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Detroit school district loses court appeal against state over paying debt with operating tax revenue

June 30, 2026

The Michigan Court of Appeals has ruled against Detroit Public Schools Community District in a dispute over tax collection authority, affirming that the old Detroit Public Schools entity cannot continue levying operating taxes once operating debt is paid off. This decision forces DPSCD to seek voter approval in an August ballot measure to transfer collection of an existing 18-mill operating tax from DPS to DPSCD, even though voters already renewed the levy in 2024. The proposed measure would not create new taxes but would redirect who collects them, a change necessitated by the 2016 restructuring that split operational responsibilities from debt payment obligations.

Who is affected

  • Detroit Public Schools Community District (DPSCD)
  • Detroit Public Schools (DPS - the legacy debt-collecting entity)
  • Superintendent Nikolai Vitti
  • Detroit students receiving education services
  • Detroit voters who must approve the ballot measure
  • Non-homestead property owners (rental properties and businesses) subject to the 18-mill operating tax
  • Michigan Department of Treasury
  • Taxpayers who district officials argued would have saved $326 million in interest under their proposed plan

What action is being taken

  • DPSCD is preparing to collect its own operating millage
  • The district plans to place a ballot measure before voters in August
  • DPSCD is working with a public affairs firm (under a $1.4 million contract approved in March) to educate voters on the millage ahead of the August election
  • The Treasury Department remains committed to working with the district to support education for Detroit's students
  • DPS continues collecting debt millages to pay off capital and revolving fund debt

Why it matters

  • This ruling has significant financial implications for Detroit's public education system. Without voter approval of the ballot measure by July 2027, DPSCD faces a $120 million deficit that would severely impact its ability to fund daily school operations. The decision also represents a fundamental shift in how DPSCD's operating budget will be funded—moving from predictable state funding to reliance on local property tax revenue, which creates vulnerability to fluctuations in property values. Additionally, the ruling blocked DPSCD's plan to accelerate debt payment that officials argued would have saved taxpayers $326 million in interest costs, meaning Detroit will continue carrying its substantial debt burden (currently $1.3 billion in capital debt and $355 million in state loan debt) until approximately 2040.

What's next

  • The district will place the ballot measure before voters in August
  • If the measure fails in August, the district plans to place it on the November ballot
  • If it fails again in November, officials plan a special election in May 2027 (estimated to cost between $1 million and $2 million)
  • The district must receive voter approval by July 1, 2027, to avoid the projected $120 million deficit
  • DPS will continue collecting debt millages until its capital and revolving fund debt is paid off (expected around 2040)
  • It is unclear whether DPSCD will appeal the Court of Appeals decision

Read full article from source: bridgedetroit.com