Senate Introduced Bill B00914

SENATE BILL No. 914

December 9, 1999, Introduced by Senators SCHUETTE, YOUNG, SCHWARZ and

SIKKEMA and referred to the Committee on Economic Development, International

Trade and Regulatory Affairs.

A bill to provide for the establishment of obsolete property

rehabilitation districts in local governmental units; to provide

for the exemption from certain taxes; to levy and collect a spe-

cific tax upon the owners of certain facilities; to provide for

the disposition of the tax; to provide for the obtaining and

transferring of an exemption certificate and to prescribe the

contents of those certificates; to prescribe the powers and

duties of certain local government officials; and to provide

penalties.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1 Sec. 1. This act shall be known and may be cited as the

2 "obsolete property rehabilitation act".

3 Sec. 2. As used in this act:

4 (a) "Commercial property" means land improvements classified

5 by law for general ad valorem tax purposes as real property

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1 including real property assessable as personal property pursuant

2 to sections 8(d) and 14(6) of the general property tax act, 1893

3 PA 206, MCL 211.8 and 211.14, the primary purpose and use of

4 which is the operation of a commercial business enterprise.

5 Commercial property shall also include facilities related to a

6 commercial business enterprise under the same ownership, includ-

7 ing, but not limited to, office, engineering, research and devel-

8 opment, warehousing parts distribution, retail sales, and other

9 commercial activities. Commercial property may be owned or

10 leased, but only the owner of the commercial property is eligible

11 for an exemption certificate issued pursuant to section 6.

12 Commercial property does not include any of the following:

13 (i) Land.

14 (ii) Property of a public utility.

15 (iii) Inventory.

16 (b) "Commercial housing property" means that portion of real

17 property not occupied by an owner of that real property that is

18 classified as residential real property under section 34c of the

19 general property tax act, 1893 PA 206, MCL 211.34c, is a

20 multiple-unit dwelling, or is a dwelling unit in a

21 multiple-purpose structure, used for residential purposes.

22 Commercial housing property may be owned or leased, but only the

23 owner of the commercial housing property is eligible for an

24 exemption certificate issued pursuant to section 6.

25 (c) "Commission" means the state tax commission created by

26 1927 PA 360, MCL 209.101 to 209.107.

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1 (d) "Department" means the department of treasury.

2 (e) "Facility" means a building or group of contiguous

3 buildings built for commercial, commercial housing, or industrial

4 purposes.

5 (f) "Industrial property" means land improvements, build-

6 ings, structures, and other real property, the primary purpose

7 and use of which is the manufacture of goods or materials or the

8 processing of goods and materials by physical or chemical change,

9 or agricultural processing facilities. Industrial property

10 includes facilities related to a manufacturing operation under

11 the same ownership, including, but not limited to, office, engi-

12 neering, research and development, warehousing, parts distribu-

13 tion facilities, or research and development laboratories.

14 Industrial property shall not include any of the following:

15 (i) Land.

16 (ii) Property of a public utility.

17 (iii) Inventory.

18 (g) "Local governmental unit" means a city, village, or

19 township.

20 (h) "Obsolete properties tax" means the specific tax levied

21 under this act.

22 (i) "Obsolete property" means commercial property, indus-

23 trial property, or commercial housing property the condition of

24 which is significantly impaired due to changes in design, con-

25 struction, composition, technology, or other similar factors that

26 make the property less desirable and less valuable for continued

27 use.

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1 (j) "Obsolete property rehabilitation district" means an

2 area of a local governmental unit established as provided in sec-

3 tion 3. Only those properties within the district meeting the

4 definition of "obsolete property" are eligible for an exemption

5 certificate issued pursuant to section 6.

6 (k) "Obsolete property rehabilitation exemption certificate"

7 or "certificate" means the certificate issued pursuant to section

8 6.

9 (l) "Rehabilitation" means changes to obsolete property

10 other than replacement as may be required to restore or modify

11 the property, together with all appurtenances, to an economically

12 efficient condition. Rehabilitation shall include major renova-

13 tion and modification including, but not necessarily limited to,

14 the improvement of floor loads, correction of deficient or exces-

15 sive height, new or improved fixed building equipment, including

16 heating, ventilation, and lighting, reducing multistory facili-

17 ties to 1 or 2 stories, improved structural support including

18 foundations, improved roof structure and cover, floor replace-

19 ment, improved wall placement, improved exterior and interior

20 appearance of buildings, and other physical changes required to

21 restore or change the obsolete property to an economically effi-

22 cient condition. Rehabilitation shall not include improvements

23 aggregating less than 10% of the true cash value of the property

24 at commencement of the rehabilitation of the obsolete property.

25 (m) "Rehabilitated facility" means a commercial property,

26 industrial property, or commercial housing property that has

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1 undergone rehabilitation, including rehabilitation that changes

2 the intended use of the building.

3 (n) "Taxable value" means the value determined under section

4 27a of the general property tax act, 1893 PA 206, MCL 211.27a.

5 Sec. 3. (1) A local governmental unit, by resolution of its

6 legislative body, may establish 1 or more obsolete property reha-

7 bilitation districts that may consist of 1 or more parcels or

8 tracts of land or a portion of a parcel or tract of land, if at

9 the times the resolution is adopted, the property within the dis-

10 trict is either of the following:

11 (a) Obsolete commercial, commercial housing, or industrial

12 property in an area characterized by obsolete commercial, commer-

13 cial housing, or industrial property and a decline in commercial,

14 commercial housing, or industrial activity.

15 (b) Obsolete commercial or industrial facilities that were

16 owned by a local governmental unit on the effective date of this

17 act, and subsequently conveyed to a private owner and zoned for

18 commercial, commercial housing, or industrial activity.

19 (2) The legislative body of a local governmental unit may

20 establish an obsolete property rehabilitation district on its own

21 initiative or upon a written request filed by the owner or owners

22 of at least 50% of the taxable value of the property located

23 within a proposed obsolete property rehabilitation district. The

24 written request must be filed with the clerk of the local govern-

25 mental unit.

26 (3) Before adopting a resolution establishing an obsolete

27 property rehabilitation district, the legislative body shall give

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1 written notice by certified mail to the owners of all real

2 property within the proposed obsolete property rehabilitation

3 district and shall afford an opportunity for a hearing on the

4 establishment of the obsolete property rehabilitation district at

5 which any of those owners and any other resident or taxpayer of

6 the local governmental unit may appear and be heard. The legis-

7 lative body shall give public notice of the hearing not less than

8 10 days or more than 30 days before the date of the hearing.

9 (4) The legislative body of the local governmental unit, in

10 its resolution establishing an obsolete property rehabilitation

11 district, shall set forth a finding and determination that the

12 district meets the requirements set forth in subsection (1).

13 (5) An obsolete property rehabilitation district established

14 by a township shall be applicable only within the unincorporated

15 territory of the township and shall not be applicable within a

16 village located in that township.

17 Sec. 4. (1) After the establishment of an obsolete property

18 rehabilitation district, the owner or lessee of obsolete property

19 may file an application for an obsolete property rehabilitation

20 exemption certificate with the clerk of the local governmental

21 unit that established the obsolete property rehabilitation

22 district. The application shall be filed in the manner and form

23 prescribed by the commission. The application shall contain or

24 be accompanied by a general description of the obsolete facility

25 and a general description of the proposed use of the facility,

26 the general nature and extent of the rehabilitation to be

27 undertaken, a descriptive list of the fixed building equipment

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1 that will be a part of the rehabilitated facility, a time

2 schedule for undertaking and completing the rehabilitation of the

3 facility, a statement of the economic advantages expected from

4 the exemption, including the number of jobs to be retained or

5 created as a result of completing the facility, including

6 expected construction employment, and information relating to the

7 requirements in section 8.

8 (2) Upon receipt of an application for an obsolete property

9 rehabilitation exemption certificate, the clerk of the local gov-

10 ernmental unit shall notify in writing the assessor of the

11 assessing unit in which the obsolete facility is located, and the

12 legislative body of each taxing unit that levies ad valorem prop-

13 erty taxes in the local governmental unit in which the obsolete

14 facility is located. Before acting upon the application, the

15 legislative body of the local governmental unit shall hold a

16 public hearing on the application and give public notice to the

17 applicant, the assessor, a representative of the affected taxing

18 jurisdictions, and the general public. The hearing on the appli-

19 cation shall be held separately from the hearing on the estab-

20 lishment of the obsolete property rehabilitation district.

21 (3) Upon receipt of an application for an obsolete property

22 rehabilitation exemption certificate for a facility located on

23 property that was owned by a local governmental unit on the

24 effective date of this act, and subsequently conveyed to a pri-

25 vate owner, the clerk of the local governmental unit, in addition

26 to the other requirements of this section, shall request the

27 assessor of the assessing unit in which the facility is located

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1 to determine the taxable value of the property. This

2 determination shall be made prior to the hearing on the applica-

3 tion for an obsolete property rehabilitation exemption certifi-

4 cate held pursuant to subsection (2).

5 Sec. 5. The legislative body of the local governmental

6 unit, not more than 60 days after receipt of the application by

7 the clerk, shall by resolution either approve or disapprove the

8 application for an obsolete property rehabilitation exemption

9 certificate in accordance with section 8 and the other provisions

10 of this act. The clerk shall retain the original of the applica-

11 tion and resolution. If disapproved, the reasons shall be set

12 forth in writing in the resolution, and the clerk shall send, by

13 certified mail, a copy of the resolution to the applicant and to

14 the assessor.

15 Sec. 6. (1) Following approval of the application by the

16 legislative body of the local governmental unit, the clerk of the

17 local governmental unit shall issue to the applicant an obsolete

18 property rehabilitation exemption certificate in the form the

19 commission determines, which shall contain all of the following:

20 (a) A legal description of the real property on which the

21 obsolete facility is located.

22 (b) A statement that unless revoked as provided in this act

23 the certificate shall remain in force for the period stated in

24 the certificate.

25 (c) A statement of the taxable value of the obsolete proper-

26 ty, separately stated for real and personal property, for the tax

27 year immediately preceding the effective date of the certificate

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1 after deducting the taxable value of the land and personal

2 property other than personal property assessed pursuant to sec-

3 tion 14(6) of the general property tax act, 1893 PA 206, MCL

4 211.14.

5 (d) A statement of the period of time authorized by the leg-

6 islative body within which the rehabilitation must be completed.

7 (e) If the period of time authorized by the legislative body

8 pursuant to subdivision (d) is less than 12 years, the exemption

9 certificate must contain the factors, criteria, and objectives,

10 as determined by the resolution of the local governmental unit,

11 necessary for extending the period of time, if any.

12 (2) The effective date of the certificate is the December 31

13 immediately following the date of issuance of the certificate.

14 (3) The clerk of the local governmental unit shall file with

15 the commission a copy of the obsolete property rehabilitation

16 exemption certificate, and the commission shall maintain a record

17 of all certificates filed. The clerk of the local governmental

18 unit shall also send, by certified mail, a copy of the obsolete

19 property rehabilitation exemption certificate to the applicant

20 and the assessor.

21 Sec. 7. (1) A facility for which an obsolete property reha-

22 bilitation exemption certificate is in effect, but not the land

23 on which the facility is located, or personal property other than

24 personal property assessed pursuant to section 14(6) of the gen-

25 eral property tax act, 1893 PA 206, MCL 211.14, for the period on

26 and after the effective date of the certificate and continuing so

27 long as the obsolete property rehabilitation exemption

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1 certificate is in force, is exempt from ad valorem property taxes

2 collected under the general property tax act, 1893 PA 206, MCL

3 211.1 to 211.157.

4 (2) Unless earlier revoked as provided in section 12, an

5 obsolete property rehabilitation exemption certificate shall

6 remain in force and effect for a period to be determined by the

7 legislative body of the local governmental unit. The certificate

8 may be issued for a period of at least 1 year, but not to exceed

9 12 years. If the number of years determined is less than 12, the

10 certificate may be subject to review by the legislative body of

11 the local governmental unit and the certificate may be extended.

12 The total amount of time determined for the certificate including

13 any extensions shall not exceed 12 years after the completion of

14 the rehabilitated facility. The certificate shall commence with

15 its effective date and end on the December 31 immediately follow-

16 ing the last day of the number of years determined. The date of

17 issuance of a certificate of occupancy, if required by appropri-

18 ate authority, shall be the date of completion of the rehabili-

19 tated facility.

20 (3) If the number of years determined by the legislative

21 body of the local governmental unit for the period a certificate

22 remains in force is less than 12 years, the review of the certif-

23 icate for the purpose of determining an extension shall be based

24 upon factors, criteria, and objectives that shall be placed in

25 writing, determined and approved at the time the certificate is

26 approved by resolution of the legislative body of the local

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1 governmental unit and sent, by certified mail, to the applicant,

2 the assessor, and the commission.

3 Sec. 8. (1) If the taxable value of the property proposed

4 to be exempt pursuant to an application under consideration, con-

5 sidered together with the aggregate taxable value of property

6 exempt under certificates previously granted and currently in

7 force under this act or under 1974 PA 198, MCL 207.551 to

8 207.572, exceeds 5% of the taxable value of the local governmen-

9 tal unit, the legislative body of the local governmental unit

10 shall make a separate finding and shall include a statement in

11 its resolution approving the application that exceeding that

12 amount shall not have the effect of substantially impeding the

13 operation of the local governmental unit or impairing the finan-

14 cial soundness of an affected taxing unit.

15 (2) The legislative body of the local governmental unit

16 shall not approve an application for an obsolete property exemp-

17 tion certificate unless the applicant complies with all of the

18 following requirements:

19 (a) The commencement of the rehabilitation of the facility

20 does not occur before the establishment of the obsolete property

21 rehabilitation district.

22 (b) The application relates to a rehabilitation program that

23 when completed constitutes a rehabilitated facility within the

24 meaning of this act and that shall be situated within an obsolete

25 property rehabilitation district established in a local govern-

26 mental unit eligible under this act to establish such a

27 district.

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1 (c) Completion of the rehabilitated facility is calculated

2 to, and will at the time of issuance of the certificate have the

3 reasonable likelihood to, increase commercial activity, create

4 employment, retain employment, prevent a loss of employment, or

5 increase the number of residents in the community in which the

6 facility is situated.

7 (d) The applicant states, in writing, that the rehabilita-

8 tion of the facility would not be undertaken without the

9 applicant's receipt of the exemption certificate.

10 (e) The applicant is not delinquent in the payment of all

11 taxes related to the facility.

12 Sec. 9. The assessor of each city, township, or village in

13 which there is a rehabilitated facility with respect to which 1

14 or more obsolete property rehabilitation exemption certificates

15 have been issued and are in force shall determine annually as of

16 December 31 the value and taxable value, both for real and per-

17 sonal property, of each rehabilitated facility separately, having

18 the benefit of a certificate and upon receipt of notice of the

19 filing of an application for the issuance of a certificate, shall

20 determine and furnish to the local legislative body the value and

21 the taxable value of the property to which the application per-

22 tains and other information as may be necessary to permit the

23 local legislative body to make the determinations required by

24 section 8(2).

25 Sec. 10. (1) There is levied upon every owner of a rehabil-

26 itated facility to which an obsolete property rehabilitation

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1 exemption certificate is issued a specific tax to be known as the

2 obsolete properties tax.

3 (2) The amount of the obsolete properties tax, in each year,

4 shall be determined by multiplying the total mills levied as ad

5 valorem taxes for that year by all taxing units within which the

6 facility is located by the taxable value of the real and personal

7 property of the obsolete property for the tax year immediately

8 preceding the effective date of the obsolete property rehabilita-

9 tion exemption certificate after deducting the taxable valuation

10 of the land and of personal property other than personal property

11 assessed pursuant to section 14(6) of the general property tax

12 act, 1893 PA 206, MCL 211.14.

13 (3) The obsolete properties tax shall be collected, dis-

14 bursed, and assessed in accordance with this act.

15 (4) The obsolete properties tax is an annual tax, payable at

16 the same times, in the same installments, and to the same officer

17 or officers as taxes imposed under the general property tax act,

18 1893 PA 206, MCL 211.1 to 211.157, are payable. Except as other-

19 wise provided in this section, the officer or officers shall dis-

20 burse the obsolete properties tax payments received by the offi-

21 cer or officers each year to and among the state, cities, town-

22 ships, villages, school districts, counties, and authorities, at

23 the same times and in the same proportions as required by law for

24 the disbursement of taxes collected under the general property

25 tax act, 1893 PA 206, MCL 211.1 to 211.157.

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1 (5) The officer or officers shall send a copy of the amount

2 of disbursement made to each unit under this section to the

3 commission on a form provided by the commission.

4 (6) A rehabilitated facility located in a renaissance zone

5 under the Michigan renaissance zone act, 1996 PA 376, MCL

6 125.2681 to 125.2696, is exempt from the obsolete properties tax

7 levied under this act to the extent and for the duration provided

8 pursuant to the Michigan renaissance zone act, 1996 PA 376, MCL

9 125.2681 to 125.2696, except for that portion of the obsolete

10 properties tax attributable to a special assessment or a tax

11 described in section 7ff(2) of the general property tax act, 1893

12 PA 206, MCL 211.7ff. The obsolete properties tax calculated

13 under this subsection shall be disbursed proportionately to the

14 taxing unit or units that levied the special assessment or the

15 tax described in section 7ff(2) of the general property tax act,

16 1893 PA 206, MCL 211.7ff.

17 Sec. 11. The amount of the tax applicable to real property,

18 until paid, shall be a lien upon the real property to which the

19 certificate is applicable. Proceedings upon the lien as provided

20 by law for the foreclosure in the circuit court of mortgage liens

21 upon real property may commence only upon the filing by the

22 appropriate collecting officer of a certificate of nonpayment of

23 the obsolete properties tax applicable to real property, together

24 with an affidavit of proof of service of the certificate of non-

25 payment upon the owner of the facility by certified mail, with

26 the register of deeds of the county in which the property is

27 situated.

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1 Sec. 12. The legislative body of the local governmental

2 unit may, by resolution, revoke the obsolete property rehabilita-

3 tion exemption certificate of a facility if it finds that the

4 completion of rehabilitation of the facility has not occurred

5 within the time authorized by the legislative body in the exemp-

6 tion certificate or a duly authorized extension of that time, or

7 that the holder of the obsolete property exemption certificate

8 has not proceeded in good faith with the operation of the facil-

9 ity in a manner consistent with the purposes of this act and in

10 the absence of circumstances that are beyond the control of the

11 holder of the exemption certificate.

12 Sec. 13. An obsolete property rehabilitation exemption cer-

13 tificate may be transferred and assigned by the holder of the

14 certificate to a new owner of the facility if the local govern-

15 mental unit approves the transfer after application by the new

16 owner.

17 Sec. 14. Not later than October 15 each year, each local

18 governmental unit granting an obsolete property rehabilitation

19 exemption shall report to the commission on the status of each

20 exemption. The report must include the current value of the

21 property to which the exemption pertains, the value on which the

22 obsolete property rehabilitation tax is based, a current estimate

23 of the number of jobs retained or created by the exemption, and a

24 current estimate of the number of new residents occupying commer-

25 cial housing property units covered by the exemption.

26 Sec. 15. (1) The department annually shall prepare and

27 submit to the committees of the house of representatives and

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1 senate responsible for tax policy and economic development issues

2 a report on the utilization of obsolete property rehabilitation

3 districts, based on the information filed with the commission.

4 (2) After this act has been in effect for 3 years, the

5 department shall prepare and submit to the committees of the

6 house of representatives and senate responsible for tax policy

7 and economic development issues an economic analysis of the costs

8 and benefits of this act in the 3 local governmental units in

9 which it has been most heavily utilized.

10 Sec. 16. A new exemption shall not be granted under this

11 act after December 31, 2015, but an exemption then in effect

12 shall continue until the expiration of the exemption

13 certificate.

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