SENATE BILL No. 305

 

 

April 20, 2017, Introduced by Senators BRANDENBURG, ROBERTSON, JONES and MACGREGOR and referred to the Committee on Finance.

 

 

     A bill to amend 1980 PA 450, entitled

 

"The tax increment finance authority act,"

 

by amending sections 1 and 3 (MCL 125.1801 and 125.1803), as

 

amended by 2016 PA 505.

 

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.

 

Evidence of the intent to repay an advance is required and may

 

include, but is not limited to, an executed agreement to repay,

 

provisions contained in a tax increment financing plan approved

 

before the advance or before August 14, 1993, 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 211.155.

 

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

 

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

 

act, 1893 PA 206, MCL 211.27a.

 

     (c) "Authority" means a tax increment finance authority

 

created under this act.

 

     (d) "Authority district" means that area within which an

 

authority exercises its powers and within which 1 or more

 

development areas may exist.

 

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

 

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

 

by which the current assessed value of the development area,

 

including the assessed value of property for which specific local

 

taxes are paid in lieu of property taxes as determined in

 

subdivision (w), (x), 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 of a village, or the supervisor of a

 

township.

 

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

 

plan is applicable.

 

     (i) "Development area citizens council" or "council" means

 

that advisory body established pursuant to section 20.

 

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

 

requirements for a development set forth in section 16.


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

 

development plan.

 

     (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.

 

Eligible obligation also includes an ongoing management contract or

 

contract for professional services or development services that was

 

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

 

authority in 1991, and related similar written agreements executed

 

before 1984, if the 1991 agreement both provides for automatic

 

annual renewal and incorporates by reference the prior related

 

agreements; however, receipt by an authority of tax increment

 

revenues authorized under subdivision (aa)(ii) (bb)(ii) in order to

 

pay costs arising under those contracts shall be limited to:

 

     (i) For taxes levied before July 1, 2005, the amount permitted

 

to be received by an authority for an eligible obligation as

 

provided in this act.

 

     (ii) For taxes levied after June 30, 2005 and before July 1,

 

2006, $3,000,000.00.

 

     (iii) For taxes levied after June 30, 2006 and before July 1,

 

2007, $3,000,000.00.


     (iv) For taxes levied after June 30, 2007 and before July 1,

 

2008, $3,000,000.00.

 

     (v) For taxes levied after June 30, 2008 and before July 1,

 

2009, $3,000,000.00.

 

     (vi) For taxes levied after June 30, 2009 and before July 1,

 

2010, $3,000,000.00.

 

     (vii) For taxes levied after June 30, 2010 and before July 1,

 

2011, $2,650,000.00.

 

     (viii) For taxes levied after June 30, 2011 and before July 1,

 

2012, $2,400,000.00.

 

     (ix) For taxes levied after June 30, 2012 and before July 1,

 

2013, $2,125,000.00.

 

     (x) For taxes levied after June 30, 2013 and before July 1,

 

2014, $1,500,000.00.

 

     (xi) For taxes levied after June 30, 2014 and before July 1,

 

2015, $1,150,000.00.

 

     (xii) For taxes levied after June 30, 2015, $0.00.

 

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

 

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

 

having legislative powers.

 

     (p) "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 resolution 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

 

property that is exempt from taxation. The initial assessed value

 

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

 

tax shall be determined as provided in subdivision (w).(x).

 

     (q) "Library capture obligation" means a bond, note, or

 

similar instrument evidencing debt for borrowed money issued by the

 

authority before January 1, 2017, which pledges payment of the debt

 

by the authority from an identified source of revenue.

 

     (r) (q) "Municipality" means a city.

 

     (s) (r) "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) (s) "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 a municipality, or the 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) (t) "Other protected obligation" means:


     (i) A qualified refunding obligation issued to refund an

 

obligation described in subparagraph (ii) or (iii), 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 the municipality or authority

 

before March 1, 1994.

 

     (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 issued or incurred by an authority or by a

 

municipality on behalf of an authority to implement a project

 

described in a tax increment finance plan approved by the

 

municipality in accordance with this act before August 19, 1993,

 

that is located on land owned by a public university on the date

 

the tax increment financing plan is approved, and for which a

 

contract for final design is entered into before December 31, 1993.

 

     (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) An obligation issued or incurred by a municipality under

 

a contract executed on December 19, 1994 as subsequently amended

 

between the municipality and the authority to implement a project

 

described in a tax increment finance plan approved by the

 

municipality under this act before August 19, 1993 for which a

 

contract for final design was entered into by the municipality

 

before March 1, 1994 provided that final payment by the

 

municipality is made on or before December 31, 2001.

 

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

 

municipality on behalf of an authority that meets all of the

 

following qualifications:

 

     (A) The obligation is issued or incurred to finance a project

 

described in a tax increment financing plan approved before August

 

19, 1993 by a municipality in accordance with this act.

 

     (B) The obligation qualifies as an other protected obligation

 

under subparagraph (ii) and was issued or incurred by the authority

 

before December 31, 1994 for the purpose of financing the project.

 

     (C) A portion of the obligation issued or incurred by the

 

authority before December 31, 1994 for the purpose of financing the

 

project was retired prior to December 31, 1996.

 

     (D) The obligation does not exceed the dollar amount of the

 

portion of the obligation retired prior to December 31, 1996.


     (viii) An obligation incurred by an authority that meets both

 

of the following qualifications:

 

     (A) The obligation is a contract of lease originally executed

 

on December 20, 1994 between the municipality and the authority to

 

partially implement the authority's development plan and tax

 

increment financing plan.

 

     (B) The obligation qualifies as an obligation under

 

subparagraph (ii). The obligation described in this subparagraph

 

may be amended to extend cash rental payments for a period not to

 

exceed 30 years through the year 2039. The duration of the

 

development plan and tax increment financing plan described in this

 

subparagraph is extended to 1 year after the final date that the

 

extended cash rental payments are due.

 

     (v) (u) "Public facility" means 1 or more of the following:

 

     (i) A street, plaza, or pedestrian mall, and any improvements

 

to a street, plaza, boulevard, alley, or pedestrian mall, including

 

street furniture and beautification, park, parking facility,

 

recreation facility, playground, school, library, public

 

institution or administration building, right of way, right-of-way,

 

structure, waterway, bridge, lake, pond, canal, utility line or

 

pipeline, transit-oriented development, transit-oriented facility,

 

and other similar facilities and necessary easements of these

 

facilities designed and dedicated to use by the public generally or

 

used by a public agency. As used in this subparagraph, public

 

institution or administration building includes, but is not limited

 

to, a police station, fire station, court building, or other public

 

safety facility.


     (ii) The acquisition and disposal of real and personal

 

property or interests in real and personal property, demolition of

 

structures, site preparation, relocation costs, building

 

rehabilitation, and all associated administrative costs, including,

 

but not limited to, architect's, engineer's, legal, and accounting

 

fees as contained in the resolution establishing the district's

 

development plan.

 

     (iii) 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.

 

     (w) (v) "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 1 of the following

 

applies:

 

     (i) The refunding obligation meets both of the following:

 

     (A) 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.

 

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

 

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

 

distributions under section 12a 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) (bb)(ii)

 

and the distributions under section 12a to repay the obligation

 

being refunded, as calculated using a method approved by the

 

department of treasury.

 

     (ii) The refunding obligation is a tax increment refunding

 

bond issued to refund a refunding bond that is an other protected

 

obligation issued as a capital appreciation bond delivered to the

 

Michigan municipal bond authority on December 21, 1994, or bonds

 

issued to refund that bond, and the authority, by resolution of its

 

board, authorized issuance of the refunding obligation before

 

December 31, 2019 with a final maturity not later than 2039. The

 

municipality by majority vote of the members of its governing body

 

may pledge its full faith and credit for the payment of the

 

principal of and interest on the refunding obligation. A refunding

 

obligation issued under this subparagraph is not subject to the

 

requirements of section 305(2), (3), (5), or (6), 501, 503, or 611

 

of the revised municipal finance act, 2001 PA 34, MCL 141.2305,

 

141.2501, 141.2503, and 141.2611. The duration of the development

 

plan and the tax increment financing plan relating to the refunding

 

obligations described in this subparagraph is extended to 1 year

 

after the final date of maturity of the refunding obligation.

 

     (x) (w) "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.

 

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

 

October 1 of each year.

 

     (z) (y) "Tax increment district" or "district" means that area

 

to which the tax increment finance financing plan pertains.

 

     (aa) (z) "Tax increment financing plan" means that information

 

and those requirements set forth in sections 13 to 15.

 

     (bb) (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.

 

     (C) Ad valorem property taxes levied under 1 or more of the

 

following or specific local taxes attributable to those ad valorem

 

property taxes:

 

     (I) The zoological authorities act, 2008 PA 49, MCL 123.1161

 

to 123.1183.

 

     (II) The art institute authorities act, 2010 PA 296, MCL

 

123.1201 to 123.1229.

 

     (III) Except as otherwise provided in section 3(6), ad valorem

 

property taxes or specific local taxes attributable to those ad

 

valorem property taxes levied for a separate millage for public


library purposes approved by the electors after December 31, 2016.

 

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

 

included under subparagraph (ii), 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 which 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, bear 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).

 

     (cc) (bb) "Transit-oriented development" means infrastructure

 

improvements that are located within 1/2 mile of a transit station

 

or transit-oriented facility that promotes transit ridership or

 

passenger rail use as determined by the board and approved by the

 

municipality in which it is located.

 

     (dd) (cc) "Transit-oriented facility" means a facility that


houses a transit station in a manner that promotes transit

 

ridership or passenger rail use.

 

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

 

that it is in the best interests of the public to halt a decline in

 

property values, increase property tax valuation, eliminate the

 

causes of the decline in property values, and to promote growth in

 

an area in the municipality, the governing body of that

 

municipality may declare by resolution 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 resolution creating the authority and designating the

 

boundaries of the authority district. Notice of the public hearing

 

shall be published twice in a newspaper of general circulation in

 

the municipality, not less than 20 nor more than 40 days before the

 

date of the hearing. Notice shall also be mailed to the property

 

taxpayers of record in the proposed authority 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

 

authority is established and a tax increment financing plan is

 

approved. Failure to receive the notice shall not invalidate these

 

proceedings. The notice shall state the date, time, and place of

 

the hearing, and shall describe the boundaries of the proposed

 

authority district. At that hearing, a citizen, taxpayer, or

 

property owner of the municipality has the right to be heard in


regard to the establishment of the authority and the boundaries of

 

the proposed authority district. The governing body of the

 

municipality shall not incorporate land into the authority district

 

not included in the description contained in the notice of public

 

hearing, but it may eliminate described lands from the authority

 

district in the final determination of the boundaries.

 

     (3) After the public hearing, if the governing body intends to

 

proceed with the establishment of the authority, it shall adopt, by

 

majority vote of its members, a resolution establishing the

 

authority and designating the boundaries of the authority district

 

within which the authority shall exercise its powers. The adoption

 

of the resolution is subject to any applicable statutory or charter

 

provisions with respect to the approval or disapproval by the chief

 

executive or other officer of the municipality and the adoption of

 

a resolution over his or her veto. This resolution 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.

 

     (4) The governing body may alter or amend the boundaries of

 

the authority district to include or exclude lands from the

 

authority district in accordance with the same requirements

 

prescribed for adopting the resolution creating the authority.

 

     (5) The validity of the proceedings establishing an authority

 

shall be conclusive unless contested in a court of competent

 

jurisdiction within 60 days after the last of the following takes

 

place:

 

     (a) Publication of the resolution as adopted.


     (b) Filing of the resolution with the secretary of state.

 

     (6) If a separate millage for public library purposes was

 

levied in effect or approved by electors before January 1, 2017,

 

and all library capture obligations and other protected obligations

 

of the authority are paid, then the levy is exempt from capture

 

under this act, unless the library board or commission allows all

 

or a portion of its taxes levied to be included as tax increment

 

revenues and subject to capture under this act under the terms of a

 

written agreement between the library board or commission and the

 

authority. The written agreement shall be filed with the clerk of

 

the municipality. However, if a separate millage for public library

 

purposes was levied in effect or approved by electors before

 

January 1, 2017, and the authority alters or amends the boundaries

 

of the authority district, adopts a new development plan or finance

 

plan, or extends the duration of, or otherwise modifies or amends,

 

the existing development plan or finance plan, then the library

 

board or commission may, not later than 60 days after a public

 

hearing required for that action is held under this subsection,

 

act, exempt all or a portion of its taxes from capture by adopting

 

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

 

municipality that created the authority. For ad valorem property

 

taxes or specific local taxes attributable to those ad valorem

 

property taxes levied for a separate millage for public library

 

purposes approved by the electors after December 31, 2016, a

 

library board or commission may allow all or a portion of its taxes

 

levied to be included as tax increment revenues and subject to

 

capture under this act under the terms of a written agreement


between the library board or commission and the authority. The

 

written agreement shall be filed with the clerk of the

 

municipality. However, if the library was created under section 1

 

or 10a of 1877 PA 164, MCL 397.201 and 397.210a, or established

 

under 1869 LA 233, then any action of the library board or

 

commission under this subsection shall have the concurrence of the

 

chief executive officer of the city that created the library to be

 

effective.