The City of Hillsdale has performed among the best in the state of Michigan for financial stewardship over the past 15 years, according to city officials.
As the city council begins to review the budget for the upcoming fiscal year, the city’s total taxable value is $173 million, surpassing its pre-2008 peak of $162.5 million. The total taxable value hit a low of $121.3 million in 2016, according to the Michigan Department of Treasury apportionment records, and did not recover fully until 2024. The recovery marks the end of what city officials described to The Collegian as a “lost decade” following the Great Recession in 2008.
“When I first started as city manager in 2015, our total taxable value was still declining, so we didn’t have the luxury of revenue growth,” City Manager David Mackie said. “The city had to make structural adjustments to match expenditures with revenues. Those decisions weren’t always easy, but they were necessary to protect the city’s financial health.”
The 1978 Headlee Amendment to the Michigan State Constitution limits tax revenue growth to the rate of inflation. Under Proposal A, introduced in 1994, growth on the taxable value of property is limited to five percent or the rate of inflation, whichever is less. So when property values in Hillsdale dropped during the recession, taxable value declined proportionally but took much longer to recover.
Unable to recover taxable value quickly, the city responded by making structural cuts, including the sale of city property, staff reductions, and budget reductions. During this time, the city kept public services intact, according to Assistant City Manager Sam Fry.
The downturn and subsequent recovery limited revenue growth and constrained progress on long-term priorities such as infrastructure investment for more than 15 years, Fry said. Despite these challenges, the city’s current net position ratio — assets relative to expenditures — places Hillsdale in the 93rd percentile of Michigan cities for financial health, according to the Michigan Department of Treasury.
As a result of structural cuts, day-to-day operating costs remained relatively flat during the past 15 years, with a general fund expenditure of $4.31 million in 2010 and a projected $5.43 million in 2025, according to the Michigan Department of Treasury, with a spike to $8.4 million in 2024.
“For more than a decade, we operated in a constrained revenue environment,” Mackie said. “By keeping spending flat and maintaining strong financial practices, we positioned the city to take advantage of growth when it returned.”
Mackie’s limitation of expenditures helped maintain the city’s financial health, according to Ward 3 Councilman and Hillsdale College Professor of Political Economy Gary Wolfram.
“He’s been able to deal with this situation of the Headlee Amendment and not having a lot of taxable value without raising property taxes,” Wolfram said. “I think that’s a good indication that it’s been managed well.”
Hillsdale residents voted down a proposed city income tax 419 to 781 in 2012, before Mackie’s tenure. The city council had put the proposed tax on the ballot to help pay for street repairs.
Fry said Hillsdale is now turning recovery into forward momentum with new investments, including renovations of historic buildings by Hillsdale Renaissance, manufacturing and technology park expansions, and new businesses like Aldi, KFC, and Meijer.
Hillsdale ranks in only the 16th percentile for taxable value per capita at $21,700, according to the Michigan Department of Treasury. Fry said this ranking is low primarily because about one third of the city’s total taxable value — including the college and Hillsdale Hospital — is tax-exempt.
Wolfram said the large portion of nonprofit property value presents another difficulty for the city in generating revenue and tax base growth. Attracting new businesses to the area has helped the city begin to overcome this difficulty.
The city will continue to focus on tax base growth in order to generate revenue and invest in infrastructure going forward, Fry said.
“Tax base growth directly impacts our ability to maintain roads, infrastructure, and the services residents expect,” Fry said. “If we want to keep taxes low and still provide quality public services, we can’t ignore that reality. The sustainable way to meet these obligations is by growing the broader tax base — making Hillsdale a place where people want to invest, build, and do business.”
