State groups dispute how downtowns spend special millages

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LANSING– A dispute between the state groups representing counties and downtowns has erupted over the way tax money is spent.
Michigan Association of County officials say some special millage tax dollars that could be spent on senior citizens, veterans and other causes get diverted into a popular tax strategy for helping downtowns.
A five-bill package was recently introduced in the House of Representatives to improve the oversight and transparency of groups capturing this tax revenue. Cosponsors are Reps. Lee Chatfield, R-Levering; Lana Theis,R- Brighton; Amanda Price; R-Park Township; Pat Somerville R-New Boston; and David Mature, R- Vicksburg.
The issue is over Tax Increment Financing, called TIF for short.
“Downtowns support the bulk of economic development, so this is a powerful tool to provide a way for the county as a whole to give back to downtowns that sustain their communities,” said Kent Wood, director of government relations for the Traverse City Area Chamber of Commerce and the Northern Michigan Chamber Alliance. “And there’s not a lot of tools we’ve got left in the toolbox.”
TIFs use revenue from taxes generated by new development to further improve the surrounding area. The Michigan Downtown Association says the technique is useful for preventing the deterioration of downtowns.
But other groups say it shifts some revenues away from other causes. And they also say that some TIFs freeze local government out of desperately needed revenue.
“At a time when counties are more strained than ever to make basic ends meet, Tax Incremental Financing restricts the small opportunity for increased tax revenue we have,” said Deena Bosworth, director of governmental affairs for the Michigan Association of Counties.
Counties don’t oppose downtown developmentauthorities, but disagree with this tax diversion, Bosworth said.
“Veterans and senior millages are among a few of the many causes that lose to business development efforts,” Bosworth said.
Separate from that, Bosworth said that a few boards use the money to renovate city halls, buy fire engines and cover other immediate needs.
Because downtown development authorities have members appointed by the city council, some people see TIFs as taxation without representation, Bosworth said.
The 1975 law that established downtown development authorities was intended to prevent the deterioration of downtowns. Bosworth sees the basic needs of communities in 2016 to be more pressing.
Counties don’t disagree on the importance of downtowns to community health — they just disagree on the method in place today, specifically in the case of special millages, Bosworth said.
But supporters of downtown development districts are skeptical of any discussion of TIF regulation.
“A major flaw in their argument about diverting funds is that they don’t take into consideration that the development happening in that district is the result of using that money to reinvest in city centers’ infrastructure,” the Traverse City Chamber of Commerce’s Wood said. “They wouldn’t see a tax increase without those districts being created and that reinvestment taking place.
“The same way you take part of your paycheck and put it into a 401k for retirement, downtown development authorities ‘capture’ funds their growth has created to invest in their futures,” Wood said.
Concern over the diversion of tax money away from a library, veterans or other special needs may be warranted and should be solved, he said. But TIFs are a vital lifeline that work to incentivize entrepreneurship and a sense of community in downtowns.
“We understand why there’s concern, but it’s not fair to say that all or even most of Downtown Development Authorities are acting underhandedly in the way they handle these funds,” Wood said.
The law already requires annual financial reports to the state, said Jerry Dettloff, executive director of the Michigan Downtown Association.
“We’re all partners in this effort and hopefully support economic development, but we want it to be done the right way,” Dettloff said. This means a clear definition of what constitutes a special millage.
This debate over Tax Incremental Financing could be the result of misconceptions, Dettloff said.
“Not to say that there aren’t some that have misused the design, but it is the responsibility of local entities to fairly communicate the positive role of their DDAs to the general public — there can’t be too much communication,” Dettloff said.

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