American Axle & Mfg., Inc. v. City of Hamtramck

• Citation: 461 Mich. 352,604 N.W.2d 330
• Decision Date: 01 February 2000
• Docket Number: Docket No. 112053, Calendar No. 2.
• Parties: AMERICAN AXLE & MANUFACTURING, INC., Plaintiff-Appellee, v. CITY OF HAMTRAMCK, Defendant-Appellant.
• Court: Supreme Court of Michigan

604 N.W.2d 330

461 Mich. 352

AMERICAN AXLE & MANUFACTURING, INC., Plaintiff-Appellee, v. CITY OF HAMTRAMCK, Defendant-Appellant.

Docket No. 112053, Calendar No. 2.

Supreme Court of Michigan.

Argued October 13, 1999.

Decided February 1, 2000.

Jackier, Gould, Bean, Upfal & Eizelman, P.C. (by A. Jeffrey Bean), and Andrew J. Bean, Bloomfield Hills, MI, Special Counsel, for appellee.

Miller, Canfield, Paddock & Stone, P.L.C. (by Larry J. Saylor, Samuel J. McKim III, P.C., and Joanne B. Faycurry), Detroit, MI, for appellant.

Bodman, Longley & Dahling, L.L.P. (by Charles N. Raimi and R. Craig Hupp), Detroit, MI, for Wayne County.

Dickinson, Wright, P.L.L.C. (by Kester K. So, Peter H. Ellsworth, and Terence M. Donnelly), Lansing, MI, for Michigan Municipal League.

PER CURIAM.

A civil judgment was entered against defendant city of Hamtramck, and it assessed the unpaid amount of the judgment on the tax rolls under § 6093 of the Revised Judicature Act.¹ Plaintiff American Axle & Manufacturing, Inc., paid the tax and petitioned the Michigan Tax Tribunal for a refund. The Tax Tribunal found for American Axle on the ground that adding the judgment to the tax rolls violated the Headlee Amendment, Const. 1963, art. 9, §§ 6, 25-34. The Court of Appeals affirmed.²

We conclude that § 6093, which authorizes levying the judgment on the tax rolls, constituted preexisting authority for that taxation, and thus is exempt from the Headlee Amendment's election requirement. We also conclude that the judgment levy does not violate the home rule cities act, M.C.L. § 117.1 et seq.; MSA 5.2071 et seq., or the Hamtramck charter. Accordingly, we reverse the judgment of the Court of Appeals and the order of the Michigan Tax Tribunal.

I

In 1984, defendant city of Hamtramck sold property to Freezer Services of Michigan as part of a redevelopment plan. The city warranted that there were no toxic or hazardous substances on the property. However, such substances were discovered, and Freezer Services sued. The case was settled, and a consent judgment against the city was entered in the amount of approximately $3 million. After some intervening litigation, the city included a judgment levy of 30 mills in its 1994 tax bills under § 6093.

Plaintiff American Axle paid its tax bill, but then filed a petition with the Michigan Tax Tribunal seeking a refund on the ground that the levy violated the Headlee Amendment because it was not approved by the voters.

The Tax Tribunal granted summary disposition for American Axle, finding that levying the additional millage without a vote of the electors constituted a violation of art. 9, § 6.

The city appealed, but the Court of Appeals affirmed, finding violations both of Headlee and of the home rule cities act³ and the Hamtramck City Charter.

II

The Headlee Amendment, adopted by referendum effective December 23, 1978, amended Const. 1963, art. 9, § 6, and added §§ 25-34. Art. 9, § 6, limits total property taxes to 15 mills without a vote of the electors, but allows the electors to approve an additional 35 mills. That section includes two exceptions to that limitation. Additional millage may be levied to repay certain bonds approved by electors, and taxes may be imposed "for any other purpose the tax limitations of which are provided by charter or by general law." Art. 9, § 6, was amended to incorporate the sections added by Headlee:

The foregoing limitations shall not apply to taxes imposed for the payment of principal and interest on bonds approved by the electors or other evidences of indebtedness approved by the electors or for the payment of assessments or contract obligations in anticipation of which bonds are issued approved by the electors, which taxes may be imposed without limitation as to rate or amount; or, subject to the provisions of Section 25 through 34 of this article, to taxes imposed for any other purpose by any city, village, charter county, charter township, charter authority or other authority, the tax limitations of which are provided by charter or by general law. [Emphasis added.][⁴]

One of the sections added by Headlee, art. 9, § 31, adds the requirement of voter approval of new taxes. However, it exempts taxes authorized by law at the time the section was ratified:

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.

We have not previously had occasion to deal with this subject. However, we agree with the decisions of several panels of the Court of Appeals 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. For example, in Bailey v. Muskegon Co. Bd. of Comm'rs, 122 Mich.App. 808, 333 N.W.2d 144 (1983), the Court of Appeals held that the county was authorized to levy an accommodations tax, even though the tax was first levied after Headlee was ratified. The Court explained:

The Muskegon County tax is unconstitutional, inasmuch as it did not receive voter approval, unless it can be determined that it was "authorized by law" prior to December [23], 1978, the date on which the Headlee Amendment was ratified. Defendants contend, the trial judge found, and we agree, that the term "authorized by law" does not require that a tax actually be levied on the date that the Headlee Amendment became effective. Rather, it requires only that a local government be empowered to levy the tax on the date that the Headlee Amendment was ratified, even if the local government had not exercised its authority. [122 Mich.App. at 821,333 N.W.2d 144 (emphasis in original).]

In 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. In Smith v. Scio Twp., 173 Mich.App. 381, 384, 433 N.W.2d 855 (1988), at the time Headlee was ratified the township was a general law township with its taxing authority limited to 1.16 mills. In 1986, the voters approved incorporation as a charter township. The charter township act, M.C.L. § 42.1 et seq.; MSA 5.46(1) et seq., authorizes levies of up to 5 mills. The Court of Appeals held that the plain language of art. 9, § 31, allowed the township board to increase taxes to 5 mills, even though there was no separate approval of that tax increase. The Court said:

The plain language of Headlee prohibits a local government from levying a tax in excess of that permitted by law or charter and it prohibits increasing the authorized tax rate without approval of the electors. But nowhere does Headlee require a direct vote of the electors in order to permit a local unit of government to increase taxes if the local unit of government has the authority by law or charter to levy the increase. [173 Mich. App. 381, 433 N.W.2d 855.]

Similarly, in Saginaw Co. v. Buena Vista School Dist., 196 Mich.App. 363, 364-365, 493 N.W.2d 437 (1992), in 1974 county voters had approved a resolution limiting school districts to a tax levy of 9.05 mills. However, the resolution also provided the districts located entirely within one city or charter township could levy 10.05 mills. At the time the Headlee Amendment was ratified the school district was located in two townships, and therefore was limited to 9.05 mills. In 1990, the district boundaries were redrawn so that the district was located within one township. Relying on Bailey, the Court of Appeals allowed the district to levy the higher rate:

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. [196 Mich.App. at 366, 493 N.W.2d 437.]

See also Taxpayers United for Michigan Constitution, Inc. v. Detroit, 196 Mich.App. 463, 493 N.W.2d 463 (1992).

III

Thus, the key question presented in this case is whether RJA, § 6093, which authorizes levying the amount of the judgment on the tax rolls, is exempt from the Headlee election requirements because it was a tax "authorized by law" at the time the Headlee Amendment was ratified.⁵

RJA, § 6093(1) provides for the levying of the amount of the judgment on the tax rolls. The statute provides:

Whenever judgment is recovered against any township, village, or city,... the clerk of the court shall, on the application of the party in whose favor judgment is rendered, ... make and deliver to the party so applying a certified transcript of the judgment, showing the amount

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