The state House has unanimously passed legislation that waives penalties and fees for deferring summer property tax payments as a way to help property owners and businesses negatively impacted by the COVID-19 pandemic.
With summer property bills representing a major annual expense for businesses, House bills 5761 and 5810 would waive penalties and interest on late payments, acting as a deferral as income starts to rebound after pandemic-related closures. The bills were sponsored by state Rep. Jim Lower, R-Greenville.
Though local government advocates initially raised concerns about the negative consequences of deferring payments to municipalities that are also financially struggling, the legislation creates a system where the state issues short-term loans to counties. Counties would then work directly with local governments and property owners.
“The important thing to us was ensuring that uninterrupted cash flow for local governments balanced with affordable relief for taxpayers,” said Chris Hackbarth, director of state and federal affairs with the Michigan Municipal League.
Late last month, officials with West Michigan sporting and entertainment venues — which remain closed due to COVID-19 — testified in support of the bills.
Nancy Hagan, chief financial officer of Celebration! Cinema, which owns the Studio Park movie theater in downtown Grand Rapids, said the company’s summer tax bill due next month is approximately $3 million. Property taxes are the company’s largest expense behind payroll and fees to show films.
“Theaters are likely a business that are first to close and last to open,” Hagan said during a May 28 committee hearing. “Deferral of summer property taxes could help this company survive.”
Lew Chamberlin, co-owners of the West Michigan Whitecaps, also testified during the May 28 meeting. Unlike most Minor League Baseball teams, the Whitecaps’ Fifth Third Ballpark in Comstock Park is privately owned, he noted.
“We have been faithfully paying that property tax for 27 years and are happy to do it, quite frankly,” Chamberlin said. “Now we’re facing an existential threat to our business.”
He added that the organization’s 2020 summer property tax bill of $450,000 will be a “huge burden.”
“Certainly this legislation would be a huge help and aid to an organization such as ours,” he said.
A House Fiscal Agency analysis said summer tax payments from state and local governments total $10 billion. Under the legislation, property owners would disclose by Aug. 28 a financial hardship caused by COVID-19. With a short-term loan from the Treasury Department, counties would provide the funding for the tax bill to local units of government. When property owners are able to pay it, the initial loan is eventually paid back to the state.
“The bills propose to have the state plug the hole that would otherwise result, essentially floating a loan to local units as well as buying individuals and businesses a year to pay their summer 2020 property taxes without incurring penalties and interest,” according to the most recent House Fiscal Agency analysis.
The legislation also allows property owners to use a payment plan, as is available in some Michigan municipalities.
Business advocates backed the bills since the start, saying they are necessary relief for property owners that have had income cut short due to the coronavirus pandemic.
“Summer property taxes can be the single largest bill for a business every year, and concerns over ability to pay were among the greatest concerns for businesses who have gone with little to no revenue for an entire quarter,” Joshua Lunger, senior director of government affairs for the Grand Rapids Area Chamber of Commerce, said in a statement. “This legislation provides a short-term lifeline for these severely impacted businesses such as theaters, restaurants, sports and event venues and more. We want these employers to be a part of our recovery and, at no fault of their own, they need more time to get their feet back under them and begin earning revenue.”