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The Michigan Court of Appeals has upheld a lower court’s decision against the Detroit school district in its battle over collecting operating tax revenue.
Unless appealed again, the ruling means the Detroit Public Schools Community District will have to rely on voter approval on a ballot measure that would allow the district to collect its own operating millage for the first time. Until now, Detroit Public Schools – which now exists only to take in tax revenue and pay off old debt – collected the operating millage and DPSCD received other state funds to pay for daily operations.
Because voters renewed the levy in 2024, district officials have said voters may be confused about why another ballot measure is needed.
The August proposal would not create a new tax. Instead, it would allow DPSCD, rather than DPS, to collect the existing tax.
Judges Michael J. Riordan, Daniel S. Korobkin, and Philip P. Mariani last week issued a ruling siding with the Michigan Department of Treasury. The case centered on whether DPS could continue collecting operating tax revenue to pay off capital debt ahead of schedule.
In their ruling, the Court of Appeals judges agreed with the lower court, writing that DPS “cannot continue to levy the operating tax” once it pays off operating debt.
District officials did not immediately respond to requests for comment. It is unclear whether DPSCD will appeal.
Ron Leix, deputy public information officer for the Treasury Department, told Chalkbeat in an email that the department remains “committed to working with the district to support a strong education for Detroit’s students.”
If the district’s ballot measure does not receive voter approval by July 1, 2027, Superintendent Nikolai Vitti has said DPSCD would face a $120 million deficit the following school year.
DPSCD’s fight with the state over use of tax dollars
Lawmakers created DPSCD in 2016 to take over day-to-day school operations while DPS remained responsible for collecting taxes to pay off its $3.2 billion debt.
Under that agreement, DPSCD did not receive local tax revenue. Instead, it received state funding from the 1998 Tobacco Settlement Fund.
Revenue from DPS’ operating millage is close to paying off a $150 million emergency loan the district received in 2016 because rising property values generated more revenue than expected.
DPSCD officials wanted DPS to continue collecting the operating tax revenue – even after the emergency loan is paid off – to accelerate the payment of the district’s $1.3 billion capital debt and $355 million in state School Loan Revolving Fund debt. Those debts are currently paid through a separate millage. District officials argued the change would save taxpayers $326 million in interest.
But the Treasury Department rejected the request, saying state law does not permit operating millages to pay nonoperating debt.
After legislation that would have allowed the change failed, DPSCD sued the state.
In March, a Court of Claims judge ruled against DPSCD, finding that current state law does not permit the district’s request. The final order also said DPS will continue collecting debt millages until its capital and revolving fund debt is paid off, which is expected around 2040.
DPSCD will rely on voters and property rates for operating costs
DPSCD began preparing to collect its own operating millage before the Court of Appeals decision.
Vitti previously said the lower courts’ decision was not ideal because it would require the district to explain that the existing 18-mill levy is not a new or higher tax.
The tax applies only to non-homestead properties, such as rentals and businesses. It is not placed on homeowners.
If the measure fails in August, the district plans to place it on the November ballot. If it fails again, officials estimate a special election in May 2027 would cost between $1 million and $2 million.
In March, the school board approved a $1.4 million contract with a public affairs firm to educate voters on the millage ahead of the August election.
The change also means DPSCD’s operating budget will rely on local property tax revenue for the first time. If rates fall in the future, the district would receive less local funding. In the past, the district received a set amount of state funding for its operating costs.
Hannah Dellinger covers Detroit schools for Chalkbeat Detroit. You can reach her at hdellinger@chalkbeat.org.
Hannah Dellinger 2026-06-29 22:53:48
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