HB 4318, As Passed Senate

HB-4318, As Passed Senate, April 21, 2005

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 4318

A bill to amend 1975 PA 197, entitled

"An act to provide for the establishment of a downtown development

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 creation

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 authorities for

certain losses of tax increment revenues; and to prescribe the

powers and duties of certain state officials,"

by amending sections 1, 3, and 18 (MCL 125.1651, 125.1653, and

125.1668), section 1 as amended by 2004 PA 196 and section 3 as

amended by 2004 PA 521.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 1. As used in this act:

(a) "Advance" means a transfer of funds made by a municipality

to an authority or to another person on behalf of the authority in

anticipation of repayment by the authority. Evidence of the intent

to repay an advance may include, but is not limited to, an executed

agreement to repay, provisions contained in a tax increment

financing plan approved prior to the advance, or a resolution of

the authority or the municipality.

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

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

equalized valuation as determined under the general property tax

act, 1893 PA 206, MCL 211.1 to 211.157.

(ii) For valuations made after December 31, 1994, the taxable

value as determined under section 27a of the general property tax

act, 1893 PA 206, MCL 211.27a.

pursuant to this act.

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

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

municipality zoned and used principally for business.

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

by which the current assessed value of the project area, including

the assessed value of property for which specific local taxes are

paid in lieu of property taxes as determined in subdivision (y),

exceeds the initial assessed value. The state tax commission shall

prescribe the method for calculating captured assessed value.

(g) "Chief executive officer" means the mayor or city manager

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

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

for purposes of this act, the township superintendent or township

manager of a township.

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

plan is applicable.

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

requirements for a development plan set forth in section 17.

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

development plan.

(k) "Downtown district" means that part of an area in a

business district that is specifically designated by ordinance of

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

downtown district may include 1 or more separate and distinct

geographic areas in a business district as determined by the

municipality if the municipality is a city that surrounds another

city and that other city lies between the 2 separate and distinct

geographic areas. If the downtown district contains more than 1

separate and distinct geographic area in the downtown district, the

separate and distinct geographic areas shall be considered 1

downtown district.

(l) "Eligible advance" means an advance made before August 19,

1993.

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

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

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

qualified refunding obligation. Eligible obligation includes an

authority's written agreement entered into before August 19, 1993

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

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

(n) "Fire alarm system" means a system designed to detect and

annunciate the presence of fire, or by-products of fire. Fire alarm

system includes smoke detectors.

(o) "Fiscal year" means the fiscal year of the authority.

(p) "Governing body of a municipality" means the elected body

of a municipality having legislative powers.

(q) "Initial assessed value" means the assessed value, as

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

development area at the time the ordinance establishing the tax

increment financing plan is approved, as shown by the most recent

assessment roll of the municipality for which equalization has been

completed at the time the resolution is adopted. Property exempt

from taxation at the time of the determination of the initial

assessed value shall be included as zero. For the purpose of

determining initial assessed value, property for which a specific

local tax is paid in lieu of a property tax shall not be considered

to be property that is exempt from taxation. The initial assessed

value of property for which a specific local tax was paid in lieu

of a property tax shall be determined as provided in subdivision

(y). In the case of a municipality having a population of less than

35,000 that established an authority prior to 1985, created a

district or districts, and approved a development plan or tax

increment financing plan or amendments to a plan, and which plan or

tax increment financing plan or amendments to a plan, and which

plan expired by its terms December 31, 1991, the initial assessed

value for the purpose of any plan or plan amendment adopted as an

extension of the expired plan shall be determined as if the plan

had not expired December 31, 1991. For a development area

designated before 1997 in which a renaissance zone has subsequently

been designated pursuant to the Michigan renaissance zone act, 1996

PA 376, MCL 125.2681 to 125.2696, the initial assessed value of the

development area otherwise determined under this subdivision shall

be reduced by the amount by which the current assessed value of the

development area was reduced in 1997 due to the exemption of

property under section 7ff of the general property tax act, 1893 PA

206, MCL 211.7ff, but in no case shall the initial assessed value

be less than zero.

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

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

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

or a requirement to pay imposed by law. An obligation does not

include a payment required solely because of default upon an

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

municipal offices. An obligation does not include those bonds that

have been economically defeased by refunding bonds issued under

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

following:

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

property taxes or taxes levied in lieu of ad valorem property

taxes.

(ii) A management contract or a contract for professional

services.

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

if the requirement to make or assume the payment arose before

August 19, 1993.

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

insurance for, or to maintain, property subject to a lease, land

contract, purchase agreement, or other agreement.

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

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

bond, or note.

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

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

protected obligation issued or incurred by a municipality, means in

anticipation that an authority would transfer tax increment

revenues or reimburse the municipality from tax increment revenues

in an amount sufficient to fully make payment required by the

eligible advance made by the municipality, or eligible obligation

or other protected obligation issued or incurred by the

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

increment revenues from the authority is pursuant to or evidenced

by 1 or more of the following:

(i) A reimbursement agreement between the municipality and an

authority it established.

(ii) A requirement imposed by law that the authority transfer

tax increment revenues to the municipality.

(iii) A resolution of the authority agreeing to make payments to

the incorporating unit.

(iv) Provisions in a tax increment financing plan describing

the project for which the obligation was incurred.

(u) "Operations" means office maintenance, including salaries

and expenses of employees, office supplies, consultation fees,

design costs, and other expenses incurred in the daily management

of the authority and planning of its activities.

(v) "Other protected obligation" means:

(i) A qualified refunding obligation issued to refund an

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

obligation that is not a qualified refunding obligation that is

issued to refund an eligible obligation, or a qualified refunding

obligation issued to refund an obligation described in this

subparagraph.

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

municipality on behalf of an authority after August 19, 1993, but

before December 31, 1994, to finance a project described in a tax

increment finance plan approved by the municipality in accordance

with this act before December 31, 1993, for which a contract for

final design is entered into by or on behalf of the municipality or

authority before March 1, 1994 or for which a written agreement

with a developer, titled preferred development agreement, was

entered into by or on behalf of the municipality or authority in

July 1993.

(iii) An obligation incurred by an authority or municipality

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

agreement entered into by a municipality or authority before August

19, 1993, for a project described in a tax increment financing plan

approved in accordance with this act before August 19, 1993, and

undertaken and installed by that party in accordance with the

development agreement.

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

finance a contract to purchase real property within a development

area or a contract to develop that property within the development

area, or both, if all of the following requirements are met:

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

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

the development of the real property located within the development

area.

authority received approval for a grant from both of the following:

(I) The department of natural resources for site reclamation

of the real property.

(II) The department of consumer and industry services for

development of the real property.

(v) An ongoing management or professional services contract

with the governing body of a county which was entered into before

March 1, 1994 and which was preceded by a series of limited term

management or professional services contracts with the governing

body of the county, the last of which was entered into before

August 19, 1993.

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

approved by the legislative body of the municipality on April 18,

1994.

(vii) Funds expended to match a grant received by a

municipality on behalf of an authority for sidewalk improvements

from the Michigan department of transportation if the legislative

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

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

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

this subparagraph issued or incurred to finance a project. An

obligation is considered issued or incurred to finance a project

described in this subparagraph only if all of the following are

met:

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

paying for the project, whether or not a borrowing is involved.

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

increment financing plan was approved by a municipality on May 6,

1991.

understanding between a municipality and a public utility dated

October 27, 1994.

(D) The authority or municipality captured school taxes during

1994.

(w) "Public facility" means a street, plaza, pedestrian mall,

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

including street furniture and beautification, park, parking

facility, recreational facility, right-of-way, structure, waterway,

bridge, lake, pond, canal, utility line or pipe, building, and

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

use by the public generally, or used by a public agency. Public

facility includes an improvement to a facility used by the public

or a public facility as those terms are defined in section 1 of

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

the barrier free design requirements of the state construction code

promulgated under the Stille-DeRossett-Hale single state

construction code act, 1972 PA 230, MCL 125.1501 to 125.1531.

(x) "Qualified refunding obligation" means an obligation

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

of an authority to refund an obligation if the obligation is issued

to refund a qualified refunding obligation issued in November 1997

and any subsequent refundings of that obligation issued before

January 1, 2010 or the refunding obligation meets both of the

following:

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

paid on the refunding obligation, including the cost of issuance,

will be less than the net present value of the principal and

interest to be paid on the obligation being refunded, as calculated

using a method approved by the department of treasury.

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

revenues described in subdivision (aa)(ii) and the distributions

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

greater than the net present value of the sum of the tax increment

revenues described in subdivision (aa)(ii) and the distributions

under section 13b to repay the obligation being refunded, as

calculated using a method approved by the department of treasury.

(y) "Specific local tax" means a tax levied under 1974 PA 198,

MCL 207.551 to 207.572, the commercial redevelopment act, 1978 PA

255, MCL 207.651 to 207.668, the technology park development act,

1984 PA 385, MCL 207.701 to 207.718, and 1953 PA 189, MCL 211.181

to 211.182. The initial assessed value or current assessed value of

property subject to a specific local tax shall be the quotient of

the specific local tax paid divided by the ad valorem millage rate.

However, after 1993, the state tax commission shall prescribe the

method for calculating the initial assessed value and current

assessed value of property for which a specific local tax was paid

in lieu of a property tax.

(z) "State fiscal year" means the annual period commencing

October 1 of each year.

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

property taxes and specific local taxes attributable to the

application of the levy of all taxing jurisdictions upon the

captured assessed value of real and personal property in the

development area, subject to the following requirements:

(i) Tax increment revenues include ad valorem property taxes

and specific local taxes attributable to the application of the

levy of all taxing jurisdictions other than the state pursuant to

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

and local or intermediate school districts upon the captured

assessed value of real and personal property in the development

area for any purpose authorized by this act.

(ii) Tax increment revenues include ad valorem property taxes

and specific local taxes attributable to the application of the

levy of the state pursuant to the state education tax act, 1993 PA

331, MCL 211.901 to 211.906, and local or intermediate school

districts upon the captured assessed value of real and personal

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

necessary, without regard to subparagraph (i), to repay eligible

advances, eligible obligations, and other protected obligations.

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

following:

(A) Ad valorem property taxes attributable either to a portion

of the captured assessed value shared with taxing jurisdictions

within the jurisdictional area of the authority or to a portion of

value of property that may be excluded from captured assessed value

or specific local taxes attributable to such ad valorem property

taxes.

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

financing plan of the authority from the determination of the

amount of tax increment revenues to be transmitted to the authority

or specific local taxes attributable to such ad valorem property

taxes.

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

valorem property taxes.

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

included under subparagraph (ii) or (v), and required to be

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

property taxes and specific local taxes attributable to the

application of the levy of the state education tax act, 1993 PA

331, MCL 211.901 to 211.906, a local school district or an

intermediate school district upon the captured assessed value of

real and personal property in a development area shall be

determined separately for the levy by the state, each school

district, and each intermediate school district as the product of

sub-subparagraphs (A) and (B):

(A) The percentage that the total ad valorem taxes and

specific local taxes available for distribution by law to the

state, local school district, or intermediate school district,

respectively, bears to the aggregate amount of ad valorem millage

taxes and specific taxes available for distribution by law to the

state, each local school district, and each intermediate school

district.

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

specific local taxes considered tax increment revenues under

subparagraph (ii) or (v).

(v) Tax increment revenues include ad valorem property taxes

and specific local taxes, in an annual amount and for each year

approved by the state treasurer, attributable to the levy by this

state under the state education tax act, 1993 PA 331, MCL 211.901

to 211.906, and by local or intermediate school districts, upon the

captured assessed value of real and personal property in the

development area of an authority established in a city with a

population of 750,000 or more to pay for, or reimburse an advance

for, not more than $8,000,000.00 for the demolition of buildings or

structures on public or privately owned property within a

development area that commences in 2005, or to pay the annual

principal of or interest on an obligation, the terms of which are

approved by the state treasurer, issued by an authority, or by a

city on behalf of an authority, to pay not more than $8,000,000.00

of the costs to demolish buildings or structures on public or

privately owned property within a development area that commences

in 2005.

Sec. 3. (1) When the governing body of a municipality

determines that it is necessary for the best interests of the

public to halt property value deterioration and increase property

tax valuation where possible in its business district, to eliminate

the causes of that deterioration, and to promote economic growth,

or to permit the development of a new commercial property with a

total cash value after development of not less than

$100,000,000.00, which includes more than 2 detached buildings

containing together not less than 500,000 square feet, the

governing body may, by resolution, declare its intention to create

and provide for the operation of an authority.

(2) In the resolution of intent, the governing body shall set

a date for the holding of a public hearing on the adoption of a

proposed ordinance creating the authority and designating the

boundaries of the downtown district. Notice of the public hearing

shall be published twice in a newspaper of general circulation in

the municipality, not less than 20 or more than 40 days before the

date of the hearing. Not less than 20 days before the hearing, the

governing body proposing to create the authority shall also mail

notice of the hearing to the property taxpayers of record in the

proposed district and for a public hearing to be held after

February 15, 1994 to the governing body of each taxing jurisdiction

levying taxes that would be subject to capture if the authority is

established and a tax increment financing plan is approved.

Beginning June 1, 2005, the notice of hearing within the time frame

described in this subsection shall be mailed by certified mail to

the <<governing body of each taxing jurisdiction levying taxes that

would be subject to capture if the authority is established and a tax

increment financing plan is approved>>. Failure of

a property taxpayer to receive the notice shall not invalidate

these proceedings. Notice of the hearing shall be posted in at

least 20 conspicuous and public places in the proposed downtown

district not less than 20 days before the hearing. The notice shall

state the date, time, and place of the hearing, and shall describe

the boundaries of the proposed downtown district. A citizen,

taxpayer, or property owner of the municipality or an official from

a taxing jurisdiction with millage that would be subject to capture

has the right to be heard in regard to the establishment of the

authority and the boundaries of the proposed downtown district. The

governing body of the municipality shall not incorporate land into

the downtown district not included in the description contained in

the notice of public hearing, but it may eliminate described lands

from the downtown district in the final determination of the

boundaries.

(3) Not more than 60 days after a public hearing held after

February 15, 1994, the governing body of a taxing jurisdiction

levying ad valorem property taxes that would otherwise be subject

to capture may exempt its taxes from capture by adopting a

resolution to that effect and filing a copy with the clerk of the

municipality proposing to create the authority. The resolution

takes effect when filed with that clerk and remains effective until

a copy of a resolution rescinding that resolution is filed with

that clerk.

(4) Not less than 60 days after the public hearing, if the

governing body of the municipality intends to proceed with the

establishment of the authority, it shall adopt, by majority vote of

its members, an ordinance establishing the authority and

designating the boundaries of the downtown district within which

the authority shall exercise its powers. The adoption of the

ordinance is subject to any applicable statutory or charter

provisions in respect to the approval or disapproval by the chief

executive or other officer of the municipality and the adoption of

an ordinance over his or her veto. This ordinance shall be filed

with the secretary of state promptly after its adoption and shall

be published at least once in a newspaper of general circulation in

the municipality.

(5) The governing body of the municipality may alter or amend

the boundaries of the downtown district to include or exclude lands

from the downtown district pursuant to the same requirements for

adopting the ordinance creating the authority.

(6) A municipality that has created an authority may enter

into an agreement with an adjoining municipality that has created

an authority to jointly operate and administer those authorities

under an interlocal agreement under the urban cooperation act of

1967, 1967 (Ex Sess) PA 7, MCL 124.501 to 124.512.

Sec. 18. (1) The governing body, before adoption of an

ordinance approving or amending a development plan or approving or

amending a tax increment financing plan, shall hold a public

hearing on the development plan. Notice of the time and place of

the hearing shall be given by publication twice in a newspaper of

general circulation designated by the municipality, the first of

which shall be not less than 20 days before the date set for the

hearing. Notice of the hearing shall be posted in at least 20

conspicuous and public places in the downtown district not less

than 20 days before the hearing. Notice shall also be mailed to all

property taxpayers of record in the downtown district not less than

20 days before the hearing. Beginning June 1, 2005, the notice of

hearing within the time frame described in this subsection shall be

mailed by certified mail to the <<governing body of each taxing

jurisdiction levying taxes that would be subject to capture if the

development plan or the tax increment financing plan is approved or

amended>>.

(2) Notice of the time and place of hearing on a development

plan shall contain: a description of the proposed development area

in relation to highways, streets, streams, or otherwise; a

statement that maps, plats, and a description of the development

plan, including the method of relocating families and individuals

who may be displaced from the area, are available for public

inspection at a place designated in the notice, and that all

aspects of the development plan will be open for discussion at the

public hearing; and other information that the governing body

~~deems~~ considers appropriate. At the time set for hearing, the

governing body shall provide an opportunity for interested persons

to be heard and shall receive and consider communications in

writing with reference ~~thereto~~ to the development plan. The

hearing shall provide the fullest opportunity for expression of

opinion, for argument on the merits, and for introduction of

documentary evidence pertinent to the development plan. The