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Senate Committee Reports Bills Protecting Local Debt Limits

Posted on October 4, 2017 by Dene Westbrook
Jeff Budd, Coldwater, and Sen. Mike Shirkey

Jeff Budd, Coldwater, and Sen. Mike Shirkey

The Senate Finance committee reported a bill package on Tuesday that has been a priority for the League this term.  Following testimony from the bill sponsors, League staff and officials from the city of Coldwater, the committee voted unanimously to send the bills to the Senate floor for further consideration.

The recently introduced package, Senate Bills 590-593 (Stamas/Shirkey), reverses an unintended consequence of the new personal property tax (PPT) reform system on municipal debt limit calculations. Currently, many local units of government are bound by statutory debt ceilings tied to a percentage of that community’s total assessed value for all real and personal property.  As small taxpayer and manufacturing equipment is removed from the tax rolls over the coming years due to the new personal property tax reform system, communities find themselves facing a situation where their statutory debt limit will be artificially reduced. This was an impact that was not discovered during the development of the PPT package in 2014, but had recently come to light in municipalities that were in discussion with rating agencies and bond counsels for potential bond proposals.

Working with Treasury and officials from the Michigan Government Finance Officers Association, the League was able to secure language through our Senate sponsors (Sen. Mike Shirkey-Clarklake and Sen. Jim Stamas-Midland) that allows for the assessed value equivalent of each community’s PPT reimbursement payment to be added into the debt limit calculation for every city, village and charter township, essentially holding every community harmless from any reduction in their debt limit due to the reduction of their overall assessed value.  This new provision is similar to how the Home Rule City Act allows for each city’s revenue sharing payment to be included in that city’s debt limit calculation.

These bills are now on the Senate floor awaiting a vote in the coming weeks before moving to the House for consideration.

Chris Hackbarth is the League’s director of state & federal affairs. He can be reached at 517-908-0304 and chackbarth@mml.org.

 

 

 

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