HOUSE BILL No. 6175 September 23, 1998, Introduced by Rep. Basham and referred to the Committee on Tax Policy. A bill to amend 1980 PA 450, entitled "The tax increment finance authority act," by amending section 1 (MCL 125.1801), as amended by 1997 PA 201. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 1. As used in this act: 2 (a) "Advance" means a transfer of funds made by a municipal- 3 ity to an authority or to another person on behalf of the 4 authority. Evidence of the intent to repay an advance is 5 required and may include, but is not limited to, an executed 6 agreement to repay, provisions contained in a tax increment 7 financing plan approvedprior toBEFORE the advance orprior8toBEFORE August 14, 1993, or a resolution of the authority or 9 the municipality. 10 (b) "Assessed value" means 1 of the following: 06969'98 JLB 2 1 (i) For valuations made before January 1, 1995, the state 2 equalized valuation as determined under the general property tax 3 act, 1893 PA 206, MCL 211.1 to 211.157. 4 (ii) For valuations made after December 31, 1994, taxable 5 value as determined under section 27a of the general property tax 6 act, 1893 PA 206, MCL 211.27a. 7 (c) "Authority" means a tax increment finance authority cre- 8 atedpursuant toUNDER this act. 9 (d) "Authority district" means that area within which an 10 authority exercises its powers and within which 1 or more devel- 11 opment areas may exist. 12 (e) "Board" means the governing body of an authority. 13 (f) "Captured assessed value" means the amount in any 1 year 14 by which the current assessed value of the development area, 15 including the assessed value of property for which specific local 16 taxes are paid in lieu of property taxes as determined in subdi- 17 vision (w), exceeds the initial assessed value. The state tax 18 commission shall prescribe the method for calculating captured 19 assessed value. 20 (g) "Chief executive officer" means the mayor or city man- 21 ager of a city, the president of a village, or the supervisor of 22 a township. 23 (h) "Development area" means that area to which a develop- 24 ment plan is applicable. 25 (i) "Development area citizens council" or "council" means 26 that advisory body established pursuant to section 20. 06969'98 3 1 (j) "Development plan" means that information and those 2 requirements for a development set forth in section 16. 3 (k) "Development program" means the implementation of the 4 development plan. 5 (l) "Eligible advance" means an advance made before 6 August 19, 1993. 7 (m) "Eligible obligation" means an obligation issued or 8 incurred by an authority or by a municipality on behalf of an 9 authority before August 19, 1993 and its subsequent refunding by 10 a qualified refunding obligation. Eligible obligation includes 11 an authority's written agreement entered into before August 19, 12 1993 to pay an obligation issued after August 18, 1993 and before 13 December 31, 1996 by another entity on behalf of the authority. 14 (n) "Fiscal year" means the fiscal year of the authority. 15 (o) "Governing body" means the elected body of a municipal- 16 ity having legislative powers. 17 (p) "Initial assessed value" means the assessed value, as 18 equalized, of all the taxable property within the boundaries of 19 the development area at the time the resolution establishing the 20 tax increment financing plan is approved as shown by the most 21 recent assessment roll of the municipality for which equalization 22 has been completed at the time the resolution is adopted. 23 Property exempt from taxation at the time of the determination of 24 the initial assessed value shall be included as zero. For the 25 purpose of determining initial assessed value, property for which 26 a specific local tax is paid in lieu of a property tax shall not 27 be considered property that is exempt from taxation. The initial 06969'98 4 1 assessed value of property for which a specific tax was paid in 2 lieu of a property tax shall be determined as provided in subdi- 3 vision (w). 4 (q) "Municipality" means a city. 5 (r) "Obligation" means a written promise to pay, whether 6 evidenced by a contract, agreement, lease, sublease, bond, or 7 note, or a requirement to pay imposed by law. An obligation does 8 not include a payment required solely because of default upon an 9 obligation, employee salaries, or consideration paid for the use 10 of municipal offices. An obligation does not include those bonds 11 that have been economically defeased by refunding bonds issued 12 under this act. Obligation includes, but is not limited to, the 13 following: 14 (i) A requirement to pay proceeds derived from ad valorem 15 property taxes or taxes levied in lieu of ad valorem property 16 taxes. 17 (ii) A management contract or a contract for professional 18 services. 19 (iii) A payment required on a contract, agreement, bond, or 20 note if the requirement to make or assume the payment arose 21 before August 19, 1993. 22 (iv) A requirement to pay or reimburse a person for the cost 23 of insurance for, or to maintain, property subject to a lease, 24 land contract, purchase agreement, or other agreement. 25 (v) A letter of credit, paying agent, transfer agent, bond 26 registrar, or trustee fee associated with a contract, agreement, 27 bond, or note. 06969'98 5 1 (s) "On behalf of an authority", in relation to an eligible 2 advance made by a municipality, or an eligible obligation or 3 other protected obligation issued or incurred by a municipality, 4 means in anticipation that an authority would transfer tax incre- 5 ment revenues or reimburse the municipality from tax increment 6 revenues in an amount sufficient to fully make payment required 7 by the eligible advance made by a municipality, or the eligible 8 obligation or other protected obligation issued or incurred by 9 the municipality, if the anticipation of the transfer or receipt 10 of tax increment revenues from the authority is pursuant to or 11 evidenced by 1 or more of the following: 12 (i) A reimbursement agreement between the municipality and 13 an authority it established. 14 (ii) A requirement imposed by law that the authority trans- 15 fer tax increment revenues to the municipality. 16 (iii) A resolution of the authority agreeing to make pay- 17 ments to the incorporating unit. 18 (iv) Provisions in a tax increment financing plan describing 19 the project for which the obligation was incurred. 20 (t) "Other protected obligation" means: 21 (i) A qualified refunding obligation issued to refund an 22 obligation described in subparagraph (ii) or (iii), an obligation 23 that is not a qualified refunding obligation that is issued to 24 refund an eligible obligation, or a qualified refunding obliga- 25 tion issued to refund an obligation described in this 26 subparagraph. 06969'98 6 1 (ii) An obligation issued or incurred by an authority or by 2 a municipality on behalf of an authority after August 19, 1993, 3 but before December 31, 1994, to finance a project described in a 4 tax increment finance plan approved by the municipality in 5 accordance with this act before December 31, 1993, for which a 6 contract for final design is entered into by the municipality or 7 authority before March 1, 1994. 8 (iii) An obligation incurred by an authority or municipality 9 after August 19, 1993, to reimburse a party to a development 10 agreement entered into by a municipality or authority before 11 August 19, 1993, for a project described in a tax increment 12 financing plan approved in accordance with this act before 13 August 19, 1993, and undertaken and installed by that party in 14 accordance with the development agreement. 15 (iv) An obligation issued or incurred by an authority or by 16 a municipality on behalf of an authority to implement a project 17 described in a tax increment finance plan approved by the munici- 18 pality in accordance with this act before August 19, 1993, that 19 is located on land owned by a public university on the date the 20 tax increment financing plan is approved, and for which a con- 21 tract for final design is entered into before December 31, 1993. 22 (v) An ongoing management or professional services contract 23 with the governing body of a county which was entered into before 24 March 1, 1994 and which was preceded by a series of limited term 25 management or professional services contracts with the governing 26 body of the county, the last of which was entered into before 27 August 19, 1993. 06969'98 7 1 (vi) An obligation issued or incurred by a municipality 2 under a contract executed on December 19, 1994 as subsequently 3 amended between the municipality and the authority to implement a 4 project described in a tax increment finance plan approved by the 5 municipality under this act before August 19, 1993 for which a 6 contract for final design was entered into by the municipality 7 before March 1, 1994 provided that final payment by the munici- 8 pality is made on or before December 31, 2001. 9 (vii) AN OBLIGATION ISSUED OR INCURRED BY AN AUTHORITY OR BY 10 A MUNICIPALITY ON BEHALF OF AN AUTHORITY THAT MEETS ALL OF THE 11 FOLLOWING QUALIFICATIONS: 12 (A) THE OBLIGATION IS ISSUED OR INCURRED TO FINANCE A 13 PROJECT DESCRIBED IN A TAX INCREMENT FINANCING PLAN APPROVED 14 BEFORE AUGUST 19, 1993 BY A MUNICIPALITY IN ACCORDANCE WITH THIS 15 ACT. 16 (B) THE OBLIGATION QUALIFIES AS AN OTHER PROTECTED OBLIGA- 17 TION UNDER SUBPARAGRAPH (ii) AND WAS ISSUED OR INCURRED BY THE 18 AUTHORITY BEFORE DECEMBER 31, 1994 FOR THE PURPOSE OF FINANCING 19 THE PROJECT. 20 (C) A PORTION OF THE OBLIGATION ISSUED OR INCURRED BY THE 21 AUTHORITY BEFORE DECEMBER 31, 1994 FOR THE PURPOSE OF FINANCING 22 THE PROJECT WAS RETIRED PRIOR TO DECEMBER 31, 1996. 23 (D) THE OBLIGATION DOES NOT EXCEED THE DOLLAR AMOUNT OF THE 24 PORTION OF THE OBLIGATION RETIRED PRIOR TO DECEMBER 31, 1996. 25 (u) "Public facility" means 1 or more of the following: 26 (i) A street, plaza, or pedestrian mall, and any 27 improvements to a street, plaza, boulevard, alley, or pedestrian 06969'98 8 1 mall, including street furniture and beautification, park, 2 parking facility, recreation facility, playground, school, 3 library, public institution or administration building, right of 4 way, structure, waterway, bridge, lake, pond, canal, utility line 5 or pipeline, and other similar facilities and necessary easements 6 of these facilities designed and dedicated to use by the public 7 generally or used by a public agency. As used in this subpara- 8 graph, public institution or administration building includes, 9 but is not limited to, a police station, fire station, court 10 building, or other public safety facility. 11 (ii) The acquisition and disposal of real and personal prop- 12 erty or interests in real and personal property, demolition of 13 structures, site preparation, relocation costs, building rehabil- 14 itation, and all associated administrative costs, including, but 15 not limited to, architect's, engineer's, legal, and accounting 16 fees as contained in the resolution establishing the district's 17 development plan. 18 (iii) An improvement to a facility used by the public or a 19 public facility as those terms are defined in section 1 of 1966 20 PA 1, MCL 125.1351, which improvement is made to comply with the 21 barrier free design requirements of the state construction code 22 promulgated under the state construction code act of 1972, 1972 23 PA 230, MCL 125.1501 to 125.1531. 24 (v) "Qualified refunding obligation" means an obligation 25 issued or incurred by an authority or by a municipality on behalf 26 of an authority to refund an obligation if the refunding 27 obligation meets both of the following: 06969'98 9 1 (i) The net present value of the principal and interest to 2 be paid on the refunding obligation, including the cost of issu- 3 ance, will be less than the net present value of the principal 4 and interest to be paid on the obligation being refunded, as cal- 5 culated using a method approved by the department of treasury. 6 (ii) The net present value of the sum of the tax increment 7 revenues described in subdivision (aa)(ii) and the distributions 8 under section 12a to repay the refunding obligation will not be 9 greater than the net present value of the sum of the tax incre- 10 ment revenues described in subdivision (aa)(ii) and the distribu- 11 tions under section 12a to repay the obligation being refunded, 12 as calculated using a method approved by the department of 13 treasury. 14 (w) "Specific local tax" means a tax levied under 1974 PA 15 198, MCL 207.551 to 207.572, the commercial redevelopment act, 16 1978 PA 255, MCL 207.651 to 207.668, the technology park develop- 17 ment act, 1984 PA 385, MCL 207.701 to 207.718, and 1953 PA 189, 18 MCL 211.181 to 211.182. The initial assessed value or current 19 assessed value of property subject to a specific local tax shall 20 be the quotient of the specific local tax paid divided by the ad 21 valorem millage rate. However, after 1993, the state tax commis- 22 sion shall prescribe the method for calculating the initial 23 assessed value and current assessed value of property for which a 24 specific local tax was paid in lieu of a property tax. 25 (x) "State fiscal year" means the annual period commencing 26 October 1 of each year. 06969'98 10 1 (y) "Tax increment district" or "district" means that area 2 to which the tax increment finance plan pertains. 3 (z) "Tax increment financing plan" means that information 4 and those requirements set forth in sections 13 to 15. 5 (aa) "Tax increment revenues" means the amount of ad valorem 6 property taxes and specific local taxes attributable to the 7 application of the levy of all taxing jurisdictions upon the cap- 8 tured assessed value of real and personal property in the devel- 9 opment area, subject to the following requirements: 10 (i) Tax increment revenues include ad valorem property taxes 11 and specific local taxes attributable to the application of the 12 levy of all taxing jurisdictions other than the state pursuant to 13 the state education tax act, 1993 PA 331, MCL 211.901 to 211.906, 14 and local or intermediate school districts upon the captured 15 assessed value of real and personal property in the development 16 area for any purpose authorized by this act. 17 (ii) Tax increment revenues include ad valorem property 18 taxes and specific local taxes attributable to the application of 19 the levy of the state pursuant to the state education tax act, 20 1993 PA 331, MCL 211.901 to 211.906, and local or intermediate 21 school districts upon the captured assessed value of real and 22 personal property in the development area in an amount equal to 23 the amount necessary, without regard to subparagraph (i), to 24 repay eligible advances, eligible obligations, and other pro- 25 tected obligations. 26 (iii) Tax increment revenues do not include any of the 27 following: 06969'98 11 1 (A) Ad valorem property taxes attributable either to a 2 portion of the captured assessed value shared with taxing juris- 3 dictions within the jurisdictional area of the authority or to a 4 portion of value of property that may be excluded from captured 5 assessed value or specific local taxes attributable to such ad 6 valorem property taxes. 7 (B) Ad valorem property taxes excluded by the tax increment 8 financing plan of the authority from the determination of the 9 amount of tax increment revenues to be transmitted to the author- 10 ity or specific local taxes attributable to such ad valorem prop- 11 erty taxes. 12 (iv) The amount of tax increment revenues authorized to be 13 included under subparagraph (ii), and required to be transmitted 14 to the authority under section 14(1), from ad valorem property 15 taxes and specific local taxes attributable to the application of 16 the levy of the state education tax act, 1993 PA 331, MCL 211.901 17 to 211.906, a local school district or an intermediate school 18 district upon the captured assessed value of real and personal 19 property in a development area shall be determined separately for 20 the levy by the state, each school district, and each intermedi- 21 ate school district as the product of sub-subparagraphs (A) and 22 (B): 23 (A) The percentage which the total ad valorem taxes and spe- 24 cific local taxes available for distribution by law to the state, 25 local school district, or intermediate school district, respec- 26 tively, bear to the aggregate amount of ad valorem millage taxes 27 and specific taxes available for distribution by law to the 06969'98 12 1 state, each local school district, and each intermediate school 2 district. 3 (B) The maximum amount of ad valorem property taxes and spe- 4 cific local taxes considered tax increment revenues under sub- 5 paragraph (ii). 06969'98 Final page. 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