Madison Heights presents $66.1 million proposed FY2026 budget as council presses on cuts, rates and pensions

City Manager Marsh presented the city's proposed fiscal year 2026 budget to the Madison Heights City Council, saying the plan "reflects our commitment to community priorities, maintains existing services, implements the capital improvement plan, and continues to honor our city's strategic plan." The total proposed budget is $66,100,000 with a General Fund allocation of $42,300,000.

The budget holds the proposed operating tax rate at 25.4572 mills, the same rate as fiscal 2025, leaving only 0.166 mills of operating millage capacity. Finance Director Linda Coonath told council the proposal reflects an overall reduction of $392,383 versus the adopted FY2025 budget (excluding carryforwards and amendments) driven primarily by the elimination of four vacant full‑time positions and by deferring certain capital expenditures.

Marsh and Coonath said capital outlay of roughly $8,800,000 is included for vehicles, equipment and infrastructure; staff also identified several deferred projects to balance the budget. City management listed specific capital deferrals: Civic Center parking lot phase 2 ($150,000), dispatch furniture ($65,000), fire station parking lot ($220,000) and phase 1 of the Fire Station 1 roof replacement ($250,000). Marsh said a state enhancement grant application has been submitted to support the roof work.

The proposed budget continues key priorities the council set in its strategic plan, including public safety, infrastructure, quality of life and financial stability. The presentation includes funding to add a second school resource officer (SRO) for the 2025–26 school year in partnership with the Lamphere School District; the position is to be 70% funded by the district and 30% by the city at a total cost of $182,000 including benefits, Coonath said.

Coonath outlined pressures on revenues: a narrow taxable value base (taxable value is about 97% of its 2008 level), declining federal and state revenue streams and an erosion of franchise fee revenue linked to cable TV. She said the city projects limited revenue growth of $431,847 across funds driven by a 3.1% inflation multiplier from the State Tax Commission offset by a millage rollback of roughly 1.73%.

On utilities, staff proposed a 6.3666% increase in both water and sewer rates to offset higher treatment costs passed on by the city's providers (cited increases of about 7.38% for water treatment and an estimated 5.34% for sewer treatment). Coonath said the water and sewer fund is projected with $14.2 million in revenues and expenditures and would use a planned portion of fund balance in FY2026.

Councilors focused questions on the nature of capital cuts, the treatment of pension liabilities and program priorities. Marsh explained capital items are fixed assets costing $5,000 or more and described the process for identifying which projects could be deferred for one year. On pensions, Marsh said the city moved the bulk of legacy defined‑benefit pension costs from department budgets into general administration to make those obligations more transparent; the police and fire pension system remains open to new hires and is about 60% funded despite additional city contributions.

Marsh and Coonath said the city remains constrained by existing voter‑approved and statutory limits, and reiterated that the full public review and the formal adoption of the budget and tax levy are scheduled for the council meeting in May (the second Monday). No formal action was taken on the budget at the April 15 meeting.

Next steps: the proposed budget was posted online and will return to council for public hearing and adoption in May, with staff returning with any requested clarifications and potential amendments.