MICHIGAN – Normally, lawmakers don’t act on important issues until newly elected representatives are seated, but that is not the case in Michigan’s “lame duck” session right now.
A key issue of concern for Tuscola County Commissioners that is being reviewed in Lansing is the proposed elimination of personal property tax (PPT), and also the fight against a change in wind farm taxation.
Personal Property Tax was targeted for reform in May because it is burdensome and complex for businesses and local governments, and is viewed as discouraging economic development by penalizing business investment. The matter on how to replace the approximate $600 million in revenue to local governments has been stalled in committee until this week.
“While PPT is difficult to administer, it is worth the cost of its complex administration because of the revenue it generates,” said county Controller Mike Hoagland. “While most would support its elimination of the way it is handled, it needs to be replaced with something that would be the same amount of revenue.’
The PPT covers industrial, commercial, and utility taxes. At issue is about $225,555 for the county’s general fund with the county’s eight special millages the review is about $489,366.
Some of the proposed changes to PPT lawmakers reviewed this week were: allowing local governments to levy special assessment to reimburse 100 percent of revenue losses for emergency service providers, and using a state tax to reimburse 80 percent review to other services funded by personal property tax. The eight-bill package would phase out personal property tax starting in 2016.
“All that’s going to do is make each county a taxing entity and put the tax (load) on homeowners instead,” noted Hoagland.
The stance of the Michigan Municipal League, and many others on the matter, is “replace – don’t erase.”
“Eliminating the tax itself isn’t opposed as long as a guaranteed revenue replacement is in place,” said Hoagland.
Plus, while county commissioners closely watch the PPT issue in Lansing, they are also trying to preserve the revenue from wind farm development.
Overall there are five counties, including Tuscola, Huron, and Sanilac, in the state that either have or will have wind farms. Earlier this year, the Michigan Tax Commission arbitrarily changed the way wind turbines are taxed. Originally, wind generators were taxed as industrial personal property at 100 percent of their value in the first year then declined by equal amounts over the next 15 year period to 30 percent of value and stayed there.
“For the first time – in several years – we will see a slight increase in revenue from wind generator taxes, but that is being jeopardized also from state changes,” said Hoagland.
Earlier this year the State Tax Commission (STC) changed their taxation to 27 percent over 20 years with only 80 percent of their value is taxed in the first year and then their value declines down to 30 percent in just 5 years.
“The graph is based on a 20 year time frame with 208 generators and on 20 mills. The loss would impact all taxing jurisdictions that levy a millage including county, townships, Intermediate School Districts, libraries and all other taxing entities,” said Hoagland. “Just in our county those taxing entities have over $22 million at stake in the change.
“Finances- one way or another – is a continuing struggle. We make cuts and adjustments and the state keeps putting more pressure on us.”
The following is a recap of wind farm tax issue:
Michigan passed a law requiring utility companies to meet a standard whereby 10 percent of electrical energy has to be produced from renewable source by 2015.
Prior to March of 2012, wind generators were taxed as industrial personal property at 100 percent of their value in the first year then declined by equal amounts over the next 15 year period to 30 percent of value which is then held constant.
However, mid year, the State Tax Commission (STC) unilaterally changed the method of taxation whereby only 80 percent of their value is taxed in the first year and then their value declines down to 30 percent in just 5 years. This change results an estimated revenue reduction of a significant 27 percent over 20 years.
Many of these projects were approved and started in communities with the understanding they would be taxed under the original STC multiplier schedule but then the STC made the change to the new multiplier schedule resulting in the revenue reduction.
The STC refused to answer questions on why they made the changes and to review the impact of the decision.
Because of that, five counties, including those in the Thumb have formed a Michigan Renewable Energy Collaborative (MREC) with the common goal of correcting this taxation inequity.
In some areas with wind farms, the assessors there refused to use the arbitrarily set tax schedule and set taxes under the pervious standard.
DTE has filed an appeal to the Michigan Tax Tribunal regarding the assessing and taxes levied in two townships in Gratiot County which where used the original multiplier schedule.
Counties in MREC have hired the law firm of Clark Hill to handle legal matters and make the argument for the original or another fair and reasonable method of wind energy taxation.
Part of the MREC strategy may be to work with the utility companies and make a united argument to the STC to revert to the original multiplier schedule or some other fair and reasonable taxation method.
Counties are discussing the possibility of financing a study of wind energy assessing/taxation to document their position.
Utility companies are starting to react to MREC concerns. DTE may also conduct a wind energy taxation study.
|Wind Watch relies entirely
on User Funding