Great Budget News for Libraries
Governor Snyder signed the 2015/16 fiscal year budget increasing state aid to libraries by $1 million for a total of $9.9 million along with an additional $600,000 for Renaissance Zone Reimbursements and $2.2 million for MPSERS (retirement funding for participating libraries).
The budget also includes funding increases for skilled trades, a third-grade reading initiative and the Healthy Michigan Medicaid program. Unfortunately, it does not include a long-term solution to fix Michigan roads. Another $400 million was appropriated to road repairs from the general fund. Recently the house passed its version of road funding, however, we expect to see many funding options before one is actually signed into law. We are alert to any efforts impacting penal fines.
Tax Tribunal and Big Box Stores
MLA and librarians from the UP to southeast Michigan have been working on a solution to the problems caused by the Michigan Tax Tribunal reducing tax obligations that allow thriving big box stores to be taxed at the same rate as closed-down, abandoned stores. In some cases, libraries have been forced to pay back thousands of dollars in tax revenue. In a recent meeting with Senator Tom Casperson (R-Escanaba), MLA discussed the huge burden this is placing on libraries. He has assured us that his four-bill package will offer some relief for those problems. We are waiting to review the language which is aimed at softening the effects of Tax Tribunal rulings.
In another twist on the big box issue, Representative Scott Dianda (D-Calumet), introduced his own “dark store” legislation. This bill would impose user fees on those businesses that get huge cuts in their property tax from the Tax Tribunal.
Sunset Amendment to the District Library Establishment Act (DLEA) Goes to Governor
Senate Bill 108 passed both chambers and has been enrolled to the governor for signature. The legislation removes the sunset for establishing a district library with a school district. Last year GCSI and MLA worked closely with legislative leadership to accelerate passage of this bill in the House and had agreement in the Senate to discharge the bill and move it all the way to final passage. However, in the end, the bill died in lame duck. This year both the House and the Senate introduced bills to once again allow school districts to be part of a district library. Our thanks to the Library of Michigan for offering support for both bills in committee. The bill will take immediate effect.
Tax Increment Financing Authorities and Library Millage Capture
A large number of libraries in Michigan have a portion of their dedicated library millage commandeered by one or more Tax Increment Financing Authorities (TIFA). According to a recent MLA survey, more than $3,026,236 is captured each year from just 49 libraries across the state. In one case 54% of the library’s dedicated millage is being captured by a TIFA and Downtown Development Authority (DDA). MLA has been highly engaged in this issue. Last year we were invited to sit on a workgroup with other stakeholders to look for solutions to the problem. Legislators were unable to find a workable solution so MLA turned to Senator Jack Brandenburg (R-Harrison Township) who is preparing legislation that will address this inequity. Soon we will ask you to contact your legislator and request their support for the bills.
Reimbursement for Debt Millage for 2015 Personal Property Tax Cut
State law provides reimbursement for 2015 Personal Property Tax cut for both debt millage and operating millage used to pay debt. This notice comes directly from Michigan Department of Treasury, Office of Revenue and Tax Analysis and provides valuable information on how to apply for reimbursement from some of the losses from the Personal Property Tax elimination.
Pursuant to Public Act 402 of 2012, as amended by PA 153 of 2013, a new “small taxpayer” personal property exemption went into effect in 2014 for commercial and industrial personal property. A "small taxpayer" is one whose combined commercial and industrial personal property owned by, leased to, or used by the taxpayer has a true cash value under $80,000.
State law measures the taxable value loss from this new exemption by subtracting each taxing unit’s total 2014 taxable value of commercial personal and industrial personal property from its total 2013 taxable value of commercial personal and industrial personal property. This difference is defined as the ‘small taxpayer exemption loss”. Pending legislation, House Bill 5446, will require use of a 2013 minus 2015 calculation if it results in a greater loss. This amount will be multiplied by the taxing unit’s 2015 debt and operating millage rate used to repay debt either incurred, or approved by voters, before 2013 to determine the state reimbursement. Local units must use any reimbursement for debt millage to repay the debt obligation.
For obligations approved by voters, or incurred, before 2013, taxing units levying debt millage in 2015 must include in their debt millage rate calculation the anticipated debt millage reimbursement that will be received from the State of Michigan for any reduction in the 2015 taxable value related to commercial personal and industrial personal property. This is done by reducing the levied debt millage rate that would otherwise by levied.
County equalization directors are required to calculate in June 2015 each taxing unit’s 2015 small taxpayer exemption loss. When calculating its 2015 debt millage rate for obligations approved by voters, or incurred, before 2013, each taxing unit must add to its 2015 taxable value its 2015 small taxpayer exemption loss. Example:
2015 Debt service adjusted for reserve and uncollectible taxes: $200,000
Taxable value: $100 million
2015 personal property small taxpayer exemption loss: $1 million
2015 debt millage rate adjusted for small taxpayer exemption loss: $200,000 divided by $101 million, or 1.9802 mills.
In this example, the reimbursement is $1 million multiplied by 1.9802 mills, or $1,980. If the debt millage rate is not adjusted, in the example the district levies debt millage of 2.0 mills ($200,000 divided by $100 million), the reimbursement is reduced by the excess debt millage rate (2 mills minus 1.9802 mills) multiplied by district’s total taxable value, divided by 1,000, = 0.0198 mills multiplied by $100 million = $1,980. The district will receive no reimbursement. On 2015 Form 5192 (for mills levied in July 2015 to repay debt) the reduction is (line 7 minus line 8) multiplied by line 10 and divided by 1,000. There is no reduction if line 7 is less than or equal to line 8.
All taxing units are encouraged to adjust their 2015 debt millage rate for their small taxpayer exemption loss so they will be eligible for reimbursement.
Taxing units (except for school districts and ISDs) are also eligible for reimbursement for 2015 operating mills used to repay debt approved by the voters, or incurred, before 2013. See 2015 Form 5192 lines 9-18. Do not claim reimbursement for debt repaid by fees, charges, or other non-general-fund revenues. Form 5192, used to claim reimbursement for debt and operating mills levied in July 2015 to repay debt, will be available this month at Michigan.gov/taxes by clicking on Property Tax and the second bullet.
Michigan Department of Treasury, Office of Revenue and Tax Analysis