Providing analysis and insights for all things legislative impacting Michigan's townships
The June issue of Township Voice features:
When the personal property tax (PPT) exemption was approved in 2012, local units of government were promised they would be reimbursed for their losses. The Legislature made good on that promise the following year, when reimbursement through the state’s use tax was put on the ballot and eventually became law.
Today, however, two Senate bills would expand PPT exemptions to new utility equipment and heavy equipment rentals. In their current versions, neither bill would reimburse locals for what could be, in some cases, steep losses.
The Senate has already passed Senate Bill 927, sponsored by Sen. David Hildenbrand (R-Lowell Chtr. Twp.), which would exempt heavy equipment rental property from the PPT. SB 1031, sponsored by Sen. John Proos (R-St. Joseph Chtr. Twp.), was reported by the Senate Finance Committee and would exempt utility equipment. MTA opposes both bills and is working with lawmakers to mitigate the impact on townships.
SB 1031 was introduced in anticipation of a major investment that one of Michigan’s largest utilities—Consumers Energy—will make to improve distribution throughout the state. Consumers has estimated that its investment would mean a $1 billion increase in PPT, which would in turn be passed on to customers.
SB 1031 would exempt qualified utility personal property from the PPT installed after Dec. 31, 2017. Qualified property would mean electric transmission and distribution systems, substation equipment, spare parts, gas distribution systems, water transmission and distribution systems, gas storage equipment, and transmission lines of gas or oil transporting companies.
While this exemption would apply to qualified new equipment, as equipment ages and is replaced, all eligible utility property will eventually be exempt. If all existing eligible utility personal property was exempted, it would mean a $576.3 million hit to local units of government. Without reimbursement, townships and other local units will be left scrambling to find ways to pay for public safety, water systems and other vital services. Utility officials have stated that local revenue concerns will be addressed; however, no such language has been presented at this point.
Another hit to local revenue would come from exempting heavy equipment rentals under SB 927. This exemption would apply to taxes levied after Dec. 31, 2017, on any construction, earthmoving or industrial equipment that is mobile and rented by a business that generates over half of its annual revenue by renting out heavy equipment. Attachments for the equipment as well as other ancillary equipment or tools would also be included in the exemption.
MTA opposes the continued erosion of township revenue that would occur under these bills. We will continue to voice our opposition and work to address the impact to townships.
MTA strongly believes that a reform of Michigan’s assessing system should enhance—not erode—assessor accountability and local control. This month, we shared this message with lawmakers in a House committee hearing. Now, township officials have the opportunity to also take this message to their lawmakers during the summer recess.
As previously shared, State Treasurer Nick Khouri proposed a major overhaul of the state’s assessing system in May. The rationale for the reform is that property taxes are difficult and complicated to administer, and while most jurisdictions do a good job, the system is failing in terms of consistency and transparency.
Khouri’s proposal to impose comprehensive quality standards is reflected in two bills—House Bill 6049, sponsored by Rep. James Lower (R-Cedar Lake), and Senate Bill 1025, sponsored by Sen. Jim Stamas (R-Midland Chtr. Twp.). Under the bills, new quality standards would be phased in for all tax-assessing entities over five years. Some local units would be able to meet these standards on their own, while others would need to form a joint entity or even contract assessment administration with their county.
HB 6049 was the subject of a House Tax Policy Committee hearing earlier this month, where MTA testified in opposition to the introduced bill outlining our concerns. SB 1025 was referred to the Senate Finance Committee, where it awaits a hearing. MTA has also shared a response and alternatives to the proposal with Treasury, committee members and other lawmakers, and we will continue to do so. MTA appreciates and thanks all the members who provided written comments and insights in early May and has shared them with the state treasurer.
While it is expected a workgroup will be convened for further discussions, both bills are on hold for the summer, until legislative session resumes this fall.
As lawmakers return to their home communities for the break, MTA encourages members to talk with them on the reform proposal:
Your voice matters in this critical issue. We will continue to update you with the latest news.
Townships that receive statutory revenue sharing dollars received some good news when Michigan’s budget was finalized—and some even learned they would receive the funding for the first time in years.
Lawmakers gave the final stamp of approval to Senate Bill 848 (now Public Act 207 of 2018), sponsored by Sen. Dave Hildenbrand (R-Lowell Chtr. Twp.), just before the legislative session broke for the summer recess. In particular, the budget will ensure that townships receiving City, Village and Township (CVT) Revenue Sharing continue to get the same level of funding they received the current fiscal year.
Since February, Gov. Rick Snyder, the House and the Senate have floated proposals for how CVT Revenue Sharing should be funded. For the past four years, $5.8 million has been appropriated to CVT Revenue Sharing, providing funding to an additional 100 townships and allowing the 34 townships that already received the money to receive their previous payment level or be paid per capita, whichever is higher. Snyder had proposed eliminating the $5.8 million, as well as the $6.2 million supplemental payment that was included for CVTs in the current fiscal year. Both the House and Senate proposed keeping the $5.8 million but would have either reduced or eliminated the $6.2 million supplemental payment. The Senate also included a proposal to reduce the previous $4,500 threshold to receive a CVT Revenue Sharing to $1,000.
The final version approved this month retains the $5.8 million and the $6.2 million supplemental, but with a caveat—the supplemental payments must be used to pay down debt, pension or other post-employment benefit obligations, unless the local unit has no such obligations. Additionally, PA 207 reduces the payment threshold to $1,000, allowing another 15 townships to receive funding. In total, 149 townships will receive CVT revenue sharing dollars from the FY 2018-19 budget.
Also impacting township funding is constitutional revenue sharing, which is estimated in the budget to increase by 2.6 percent over the current year’s funding. However, this is a projection and depends entirely on state sales tax revenues.
The budget includes a one-time allocation of $300 million for roads, with money to be distributed among the Michigan Department of Transportation, county road commissions, and cities and villages. While townships wouldn’t receive funding, the additional money could indirectly provide a benefit.
Payments in lieu of taxes (PILT) will be fully funded, and $2 million will be set aside for firefighter training grants.
Another bill, House Bill 5908, sponsored by Rep. Rob VerHeulen (R-Walker), provides $13.6 million for fire protection grants. Until the budget work was completed, the question of how to pay for fire protection grants was left up in the air when the previous funding source—driver responsibility fees—was approved to be phased out earlier this year. HB 5908 fills that hole by allocating funds from the Local Community Stabilization Act above the 100 percent reimbursement level from libraries and authorities. This now provides a dedicated revenue source for local units that provide fire protection to state buildings.
For decades, Michigan has relied too heavily on throwing waste into landfills. With a paltry 14.5 percent recycling rate, our state lags behind every other Great Lakes state and has one of the worst recycling rates in the country.
Gov. Rick Snyder started a recycling initiative in 2014 to combat this problem, with the goal of doubling Michigan’s recycling rate. Now, legislation is expected that would rewrite Michigan’s solid waste laws, with a focus on waste management rather than disposal. MTA is part of a work group comprised of a broad base of stakeholders ranging from local government and business to environmental organizations and academia, which recommended a new solid waste law that is being drafted. Throughout the process, MTA has worked to raise issues that could impact townships and alleviate concerns.
The legislation, while not yet introduced, would incorporate ways to view waste as a resource. This would be done through material management such as recycling, but also by composting organic waste into material that can be added to soil, as well as anaerobic digesters to break down food waste into energy. The bill is expected to require all 83 counties to develop materials management plans—rather than solid waste plans—by 2020, with the first new plans to be approved by 2023. Counties would have three years to develop their plans and have them approved by townships and cities within the planning area. This means that a majority of local units in a planning area must agree that a recycling or composting facility should be located in a jurisdiction within the county.
While the material management plan process would be similar to how plans were established in the past, they would now ensure that facilities, such as recycling and composting, were developed to process materials from a particular county. For a facility to be sited, it would have to either comply with local zoning, meet the requirements of a county’s material management plan without going through an amendment process, or go through a plan amendment process. The state Department of Environmental Quality would provide regulatory oversite and funding, and locals would require fewer resources to manage these facilities.
A major recommendation was that the state provide funding so that local units can meet the requirements of the proposed legislation. Another bill has already been introduced to help pay for some of these activities, as well as clean up contaminated sites.
These recommendations are just one step early in the process, and no bill has been introduced. MTA will keep members updated on any developments in this important issue.
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