Published in Economic Development

Legislation would bring property tax relief, raising concerns for local governments

BY Wednesday, May 27, 2020 04:11pm

State lawmakers will consider a bill this week that waives penalties for property owners who defer payments on their summer property tax bills because of hardships caused by the coronavirus pandemic.

While the legislation has support from West Michigan business advocates, municipal governments want to ensure the revenue is maintained as summer property taxes make up a significant portion of their budgets.

Chris Hackbarth, director of state and federal affairs with the Michigan Municipal League COURTESY PHOTO

“We predict that if the (bill) language as introduced were to pass and become law, it would result in a de facto delay of summer tax filings,” said Chris Hackbarth, director of state and federal affairs with the Michigan Municipal League. “That would be catastrophic for local governments and schools.”

House Bill 5761 — sponsored by state Rep. Jim Lower, R-Greenville — is scheduled to be taken up Thursday during a meeting of the Local Government and Municipal Finance Committee, which Lower chairs.

As introduced, the bill would prevent local taxing units from collecting penalties, fees and other charges associated with unpaid property taxes. Instead, the local unit may apply to the county treasurer to seek reimbursement from the state. Under the bill, the state Legislature would appropriate general fund dollars to reimburse local units of government within 45 days. The bill would provide relief to property owners until March 2021.

Joshua Lunger, senior director of government affairs with the Grand Rapids Area Chamber of Commerce, says discussions are ongoing about potential changes to address local governments’ concerns. But he says the Chamber’s priority is relief for businesses that, in some cases, have had very little revenue since March.

“The last thing we want to do is create another problem by trying to solve this problem,” Lunger said. “This isn’t property tax forgiveness, it’s a necessary extension so businesses can get their feet back under them.

Separately, the Michigan Department of Treasury announced today that businesses that have deferred payments of sales, use and withholding taxes because of COVID-19 can enroll in a six-month installment payment plan.

Property tax deferments are among policy recommendations in the Grand Rapids Chamber’s Smart Restart Agenda, and Lunger noted the summer tax bill is one of the largest expenses for businesses.

However, the plan as drafted could be problematic for local governments already strained by COVID-19, as well as the state, which is facing multi-billion-dollar deficits for the next few years. The MML and others have been advocating for additional federal stimulus funds that will support state and local budgets.

Hackbarth said MML has been in discussions with Lower about bill substitutions that “take a different approach.” Alternatives are modeled off of the Payroll Protection Program that would allow certain taxpayers to qualify for a hardship program that sets a time period when penalties and interest aren’t assessed, Hackbarth said. 

In the interim, local taxing entities — cities, schools and libraries, for example — would be made whole through financing programs like short-term borrowing or tax anticipation notes, he added. As summer property taxes are often a large expense for property owners, it’s also a major revenue stream that supports local services.

“If we can get the money coming into those jurisdictions … you would potentially solve a problem for folks who need assistance and keep local government services operating,” Hackbarth said.

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