OBSOLETE PROPERTY ABATEMENT                                                                   S.B. 308:

                                                                   ANALYSIS AS REPORTED FROM COMMITTEE











Senate Bill 308 (as reported without amendment)                        (as passed by the Senate)

Sponsor:  Senator Rick Jones

Committee:  Economic Development


Date Completed:  5-9-13




The Obsolete Property Rehabilitation Act provides for tax abatements for certain facilities undergoing rehabilitation that are located in an obsolete property rehabilitation district created by a qualified local governmental unit (sometimes called a "core community").  The local unit of government by resolution may approve an exemption certificate for the rehabilitation of blighted, functionally obsolete, and contaminated property, and then must forward the application and resolution to the State Tax Commission.  After the Commission approves an application, it must issue the applicant an obsolete property rehabilitation exemption certificate.  The legislative body of a qualified local unit may not approve an application, however, unless the applicant complies with certain criteria.  The criteria include a requirement that the rehabilitation of the facility not begin before the obsolete property rehabilitation district has been established.  Various exceptions have been made to this requirement, and another has been suggested.


In 2010, an organization wishing to rehabilitate a closed, blighted nursing home in Charlotte and reopen it as a residential care facility for dementia patients worked with the city to secure a tax-break under the Act.  The new owners of the facility later discovered that the Tax Commission had never received the application for the exemption certificate.  City officials admitted responsibility for the error and established a rehabilitation district in 2012, but the rehabilitation work had already been done.  It has been suggested that the Act be amended to accommodate this situation.




The bill would amend the Obsolete Property Rehabilitation Act to make an exception to the requirement that the rehabilitation of a facility not begin before the establishment of an obsolete property rehabilitation district.


Specifically, the bill would allow a qualified local unit's legislative body to approve an application for an exemption certificate if the rehabilitation began before the rehabilitation district was established if all of the following were met:


 --    The building permit for the rehabilitation of the facility was obtained in September 2010.

 --    The obsolete property rehabilitation district was created in October 2012.

 --    The rehabilitation of the facility included renovation of the entire interior building structure and mold removal.


The effective date of a certificate issued under this exception would be December 31, 2011.


MCL 125.2788




(Please note:  The arguments contained in this analysis originate from sources outside the Senate Fiscal Agency.  The Senate Fiscal Agency neither supports nor opposes legislation.)


Supporting Argument

In 2010, Sensations Memory Care bought a former nursing home in Charlotte with the intention to rehabilitate the property and open it as a residential facility for people suffering from dementia.  Since the facility

was blighted and in need of extensive mold removal, the company approached city officials about designating the property as a rehabilitation district so that the property would be eligible for a tax break under the Obsolete Property Rehabilitation Act.  City officials apparently were agreeable and the property owner submitted its application for an exemption certificate.  The rehabilitation project was begun in September 2010 and, following some delays in completing the project and securing a license to operate, the facility opened in 2012.  After the improvements were completed, the facility's owners received a tax bill that did not reflect an abatement under the Act.  City officials realized that they had made a mistake, and the application for the exemption certificate had not been processed.  The city then created the obsolete property rehabilitation district in October 2012, but that was more than two years after the rehabilitation project was begun, so the property does not qualify for the tax abatement. 


Previous amendments to the Act have made exceptions to the requirement that a district be designated before a rehabilitation project has begun, for other instances in which an error was made.  By enacting another exception to that requirement, the bill would correct an error that kept Sensations Memory Care from securing an expected tax benefit of rehabilitating blighted property.

Response:  A statutory amendment should not be required to correct this kind of honest mistake.  Rather than amend the Act every time a situation like this occurs, perhaps legislation should establish an administrative procedure to address such errors.


Legislative Analyst:  Patrick Affholter




The bill would reduce local property tax revenue by an unknown and likely negligible amount.  The actual amount of the reduction would depend upon the specific characteristics of the property affected by the bill, as well as the specific improvements made for any rehabilitated property.


Fiscal Analyst:  David Zin

This 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.