Summer Property Tax Deferral Package Heads to Governor-Outlook Uncertain

Posted on June 29, 2020 by chackbarth

Given the limited calendar for legislative action last week, the Senate moved quickly to report House Bills 5761 and 5810 through committee and then overwhelmingly passed the bills, along with a potential trailer bill (SB 943) intended to address any continuing clean-up language that is expected to be needed.  The House Bills went back to the House where they were unanimously concurred in and prepared for enrollment.  The bills are still awaiting presentation to the Governor, where the prospects for her signature are currently uncertain.

Over the course of the last month, this proposal has gone through numerous rewrites, with new versions being reviewed by the League and other interest groups on an almost weekly basis.  The proposal adopted by the House and then modified in the Senate would allow for individuals and businesses that meet certain COVID-related hardship criteria to apply for a hardship deferral to their local unit of government by August 28th of this year. The Senate changes also included individuals and businesses impacted by the flooding in Midland County to be eligible for this one-time property tax deferral program.  This deferral opportunity would relate solely to real property taxes associated with the Summer 2020 property tax bill.  Individuals and businesses currently escrowing their property taxes or participating in another deferral or property tax relief program would be excluded from this program.  Property owners qualifying under this program would have until February 28, 2021 to pay their Summer 2020 property tax bill or the local unit would turn the parcel over to the county along with all other normal delinquent parcels.

Following the property owner’s submission of the hardship affidavit, the local tax collecting jurisdiction would forward the affidavits to the county treasurer by September 11th.  The county treasurer would then provide an advance payment for all of the local taxing units for any eligible summer 2020 property taxes that were deferred under this program in that county.  The county treasurer could utilize existing funds or borrowing under their individual Delinquent Tax Revolving Funds or serve as a conduit borrower from one larger, pooled borrowing done by the state through a mechanism like Treasury’s Municipal Finance Authority.  This advance payment for the deferred parcels must be made to all local jurisdictions by December 1, 2020.

The League submitted testimony in both the House and Senate that throughout the negotiations, we have maintained our desire to balance affordable and sustainable relief for main street and downtown small businesses, while protecting the critical revenue stream that the summer property tax collection provides for our local governments and schools.  Without the necessary financing to support the advance payments to our municipalities, in as close a time-frame to the normal summer tax collection dates as possible, we run the risk of harming our front line services and personnel and potentially forcing a number of local units and schools into deficit.  We advocated that any such program should be crafted to be as easy to administer as possible and be easily understood by the taxpayer.

Due to the compressed nature of negotiations with the limited legislative session calendar and the fact that summer tax bills were already being sent to taxpayers, both House Bills were moved through the process with the expectation that any additional technical or structural issues necessary to ensure the viability of this program would be adopted within Senate Bill 943 and passed when the legislature returns in late July.

During Senate committee testimony, the Michigan Department of Treasury went on record opposing the bills and cited a number of concerns related to the timelines in the bills for state action and concerns about the state’s ability to comply with the short-term borrowing required by the bill.  Based on this opposition, the future of the bills is not clear at this time.  Additional work group meetings have been scheduled for later this week to determine if changes can be made within SB 943 to address Treasury’s concerns and gain the Governor’s support.  The League will continue to update our members as additional information becomes available.

Chris Hackbarth is the League’s director of state & federal affairs. He can be reached at 517-908-0304 and [email protected].

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