Local officials worry about losing tax revenue

By WEI YU
Capital News Service
LANSING – County governments across Michigan are keeping a close eye on what legislators do about repealing the personal property tax this year.
Because counties’ reliance on the tax varies, the effect of repealing it would be much greater in some than in others.
St. Joseph County is the second most-dependent on the personal property tax, which accounts for 26.9 percent of its budget. It is behind Calhoun County, which gets 27 percent of its revenue that way, according to the Michigan Association of Counties.
The other three most-dependent counties are Schoolcraft (21.7 percent), Dickinson (21.4 percent) and Kalkaska (20.9 percent).
Michigan’s personal property tax is paid by businesses on property that is not permanently attached to land, such as equipment and machinery. Michigan is one of 43 states that levy some form of personal property tax.
“Many different local units get the benefit from personal property tax. Counties, cities, villages, townships, libraries, schools, public safety departments–everybody gets a piece of that,” said Deena Bosworth, a legislative coordinator for the association. “If the personal property tax is repealed, that will short all of those entities that rely on this funding to provide services that are required by the state.”
Local governments have experienced numerous cuts in state aid in recent years. A major hit to tax receipts due to repeal of the personal property tax without full replacement could be devastating for a small public institution like Glen Oaks Community College in Centreville whose funding sources are declining, said President Gary Wheeler.
“Our college substantially relies upon the revenue generated from the personal property tax,” Wheeler said. “The elimination of this revenue source would mean the elimination of as much as 13 percent of Glen Oaks’ total property tax revenue.”
Wheeler said the college is already at a minimum level of staffing. “We find it hard to address ongoing deferred maintenance problems with our aging physical plant. We froze salaries this year and anticipate minimal increments over the next few years.”
Counties have faced budget crises for a long time, officials say. With the possibility of losing millions of dollars more, they find themselves facing an even more difficult situation.
“Right now there is around $7 million in revenue generated from the personal property tax for the county,” said Vicky Anders, the chief deputy treasurer of St. Joseph County. “If the personal property tax is repealed without replacement, it would affect our general fund, the Commission on Aging, transportation, roads, bridges and 911.”
She said it’s hard to provide services without an alternative in place to make up the lost funding.
Many legislators criticize the personal property tax and say that repealing it would improve Michigan’s business climate and put the state in the top 10 for business development.
“I favor the repeal,” said Sen. Bruce Caswell, R-Hillsdale. He said 90 percent of the lost local revenue could be replaced with money from expiring business tax credits.
Meanwhile, Gov. Rick Snyder has proposed using funds from expiring business tax credits to replace the revenue generated for local governments by the personal property tax.
Some local officials and groups want a constitutionally guaranteed replacement to offset the loss.
Bosworth said, “Our position is that if you want to repeal the personal property tax, that’s fine. But if you do, you need to replace that revenue in full. And not only do you need to replace the revenue in full, you need also guarantee it.”
© 2012, Capital News Service, Michigan State University School of Journalism. Nonmembers cannot reproduce CNS articles without written permission.