Proposed elimination of personal property tax may cost city $70,000 and lead to new local tax for Tecumseh
If the leaders of cities, towns and villages across the state could say one thing to Michigan legislators this week, it would be to “Slow down!” Many are calling and e-mailing their representatives to say just that. The Michigan House is currently considering a proposal to repeal the Personal Property Tax and held hearings on Tuesday, Dec. 4, and Wednesday, Dec. 5. The measure could come to a vote by the end of the week.
Tecumseh City Manager Kevin Welch makes it clear that no one is opposed to the repeal itself.
“Our biggest issue is why does it have to be done now? What’s the big rush?” said Welch, who added that the Legislature is attempting to push it through during the lame duck session. “If they wait until January, allowing for an opportunity for all of us to better understand the implications, it would still take effect at the same time in 2014.”
Welch joins other officials, including the Michigan Municipal League, in his concern that there are too many unanswered questions surrounding what is being proposed. While legislators have told constituents that there would be replacement of the revenues lost through the elimination of the personal property taxes, there has not been a guaranteed of 100 percent replacement. Unanswered questions about the reimbursement formula abound, along with how new exemptions would work, and creation of a new authority, and essential services assessment.
The MML maintains that guaranteed replacement revenue is an absolute requirement, and that the cut or elimination of the PPT must not take effect if the ballot proposal to dedicate the use tax to replacement revenues is not approved by Michigan voters.
“What they are proposing is putting a ballot proposal before Michigan voters that would allow a use tax, or new tax, for individual communities,” said Welch. “Number one, we oppose new tax, and number two, in some communities, and Tecumseh could be one, large industrial customers like Lenawee Stamping (now Van Rob Tecumseh) that have a lot of equipment, could end up paying more than they do with the personal property tax. And the proposal to replace only police and fire services for them is an insult to the community.” He said replacement costs for roads and other quality of life areas seem not to be important.
Questions that arise specifically in Tecumseh include what might happen with the newly formed Local District Finance Authority, which was set to capture some funding to help reconstruct road projects on M-50 in front of the plant, and the end of Rogers Highway, adding new turn lanes. Another question is how the Downtown Development Authority monies would be affected. With all the unanswered questions, Welch told council it was just “careless and reckless legislation.”
“I don’t think you’ve ever heard me say that,” he told council members Monday night, Dec. 3, “but you’re hearing it in this case.”
While the long-range impact is not known, Welch said the city stands to lose at least 20 percent of its tax revenues, or an estimated $70,000.
“Something would have to go and there’s absolutely no room for cutting things,” he said. “We’ve been operating as efficient as we can and have made cutbacks over the past few years. Not to be considered a threat or anything like that, but it could impact the TCA [Tecumseh Center for the Arts] or programming for the Parks and Recreation Department.” He said he’d hate to see that as the city prepares to open the new AJ Smith Recreation Center. Tecumseh City Council would likely have to take a hard look at everything the city does and make some even tougher choices than have already been made.
Welch said that he knows Lt. Gov. Brian Calley worked hard on the proposal, but it would be better for everyone to take a closer look at it and clarify the impact on local communities.
“Unfortunately, what’s pretty common with these initiatives is there’s been very little discussion with local units of government,” Welch said. “I don’t think many really understand how we operate. They want vibrant communities that are attractive to business, but at some point, we can’t do the things that make our communities special, such as keeping them maintained, clean and attractive. ‘Placemaking’ that is talked about takes money. Pure Michigan! takes money. Nothing is free.”
Clinton Village Manager Kevin Cornish said the village is also struggling with the issue.
“The Village of Clinton is very concerned about the state proposing to eliminate personal property taxes,” said Cornish, who estimates Clinton will lose approximately $50,000, or 10 percent of tax revenues. “We’ve already lost $100,000 from revenue sharing, and have experienced declines in real property value. Our utility sales are also down significantly. Those losses make it extremely hard for us moving forward.”