City Managers Say PPT Reform Necessary, but FlawedCity Managers Say PPT Reform Necessary, but Flawed

1/25/13 - Michigan has lagged behind many other states in growth for a variety of reasons. Probably the most hated tax has been the single business tax and its successor, the Michigan Business Tax, both of which the state has now eliminated. Arguably, the number two detriment to business and industry growth in the state is the personal property tax. Personal property taxes — which are on the decline nationally — are a property tax on equipment, furniture and other possessions. When the first phase of the Personal Property Tax Reform Law goes into effect on Jan. 1st, individuals, businesses and industries with personal property worth less than $80,000 will be exempt from paying taxes on that property. Local governments which will stand to lose revenue from the law include cities, villages, townships, counties, libraries, public school districts and community colleges. Howell City Manager Shea Charles tells WHMI that his city will take a big hit if the personal property tax legislation goes into effect as it stands now, without being amended, with the city standing to lose from $100,000 to $250,000 in revenue annually by the year 2016, which will further erode the city's ability to provide the services its residents and businesses rightfully demand. While Brighton City Manager Dana Foster emphasizes that the city of Brighton is in agreement with the necessity of amending the personal property tax to make the state more attractive to business and industry, he tells WHMI that for the reform law to work for local governments, there must be a method of recouping the lost revenues. Foster says that while the personal property tax reform will affect Brighton's revenue picture, it will hit the city's Downtown Development Authority much harder. That's because the DDA depends almost solely on the Tax Increment Financing Authority Law, or TIFA, for its revenue, which has resulted in major improvements to the city's downtown. He says TIFA will be negatively impacted by the law, as will the Local Development Finance Authority Law, which municipalities such as Brighton and Howell have used in the past to facilitate industrial growth. In the meantime, Foster says he's hopeful that a number of proposals to provide some relief to local governments will find their way into the new law in the form of amendments. The tax reform law is scheduled to take full effect on Jan. 1, 2016. However, it is tied to passage of a statewide vote next August in which voters will decide whether revenue losses to local governments may be partially offset by assessments that could be levied against commercial and industrial property. If that measure were to fail, the tax reform law would be rendered invalid and would not take effect. (JK)