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MADISON HEIGHTS — In a sign of good financial health, the city of Madison Heights recently received the Distinguished Budget Presentation Award from the Government Finance Officers Association.
“This award is the highest form of recognition in governmental budgeting and reflects the professionalism and dedication of our finance director and team,” City Manager Melissa Marsh said in an email. “It recognizes that Madison Heights has strong financial policies, a transparent and well-organized budget process, and a commitment to long-term planning.”
Specifically, the city of Madison Heights earned top marks in categories such as strategic goals, priorities and issues; financial policies; debt and capital planning; and supplemental data and explanations. All other categories were rated “proficient,” which means the budget meets or exceeds nationally-recognized best practices.
Marsh said the city’s budgeting process begins each fall with a strategic planning session where the City Council reviews a five-year financial forecast. This process allows the city to plan for infrastructure, capital replacements and major purchases, which reduces reliance on debt and helps ensure financial stability.
“New this year, we introduced a ‘budget in brief’ to make key budget information even more accessible to residents,” Marsh said.
The city manager also noted that the city completed its annual independent audit, conducted by the firm Rehmann.
“The audit confirmed that Madison Heights’ financial statements are accurate and in accordance with acceptable accounting standards,” Marsh said, adding that a clean audit reflects healthy reserves, well-managed expenses, and careful planning for the future.
Still, the city manager — who herself was once the city’s finance director — sounded a note of caution.
“Overall, Madison Heights is financially stable, but like most Michigan communities, we’re facing several long-term structural challenges that require careful planning,” Marsh said. “The most significant pressures include pension obligations, inflationary operational costs, and constrained revenue growth due to state-level policies.”
Elaborating on these points, she explained that the city’s police and fire pension system, “while improving,” remains only about 63% funded. This is up from 48% only several years ago, but the annual required contributions continue to rise, and they will remain a major factor in the city’s long-term budgeting. Marsh said being able to offer this benefit is important for recruiting police officers and firefighters, which are in high demand among cities.
Regarding inflation and rising operating costs, Marsh noted that costs for health care, utilities, materials and contracted services all continue to rise faster than revenues coming into the city’s coffers. She said that health insurance by itself is conservatively projected to increase by 6% next year and 5% each year thereafter. Costs related to public safety and other core services have also risen — areas that make up the majority of the city’s general fund budget.
Not helping the situation is the decline in revenue sharing from the state. Marsh said that recent changes to the state’s sales tax distribution has caused permanent reductions in revenue sharing with cities. For Madison Heights, this is a projected loss of $62,000 this fiscal year and more than $131,000 next year and each year thereafter.
“Revenue sharing today is nearly flat compared to 20 years ago, even as service demands and costs have grown significantly,” Marsh said.
Further complicating matters for Michigan cities is the interaction between Proposal A and the Headlee Amendment — two state-level policies that together limit the amount of increased revenue annually a city can collect from its tax base to 5% or the rate of inflation, whichever is less.
“In practice, this means revenues lag behind real market growth, especially in high-inflation years,” Marsh said. “For example, although property values have increased significantly, the city’s charter-authorized millage has been rolled back from 16 mills to 13.5578 in FY 2026, leaving just 0.1617 mills of capacity — only about $177,000 — to absorb future increases.
“More than two-thirds of our general fund revenue now comes from property taxes, so these limitations have a major impact,” she said. “For FY 2027, this inflation rate as approved by the State Tax Commission is 2.7%.”
So how is the city managing these pressures?
Marsh said Madison Heights has remained stable because of proactive planning and disciplined financial management. The five-year forecast helps identify challenges early, allowing officials to adjust accordingly.
“Even with these pressures, we ended FY 2025 in a strong position, with a healthy fund balance — much of it intentionally set aside to ‘phase fund’ future capital needs,” Marsh said. “The city has policies requiring reserves of at least 16% of operating expenditures, plus one year of debt payments, and we remain comfortably above that threshold.”
Madison Height City Councilman Quinn Wright said he appreciates the way that city staff approaches the budgeting process, from implementation to ongoing tracking.
“It truly sets us apart from other cities,” Wright said. “I’m very happy that we have the right people and processes in place to keep Madison Heights exemplary.”
Madison Heights Mayor Corey Haines said continued management of the budget will be a top priority for the council.
“My mindset centers on fiscal responsibility and long-term planning to ensure the city’s continued financial stability,” Haines said. “With the reduction in state revenue sharing, along with potential increased inflation, we must continue to be focused on essential services and be certain that we are planning for the long term. The city manager has done an excellent job moving our city forward responsibly.”
