Legislature passes personal property tax plan with significant improvements; League responds with neutral position

Posted on December 13, 2012 by Dene Westbrook

Early Friday morning the Legislature passed a package of bills that reform the personal property tax. These bills contain significant changes over previous versions, and as a result the League took a neutral position. The bills are on the way to the Governor for his signature.

The League participated in many negotiations with Lt. Governor Brian Calley and key House and Senate leaders and other local government organizations on this issue in the past several weeks. Late Thursday additional changes to the bills were proposed in exchange for a neutral position from the League. We are optimistic that our existing concerns over the bills approved Thursday can be addressed by the Legislature in 2013.

One of our key sticking points was that there be a guarantee for our communities aside from the legislative appropriations process. The plan passed by the House is the plan outlined by the Lt. Governor a few weeks ago including the Essential Services Assessment for 100 percent reimbursement for police and fire and a diversion of a portion of the use tax to reimburse 80 percent of non-public safety loss. The League contracted with independent analysts who after running the numbers determined that the formulas would work for our communities and the replacement revenue relied upon is sound.

The plan requires a statewide vote of the people in order to divert the use tax for local government use, and in a significant compromise by the Lt. Governor and legislature the entire repeal of personal property tax is tie-barred to the statewide use tax vote. Simply put, if the statewide vote fails PPT as we know it remains in effect. This represents a more substantial guarantee from the original proposal – something that is critical for our membership.

There are some issues that will still need to be addressed after the first of the year – namely the inclusion of LDFAs and TIFAs. All parties, including the League and other local government associations as well as the business community have publicly committed to working together to address these and any other unresolved issues after the first of the year.

The effective dates are similar to what passed the Senate: the small parcel exemption ($40,000 and under) will go into effect on December 31, 2013 and the remainder of the package will go into effect in 2016. The statewide vote, upon which the entire plan is reliant, will take place on the August 2014 ballot.

After legislative session started today a plan began floating around that would have eliminated all new personal property from the tax rolls beginning January 1, 2013. Without knowing the potentially devastating impact of such a proposal the League, along with other local government associations and schools, made the decision to continue to negotiate on the Lt. Governor’s plan and hence the resulting tie bar.

Repealing PPT was a priority for the Governor, Speaker, and Majority Leader. Like the Lansing leadership and the business community, the League agrees that the PPT is a bad tax that should be reformed. However the League has always maintained that if the state is going to cut or eliminate PPT it must replace the funds in full with a stable and certain revenue stream. The plan approved Thursday does not provide communites with full revenue replacement; however, it did include other concessions sought by the League including the tie bar.

You may view the bills as passed on the legislature’s website. The repeal bills are Senate Bills 1065, 1066, 1067, 1068, 1069, 1070 and 1071. The reimbursement plan is detailed in House Bills 6022, 6024, 6025 and 6026.

Samantha Harkins is the Director of State Affairs for the League. She can be reached at 517-908-0306 and by email at [email protected].

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