The passage of Proposal 1 last week means personal property tax will being phasing out in 2016 (in addition to the small parcel exemption that went into effect this year.)  League members have had a lot of questions regarding the passage of the proposal.

One main question has been the amount of reimbursement for local units. The Department of Treasury has put together a reimbursement sheet to help members calculate reimbursement. It’s available here: ppt reimbursement worksheet

We also have an updated “one-pager plus” fact sheet on our website that includes answers to some frequently asked questions. Please don’t hesitate to contact me with any questions about the legislation as well.

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 Department of Treasury has released a personal property tax reimbursement spreadsheet to help members calculate their reimbursement amounts under the legislation the Governor signed in March. You can view the spreadsheet and determine your community’s reimbursement amount here: ppt reimbursement worksheet

Samantha Harkins is the Director of State Affairs for the League handling municipal finance issues.  She can be reached at sharkins@mml.org or 517-908-0306

This afternoon the Senate passed Senate Bill 850, a bill that would exempt police and fire from PA 54 so they can have retroactive pay increases after a contract expires. The bill passed by a vote of 27-10.

In 2011 the legislature passed a number of reforms to help employers control costs and be better stewards of taxpayer resources. One of the, if not the, most significant reform was to prohibit retroactive pay increases after a contract has expired. This game changing statute, PA 54 of 2011, has helped communities settle contracts more quickly and provides more certainty in municipal budgets. Passage of SB 850 would be detrimental to our ability to settle contracts quickly and efficiently.

The Michigan Municipal League has been strongly opposed to this bill and we continue to urge you to contact your legislators to let them know how detrimental this carve out would be. The arguments the public safety groups use for supporting this bill are that the number of PA 312 filings would proliferate and the legislature only intended this bill to impact teachers.

According to the Michigan Employment Relations Commission there were only 43 PA 312 filings in 2013 as opposed to 69 in 2011. PA 312 filings are significantly lower than they were before enactment of PA 54.

In addition, even if the legislature only intended this for teachers, it has been a game changer for municipal budgets, and it’s critical that we keep this tool to allow local units the opportunity to settle contracts expeditiously and save taxpayers money.

We appreciate all the members who have already contacted their lawmakers on this issue and we hope others follow their lead. It is critical that you please contact your legislators and ask them to OPPOSE Senate Bill 850. You can find the contact information for your Legislators here. We’ve also prepared a letter you can email directly to your lawmakers. Go here to do that today.

The legislation now goes to the House for consideration. A House version, House Bill 5097, is on the House floor.

Samantha Harkins is the Director of State Affairs for the League handling municipal finance issues.  She can be reached at sharkins@mml.org or 517-908-0306.

This evening the Michigan General Government Budget Conference Report was signed. The Michigan Municipal League was successful in its efforts to eliminate most of the Economic Vitality Incentive Program (EVIP) requirements that have been burdensome to communities for the last several years. The category 1 requirements still remain as far as dashboards, citizen guides, etc, but the other criteria for category 2 and 3 have been eliminated entirely.

A huge thank you to Senator John Pappageorge (R-Troy) who has been the champion in eliminating EVIP this entire year. Sen. Pappageorge has requested that we no longer use the term “EVIP” and eliminate it entirely from our vocabularies. I think many of our members will happily comply.

Many of our communities contacted their legislators expressing concerns with EVIP, and a number of you testified before the legislature (View photos of that here). Thank you for your critical advocacy on this issue. They clearly heard us, and the pressure worked!

Sen. Pappageorge

The conference report included an increase of $13 million to revenue sharing. Of that amount, $7.2 million (or 3 percent) would be distributed through the existing revenue sharing formula for cities, villages and townships who are currently eligible for statutory revenue sharing.

An additional $5.8 million of one-time funding is included and distributed to cities, villages and townships. The payment will be distributed by providing the greater of a 3 percent increase over the Fiscal Year 2013-14 revenue sharing payment or per capita of $2.65 for a local unit with a population of 7,500 or more. Communities with a population of less than 7,500 will receive a 3 percent increase over a FY2013-14 payment.

The budget also includes an additional $8 million to help financially distressed cities, villages and townships. The funding will be distributed by the Department of Treasury in a grant program.

Constitutional revenue sharing is also up by 2.4 percent.

You can view the amount your community will receive in revenue sharing here: revshare conf table

The conference report now goes to the House and Senate chambers for approval, but it may not be amended. We expect it will be presented to the Governor as early as the end of this week.

Samantha Harkins is the Director of State Affairs for the League handling municipal finance issues.  She can be reached at sharkins@mml.org or 517-908-0306.

Please see below from Treasury’s Office of Revenue and Tax Analysis.

STATE LAW REQUIRES 2014 DEBT MILLAGE RATE CALCULATIONS TO REFLECT STATE REIMBURSEMENT FOR 2014 PERSONAL PROPERTY TAX CUT

Local units of government have levied property taxes on all taxable property in its geographic boundaries, including commercial personal and industrial personal property. Pursuant to Public Act 402 of 2012, as amended by PA 153 of 2013, a new “small taxpayer” personal property exemption (the “Exemption”) comes into effect in 2014 for commercial and industrial personal property. A “small taxpayer” is one whose combined commercial and industrial personal property owned by, leased to, or used by the taxpayer has a true cash value under $80,000. Application of that exemption will result in a loss of taxable value for governmental entities, including school districts.

For debt obligations incurred before 2013 by taxing units pledging their unlimited or limited taxing power, recently enacted Public Acts 86 and 87, Public Acts of Michigan, 2014, require the state of Michigan to reimburse taxing units for the amount of estimated revenue lost due to the Exemption and provides a mechanism for the reimbursement to occur in 2014. As a result, for debt obligations incurred before 2013, taxing units levying debt millage in 2014 must include in their debt millage rate calculation the anticipated debt millage reimbursement that may be received from the State of Michigan for any reduction in the 2014 taxable value related to commercial personal and industrial personal property.

State law measures the taxable value loss from this new exemption by subtracting each taxing unit’s total 2014 taxable value of commercial personal and industrial personal property from its total 2013 taxable value of commercial personal and industrial personal property. This difference is defined as the ‘small taxpayer exemption loss”. This amount will be multiplied by the taxing unit’s 2014 debt millage rate to determine the state reimbursement for 2014 debt millage. Local units must use the reimbursement to repay the debt obligation.

When calculating its 2014 debt millage rate for debt obligations incurred before 2013, each taxing unit must add to its 2014 taxable value its 2014 small taxpayer exemption loss. Assessors and county equalization directors are required to calculate in June 2014 each taxing unit’s small taxpayer exemption loss.

Commercial personal and industrial personal property are defined to include IFT personal property, with new facility IFT personal property included at 50% of taxable value. The law provides that certain property classification changes should neither increase nor decrease a small taxpayer exemption loss.   If property was assessed as commercial personal property or industrial property for 2014 but assessed for 2013 as either real property or utility personal property, its 2014 taxable value is excluded from the calculations. Conversely, if property was assessed as either real property or utility personal property in 2014, but assessed as commercial personal or industrial personal in 2013, its 2013 taxable value is excluded from the calculation.

For school districts and ISDs, these provisions apply to voted bond issues approved before 2013, and are not tied to the date the debt was incurred.

Prepared by the Michigan Department of Treasury, Office of Revenue and Tax Analysis

June 2, 2014

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 the Senate Government Operations Committee passed a package of bills that seek to deal with the bankruptcy in the City of Detroit. The state will appropriate $194.8 million dollars that will go toward the city’s pension system.

In exchange there are a number of conditions set forth in the package. The bills create an oversight commission that will have approval over the city’s major financial decisions including contracts over $750,000 and collective bargaining agreements. As amended in committee if the commission does not reject a contract for $750,000 or more in 30 days it would be deemed approved. Public Act 312 awards are also subject to review by the commission.

The legislation also requires the city to establish the position of chief financial officer. The bills as amended in committee allow the City to choose between defined contribution plans and defined contribution for new hires but caps the city contribution at 7 percent of base pay. The package also prohibits the City of Detroit from opting out under PA 152 of 2011. The bills limit travel pay for retirement system board members.

The committee did not report HB 5571, a bill that would prohibit new millages for the Detroit Institute of Art. This was an area of concern for many legislators in the House and passed more narrowly than the others (66-44).

The bills very narrowly define eligibility for these provisions as a city over 600,000 that is in bankruptcy. We expect the full Senate to pass this legislation quickly.

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

(Go here to easily send your senators an email opposing SB 850).

In 2011, the legislature passed a number of reforms to help employers control costs and be better stewards of taxpayer resources. One of the, if not the, most significant reform was to prohibit retroactive pay increases after a contract has expired. This game changing statute, PA 54 of 2011, has helped communities settle contracts more quickly and provides more certainty in municipal budgets. On Wednesday the Senate Reforms, Restructuring and Reinventing Committee is expected to vote on Senate Bill 850, a bill that would exempt police and fire from PA 54 so they can have retroactive pay increases after a contract expires.

This would be detrimental to our ability to settle contracts quickly and efficiently. The bill will be taken up in committee on Wednesday, June 4. A similar bill, House Bill 5097, is sitting on the House floor.

I urge you to contact your legislators to let them know how detrimental this carve out would be. The arguments the public safety groups use for supporting this bill are that the number of PA 312 filings would proliferate and the legislature only intended this bill to impact teachers.

According to the Michigan Employment Relations Commission there were only 43 PA 312 filings in 2013 as opposed to 69 in 2011. PA 312 filings are significantly lower than they were before enactment of PA 54.

In addition, even if the legislature only intended this for teachers, it has been a game changer for municipal budgets, and it’s critical that we keep this tool to allow local units the opportunity to settle contracts expeditiously and save taxpayers money.

We appreciate all the members who have already contacted their lawmakers on this issue and we hope others follow their lead. It is critical that you please contact your legislators and ask them to OPPOSE Senate Bill 850. You can find the contact information for your Legislators here.

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 morning the House Tax Policy Committee 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.

In the version that passed the Senate 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. This language was struck from the House passed version.

In addition the House added an enacting section to indicate that occupancy was struck from the language in the bill to reflect the WPW decision.

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.

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

Yesterday the House reported House Bills 5193 and 5194, bills that amend the Open Meetings Act (OMA).

House Bill 5193 prohibits a local unit from going into closed session in connection with anticipated litigation. House Bill 5194 indicates that if a public body reenacts a disputed decision in cases where an action has been initiated to invalidate a decision of a public body then that reenactment is not a defense to a criminal action.

Originally the League testified in opposition to the legislation. In particular the changes to HB 5193 are confusing and unnecessary. However there was an amendment added in committee to HB 5193 that clarified what was meant by “anticipated litigation” at the request of the League and the Michigan Association of Municipal Attorneys which was extremely helpful.

The legislation now goes to the 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

Yesterday the House unanimously passed House Bills 5414 and 5501, legislation that would repeal Driver Responsibility Fees. The fees were enacted over a decade ago to penalize “bad” drivers. The fees have contributed more than $100 million to the state’s general fund.

In addition they fund Fire Protection Grants for local communities. Fire Protection Grants are given to communities who have state buildings (i.e., office buildings, prisons, universities) that are not on the tax rolls to compensate for fire protection.

The League approached the sponsors and asked for dedicated funding for Fire Protection Grants. The committee discussed at length that they would find funding for these important grants. The sponsor is working with the House Fiscal Agency to identify a dedicated source of revenue.

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