Robert F. Rhoades | Miller, Canfield, Paddock and Stone, P.L.C. |
150 West Jefferson Ave, Sutie 2500 | Detroit, MI 48226 | 313-963-6420

Proposal A of 1994 was a part or a package of related constitutional and statutory amendments, which changed the state’s system of school finance and Its property tax. It
contained a provision that required the legislature to provide a cap on assessment increases in taxable value to the lesser of 5% or inflation, with the exception that adjustments to taxable value for additions and losses were also required to be provided. The legislature provided for 8 adjustments for additions in 1994 PA 415, MCL 211.34d(i)(b)(iviii). It also provided for 8 corresponding adjustments for losses. One of the
adjustments for additions to taxable value provided that an increase in value caused by an increase in occupancy was an addition if there had been a loss in a previous year for a loss of
value due to a decrease in occupancy. The Appellant owns taxable rental property. It receIved a 23% reduction in a previous assessment based on a loss of occupancy. The occupancy then II1creased and the assessed and taxable values were therefore increased by more than the 2.8% general price level for that year. The increase in taxable value was 13.6%. The Taxpayer-Appellant challenges the increase in the
assessment. Its position is that the statute which provided for adjustments to value and which provided an adjustment to value for value increased caused hy increase occupancy if there had been a previous reduction of value for a decrease in occupancy, is void bccause only physical additions to the property can be an addition. The Court of Appeals held that the people who ratified Proposal/ of 1994 authorized the
legislature to provide for adjustments for additions, that the statute did not exceed the auth01intion and that the increase 111 taxable value was valid. The Michigan Municipal League, asserts that the Court of Appeals decision was correct an should be affinned. “Adjustments for additions” as used by the people in Proposal A was not a limit to physical additions to property. The legislature, which was the body required to provide for adjustments, did not define the term so broadly as to defraud the voters by eliminating the cap on taxable
value, the voters had clearly approved a cap on assessment increases, but they just as clearly and just as emphatically provided that the legislature would provide for exceptions to the cap by providing for adjustment for additions and losses.

Underlying this case is the adoption of the “Proposal A”
amendment of the Michigan Constitution at the special election
held on March 15, 1994. In particular, Proposal A added
language to Const 1963, art 9, § 3 that generally limits
annual increases in property tax assessments on a parcel of
property as long as that property is owned by the same party.
However, Proposal A allows the value of property to be
adjusted for “additions” without regard to this cap. At issue
is the constitutionality of a statutory provision, MCL
211.34d(1)(b)(vii), that purports to include, in certain
circumstances, an increase in the value of property because of
increased occupancy by tenants within the meaning of
“additions.” We conclude that this statutory provision is
unconstitutional because it is inconsistent with the meaning
of the term “additions” as used in Proposal A.
The opinion of the Court of Appeals is reversed. This
case is remanded to that Court for further proceedings
consistent with this opinion.

Plaintiffs are commercial property owners in Troy, Oak Park, Southfield, and Canton and Southfield Townships. The cases were consolidated on appeal. In each case the issue was whether Const 1963, art 9, § 3, of the state Constitution, requires that taxable values of real property, which, as percentages of true cash value, must equal the average ratio of taxable value to true cash value of all other property in the taxing district. The Michigan Court of Appeals, after providing
an overview of real property taxation in Michigan and the effect of Proposal A, concluded that the uniformity of taxation clause is not violated where the ratio of taxable value to true cash value is not uniform with the average ratio for all other property in a city or township. The court of appeals affirmed the decisions of the trial courts. Basically the trial courts recognized that by accepting Proposal A, the electorate provided for a cap on real property tax assessments. Furthermore, the courts recognized that taxes are levied according to a property’s taxable value and that since a property’s taxable values are contingent on whether its owner retains or sells it, the percentage of taxable value to true cash value among identical pieces of property will not be uniform.