This morning the House Tax Policy Committee passed several bills that would exempt the “tax on the difference” of motor vehicle and watercraft sales.

Michigan has reciprocal agreements with a number of states whereby Michigan and the reciprocal state each collect and retain sales tax on vehicles purchased in their respective state, even in instances when the vehicle will be titled and registered in the other state. For sales in Michigan of vehicles that will be registered and titled in a reciprocal state, Michigan collects the lesser amount of sales tax due calculated under Michigan law and under the law of the reciprocal state. The calculation of the sales tax due under the laws of the reciprocal state will include a trade-in allowance if provided under the reciprocal state’s law. The sales tax collected by the state of purchase will generally be used as a credit against any applicable use tax owed to the state where the vehicle will be titled. Wisconsin, Illinois, Indiana, and Ohio each provide for a trade-in allowance.

House Bill 4234 would exempt from sales tax the agreed-upon value of a motor vehicle or recreational vehicle used as partial payment for the purchase of a new or used motor vehicle or recreational vehicle if the agreed-upon value is separately stated on the invoice, bill of sale, or similar document provided to the purchaser. This exemption would begin October 1, 2013.

This would reduce sales tax revenue by $125-150 million annually and thus have an impact on Constitutional Revenue Sharing and the Comprehensive Transportation Fund.

Similarly Senate Bills 89 and 90 would have the same impact as HB 4234. The League opposed all three bills because of its significant impact on sales tax revenue and as a result local units of government.

The bills were reported from committee and will be considered by the full House.

Samantha Harkins is the Director of State Affairs for the Michigan Municipal League.  She can be reached at 517-908-0306 or email at sharkins@mml.org

The budget agreement reached yesterday by the House and Senate includes more flexible language for the Economic Vitality Incentive Program (EVIP). The language is viewable in the budget bill beginning on page 121.

The new EVIP language expands eligibility for EVIP grant projects to include those projects in which a local unit of government shares services with a university, community college, authority, school district, or intermediate school district.

In Category 1, accountability and transparency (dashboards), the language is similar to last year; however, it does also require a detailed listing of debt service requirements. The dashboard information must be submitted to the Department of Treasury by October 1 to comply with EVIP.

Category 2, consolidation of services, includes “innovation” and “privatization”. So while a local unit must still submit a new plan under this provision, it can include an innovative practice of an existing service or privatization of service to be eligible for category 2.

The “timeline” piece in category 2 has been an issue with the Department of Treasury calling communities to follow up on that piece. The language now says “estimated timeline” in hopes that it allows more flexibility.

The consolidation plan must be submitted by February 1 to qualify for EVIP.

Category 3 has been dramatically changed to “unfunded accrued liability plan”.  This would require a local unit with unfunded accrued liabilities as of its most recent audited financial report related to employee pensions or other post-employment benefits shall submit a plan to lower all unfunded accrued liabilities. The plan shall include a listing of all previous actions taken to reduce its unfunded accrued liabilities with an estimated cost savings of those actions; a detailed description of how it will continue to implement and maintain previous actions taken; and a listing of additional actions it could take. If no actions have been taken to reduce its unfunded accrued liabilities, it shall provide a detailed explanation of why no actions have been taken and a listing of actions it could implement to reduce unfunded accrued liabilities. Actuarial assumption changes and issuance of debt instruments shall not qualify as a new proposal. The unfunded accrued liabilities plan must be made available in the clerk’s office or on the website.

If a local unit does not have any unfunded accrued liabilities it must certify to the Department of Treasury that it has none.

The unfunded accrued liabilities plan must be submitted to the Department by June 1.

This new EVIP language goes into effect October 1, 2013.

Samantha Harkins is the Director of State Affairs for the Michigan Municipal League.  She can be reached at 517-908-0306 or email at sharkins@mml.org

This afternoon bill providing more local control on the use of fireworks passed the House following significant complaints from local units of government after last July 4.

HB 4743 passed with only one no vote. The bill would require retail locations to post signs informing the public where to find the Fireworks Safety Act and copies of the local municipality’s ordinances regarding time limits for the use of the fireworks.

The bill also would require retailers to comply with the National Fire Protection Association Code, and clarify that a retailer or a person issued a consumer fireworks certificate is responsible for remitting all fireworks safety fees to the Department of Licensing and Regulatory Affairs. It would also require retailers to remit the fees within 20 days after the end of each month.

The bill would allow municipalities to regulate the use of fireworks within counties of 750,000 or more persons to 1 a.m. and 8 a.m. on New Year’s Day only, for all other days surrounding national holidays the hours are 12 a.m. to 8 a.m. For municipalities within counties with a population fewer than 750,000 ordinances can be enacted regulating the times of 1 a.m. and 8 a.m. on the day before, the day after and the day of national holidays.

The legislation now goes to the full Senate for consideration.

Samantha Harkins is the Director of State Affairs for the Michigan Municipal League.  She can be reached at 517-908-0306 or email at sharkins@mml.org

State lawmakers are finally beginning the process of restoring more than a decade of cuts to Michigan communities.

Thanks to the urging of Michigan Municipal League members in recent days, the state’s conference committee this morning approved a 2014 state budget agreement that includes a 4.8% increase in statutory revenue sharing for local governments. In the past 12 years the state has cut local revenue sharing by more than $6 billion. Previous 2014 state budget recommendations called for no statutory revenue sharing increases to cities, villages and townships, but League staff and League members in recent days and weeks strongly encouraged lawmakers to support the Senate budget plan that included a 4.8 percent increase. It appears the League and our members have been heard. Check out this mlive.com article about the increase.

The budget also removed burdensome posting language, including the latest language that would have required local units of government to disclose the country of origin of their American flags.

The budget also included a 2.8 percent increase in constitutional revenue sharing.

Here is a statement from League CEO and Executive Director Daniel Gilmartin released to the media today:

“We are genuinely grateful to legislative leaders and Gov. Snyder for restoring a small portion of the cuts made by legislatures and governors to local revenue sharing over the past dozen years,” said Gilmartin, noting that the state has cut local revenues and used the funds to fill holes in the state budget, to reduce taxes, and for other state programs and services. “We will continue to seek additional restorations in future state budgets so local communities can also begin to share in the state’s economic recovery, just as the state budget is doing. The massive cuts to local revenue sharing have combined with other fiscal calamities, including slumping real property values, to decimate the finances of many local communities.

“When we need a cop or a firefighter at our homes or businesses, we don’t call the state capital. We call our local public safety agencies, which are largely funded by revenue sharing. When we turn on the faucet at our sinks, the water is clean largely because of revenue sharing funds. When young people are looking for great places to live, work and raise families and corporations are looking for places to locate and expand, they seek places that can deliver essential public services and that provide lifestyle attributes such as parks, art, culture, transportation alternatives to driving, and more. We hope this budget marks the start of a policy of reinvesting in Michigan cities and the end of the state’s policy of disinvestment and broken promises.”

View the full statement here on the League’s media room page.

Samantha Harkins is the Director of State Affairs for the Michigan Municipal League.  She can be reached at 517-908-0306 or email at sharkins@mml.org

This morning the House Judiciary Committee held a hearing on the Michigan Medical Marijuana Act. The League testified about the need for local control and clarity in the Act. We were joined by two city attorneys, Clyde Robinson (Kalamazoo) and Stephen Postema (Ann Arbor) who detailed how those cities have reacted to the 2008 law.

The committee appears to be taking a deliberative and thoughtful look at the Act, and we look forward to partnering with them as we move forward in this process.

Samantha Harkins is the Director of State Affairs for the Michigan Municipal League.  She can be reached at 517-908-0306 or email at sharkins@mml.org

For years the League has been working on a tax reduction loophole that was created due to the 2002 Michigan Supreme Court case of WPW Acquisition Company v. City of Troy. After Proposal A created the term taxable value, the Legislature passed legislation that allowed for an increase and decrease of certain commercial property’s taxable value based on their occupancy. This was meant to allow the taxable value of income producing property to reflect the ebb and flow of the economy.

Under that system, the City of Troy granted a reduction to WPW Acquisition Company due to a reduced occupancy. However, when the City increased their taxable value when they were more fully occupied, WPW Acquisition Company sued the City, claiming they could not increase their taxable value above 5% or the rate of inflation, whichever is less, due to Proposal A. The Supreme Court addressed the question of increases in occupancy and agreed with WPW. However, the reduction issue due to occupancy was never in question, so a legal loophole, creating tax inequity, was born.

This afternoon the Senate Finance Committee unanimously passed Senate Bill 114, a bill introduced by Senator Vince Gregory (D-Southfield) that amends the General Property Tax Act. The Act’s definition of “losses” includes an adjustment in value, if any, due to a decrease in the property’s occupancy rate, to the extent provided by law. The definition of “additions” includes an increase in value attributable to the property’s occupancy rate if a loss had been previously allowed because of a decrease in occupancy rate, or if the value of new construction was reduced because of a below- market occupancy rate.

The bill would limit the use of occupancy rates in the determination of losses to the period before December 31, 2013. The use of occupancy rates in the determination of additions would be limited to the period before December 31, 2001.

This morning the House Regulatory Reform committee reported House Bill 4743, a bill that adds some new provisions into the existing Michigan Fireworks Safety Act.

The committee substitute combined House Bills 4743 and 4744 to allow local units of government to regulate consumer fireworks between midnight and 8 am on the day before, of and after a national holiday. You will recall that the current statute prohibits local regulation on the date before, of or after a national holiday.

The legislation also ensures fireworks safety fees will go into training for fire departments for the enforcement of the Act.

The intent is to have this legislation to the Governor before the 4th of July to give local units time to pass ordinances regulating fireworks. The bill will now be considered by the full House.

Samantha Harkins is the Director of State Affairs for the Michigan Municipal League.  She can be reached at 517-908-0306 or email at sharkins@mml.org