STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5450

March 6, 1979

SCHOOLS AND SCHOOL DISTRICTS:

Millage to repay notes

TAXATION:

Millage levied by a school district to repay notes

The Detroit Board of Education may not levy millage in fiscal year 1979-1980, pursuant to 1976 PA 451, Sec. 1356 and its predecessor provision, in excess of the amount required to pay outstanding notes. After notes or bonds issued pursuant to 1976 PA 451, Sec. 1356 and its predecessor provision have been repaid in full, the Detroit Board of Education has no authority to levy any millage under that section.

Ms. Lynne M. Metty

Attorney at Law

Office of Legal Affairs

Board of Education of the City of Detroit

5057 Woodward Avenue

Detroit, MI 48202

You have requested my opinion on two questions regarding millage levies authorized by Sec. 1356 of the School Code of 1976, 1976 PA 451, Sec. 1356; MCLA 380.1356; MSA 15.5356 and the predecessor provision found in 1955 PA 269, Sec. 681.

You advise that the Detroit Board of Education issued notes dated March 1, 1974, and levied a millage of 2.25 mills to raise revenue to repay the notes, without a vote of the school district's electors, as authorized by 1976 PA 451, supra, Sec. 1356 and the predecessor provision, 1955 PA 269, Sec. 681. This millage has not raised sufficient revenue, however, to repay all of the notes. Thus, the Board has been required to use operating revenues to repay some of the notes. You advise that final payment on all notes issued will be made in the 1979-80 fiscal year and that the amount due in that year will require a levy of only .67 mills.

You then ask the following questions:

1976 PA 451, supra, Sec. 1356 is a reenactment, without material change, of 1955 PA 269, Sec. 681(2)-(10), as added by 1973 PA 1. 1973 PA 1 was enacted by the legislature to assist the Detroit Board of Education to eliminate an operating deficit of approximately $73,000,000. Its constitutionality was upheld in Advisory Opinion re Constitutionality of 1973 PA 1 and 2, 390 Mich 166; 211 NW2d 28 (1973).

1976 PA 451, supra, Sec. 1356, and its predecessor provision, 1955 PA 269, Sec. 681, authorized school districts, under prescribed conditions, to issue up to $75,000,000 in notes or bonds to fund operating deficits. The section further empowers a school district to levy a property tax of not more than 2.25 mills each year to raise revenue to repay the principal and interest on the bonds or other evidence of indebtedness.

The legislature clearly contemplated the possibility that such tax might not raise sufficient revenue to repay the notes or bonds. 1976 PA 451, supra, Sec. 1356 provides that the tax shall be the primary source of revenue for repayment but the school district must pledge other available district funds as secondary security for the notes or bonds. There is no language in 1976 PA 451, supra, Sec. 1356 authorizing the school district to levy any millage to reimburse itself in the event it is required to use secondary sources to pay the notes or bonds.

1976 PA 451, supra, Sec. 1356(3) and its predecessor provision as added by 1973 PA 1 both authorize the millage levy only '. . . for each year the notes or bonds are outstanding.' Since the millage must be pledged as the primary source of payment for the notes or bonds and may only be levied if notes or bonds are outstanding, the legislative intent is clearly to permit only such levy as is required to repay the notes or bonds. Moreover, in 1973 PA 2, which was in pari materia with 1973 PA 1, this authorized levy was specifically described as '. . . 2.25 mills for the retirement of an operating or projected operating deficit. . . .' The legislature never intended that any of the millage revenue be used as operating funds.

In addition, Const 1963, art 9, Sec. 6 provides that no millage may be levied by a school district in excess of the 15 mill constitutional limitation unless the additional millage is approved by the district's electors. This limitation did not apply, however, to millage levied for payment of principal and interest on bonds or other evidences of indebtedness. ⁽¹⁾

In Advisory Opinion, supra, the Supreme Court held, at 390 Mich 183; 211 NW2d 28, that:

It is, therefore, my opinion, in answer to your first question, that for both the statutory and constitutional reasons set forth, the Detroit Board of Education may not levy a millage in fiscal year 1979-80, pursuant to 1976 PA 451, supra, Sec. 1356 in excess of the amount required to pay the outstanding notes.

It is further my opinion, in answer to your second question, that for the same reasons, after the notes or bonds issued pursuant to 1976 PA 451, supra, Sec. 1356, and its predecessor provision, 1955 PA 269, Sec. 681, have been repaid in full, the Detroit Board of Education has no authority to levy any millage under that section.

Frank J. Kelley