Background: Proposal A of 1994 was a part of 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 percent or inflation, with the exception that adjustments to taxable value for additions and losses were also required to be provided.
Pre-Proposal A legislation defined additions to include all increases in value caused by new construction or a physical addition of equipment and furnishings.
Subsequent to the passage of Proposal A, the Legislature subsequently passed amendments to the statute that provided for several adjustments for additions and also provided for 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 the value attributable to the occupancy rate had been previously allowed as a loss due to a decrease in occupancy. MCL 211.34d(1)(b)(vii).
WPW owned taxable rental property in the city of Troy. It received a reduction in a previous assessment based on a loss of occupancy. The occupancy then increased and the assessed value and taxable value were increased accordingly. The taxable value was increased 13.6 percent, exceeding the cap imposed by Proposal A. WPW asserted that the statute was unconstitutional in purporting to define additions in a way that was inconsistent with the established meaning of that term at the time that it was added by virtue of the passage of Proposal A.
Why did the LDF get involved?
At issue was the constitutionality of an amendment to a statute enacted after Proposal A that allowed for increases in the value of property because of increased occupancy by tenants as an addition.What action did the LDF take? Filed an amicus brief with Michigan Supreme Court
What was the outcome? The Michigan Supreme Court ruled in favor of the taxpayer and ruled the amended statute unconstitutional. As a result of the unfavorable decision by the Court, the Michigan Municipal League has lobbied extensively for a revision to the Act and has focused most recently on eliminating the mandate to reduce taxable value as a result of decreases in occupancy.
Who prepared the amicus brief?
Robert F. Rhoades
(Miller, Canfield, Paddock and Stone, P.L.C.)