the increased amount this summer and plan on the additional revenue in the 2018-19 budget.

An important aspect of the operating millage proposal is that it would restore Ann Arbor Public Schools' ability to levy a full 18 mills on non-homestead property, counteracting the Headlee rollback that has limited the school district's revenue from the millage in recent years.

The Headlee amendment says that when property values rise faster than the rate of inflation, millage rates will be rolled back to protect property owners from rapidly increasing taxes.

While AAPS is currently authorized to levy 18 mills on non-homestead property, the Headlee rollback has reduced the school district's actual levy since 2015, according to information from the school district.

In 2017, Ann Arbor Schools levied 17.5957 mills on non-homestead properties due to the Headlee rollback, which resulted in $1.3 million less in revenue than if the district had been able to levy the full 18 mills.

The revenue shortfall is expected to increase each year, school officials said, unless this new millage proposal passes to counteract the Headlee rollbacks.

The ballot proposal that will go to voters in May would increase the maximum levy AAPS is authorized to collect to 21 mills on non-homestead property.

State law says school districts can never levy more than 18 mills for their non-homestead operating millages, but the 21-mill authority would give AAPS a cushion to offset the Headlee rollbacks.

"We are taking some steps in this millage to ensure that what the voters approved - (the 18-mill non-homestead millage) - we will be able to collect," said Superintendent Jeanice Swift.

If the proposal passes in May, AAPS would be able to collect an additional $1.3 million to $1.4 million this summer. In all, the 18-mill non-homestead millage and related hold harmless millage are expected to generate $84.78 million in 2018, which accounts for about 36 percent of Ann Arbor Public Schools' general fund.

The terms of Ann Arbor Schools' hold harmless millage would be unchanged under this ballot proposal.

In 1994, when the state set the 18-mill limit on schools' non-homestead operating millages as part of a new funding formula called Proposal A, Ann Arbor Public Schools was already generating more revenue from local property taxes than the 18-mill cap would have allowed.

To prevent AAPS - and other school districts in a similar position - from losing revenue under the Proposal A, the state included a provision for "hold harmless" millages.

Ann Arbor Schools' hold harmless millage applies to primary residences within the district, and it's intended to maintain the school district's revenue at the same level as before Proposal A went into effect, taking into account the rate of inflation.

Ann Arbor Public Schools is authorized to levy a maximum of 12.3777 mills for its hold harmless millage, but in practice, the millage rate has been much lower.

In 2017, the school district's hold harmless millage was 4.3564 mills. The millage rate varies slightly from year to year based on changes in property values and other factors.

As far as the length of the operating millage extension, the trustees thought 20 years was a reasonable amount of time to provide consistency in the revenue stream for the district's general fund. They also wanted to avoid "voter fatigue" from asking for a renewal of the operating millage more frequently.

Voters who live in the Ann Arbor Public Schools district have supported school-related millage proposals four times in the past three years:

May 2015 -

May 2016 -

May 2017 -

November 2017 -

Susan Baskett, board vice president, advised the trustees and school officials to be clear about how the operating millage differs from the other millage proposals voters have recently supported.

"This is the foundation, this is what we have got to have if nothing else," Baskett said. "The question I think people will ask is, 'So does this mean you're not going to bother me again?' And I think we need to be very upfront that no, we will probably come knocking again, because our costs are continuing to grow and our student needs."

The school district is now developing informational items on the operating millage proposal, and a series of community forums will be scheduled to answer questions related to the ballot proposal.