I've mentioned before that the police need more authority/duties and the military less... Or at least more defined. Don't allow military to stop smugglers without a police officer calling for assistance first. Maybe say they aren't allowed to fire on any non-terrorist unlawful unless fired upon first or protecting someone else who has been fired upon, though they'd be free to deny them access to jumpgates (not jumpholes). Border security and all. The army doesn't have the authority to enforce laws or arrest people except in very specific circumstances.
I'd say allow police anything up to bombers, but nothing larger. Sure, ideally most police should stick to LFs... But realistically they need much more. Don't limit militaries to no LFs, though.