Personal Property Tax Implementation Process Continues to Evolve

A series of bills amending the new personal property tax reform effort were signed by the Governor this month.  House Bills 5525-5527, 5545, and 5176 were all signed with immediate effect over the past two weeks.

The bulk of this package of bills arose from Treasury’s initial experience, early this year, with the first phase-out of Eligible Manufacturing Personal Property certification filings. As Treasury worked with the assessing and business communities, they discovered numerous concerns with the structure of the forms, filing deadlines, and process for dealing with corrections or amendments to those filings.  The main result in these bills was an agreement to allow a 2016-only extension of the EMPP filing window for businesses until May 31st of this year.  The bills also included amendments to address the state and local process for handling any additional filings and/or corrections that occur as a result of those filings.

While HB 5176 was originally requested by the League to address a technical concern with the distribution formula for revenue that is set to be sent to the 300+ cities that received a reimbursement check last fall for their small taxpayers exemption losses from 2014 and 2015, the extension of the filing window for EMPP also necessitated a short delay in the reimbursement schedule from PPT losses from October 20th, 2016 until November 20, 2016.  This delay will only impact the 2016 reimbursement payment timing.  Treasury has been awaiting the statutory correction to the formula so that they could distribute approximately $3.5 million additional dollars to those cities eligible for reimbursement of those small taxpayer exemption losses.  Reimbursement checks from this $3.5 million fund should be distributed before the end of this month.

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

Committee Approves Dark Store Fix – Contact Your Legislator!

Underutilized Mall in Wyoming (2) dark storesThe House Tax Policy committee today reported House Bill 5578 with a bi-partisan 11-2 vote.  Following multiple committee hearings spanning the past six months, today’s positive committee vote had been anticipated, based upon the amount of work done by the sponsor and local government advocates.

As the committee vice-chair, Rep. Dave Maturen was able to draw upon his extensive appraisal background to educate the members of the committee on the dark store problem and develop the language in the proposal, in conjunction with help from the League and numerous local government organizations and officials.

The language in HB 5578 provides very simple guidance to the Michigan Tax Tribunal that aligns directly with the existing, accepted methods of valuation that all assessors are trained to follow. This proactive acknowledgement of the three standard methods of valuation, coupled with language that restricts the Tribunal from accepting self-imposed deed restrictions as a true sales comparison are designed to restore balance to the decisions of the Tribunal and ensure that these decisions are based on the best data available.

We need your help to ensure that this bill will be voted on by the full House! The Michigan Chamber of Commerce and the Michigan Retailers Association are aggressively opposing this bill and contacting Representatives and Senators in an attempt to block further action on the bill. They claim that the only problem is uneducated local assessors who are over-assessing these large retailers.

Their direct message to legislators is; “Local governments are trying to legitimize their over-assessments and lack of persuasive evidence before the MTT by making scapegoats out of job providers who have successfully challenged their over-assessments and the MTT.”  Your involvement and personal contact with your Representative and Senator are the only way to counteract these attacks and ensure that this critical legislation moves before the Legislature recesses for the summer.  Please contact your State Representative and Senator today to urge their support for HB 5578!

For further information about the bill and the previous committee testimony, please review these Inside 208 articles – “New Dark Stores Solution…”  and “Michigan Municipal League Members Testify…“.  Or visit the League’s Dark Stores Information Page.

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

 

Local Infrastructure Report Released by National League of Cities

The National League of Cities released a new report Paying for Local Infrastructure in a New Era of Federalism. Declining funding, increasing mandates and misaligned priorities at the federal and states levels have put responsibility for infrastructure on local governments. But what ability do cities have to take up this call? The authority of cities to meaningfully address growing infrastructure challenges is bound by levers authorized to them by their states. The report finds that cities are limited in the number and scope of tools they are authorized to use, and that access to these tools is highly uneven in states across the country.

Summer Minnick is the Director of External Relations and Federal Affairs. She can be reached at 517-908-0301 or sminnick@mml.org.

Revenue Sharing Budgets Positioned for Initial Action; Senate Cuts Statutory by 1.5%

One of the many charts showing how Michigan has disinvested in its cities more than any other state in the state. That tiny red line you see is Michigan.

One of the many charts showing how Michigan has disinvested in its cities more than any other state in the state. That tiny red line you see is Michigan. A 2016-17 Senate budget plan would cut statutory revenue sharing to communities even more. Learn more at SaveMiCity.org

The Michigan House and Senate Appropriations committees made their opening moves on the state budget this week by reporting the full budget bills to the floors of their respective chambers. Following expected floor action on these bills in the coming week or two, each chamber will review the other’s proposal and move toward a final budget deal sometime in early June.

Both proposals continue the current practice of ignoring the fiscal needs of local government, failing to make revenue sharing and the larger issue of municipal finance a budget priority. Without a renewed focus and commitment by the Governor and Legislature, Michigan will continue to occupy last place nationally in our treatment of local government. Learn about the League’s municipal finance initiative at SaveMiCity.org. View how much money your community has lost in revenue sharing here.

The House committee reported an omnibus budget bill, House Bill 5294, to the floor which includes funding for revenue sharing. The House proposal maintains current-year funding for revenue sharing, only deviating from the Governor’s original recommendation by maintaining the $5.8 million that the Governor would have removed for approximately 100 townships that hadn’t received revenue sharing previously.

The Senate committee, on the other hand, moved Senate Bill 788 to the Senate floor with significant changes to the Governor’s proposal for revenue sharing. Statutory revenue sharing would see a 1.5% reduction ($3.85 million) in the Senate version, with the dollars from that reduction being shifted to cover a proposed local match requirement for the purchase of new voting equipment. The League urges you to contact your Senator, asking them to join us in opposition to this approach.

In the Governor’s original budget proposal, the effort to replace existing voting equipment statewide was supported by $10 million in General Fund and $5 million in requested (unidentified) local match. These dollars would be coupled with remaining federal Help America Vote Act funds and dollars appropriated for this purpose in the current budget year. The purchase of new voting equipment has been championed by the County and Municipal Clerks Associations and the Secretary of State’s office, but the call for a local match requirement had not been voiced prior to this year’s budget.

The proposal to accommodate the Governor’s local match request in the Senate version raises serious concerns for the Michigan Municipal League and member communities, even beyond the further erosion of an already devastated statutory revenue sharing base.

  • All cities, villages, townships and counties would benefit from the purchase of new voting equipment, but the local match requirement would only be paid by those cities and villages and few townships that receive a statutory payment. ***Counties and townships that do not receive non-Constitutional revenue sharing payments would pay no local match.  
  • By paying the local match only out of the statutory revenue sharing line, there is no correlation to the actual match requirement for equipment being purchased within each community. In a sample comparing similarly sized communities, one with 19 voting precincts would forgo only about $1,500 in revenue sharing, while another community with only 12 polling places would lose more than $22,000 … and this does not account for the more than 1,000 local government units that would pay nothing in local match!
  • County statutory payments, already funded at 100%, would receive a 2% increase ($4.3 million) in this proposal. Again, without any requirement for a local match for voting equipment purchases by a county.
  • This match requirement would be deducted during the FY 16-17 budget year, yet voting equipment would not be received by any local government until at least 2017 and delivery would like be phased in over two to three years.

Comments have been made that under this proposal, every local unit will receive at least what they received during  the current budget year even with the 1.5% base reduction, but this statement assumes that there will be growth in sales tax revenue driving higher Constitutional revenue sharing payments. Early indications from the most recent Senate Fiscal Agency monthly revenue report reveal that it is unlikely that the state will even meet its already reduced sales tax estimate for the current year, let alone meet the overly optimistic 3.9% growth estimate for the coming year. It is more probable that Constitutional revenue sharing payments will be flat for a third year in a row, if not reduced at some point over the next year.

It is expected that the Senate’s revenue sharing plan will be voted on by the full chamber next week. Please remember to contact your Senator and urge them to begin restoring the cuts of the past decade and reform the way local governments are funded. They should start by rejecting the committee proposal.

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

PPT Reimbursement and Budget Preparation Guidance from Michigan Department of Treasury

The Michigan Department of Treasury has asked us to share some information detailing changes to the Personal Property Tax local government reimbursements for 2016-17 budget preparation. Treasury has prepared a document below and requested the Michigan Municipal League pass it along to our members. If you have any questions, there is contact information at the end.

Here is the information from Treasury:

In 2012, legislation was passed providing new personal property tax exemptions for small taxpayers (starting in 2014) and eligible manufacturing personal property (EMPP, phase-in starting in 2016).  The Local Community Stabilization Authority (LCSA) Act, 2014 PA 86, requires reimbursement for the loss from the personal property exemptions.  The payments are made using the Authority’s share of the 6% use tax.

How the Loss in Taxable Value is Measured.  Beginning for 2016, the personal property exemption loss is calculated by subtracting each local unit’s current year taxable value of all industrial and commercial personal property from its 2013 taxable value of industrial and commercial personal property.  Calculations include IFT property, with IFT new facility TV reported at 50%.  Calculations exclude property classified as either industrial or commercial personal in one year but classified as either real property or utility personal in the other year.  County equalization directors will report the personal property exemption loss amounts to Treasury.

Millage Rates Being Reimbursed.  All types of millage are being reimbursed.  Except for local school district/ISD debt millage, reimbursements are calculated using each taxing unit’s sum of the lowest rate of each individual millage levied between 2012 and the immediately preceding year.  Treasury posts these rates on the Internet by May 1 of each year.  School districts/ISDs must report their current-year debt millage to Treasury by August 15.

Calculation of Reimbursements.  The personal property exemption loss is multiplied by the millage rates being reimbursed.  It is estimated there will be 100% reimbursement for all losses.  While all millages are being reimbursed, the reimbursements for certain losses and millage are calculated separately.  The following losses/millages are guaranteed 100% reimbursement:

  • Local school district and ISD millages;
  • Millage used to fund essential services, i.e. police, fire, ambulance and jails, including the loss from expiring tax exemptions that is reported on Form 5403 by the assessor;
  • Tax increment financing loss, including, for certain TIF plans, any loss from increased captured value; and
  • 2015 small taxpayer exemption loss.

Reimbursement for other millages may be at less than 100% or more than 100%, depending on the total calculated losses for those millages and the $ available for reimbursement.  We estimate the LCSA will have sufficient $ to reimburse all losses at 100%.

Beginning for 2019, 5% of the $ available for reimbursement under the previous paragraph will be distributed based on each taxing unit’s share of EMPP tax loss calculated using a modified acquisition cost of exempt EMPP.  That 5% is increased by 5% each year for 20 years, until no $ are distributed under the previous paragraph.

Taxing units will not have to claim reimbursement, except for tax increment financing plans, which will file Form 5176.  Reimbursements for most millage will be calculated using millage rates already available to Treasury.  Most local school districts receive reimbursement for their basic operating mills through operation of the state school aid formula.

Timing of reimbursements.  Reimbursement for county allocated millage will be paid on September 20th.  Reimbursement for other county millage, township millage, and other millage levied 100% in December will be paid the following February 20.  All other millage reimbursements will be paid on October 20th.

Fiscal Year 2016-2017 budget preparation.  In estimating FY 17 revenues, for the millage rates being reimbursed, local units should assume that their FY 17 property tax revenues from industrial/commercial personal property, including LCSA reimbursement, will equal their FY 14 property tax revenue from industrial/commercial personal property.  Millage increases after 2012 will not be reimbursed.

Total Amount of Reimbursements.  Reimbursements will total $374 million for calendar year 2016 losses, increasing to over $500 million for calendar year 2021 losses, as the EMPP exemption phases in.

For additional personal property tax reimbursement information, please email TreasORTA@michigan.gov, or call 517-373-2697.

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

Michigan Road Preservation Association Annual City County Workshop

Michigan Road Preservation Association Annual City County Workshop will be held on April 7, 2016 in Lansing. The workshop will explore the best practice of pavement preservation. Attendees will learn:

• Best treatments to use at each point along the pavement deterioration curve
• Technical advantages and specifications for specific treatments
• Find answers from peers and industry leaders that can help guide local agency preventive maintenance decision making.

For more information about the workshop please click on the following link. MRPA Annual Workshop 2016

John LaMacchia is the Assistant Director of State Affairs for the League handling transportation, infrastructure, energy and environment issues. He can be reached at jlamacchia@mml.org or 517-908-0303.

Libraries Push for Tax Capture Opt-Out

The Michigan Senate voted overwhelmingly today to send a seven-bill package over to the House that would allow separate millages for library purposes to opt-out of tax capture situations.  Senate Bills 579 and 619-624 moved out of the Senate this morning despite strong opposition from local government groups, including the League.

A separate discussion has been underway in the House for the past year, that would look at TIF and DDA reform from a much broader perspective.  At the same time, the Snyder Administration has initiated a workgroup process on this issue.  The League and many individual League member communities have been invited to participate on those workgroups that have bee set up to examine this topic at a holistic level.  A different group of Senators have expressed an interest in talking about TIF/DDA reform along those broader lines, as well.  Any reform proposals in this area need to be viewed comprehensively and not approached in a piecemeal fashion and we will continue to advocate from that standpoint, looking to preserve these important local economic development tools.

These Senate bills are scheduled to be referred to the House Tax Policy committee where the League will be working to oppose them.  Please contact your State Representative and let them know that this is a complex, important issue for all local governments and that TIF districts are a critical tool for local economic development that should not be dismantled.

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

Tuesday’s Election Fills House Vacancies

In addition to the Presidential Primary on Tuesday, three Michigan House districts held special general elections to fill vacancies.  The three districts that held special elections were the 75th in the city of Grand Rapids, the 80th in Allegan County and the 82nd district in Lapeer County.  With these seats filled, only one vacancy remains in the 110 member House of Representatives following the resignation of Derek Miller (D-Warren).  Miller was appointed Macomb County Treasurer at the end of January.  The special election to fill the remainder of the current term in that now vacant 28th House District will take place later this year to coincide with the August primary and November general elections.

On Tuesday in Grand Rapids, democrat David LaGrand was elected as State Representative, taking over for former Rep. Brandon Dillion, who now works for the Michigan Democratic Party.  LaGrand won with over 77% of the vote.

In Allegan County, republican Mary Whiteford was elected as State Representative, taking over for former Rep. Cindy Gamrat.  Whiteford was elected with nearly 64% of the vote.

In Lapeer County, republican Gary Howell was elected as State Representative, taking over for former Rep. Todd Courser.  Howell won with just under 59% of the vote.

LaGrand, Whiteford and Howell will serve out the remainder of the current term, through the end of 2016, and are expected to run for re-election in the fall.

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

Time is Running Out: Tell Congress to Support the TIGER and Transit Programs in FY 2017

Congress is currently finalizing appropriations requests for FY 2017 and you have only one week to tell Congress to support TIGER and Federal Transit Administration’s (FTA) Capital Investment programs.

Please consider supporting a fully funded TIGER and Capital Investment Programs by signing onto T4A’s nationwide support letter. Deadline: Friday February 26th, 2016.

  • Read and Sign Transportation for America’s TIGER and Capital Investment Program support letter.

The incredibly popular TIGER grant program is one of the few ways that local communities can apply for and win funds from the federal government for important priority projects of almost any kind. This important program gets the best locally-supported projects off the ground. In 2015, TIGER funded 39 projects in 34 states.

John LaMacchia is a Legislative Associate for the League handling transportation, infrastructure, and energy issues. He can be reached at jlamacchia@mml.org or 517-908-0303.

House Moves Gag Order Bill Despite Opposition

The Michigan House passed House Bill 5219 over to the Senate Tuesday afternoon on a 60-46 vote, following weeks of contentious debate over the original gag order provisions in PA 269/SB 571 and calls by the League and other local government organizations for a repeal of the offending language.

The changes made to the bill on Tuesday do nothing to address the contention by MML and others that there remains no justification for the gag order provisions originally adopted in December.  The attempts in this bill to bolt on new language to the already flawed and vague provisions from PA 269 do little to provide clarity and confidence to communities around the state as they seek to communicate with their residents about critical local ballot questions.

The bill now moves to the Senate for further consideration.  Please continue to contact your legislators, especially your Senator(s) and urge them to repeal the new language added to Section 57 by PA 269.

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