SENATE BILL No. 80

February 1, 2001, Introduced by Senators STEIL, SHUGARS, SIKKEMA, BENNETT,

VAN REGENMORTER, GAST, DUNASKISS, NORTH, GOUGEON and DINGELL

and referred to the Committee on Economic Development, International Trade and

Regulatory Affairs.

A bill to amend 1975 PA 197, entitled

"An act to provide for the establishment of a downtown develop-

ment authority; to prescribe its powers and duties; to correct

and prevent deterioration in business districts; to encourage

historic preservation; to authorize the acquisition and disposal

of interests in real and personal property; to authorize the cre-

ation and implementation of development plans in the districts;

to promote the economic growth of the districts; to create a

board; to prescribe its powers and duties; to authorize the levy

and collection of taxes; to authorize the issuance of bonds and

other evidences of indebtedness; to authorize the use of tax

increment financing; to reimburse downtown development authori-

ties for certain losses of tax increment revenues; and to pre-

scribe the powers and duties of certain state officials,"

by amending section 1 (MCL 125.1651), as amended by 1997 PA 202.

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 in anticipation of repayment by the authority.

5 Evidence of the intent to repay an advance may include, but is

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1 not limited to, an executed agreement to repay, provisions

2 contained in a tax increment financing plan approved prior to the

3 advance, or a resolution of the authority or the municipality.

4 (b) "Assessed value" means 1 of the following:

5 (i) For valuations made before January 1, 1995, the state

6 equalized valuation as determined under the general property tax

7 act, 1893 PA 206, MCL 211.1 to 211.157.

8 (ii) For valuations made after December 31, 1994, the tax-

9 able value as determined under section 27a of the general prop-

10 erty tax act, 1893 PA 206, MCL 211.27a.

11 (c) "Authority" means a downtown development authority cre-

12 ated pursuant to this act.

13 (d) "Board" means the governing body of an authority.

14 (e) "Business district" means an area in the downtown of a

15 municipality zoned and used principally for business.

16 (f) "Captured assessed value" means the amount in any 1 year

17 by which the current assessed value of the project area, includ-

18 ing the assessed value of property for which specific local taxes

19 are paid in lieu of property taxes as determined in subdivision

20 (x), exceeds the initial assessed value. The state tax commis-

21 sion shall prescribe the method for calculating captured assessed

22 value.

23 (g) "Chief executive officer" means the mayor or city man-

24 ager of a city, the president or village manager of a village, or

25 the supervisor of a township or, if designated by the township

26 board for purposes of this act, the township superintendent or

27 township manager of a township.

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1 (h) "Development area" means that area to which a

2 development plan is applicable.

3 (i) "Development plan" means that information and those

4 requirements for a development PLAN set forth in section 17.

5 (j) "Development program" means the implementation of the

6 development plan.

7 (k) "Downtown district" means THAT PART OF an area in a

8 business district that is specifically designated by ordinance of

9 the governing body of the municipality pursuant to this act. A

10 DOWNTOWN DISTRICT MAY INCLUDE 1 OR MORE SEPARATE AND DISTINCT

11 GEOGRAPHIC AREAS IN A BUSINESS DISTRICT AS DETERMINED BY THE

12 MUNICIPALITY. IF THE DOWNTOWN DISTRICT CONTAINS MORE THAN 1 SEP-

13 ARATE AND DISTINCT GEOGRAPHIC AREA IN THE DOWNTOWN DISTRICT, THE

14 SEPARATE AND DISTINCT GEOGRAPHIC AREAS SHALL BE CONSIDERED 1

15 DOWNTOWN DISTRICT.

16 (l) "Eligible advance" means an advance made before

17 August 19, 1993.

18 (m) "Eligible obligation" means an obligation issued or

19 incurred by an authority or by a municipality on behalf of an

20 authority before August 19, 1993 and its subsequent refunding by

21 a qualified refunding obligation. Eligible obligation includes

22 an authority's written agreement entered into before August 19,

23 1993 to pay an obligation issued after August 18, 1993 and before

24 December 31, 1996 by another entity on behalf of the authority.

25 (n) "Fiscal year" means the fiscal year of the authority.

26 (o) "Governing body of a municipality" means the elected

27 body of a municipality having legislative powers.

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1 (p) "Initial assessed value" means the assessed value, as

2 equalized, of all the taxable property within the boundaries of

3 the development area at the time the ordinance establishing the

4 tax increment financing plan is approved, as shown by the most

5 recent assessment roll of the municipality for which equalization

6 has been completed at the time the resolution is adopted.

7 Property exempt from taxation at the time of the determination of

8 the initial assessed value shall be included as zero. For the

9 purpose of determining initial assessed value, property for which

10 a specific local tax is paid in lieu of a property tax shall not

11 be considered to be property that is exempt from taxation. The

12 initial assessed value of property for which a specific local tax

13 was paid in lieu of a property tax shall be determined as pro-

14 vided in subdivision (x). In the case of a municipality having a

15 population of less than 35,000 which established an authority

16 prior to 1985, created a district or districts, and approved a

17 development plan or tax increment financing plan or amendments to

18 a plan, and which plan or tax increment financing plan or amend-

19 ments to a plan, and which plan expired by its terms December 31,

20 1991, the initial assessed value for the purpose of any plan or

21 plan amendment adopted as an extension of the expired plan shall

22 be determined as if the plan had not expired December 31, 1991.

23 For a development area designated before 1997 in which a renais-

24 sance zone has subsequently been designated pursuant to the

25 Michigan renaissance zone act, 1996 PA 376, MCL 125.2681 to

26 125.2696, the initial assessed value of the development area

27 otherwise determined under this subdivision shall be reduced by

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1 the amount by which the current assessed value of the development

2 area was reduced in 1997 due to the exemption of property under

3 section 7ff of the general property tax act, 1893 PA 206, MCL

4 211.7ff, but in no case shall the initial assessed value be less

5 than zero.

6 (q) "Municipality" means a city, village, or township.

7 (r) "Obligation" means a written promise to pay, whether

8 evidenced by a contract, agreement, lease, sublease, bond, or

9 note, or a requirement to pay imposed by law. An obligation does

10 not include a payment required solely because of default upon an

11 obligation, employee salaries, or consideration paid for the use

12 of municipal offices. An obligation does not include those bonds

13 that have been economically defeased by refunding bonds issued

14 under this act. Obligation includes, but is not limited to, the

15 following:

16 (i) A requirement to pay proceeds derived from ad valorem

17 property taxes or taxes levied in lieu of ad valorem property

18 taxes.

19 (ii) A management contract or a contract for professional

20 services.

21 (iii) A payment required on a contract, agreement, bond, or

22 note if the requirement to make or assume the payment arose

23 before August 19, 1993.

24 (iv) A requirement to pay or reimburse a person for the cost

25 of insurance for, or to maintain, property subject to a lease,

26 land contract, purchase agreement, or other agreement.

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1 (v) A letter of credit, paying agent, transfer agent, bond

2 registrar, or trustee fee associated with a contract, agreement,

3 bond, or note.

4 (s) "On behalf of an authority", in relation to an eligible

5 advance made by a municipality, or an eligible obligation or

6 other protected obligation issued or incurred by a municipality,

7 means in anticipation that an authority would transfer tax incre-

8 ment revenues or reimburse the municipality from tax increment

9 revenues in an amount sufficient to fully make payment required

10 by the eligible advance made by the municipality, or eligible

11 obligation or other protected obligation issued or incurred by

12 the municipality, if the anticipation of the transfer or receipt

13 of tax increment revenues from the authority is pursuant to or

14 evidenced by 1 or more of the following:

15 (i) A reimbursement agreement between the municipality and

16 an authority it established.

17 (ii) A requirement imposed by law that the authority trans-

18 fer tax increment revenues to the municipality.

19 (iii) A resolution of the authority agreeing to make pay-

20 ments to the incorporating unit.

21 (iv) Provisions in a tax increment financing plan describing

22 the project for which the obligation was incurred.

23 (t) "Operations" means office maintenance, including sala-

24 ries and expenses of employees, office supplies, consultation

25 fees, design costs, and other expenses incurred in the daily man-

26 agement of the authority and planning of its activities.

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1 (u) "Other protected obligation" means:

2 (i) A qualified refunding obligation issued to refund an

3 obligation described in subparagraph (ii), (iii), or (iv), an

4 obligation that is not a qualified refunding obligation that is

5 issued to refund an eligible obligation, or a qualified refunding

6 obligation issued to refund an obligation described in this

7 subparagraph.

8 (ii) An obligation issued or incurred by an authority or by

9 a municipality on behalf of an authority after August 19, 1993,

10 but before December 31, 1994, to finance a project described in a

11 tax increment finance plan approved by the municipality in

12 accordance with this act before December 31, 1993, for which a

13 contract for final design is entered into by or on behalf of the

14 municipality or authority before March 1, 1994.

15 (iii) An obligation incurred by an authority or municipality

16 after August 19, 1993, to reimburse a party to a development

17 agreement entered into by a municipality or authority before

18 August 19, 1993, for a project described in a tax increment

19 financing plan approved in accordance with this act before August

20 19, 1993, and undertaken and installed by that party in accord-

21 ance with the development agreement.

22 (iv) An obligation incurred by the authority evidenced by or

23 to finance a contract to purchase real property within a develop-

24 ment area or a contract to develop that property within the

25 development area, or both, if all of the following requirements

26 are met:

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1 (A) The authority purchased the real property in 1993.

2 (B) Before June 30, 1995, the authority enters a contract

3 for the development of the real property located within the

4 development area.

5 (C) In 1993, the authority or municipality on behalf of the

6 authority received approval for a grant from both of the

7 following:

8 (I) The department of natural resources for site reclamation

9 of the real property.

10 (II) The department of consumer and industry services for

11 development of the real property.

12 (v) An ongoing management or professional services contract

13 with the governing body of a county which THAT was entered into

14 before March 1, 1994 and which THAT was preceded by a series of

15 limited term management or professional services contracts with

16 the governing body of the county, the last of which was entered

17 into before August 19, 1993.

18 (vi) A loan from a municipality to an authority if the loan

19 was approved by the legislative body of the municipality on April

20 18, 1994.

21 (vii) Funds expended to match a grant received by a munici-

22 pality on behalf of an authority for sidewalk improvements from

23 the Michigan department of transportation if the legislative body

24 of the municipality approved the grant application on April 5,

25 1993 and the grant was received by the municipality in June

26 1993.

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1 (viii) For taxes captured in 1994, an obligation described

2 in this subparagraph issued or incurred to finance a project. An

3 obligation is considered issued or incurred to finance a project

4 described in this subparagraph only if all of the following are

5 met:

6 (A) The obligation requires raising capital for the project

7 or paying for the project, whether or not a borrowing is

8 involved.

9 (B) The obligation was part of a development plan and the

10 tax increment financing plan was approved by a municipality on

11 May 6, 1991.

12 (C) The obligation is in the form of a written memorandum of

13 understanding between a municipality and a public utility dated

14 October 27, 1994.

15 (D) The authority or municipality captured school taxes

16 during 1994.

17 (v) "Public facility" means a street, plaza, pedestrian

18 mall, and any improvements to a street, plaza, or pedestrian mall

19 including street furniture and beautification, park, parking

20 facility, recreational facility, right of way, structure, water-

21 way, bridge, lake, pond, canal, utility line or pipe, building,

22 and access routes to any of the foregoing, designed and dedicated

23 to use by the public generally, or used by a public agency.

24 Public facility includes an improvement to a facility used by the

25 public or a public facility as those terms are defined in section

26 1 of 1966 PA 1, MCL 125.1351, which improvement is made to comply

27 with the barrier free design requirements of the state

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1 construction code promulgated under the STILLE-DEROSSETT-HALE

2 SINGLE state construction code act, of 1972, 1972 PA 230, MCL

3 125.1501 to 125.1531.

4 (w) "Qualified refunding obligation" means an obligation

5 issued or incurred by an authority or by a municipality on behalf

6 of an authority to refund an obligation if the refunding obliga-

7 tion meets both of the following:

8 (i) The net present value of the principal and interest to

9 be paid on the refunding obligation, including the cost of issu-

10 ance, will be less than the net present value of the principal

11 and interest to be paid on the obligation being refunded, as cal-

12 culated using a method approved by the department of treasury.

13 (ii) The net present value of the sum of the tax increment

14 revenues described in subdivision (z)(ii) and the distributions

15 under section 13b to repay the refunding obligation will not be

16 greater than the net present value of the sum of the tax incre-

17 ment revenues described in subdivision (z)(ii) and the distribu-

18 tions under section 13b to repay the obligation being refunded,

19 as calculated using a method approved by the department of

20 treasury.

21 (x) "Specific local tax" means a tax levied under 1974 PA

22 198, MCL 207.551 to 207.572, the commercial redevelopment act,

23 1978 PA 255, MCL 207.651 to 207.668, the technology park develop-

24 ment act, 1984 PA 385, MCL 207.701 to 207.718, and 1953 PA 189,

25 MCL 211.181 to 211.182. The initial assessed value or current

26 assessed value of property subject to a specific local tax shall

27 be the quotient of the specific local tax paid divided by the ad

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1 valorem millage rate. However, after 1993, the state tax

2 commission shall prescribe the method for calculating the initial

3 assessed value and current assessed value of property for which a

4 specific local tax was paid in lieu of a property tax.

5 (y) "State fiscal year" means the annual period commencing

6 October 1 of each year.

7 (z) "Tax increment revenues" means the amount of ad valorem

8 property taxes and specific local taxes attributable to the

9 application of the levy of all taxing jurisdictions upon the cap-

10 tured assessed value of real and personal property in the devel-

11 opment area, subject to the following requirements:

12 (i) Tax increment revenues include ad valorem property taxes

13 and specific local taxes attributable to the application of the

14 levy of all taxing jurisdictions other than the state pursuant to

15 the state education tax act, 1993 PA 331, MCL 211.901 to 211.906,

16 and local or intermediate school districts upon the captured

17 assessed value of real and personal property in the development

18 area for any purpose authorized by this act.

19 (ii) Tax increment revenues include ad valorem property

20 taxes and specific local taxes attributable to the application of

21 the levy of the state pursuant to the state education tax act,

22 1993 PA 331, MCL 211.901 to 211.906, and local or intermediate

23 school districts upon the captured assessed value of real and

24 personal property in the development area in an amount equal to

25 the amount necessary, without regard to subparagraph (i), to

26 repay eligible advances, eligible obligations, and other

27 protected obligations.

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1 (iii) Tax increment revenues do not include any of the

2 following:

3 (A) Ad valorem property taxes attributable either to a por-

4 tion of the captured assessed value shared with taxing jurisdic-

5 tions within the jurisdictional area of the authority or to a

6 portion of value of property that may be excluded from captured

7 assessed value or specific local taxes attributable to such ad

8 valorem property taxes.

9 (B) Ad valorem property taxes excluded by the tax increment

10 financing plan of the authority from the determination of the

11 amount of tax increment revenues to be transmitted to the author-

12 ity or specific local taxes attributable to such ad valorem prop-

13 erty taxes.

14 (C) Ad valorem property taxes exempted from capture under

15 section 3(3) or specific local taxes attributable to such ad

16 valorem property taxes.

17 (iv) The amount of tax increment revenues authorized to be

18 included under subparagraph (ii), and required to be transmitted

19 to the authority under section 14(1), from ad valorem property

20 taxes and specific local taxes attributable to the application of

21 the levy of the state education tax act, 1993 PA 331, MCL 211.901

22 to 211.906, a local school district or an intermediate school

23 district upon the captured assessed value of real and personal

24 property in a development area shall be determined separately for

25 the levy by the state, each school district, and each intermedi-

26 ate school district as the product of sub-subparagraphs (A) and

27 (B):

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1 (A) The percentage which the total ad valorem taxes and

2 specific local taxes available for distribution by law to the

3 state, local school district, or intermediate school district,

4 respectively, bears to the aggregate amount of ad valorem millage

5 taxes and specific taxes available for distribution by law to the

6 state, each local school district, and each intermediate school

7 district.

8 (B) The maximum amount of ad valorem property taxes and spe-

9 cific local taxes considered tax increment revenues under sub-

10 paragraph (ii).

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