OPEN SPACE DEV'T RIGHTS EASEMENT S.B. 472: COMMITTEE SUMMARY
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Senate Bill 472 (as introduced 6-15-11) (as passed by the Senate)
Sponsor: Senator John Moolenaar
Committee: Agriculture


Date Completed: 6-16-11

CONTENT The bill would amend Part 361 (Farmland and Open Space Preservation) of the Natural Resources and Environmental Protection Act (NREPA) to do all of the following:

-- Require the State land use agency to approve an application for an open space development rights easement for certain property that met particular criteria.
-- Require the agency to submit applications for open space development rights easements to the Agriculture and Rural Development Commission, rather than the Legislature, for approval or rejection.
-- Require the Legislature to reimburse local taxing authorities for revenue lost as a result of a tax exemption for development rights held by the State in an open space development rights easement.
-- Allow an owner of certain property to waive the tax exemption that otherwise would apply to an open space development rights easement; and specify that a land appraisal requirement would not apply in such a case.
-- Revise provisions regarding the appeal of a rejected application.
-- Require the State land use agency to approve an appealed application under certain circumstances.

The Act allows an owner of certain land to apply for a development rights easement, in which the owner relinquishes to the public, in perpetuity or for a term of years, the right to develop the land. The easement includes a covenant running with the land not to undertake development, subject to permitted uses.


Open Space Land


Approval of Application. Within 60 days after receiving an application for an open space development rights easement for certain land, the State land use agency must approve or reject an application. (This applies to land that is any of the following:

-- Any undeveloped site included in a national registry of historic places or designated as a historic site pursuant to State or Federal law.
-- Riverfront ownership subject to designation under Part 305 (Natural Rivers) of NREPA, under particular circumstances.
-- Undeveloped land designated as environmental areas under Part 323 (Shorelands Protection and Management) of NREPA, including unregulated portions of that land.)


Under the bill, the agency would have to approve the application if the land met all of the following requirements:

-- Was 15 acres or more in size.
-- Did not contain any residential, commercial, or industrial structures.
-- Was not operated as a commercial facility.


Commission Approval. For the land described above, the State land use agency must submit to the Legislature each application for an open space development rights easement and an analysis of its cost to the State. The application must be approved in both the Senate and the House of Representatives by a resolution concurred in by a majority of the members elected and serving. The amount of the cost must be returned to the local governing body if lost revenue was indicated.


Under the bill, instead, if the application were approved by the State land use agency, the agency would have to submit the application and an analysis of its costs to the Agriculture and Rural Development Commission. The Commission would have to approve or reject the application.


Legislative Reimbursement. Under Part 361, development rights held by the State, as expressed in an open space development rights easement, are exempt from ad valorem taxation. The bill would require the Legislature, by annual appropriation, to reimburse the local taxing authorities for revenue lost as a result of that exemption.


Land Subject to Local Approval


Waiver of Tax Exemption. If an owner of open space land, other than the land described above for which the State land use agency must approve or reject an application, desires an open space development rights easement, the owner may file an application with the local governing body. (This applies to areas approved by the local governing body, whose preservation in its present condition would conserve natural or scenic resources, including the conservation of soils, wetlands, and beaches; the enhancement of recreational opportunities; the preservation of historic sites; and idle potential farmland o not less than 40 acres that is substantially undeveloped and, because of its soil, terrain, and location, is capable of being devoted to agricultural uses.)


Under the bill, in the application, the owner could waive the exemption from ad valorem taxation that would otherwise apply if the open space development rights easement were approved.


Currently, the development rights held by the local governing body under an open space development rights easement are exempt from ad valorem taxation. Under the bill, that would apply unless the owner waived the exemption in the application. The bill would require the Legislature, by annual appropriation, to reimburse the local taxing authorities for revenue lost as a result of the application of the tax exemption.


Upon receiving an application, the local governing body must direct either the local assessing officer or an independent certified assessor to make an on-site appraisal of the land within 30 days. The approved application must contain a statement specifying the current fair market value of the land and the current fair market value of the development right, if any. Under the bill, these provisions would not apply if, in the application, the owner waived the tax exemption.


Appeal. If the local governing body rejects an application for an open space development rights easement, it must notify the applicant and all reviewing entities of the reasons for the rejection. Within 30 days after receiving the rejected application, the applicant may appeal the rejection to the State land use agency.


The agency has 60 days to approve or reject the application. It must submit each approved application to the Legislature along with an analysis of its cost. The application must be approved in both the Senate and house by a resolution concurred in by a majority of the members elected and serving. The amount of the cost must be returned to the local governing body where lost revenue is indicated. The bill would delete those provisions.


Under the bill, instead, if the owner waived the exemption from ad valorem taxation in the application, the State land use agency would have to reject or finally approve the application within 60 days after receiving an appeal. If the owner did not waive the tax exemption, the agency would have to reject the application or approve it and submit it to the Agriculture and Rural Development Commission within 60 days after receiving the appeal. The Commission would have to reject or finally approve the application.


The State Land Use Agency would have to approve an appealed application if the land met all of the following requirements:

-- Was 15 acres or more in size.
-- Did not contain any residential, commercial, or industrial structures.
-- Was not operated as a commercial facility.
-- Had significant importance to the public interest of more than local concern as a valuable land resource.


MCL 324.36105 & 324.36106 Legislative Analyst: Patrick Affholter

FISCAL IMPACT
The bill would reduce School Aid Fund revenue and increase both General Fund and School Aid Fund expenses by an unknown amount. The magnitude of any changes would depend upon the number of properties affected and their specific characteristics. However, because the bill would require local units to be reimbursed for revenue losses, the increased expenses would include not only new property that might change its status under the bill, but also property already covered by open space development rights easements. According to data from the Michigan Department of Agriculture and Rural Development, in 2005 approximately 35% of farmland in Michigan was enrolled under various provisions of the Farmland and Open Space Preservation Act.


While the bill would require the Legislature to appropriate funds to reimburse local units, the statute cannot compel an appropriation. Based on the history of appropriations for statutory revenue sharing and payment-in-lieu-of-taxes (PILT) payments, it is likely that local units would not be held completely harmless under the bill. As a result, the bill would potentially also reduce local unit revenue by an unknown amount.

Fiscal Analyst: David Zin

Analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent. sb472/1112