Legislative Highlights To Kick Off The New Year

OPEB – Since the passage of the OPEB package, Treasury has been working with our staff to develop the reporting requirements necessary to begin implementing the new law. That reporting guidance was recently published, with an initial deadline for municipalities to respond by the end of January. Additional guidance is yet to be developed by Treasury on the waiver and corrective action plan processes. The League will continue working with the Department to ensure that the new law is implemented in a thoughtful and efficient way.

Consensus Revenue Estimating Conference – The main event for the first week following the holiday recess was the Consensus Revenue Estimating Conference on Thursday. The final consensus on revenues didn’t reveal anything unexpected—maintaining steady, slow growth for the coming years—and these numbers will serve as a baseline for the Governor’s upcoming budget presentation in early February.

Federal and State Income Tax Conflicts – One item that is virtually guaranteed to be addressed this month is the purported conflict between the recently passed federal income tax reform and Michigan’s state income tax personal exemption. The Governor is proposing to amend the existing state income tax personal exemption to ensure that the changes at the federal level do not cause an additional tax burden on residents at the state level. In addition to maintaining the existing state personal exemption, the Administration’s proposal would increase the personal exemption from the current $4,000 to $4,500 in three years.

Both the House and Senate are now moving competing proposals to expand on the opening the Governor has provided, with  the Senate moving Senate Bill 748 unanimously over to the House to expand the personal exemption to $4700 by 2020 and increasing the inflationary factor for years beyond 2020 up to a reported $5000. A companion bill that will move next week would also create a child/dependent tax credit similar to the feds.  Combined, these senate bills (SB 748-750) are estimated to reduce state tax revenue by approximately $225-250 million when fully phased in.

The House proposal was just introduced this week, as well.  House Bills 5420-22 would also preserve the existing state personal exemption and then expand the exemption beyond the Governor’s proposal, to $4800 for tax year 2020 and beyond.  Additionally, the House proposal includes a separate bill that would provide a $100 refundable tax credit for seniors above 62 years of age.  Combined, the House package would reduce state revenues by approximately $350 million.

Both packages also include a technical amendment to the Uniform City Income Tax Act to prevent any similar conflict with the personal exemption elimination at the federal level.

The State Treasurer and Budget Director have both cautioned against additional tax relief as the state already has over $2 billion in tax cuts still scheduled to take effect and other budget pressures, like road funding and Medicaid cost increases that will consume all of the state’s expected revenue growth for the foreseeable future. Conversations between the Governor, Speaker and Senate Majority Leader continue as they negotiate on a final amount of tax relief and under which format. We should know more by next week.

Veto Override – In a surprising move, both the House and Senate voted this week to override the Governor’s veto of the acceleration of the sales tax on the difference proposal for trading in used cars or boats.  This override vote comes just as the Detroit International Auto Show is set to debut and is the first override of a Governor’s veto in 16 years and only the fourth in modern history.

Senate Bills 94 & 95 move the currently scheduled phase out from 2039 to 2029 at a cost the House Fiscal Agency estimates at $300 million spread out over the coming years. Gov. Snyder had originally vetoed these bills, calling the proposal “not fiscally prudent” given the budget pressures the state faces in the next few years..

Both chambers voted overwhelmingly to override this veto on Wednesday, with the Senate’s override vote being unanimous.  Interestingly, the last veto override was one that was championed by the League to restore former Governor Engler’s veto of revenue sharing in 2002.

State of the State – The Governor will present his final State of the State address to a joint session of the Legislature on Jan. 23. Infrastructure and talent development are themes he is likely to continue promoting.

Events – The State & Federal Affairs and Member Engagement teams will be joining League member communities at the National League of Cities Congressional City Conference in March.  Registration for this conference is still open and members are encouraged to sign up and help share our message with Michigan’s congressional delegation.  The State & Federal Affairs team will also be providing legislative updates around the state this month, presenting to the South Oakland Mayors Association, the Michigan Municipal Treasurers Association Winter Workshop, the Michigan Municipal Executives Winter Institute, and at the Michigan Association of Municipal Attorneys winter retreat.  Team members are also serving as panelists talking medical marijuana at an event hosted by Saginaw Future, Inc. and meeting with the Portland Downtown Development Authority this month.

Chris Hackbarth is the League’s director of state & federal affairs. He can be reached at 517-908-0304 and chackbarth@mml.org.

New Pension/OPEB Reporting Requirement Released

Following the year-end passage of pension/OPEB legislation that implements the recommendations of Governor Snyder’s Responsible Retirement Reform task force report, Treasury released late today the reporting requirement documentation which ended up as the main component of Public Act 202 of 2017.

This afternoon’s Treasury announcement is included in Numbered Letter 2018-1: Local Government Retirement System Annual Report. This guidance includes links to a fillable reporting template (Form No. 5572), detailed instructions, and frequently asked questions.  Each of the documents can also be found on Treasury’s Local Retirement Reporting web page.

Under this new law, the linked pension and retiree health care reporting is due six months after the end of a local unit’s fiscal year. For those that have already filed their 2017 audited financial statements, this new report is due by Jan. 31, 2018.

Additional information from Treasury is expected in the coming weeks regarding “underfunded status” waivers and the corrective action plan process under the still-to-be-established stability board.

Communities are encouraged to direct questions via email to their office at LocalRetirementReporting@michigan.gov or visit Michigan.gov/LocalRetirementReporting.

Chris Hackbarth is the League’s director of state & federal affairs. He can be reached at 517-908-0304 and chackbarth@mml.org.

Year-End Legislative Wrap-Up

While last week’s House and Senate adjournment merely marks the mid-point of this two-year legislative session, that did not mean that the Legislature coasted into their holiday break.

Highlighted by the intense activity surrounding OPEB reform, both legislative chambers pursued aggressive agendas in the final days before adjourning.  Numerous bills that the League was tracking and engaged with experienced some measure of action:

The now 13-bill OPEB package was signed by Governor Snyder this week as Public Acts 202-214 of 2017 and takes effect immediately.  New reporting requirements under the bill are expected to be phased in over the next year, with some reporting expected due as early as January 31, 2018.  The League will work to update member communities as more information becomes available in the next couple of weeks.

Senate Bill 110 clarifies that municipalities implementing plans to increase the supply of below market housing are not violating the Rent Control Act (PA 226 of 1988) by offering voluntary incentives. This League-supported legislation was introduced in February and received a committee hearing this last week of session. It’s anticipated the bill will receive another committee hearing in early 2018 and be voted out.

Two economic development proposals of key interest to municipalities were also voted out of the Senate during the last week of session.  Similar to legislation that died at the end of 2016, the Senate sponsor introduced Senate Bill 393, which consolidates all tax increment financing authorities, excluding Brownfield Redevelopment Authorities, into one act with added transparency and reporting requirements.  Senate Bill 469 would reinstate the Michigan Historic Preservation Tax Credit.  Both of these bills were voted out of committee and out of the Senate last week and have been referred to the House Tax Policy committee where they are expected to receive committee consideration in the new year.

The League was also pleased with the Governor’s signature on legislation allowing urban grocery store projects to access funding from the community revitalization program this week. The House and Senate coordinated efforts last week on House Bill 4207 to provide State Rep. Andy Schor with one last Public Act before he resigns to take over as mayor of the City of Lansing.

Three different proposals related to the new Personal Property Tax system also saw movement before the recess, with Senate Bills 570-573 being finalized and sent to the Governor.  These bills provide for a much needed local mechanism to address late-filed business exemption applications.  Senate Bills 590-593 were voted out of the Senate and were referred to the House Local Government committee.  These bills, promoted by the League and reported from the Senate committee earlier this fall, would essentially hold communities harmless from any reduction in their debt limit due to a reduction in their property tax base from now-exempt personal property.  Finally, House Bill 5086 was developed between local government groups and the Department of Treasury to address a host of technical and minor policy issues related to the continuing implementation of the new system and the need to align the statute with the practical realities of managing and administering the new law.  This bill moved nearly unanimously out of the House last week and will be considered by the Senate Finance committee in early 2018.

Finally, a League-supported proposal to allow for the voluntary coordination of election duties and functions moved this month as House Bill 4671 received overwhelming support in the House and is now awaiting further action before the Senate Elections & Government Reform committee.

Infrastructure and technology issues also experienced a flurry of lobbying and negotiation over these final weeks of 2017.

Our advocacy efforts combined with a broader coalition opposing legislation which would have preempted most local control over private telecommunication provider line relocation projects.  We were able to delay action on House Bill 5098 that was being pursued by the industry before the end of the year.  This proposal remains alive, however, and we will continue to work to block further action on this bill.

The discussions surrounding the proposed industry roll-out of small cell technology is quickly becoming a big issue for municipalities. Small cells are low-powered antenna nodes that have a range of up to 2 miles and are installed for the purpose of relieving congestion for wireless users. The term “small” refers to the footprint of the device. Small cell devices can be mounted on their own 40’ poles, or on existing utility or street light poles. Senate Bill 637 was recently introduced that would create a new act that allows for small cell technology to be consider a permitted use both inside and outside the right-of-way with limited exceptions. The bill would severely limit local control around siting, impair municipal ability to protect the public health, safety and welfare of residents, and hinder local government’s ability to manage the ROW, potentially leading to a significant increase in the number of new poles within our communities.  Supporters of this proposal are looking for a statewide regulatory structure that is similar to the Metro Act and the Video Franchise Act.

The League is opposed to the language as introduced but working with the Chairman, Senator Mike Nofs, of the Senate Energy and Technology Committee to improve the bill. To do that we have extensively researched legislative efforts in other states, discussed the issue with several communities and municipal attorneys, and looked at the Distributed Antenna System (DAS)/Small Cell License Agreement created by the Grand Valley Metro Council.

League staff have met with Chairman Nofs and presented alternative language based on our research and conversations with members. This viable alternative to the introduced legislation strikes a balance between local control and the nationwide deployment of this new technology. The telecommunications industry will continue its push for the bill when the legislature returns next year in the hopes of quick action . We have asked the Chairman that this issue not be rushed and that all parties be brought to the table to discuss this bill and our alternative.

The Michigan Municipal League is also participant on the Lead and Copper Rule Stakeholder Workgroup that is assisting MDEQ with recommendations to address modifications to the Administrative Rules promulgated pursuant to Michigan’s Safe Drinking Water Act, 1976 PA 399, as amended. The ongoing discussion continues to be about how to best protect the public from lead exposure.  Unfortunately, the preliminary draft rules add additional burdens to community water supply systems that run counter to the principles of asset management and may ultimately hinder the protection of public health. In addition to the League, there are more than a half dozen community water suppliers, the American Water Works Association, public health departments and others participating on this work group.

The draft rule would reduce the action level from 15 parts per billion down to 10 parts per billion, require communities to map their existing system to identify the presence of lead, require that a community water supplier be responsible for the replacement and cost of private lead service lines, along with many other requirements that could pose significant financial and logistic hardships on a community. The League has taken a stance that we are not opposed to determining how much lead is present in water systems or the need to systematically begin removing lead from systems, but it cannot be done in such a way that causes a financial hardship or conflicts with the Headlee Amendment or the Bolt decision.

Link to the Preliminary Draft Rule: 2017 Preliminary Draft Lead and Copper Rule

Link to the DEQ Summary Document: Summary Lead and Copper Rule Requirements

The Governor has requested this issue be placed on an aggressive timeline and a finalized draft rule is expected by the first of the year. Should our concerns not be addressed through the stakeholder process, communities will need to be prepared to offer public comments on the rule in early January. In the meantime we will continue to work with those stakeholders that have common concerns with the process and draft rules to make the necessary adjustment to help prevent exposure to lead while still allowing for the efficient management of our water supply systems.

The Legislature is scheduled to return to full session on January 10, 2018, with the Governor’s final State of the State message and the Fiscal Year 2018-19 budget presentation to follow shortly thereafter.

Chris Hackbarth is the League’s director of state & federal affairs. He can be reached at 517-908-0304 and chackbarth@mml.org.

State House Considering Revenue Sharing Package

The League's Chris Hackbarth testifies about the proposed revenue sharing bills Tuesday, Dec. 5, 2017 in the House committee along with officials from the Michigan Association of Counties and Michigan Townships Association.

The League’s Chris Hackbarth testifies about the proposed revenue sharing bills Tuesday, Dec. 5, 2017 in the House committee along with officials from the Michigan Association of Counties and Michigan Townships Association.

Following the introduction last week of the 16-bill OPEB reform package, three additional bills were introduced in the House to create a structure that attempts to address the chronic under-funding of revenue sharing for local units of government.

Lead by chief sponsor, former Walker city mayor, Rep. Rob VerHeulen, House Bills 5314-5316 do three main things:

 

  1. Creates separate city, village, township (CVT), and county Revenue Sharing Trust funds to protect against future revenue sharing reductions. These trust funds would receive dollars earmarked directly from Michigan’s sales tax to provide the funding for statutory revenue sharing for CVTs based upon the current budget appropriation amount (approx $248 million for CVTs).
  2. Provides an initial attempt at increasing revenue sharing by growing the current statutory appropriation by $100 million over the next 20 years from the sales tax. The bills would divide these new funds ($5 million/year) equally between counties, cities, villages, and townships.
  3. Secures future Personal Property Tax (PPT) reimbursement revenue that is available above what is needed for 100% reimbursement, as an additional down payment on revenue sharing restoration.

The League’s Chris Hackbarth testified Tuesday about the bills in the House Competitiveness Committee along with officials from the Michigan Association of Counties and Michigan Townships Association.

The League supports the bill package in concept and continues to advocate for a plan that restores the revenue sharing cuts of the past decade and distributes dollars appropriately. The three bills were voted out of the House committee Tuesday and await action on the House floor.

Rep. VerHeulen issued a press release about the package and explained it would be funded through Michigan’s sales tax and would give a level of security to local communities in the case of an economic downturn.

“There have been compounding factors that have all led us to where we are at right now in areas across the state,” VerHeulen stated in the release. “Our communities face a funding crisis. They cannot make reliable payments into retirement systems for their employees, including police and fire, and money is often being diverted away from vital public services in an effort to keep up with funding those retirement benefit plans or other budget necessities.”

The bills could be considered in the full House by the end of the year.

Posted by Matt Bach, the League’s director of communications, on behalf of Chris Hackbarth. For details contact Hackbarth at chackbarth@mml.org.

Stay Tuned: OPEB Revisions Forthcoming and We May Need Your Help

UPDATED (10 a.m., Dec. 6, 2017): The League has been told to expect substitute versions for the 16-bill OPEB reform package sometime this morning or later today. The original package of bills, as introduced Nov. 30, was approved without support from Democrats in House and Senate committees Tuesday and have been tentatively scheduled for action on today’s House and Senate agendas. The League continues to actively press for amendments to the bills that would address our concerns. Please stay tuned as the League may ask you – our members – to contact your lawmakers to support or oppose the forthcoming revisions.

The League's Chris Hackbarth, right, testifies about the proposed OPEB legislation with officials from the Michigan Association of Counties and Michigan Townships Association.

The League’s Chris Hackbarth, right, testifies about the proposed OPEB legislation with officials from the Michigan Association of Counties and Michigan Townships Association.

FROM 4:30 p.m. Dec. 5, 2017: The League’s Chris Hackbarth and Anthony Minghine testified this morning and this afternoon in opposition to the introduced versions of the identical OPEB (Other Post Employment Benefit) bill packages in the Michigan Senate and House committees. Negotiation on these bills is ongoing and we are working diligently with the Governor’s Administration and House and Senate leadership staff to address our concerns. They have been receptive to our input so far and we are waiting for revisions that should reflect the input we have provided.

We testified Tuesday in both committees alongside officials from the Michigan Association of Counties and Michigan Townships Association. League member and Port Huron City Manager James Freed also testified. We continue to work and propose changes to the complex 16-bill package. The Senate Michigan Competitiveness Committee approved each of the bills, along with a related technical amendment, along party lines in 4-1 votes and sent them to the full Senate for a vote. The Senate adjourned for the day and may take up the package possibly later this week or next.

Port Huron City Manager James Freed testifies about the OPEB bill during a state House committee meeting Tuesday morning.

Port Huron City Manager James Freed testifies about the OPEB bill during a state House committee meeting Tuesday morning.

As most League members are probably aware, the League has been working for nearly two years on major municipal finance reform through our SaveMiCity initiative (go to saveMicity.org for details). The SaveMICity efforts has been looking for revenue, structure, and cost solutions to make our municipalities more fiscally sustainable. OPEB has been identified as our most significant budget cost driver in need of reform. Therefore the OPEB discussion happening now in the state Legislature is extremely important. For many months, League staff have been working with the legislature and governor’s office to help craft solutions to the OPEB problem.

The 16-bill package (House Bills 5298-5313 and duplicate Senate Bills 686-701) has pros and cons that League staff continue to assess to determine if these reform bills will provide necessary tools for communities to better manage these costs while remaining true to our fundamental beliefs –  that communities need the ability to provide reasonable benefits to their employees and retirees without crowding out essential city services.

The League's Anthony Minghine testifies before a state House committee.

The League’s Anthony Minghine testifies before a state House committee.

There are many parts of the bill package that the League supports, but we are also working to address a number of concerns that exist within the bills as introduced. Chief among them is the use of the Emergency Management (EM) law as the enforcement mechanism to address any impasse situation in the OPEB reform process. The League’s Anthony Minghine, deputy executive director and chief operating officer, testified that the use of the EM law is a “broad overstep” to the problem. Specifically, the League has raised concerns over the inclusion of language in this package that opens PA 436, the Emergency Manager law to add in a new provision for an emergency management team to be appointed in communities where the community and its bargaining units are unable to come to agreement on a local corrective action plans designed to address an OPEB or pension funding situation that exceeds specified funding and budget spending thresholds.

Port Huron City Manager James Free talks with the League's Anthony Minghine during the Senate committee hearing Tuesday afternoon.

Port Huron City Manager James Free talks with the League’s Anthony Minghine during the Senate committee hearing Tuesday afternoon.

View details about the OPEB bills in a previous blog that the League’s Chris Hackbarth, director of state and federal affairs, posted Thursday, Nov. 30, and updated yesterday here.

While it appears that both committees will be moving their respective bill packages to the floor today we anticipate changes to these bills before any further action and continue to actively press for amendments to the bills that would address our concerns.

Matt Bach is director of communications for the Michigan Municipal League. He can be reached at mbach@mml.org.

League Testifies on OPEB Bills, Continues to Work on Revisions

The League's Chris Hackbarth, right, testifies about the proposed OPEB legislation with officials from the Michigan Association of Counties and Michigan Townships Association.

The League’s Chris Hackbarth, right, testifies about the proposed OPEB legislation with officials from the Michigan Association of Counties and Michigan Townships Association.

UPDATED (4:30 p.m. Dec. 5, 2017): The League’s Chris Hackbarth and Anthony Minghine testified this morning and this afternoon in opposition to the introduced versions of the identical OPEB (Other Post Employment Benefit) bill packages in the Michigan Senate and House committees. Negotiation on these bills is ongoing and we are working diligently with the Governor’s Administration and House and Senate leadership staff to address our concerns. They have been receptive to our input so far and we are waiting for revisions that should reflect the input we have provided.

We testified Tuesday in both committees alongside officials from the Michigan Association of Counties and Michigan Townships Association. League member and Port Huron City Manager James Freed also testified. We continue to work and propose changes to the complex 16-bill package. The Senate Michigan Competitiveness Committee approved each of the bills, along with a related technical amendment, along party lines in 4-1 votes and sent them to the full Senate for a vote. The Senate adjourned for the day and may take up the package possibly later this week or next.

Port Huron City Manager James Freed testifies about the OPEB bill during a state House committee meeting Tuesday morning.

Port Huron City Manager James Freed testifies about the OPEB bill during a state House committee meeting Tuesday morning.

As most League members are probably aware, the League has been working for nearly two years on major municipal finance reform through our SaveMiCity initiative (go to saveMicity.org for details). The SaveMICity efforts has been looking for revenue, structure, and cost solutions to make our municipalities more fiscally sustainable. OPEB has been identified as our most significant budget cost driver in need of reform. Therefore the OPEB discussion happening now in the state Legislature is extremely important. For many months, League staff have been working with the legislature and governor’s office to help craft solutions to the OPEB problem.

The 16-bill package has pros and cons that League staff continue to assess to determine if these reform bills will provide necessary tools for communities to better manage these costs while remaining true to our fundamental beliefs –  that communities need the ability to provide reasonable benefits to their employees and retirees without crowding out essential city services.

The League's Anthony Minghine testifies before a state House committee.

The League’s Anthony Minghine testifies before a state House committee.

There are many parts of the bill package that the League supports, but we are also working to address a number of concerns that exist within the bills as introduced. Chief among them is the use of the Emergency Management (EM) law as the enforcement mechanism to address any impasse situation in the OPEB reform process. The League’s Anthony Minghine, deputy executive director and chief operating officer, testified that the use of the EM law is a “broad overstep” to the problem. Specifically, the League has raised concerns over the inclusion of language in this package that opens PA 436, the Emergency Manager law to add in a new provision for an emergency management team to be appointed in communities where the community and its bargaining units are unable to come to agreement on a local corrective action plans designed to address an OPEB or pension funding situation that exceeds specified funding and budget spending thresholds.

Port Huron City Manager James Free talks with the League's Anthony Minghine during the Senate committee hearing Tuesday afternoon.

Port Huron City Manager James Free talks with the League’s Anthony Minghine during the Senate committee hearing Tuesday afternoon.

View details about the OPEB bills in a previous blog that the League’s Chris Hackbarth, director of state and federal affairs, posted Thursday, Nov. 30, and updated yesterday here: http://blogs.mml.org/wp/inside208/2017/11/30/legislature-introduces-opeb-reform-proposal/.

While it appears that both committees will be moving their respective bill packages to the floor today we anticipate changes to these bills before any further action and continue to actively press for amendments to the bills that would address our concerns.

Matt Bach is director of communications for the Michigan Municipal League. He can be reached at mbach@mml.org.