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Sunday, 08 December 2013 20:31

Counties looking for more say in possible TIF reforms

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A broad discussion on the practice of tax increment finance (TIF) taking place in Lansing could create new implications for both counties and municipalities that rely on the tool for economic development.

Downtown development authorities and other tax increment finance districts claim the creation of those districts is a boon for downtown revitalization efforts, but counties have long wanted more say in what taxes are captured and kept by local municipalities.

“Kent County has been interested in seeing changes for a decade or longer,” said Daryl Delabbio, the administrator for Kent County. “Specifically, we think specially voted millages should not be subject to tax capture districts. That’s something that’s been a part of our agenda for a long time.”

Roughly $1.75 million to $2 million annually goes to various tax capture districts that would otherwise go to the county, Delabbio said. For the 2014 fiscal year, Kent County’s total revenues are budgeted for just more than $352 million.

Tax capture districts divert these funds for purposes not necessarily agreed to by the county, said Deena Bosworth, director of legislative affairs for the Michigan Association of Counties. Many of these tax capture districts have been capturing all of the growth in taxes for decades with no resetting of the tax baseline and with no consideration of the county’s obligations to provide services for the area, she said.

Most tax capture authorities not only capture all of the general operating millage growth but also capture voter-approved special millages for services like county medical care facilities, veterans services, transportation and public safety. Counties say TIF districts hold on to funds that should have gone to their other fiscal obligations.

There isn’t much of an argument for the capture of funds from the county’s general operating millage, Delabbio said. It’s in the collection of funds for special millages that the counties want more say, he said.

“Many will argue, and I don’t disagree, that DDA and TIF districts have been a big benefit to economic development,” Delabbio said. “We’re only concerned about the specially designated millages, not the general millages. We view that some capture of the general operating millage is our contribution to economic development.”

Reform discussions started after the state House passed two bills that protect the millages for both the Detroit Institute of Art and the Detroit Zoo, which is operated by the Detroit Zoological Authority. The bills prohibit a TIF district from keeping tax increment revenues from property taxes levied under the Zoological Authorities Act and the Art Institute Authorities Act, funds that proponents argue should have gone to the DIA and the zoo all along.

The Michigan Municipal League (MML), which supports DDA and TIF capture districts, wants to make sure legislators understand there are already few tools communities have to revitalize struggling areas. Further limiting them would have a detrimental impact on not just the municipalities, but their entire regions, said Nikki Brown, a legislative associate with the MML.

“The value these authorities have to the districts to help attract people and create places people want to go is really important,” Brown said. “We understand the concern of the counties, but if we can’t help improve and develop around those assets in communities that levee those millages, that is a very real concern for us.”

Counties also want more transparency with how captured funds are spent and more say in the decision-making process, said Bosworth of the MAC.

There is no requirement in state law to negotiate with the counties for the capture of their taxes in all of those districts created prior to 1994. However, legislation was updated that same year to allow counties to opt out of some capture statutes.

“There are 11 different tax capture statutes in state law, many that allow for a county opt out, but many that do not,” Bosworth said.

Aside from a seat on the oversight boards of the districts that already exist, the MAC also wants to require that tax capture authorities expire after 10 years unless they have borrowed for a large project, which would extend the expiration timeline to 20 years. Nothing would prevent the municipalities from re-establishing the authorities, but it would allow for the resetting of the baseline for taxing units, which would provide counties a share of the increased property values that the districts created through the use of TIF funding, according to the MAC.

“County services are not all that sexy. We’re the social safety net, and like it or not, it does take revenue,” Bosworth said. “But without any say, it makes it more difficult to pay for those services. Counties need to be partners and not just donors.”

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Editor’s note: A previous version of this story contained a misspelling of Deena Bosworth’s name. It has been updated with the correct spelling. 

Read 2936 times Last modified on Monday, 09 December 2013 09:13

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