Local officials moan about reduced, late state payments

By CELESTE BOTT
Capital News Service
LANSING – The size and timelines of state payments to local governments is under fire as many counties, advocacy organizations and legislators are calling for more accountability in Lansing.
At issue are state payments in lieu of taxes (PILT) to local governments, including school districts, instead of property taxes on land administered by the Department of Natural Resources (DNR).
Late and reduced payments are harming local governments and communities that feel the state already holds an advantage through the PILT system, critics say.
According to Ben Bodkin, director of legislative affairs for the Michigan Association of Counties (MAC), PILT payments are much less than what the counties would have received if the state-owned property were on the tax rolls.

Underfunding has prevented the state from making PILT payments in full since 2008, leaving local governments to compensate, he said.
“The state needs to pay their property taxes like everybody else,” Bodkin said.
According to the DNR, the state is the single largest landholder in Michigan. The department controls 4.5 million acres, or 12 percent of the total land area, primarily in state forests, parks, recreation areas and game areas.
Michigan ranks 7th nationwide in the percent of state-controlled land.
For local communities, primarily in the northern Michigan and the Upper Peninsula, where the state owns significant interests, this translates to a significant negative impact on their budgets and the services they can provide, local officials said.
Cheboygan County Treasurer Linda Cronan said that it’s particularly frustrating when the state faces no consequences for its actions.
“State officials decide to pay late and to pay less than what’s due, and they don’t explain themselves,” Cronan said. “The state has the ability to set their own taxable value on property. They refuse to pay the one percent administration fee.
“When they don’t pay in a timely manner, they never pay interest like other taxpayers would be required to,” she said.
Cronan said she is concerned about the future of her county and the challenges UP counties face.
“We’re better off than places where state-owned land makes up 50 percent or 75 percent of their tax base,” she said. “But it still cuts our income. If it continues, we may need to make significant staff or budgetary cuts. Property values are declining, and we could be in trouble.”
Anne Giroux, the Marquette County treasurer, said that the UP is at a definite disadvantage.
“We have so few representatives that it’s always a struggle,” Giroux said. “There is both a budgetary impact and an administrative impact.
“We don’t get the full funding, and local treasurers have to find out how to disperse what is paid. We are left to answer why the government isn’t paying revenue that we rely on,” she said.
Giroux said timeliness is a problem when counties like hers don’t know how much the state will pay until after they’ve already adopted a budget.
The Mackinac Center for Public Policy, a free market-oriented institute in Midland, also complains of inequities in PILT policy.
According to Diane Katz, an adjunct scholar at the center, the DNR’s lands are exempt from all special assessments, such as 18 of the 24 mills of school taxes.
That can negatively impact school districts with large amounts of state-owned property.
“Numerous counties in which large blocks of state land are located depend heavily on these PILT payments, discounted though they are,” Katz said. “Any private landowner unable to pay his or her taxes would be forced either to sell the property or face forfeiture.
“But in spite of the shortfall, DNR officials have continually authorized millions to be spent on new land acquisitions. It is the unparalleled power of the state to ignore debt and, at the same time, increase spending,” she said.
Other interest groups have expressed concerns not just about payments being made in full or on time, but where the payment money is coming from.
The Heart of the Lakes Center for Land Conservancy Policy, based in Grand Ledge, doesn’t want PILT payments to come from the Natural Resources Trust Fund.
Doing so would “restrict legislative flexibility for using other sources, including the general fund, and will limit the funds available to local communities to acquire and develop recreational lands,” the organization said.
“Any PILT taken from the trust fund reduces the amount of funds available for local communities to acquire parkland and open space as part of their own economic and place-making strategies,” it said.
Some legislators are working to improve what they say is a flawed PILT system.
Sens. Tom Casperson, R-Escanaba, and Darwin Booher, R-Evart, are sponsoring bills that would increase PILT payments, set strict payment due dates, establish penalties for late payments and limit the amount of land the government can purchase.
“With more than two million acres of state-owned land in the Upper Peninsula, this makes the PILT payments extremely important to our communities,” Casperson said.
“This legislation would help get local units of government their fair share of revenue, and also force state officials to understand the true cost of purchasing more and more public land,” he said.
Booher also said the state should meet its obligations.
“Michigan residents are not allowed to only pay part of their tax bills and continue to own their land as evidenced by the fact that much of the land DNR currently owns came into state ownership years ago when people could not afford to pay their taxes on it,” he said.
Marquette County’s Giroux said that she and many officials of other counties support the bill but don’t expect a resolution of the problem.
“You can change the law, but there’s still a problem at the administrative level if the appropriations committee doesn’t distribute the funds the way they are supposed to,” she said.