Bill Would Tax Residences For Local Business Improvements

Homeowners residing in municipal areas designated as “business improvement zones” or “principal shopping districts” could experience a jump in property taxes if a bill that recently passed the Michigan Senate becomes law.

Senate Bill 306, sponsored by Sen. Peter MacGregor, R-Rockford, would let local governments impose additional taxes on certain residential properties. The properties would be in zones the local governments designate as “business improvement” or “principal shopping” districts, and the money would be used to provide direct and indirect subsidies to businesses in the district. The 1961 law permitting these levies applies to business properties only, but MacGregor’s bill would extend them to residential properties.

“These Business Improvement Districts (BID) are self-help tools that local property owners can use, voluntarily, to implement management services above and beyond the local government’s baseline of services,” MacGregor said.

Examples of such services include graffiti removal, landscaping, cleaning, clearing snow and various public safety measures. They would be paid for by imposing extra taxes, or “special assessments” on each property owner. The taxes would be set, according to the legislation, “on the basis of the special benefits to that parcel,” under a presumption that a “project specially benefits all assessable property located within the district.”

No individuals or groups representing homeowners appear to have testified at Senate committee hearing on the bill last May. In contrast, governmental and certain business interests were well-represented. These included subsidy-promoting economic development organizations from Detroit and Grand Rapids. Also represented was the Michigan Economic Development Corporation, the agency in charge of the state’s many business subsidy programs.

Various local government interests also expressed their support, including the Michigan Municipal League, the Michigan Townships Association and the city of Grand Rapids. The Michigan Retailers Association was on board on behalf of local retail shops, the type of local business most likely to benefit from extending this tax to residential owners.

The bill’s backers argue that residential property owners in such districts should pay, too, because they also benefit from the spending the assessments support, which may generate higher property valuations.

MacGregor argues that residential property owners would also benefit from paying the assessments because doing so would entitle them to participate in the BID process, thereby providing “greater fairness and representation in assessment districts.”