Municipal Finance
Underlying just about every function of local government is our municipal finance system. It governs how communities can pay for public services, repair roads and infrastructure, maintain records, and prepare for future needs. This page focuses on five issues important to Michigan cities and villages and identifies League policy priorities where applicable. It is not a complete municipal finance guide.
Select a topic to learn how the rules work and what they mean for your community.
Property Taxes
Property taxes are typically the largest source of local revenue for most Michigan cities and villages. Proposal A limits annual growth in an individual property’s taxable value, while the Headlee Amendment can reduce a community’s maximum authorized operating millage rate.
Together, these limits can hold down revenue growth even as service costs rise.
Revenue Sharing
Michigan cities and villages receive constitutional revenue sharing based on population and state sales tax collections. Statutory revenue sharing also depends on the annual state budget appropriation and has long been funded below the formula envisioned in law.
The League supports a dedicated Revenue Sharing Trust Fund to make this funding more reliable.
Personal Property Taxes
Personal property taxes apply to taxable business machinery, equipment, and other tangible property—rather than land and buildings. The State of Michigan exempts many categories of business personal property and has created programs to reimburse eligible local revenue losses.
For communities with large industrial or commercial tax bases, accurate and timely payments are especially important.
Municipal Budgeting
Local officials are responsible for adopting and overseeing their municipal budget. Michigan’s Uniform Budgeting and Accounting Act sets out requirements for preparing, reviewing, adopting, and amending budgets, as well as controlling spending.
Regular financial reports help officials identify problems and make adjustments before costs exceed approved appropriations.
Local Road Funding
Public Act 51 of 1951 governs much of the road funding Michigan cities and villages receive from the state. Act 51 revenue is restricted to transportation purposes and is recorded in separate Major Street and Local Street funds.
The Neighborhood Road Fund created in 2025 adds another funding source with its own distribution rules.