HOUSE BILL No. 6431 September 24, 2002, Introduced by Rep. Dennis and referred to the Committee on Commerce. A bill to amend 1986 PA 281, entitled "The local development financing act," by amending section 2 (MCL 125.2152), as amended by 2000 PA 248. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 2. (1) As used in this act: 2 (a) "Advance" means a transfer of funds made by a municipal- 3 ity to an authority or to another person on behalf of the author- 4 ity in anticipation of repayment by the authority. Evidence of 5 the intent to repay an advance may include, but is not limited 6 to, an executed agreement to repay, provisions contained in a tax 7 increment financing plan approved prior to the advance, or a res- 8 olution of the authority or the municipality. 9 (b) "Assessed value" means 1 of the following: 06716'02 JLB 2 1 (i) For valuations made before January 1, 1995, the state 2 equalized valuation as determined under the general property tax 3 act, 1893 PA 206, MCL 211.1 to 211.157. 4 (ii) For valuations made after December 31, 1994, the tax- 5 able value as determined under section 27a of the general prop- 6 erty tax act, 1893 PA 206, MCL 211.27a. 7 (c) "Authority" means a local development finance authority 8 created pursuant to this act. 9 (d) "Authority district" means an area or areas within which 10 an authority exercises its powers. 11 (e) "Board" means the governing body of an authority. 12 (f) "Business development area" means an area designated as 13 a certified industrial park under this actprior to the effec-14tive date of the amendatory act that added this subdivision15 BEFORE JUNE 29, 2000, or an area designated in the tax increment 16 financing plan that meets all of the following requirements: 17 (i) The area is zoned to allow its use for eligible 18 property. 19 (ii) The area has a site plan or plat approved by the city, 20 village, or township in which the area is located. 21 (g) "Business incubator" means real and personal property 22 that meets all of the following requirements: 23 (i) Is located in a certified technology park. 24 (ii) Is subject to an agreement under section 12a. 25 (iii) Is developed for the primary purpose of attracting 1 26 or more owners or tenants who will engage in activities that 06716'02 3 1 would each separately qualify the property as eligible property 2 under subdivision (p)(iii). 3 (h) "Captured assessed value" means the amount in any 1 year 4 by which the current assessed value of the eligible property 5 identified in the tax increment financing plan or, for a certi- 6 fied technology park, the real and personal property included in 7 the tax increment financing plan, including the current assessed 8 value of property for which specific local taxes are paid in lieu 9 of property taxes as determined pursuant to subdivision (bb), 10 exceeds the initial assessed value. The state tax commission 11 shall prescribe the method for calculating captured assessed 12 value. 13 (i) "Certified business park" means a business development 14 area that has been designated by the Michigan economic develop- 15 ment corporation as meeting criteria established by the Michigan 16 economic development corporation. The criteria shall establish 17 standards for business development areas including, but not 18 limited to, use, types of building materials, landscaping, set- 19 backs, parking, storage areas, and management. 20 (j) "Certified technology park" means that portion of the 21 authority district designated by a written agreement entered into 22 pursuant to section 12a between the authority, the municipality, 23 and the Michigan economic development corporation. 24 (k) "Chief executive officer" means the mayor or city man- 25 ager of a city, the president of a village, or, for other local 26 units of government or school districts, the person charged by 06716'02 4 1 law with the supervision of the functions of the local unit of 2 government or school district. 3 (l) "Development plan" means that information and those 4 requirements for a development set forth in section 15. 5 (m) "Development program" means the implementation of a 6 development plan. 7 (n) "Eligible advance" means an advance made before 8 August 19, 1993. 9 (o) "Eligible obligation" means an obligation issued or 10 incurred by an authority or by a municipality on behalf of an 11 authority before August 19, 1993 and its subsequent refunding by 12 a qualified refunding obligation. Eligible obligation includes 13 an authority's written agreement entered into before August 19, 14 1993 to pay an obligation issued after August 18, 1993 and before 15 December 31, 1996 by another entity on behalf of the authority. 16 (p) "Eligible property", EXCEPT AS OTHERWISE PROVIDED IN 17 SUBSECTION (2), means land improvements, buildings, structures, 18 and other real property, and machinery, equipment, furniture, and 19 fixtures, or any part or accessory thereof whether completed or 20 in the process of construction comprising an integrated whole, 21 located within an authority district, of which the primary pur- 22 pose and use is or will be 1 of the following: 23 (i) The manufacture of goods or materials or the processing 24 of goods or materials by physical or chemical change. 25 (ii) Agricultural processing. 26 (iii) A high technology activity. 06716'02 5 1 (iv) The production of energy by the processing of goods or 2 materials by physical or chemical change by a small power 3 production facility as defined by the federal energy regulatory 4 commission pursuant to the public utility regulatory policies act 5 of 1978, Public Law 95-617, 92 Stat. 3117, which facility is 6 fueled primarily by biomass or wood waste. This act does not 7 affect a person's rights or liabilities under law with respect to 8 groundwater contamination described in this subparagraph. This 9 subparagraph applies only if all of the following requirements 10 are met: 11 (A) Tax increment revenues captured from the eligible prop- 12 erty will be used to finance, or will be pledged for debt service 13 on tax increment bonds used to finance, a public facility in or 14 near the authority district designed to reduce, eliminate, or 15 prevent the spread of identified soil and groundwater contamina- 16 tion, pursuant to law. 17 (B) The board of the authority exercising powers within the 18 authority district where the eligible property is located adopted 19 an initial tax increment financing plan between January 1, 1991 20 and May 1, 1991. 21 (C) The municipality that created the authority establishes 22 a special assessment district whereby not less than 50% of the 23 operating expenses of the public facility described in this sub- 24 paragraph will be paid for by special assessments. Not less than 25 50% of the amount specially assessed against all parcels in the 26 special assessment district shall be assessed against parcels 06716'02 6 1 owned by parties potentially responsible for the identified 2 groundwater contamination pursuant to law. 3 (v) A business incubator. 4 (q) "Fiscal year" means the fiscal year of the authority. 5 (r) "Governing body" means the elected body having legisla- 6 tive powers of a municipality creating an authority under this 7 act. 8 (s) "High technology activity" means that term as defined in 9 section 3 of the Michigan economic growth authority act, 1995 PA 10 24, MCL 207.803. 11 (t) "Initial assessed value" means the assessed value of the 12 eligible property identified in the tax increment financing plan 13 or, for a certified technology park, the assessed value of any 14 real and personal property included in the tax increment financ- 15 ing plan, at the time the resolution establishing the tax incre- 16 ment financing plan is approved as shown by the most recent 17 assessment roll for which equalization has been completed at the 18 time the resolution is adopted or, for property that becomes eli- 19 gible property in other than a certified technology park after 20 the date the plan is approved, at the time the property becomes 21 eligible property. Property exempt from taxation at the time of 22 the determination of the initial assessed value shall be included 23 as zero. Property for which a specific local tax is paid in lieu 24 of property tax shall not be considered exempt from taxation. 25 The initial assessed value of property for which a specific local 26 tax was paid in lieu of property tax shall be determined as 27 provided in subdivision (bb). 06716'02 7 1 (u) "Michigan economic development corporation" means the 2 public body corporate created under section 28 of article VII of 3 the state constitution of 1963 and the urban cooperation act of 4 1967, 1967 (Ex Sess) PA 7, MCL 124.501 to 124.512, by a contrac- 5 tual interlocal agreement effective April 5, 1999 between local 6 participating economic development corporations formed under the 7 economic development corporations act, 1974 PA 338, MCL 125.1601 8 to 125.1636, and the Michigan strategic fund. If the Michigan 9 economic development corporation is unable for any reason to per- 10 form its duties under this act, those duties may be exercised by 11 the Michigan strategic fund. 12 (v) "Michigan strategic fund" means the Michigan strategic 13 fund as described in the Michigan strategic fund act, 1984 PA 14 270, MCL 125.2001 to 125.2093. 15 (w) "Municipality" means a city, village, or urban 16 township. 17 (x) "Obligation" means a written promise to pay, whether 18 evidenced by a contract, agreement, lease, sublease, bond, or 19 note, or a requirement to pay imposed by law. An obligation does 20 not include a payment required solely because of default upon an 21 obligation, employee salaries, or consideration paid for the use 22 of municipal offices. An obligation does not include those bonds 23 that have been economically defeased by refunding bonds issued 24 under this act. Obligation includes, but is not limited to, the 25 following: 06716'02 8 1 (i) A requirement to pay proceeds derived from ad valorem 2 property taxes or taxes levied in lieu of ad valorem property 3 taxes. 4 (ii) A management contract or a contract for professional 5 services. 6 (iii) A payment required on a contract, agreement, bond, or 7 note if the requirement to make or assume the payment arose 8 before August 19, 1993. 9 (iv) A requirement to pay or reimburse a person for the cost 10 of insurance for, or to maintain, property subject to a lease, 11 land contract, purchase agreement, or other agreement. 12 (v) A letter of credit, paying agent, transfer agent, bond 13 registrar, or trustee fee associated with a contract, agreement, 14 bond, or note. 15 (y) "On behalf of an authority", in relation to an eligible 16 advance made by a municipality or an eligible obligation or other 17 protected obligation issued or incurred by a municipality, means 18 in anticipation that an authority would transfer tax increment 19 revenues or reimburse the municipality from tax increment reve- 20 nues in an amount sufficient to fully make payment required by 21 the eligible advance made by a municipality, or eligible obliga- 22 tion or other protected obligation issued or incurred by the 23 municipality, if the anticipation of the transfer or receipt of 24 tax increment revenues from the authority is pursuant to or evi- 25 denced by 1 or more of the following: 26 (i) A reimbursement agreement between the municipality and 27 an authority it established. 06716'02 9 1 (ii) A requirement imposed by law that the authority 2 transfer tax increment revenues to the municipality. 3 (iii) A resolution of the authority agreeing to make pay- 4 ments to the incorporating unit. 5 (iv) Provisions in a tax increment financing plan describing 6 the project for which the obligation was incurred. 7 (z) "Other protected obligation" means: 8 (i) A qualified refunding obligation issued to refund an 9 obligation described in subparagraph (ii) or (iii), an obligation 10 that is not a qualified refunding obligation that is issued to 11 refund an eligible obligation, or a qualified refunding obliga- 12 tion issued to refund an obligation described in this 13 subparagraph. 14 (ii) An obligation issued or incurred by an authority or by 15 a municipality on behalf of an authority after August 19, 1993, 16 but before December 31, 1994, to finance a project described in a 17 tax increment finance plan approved by the municipality in 18 accordance with this act before August 19, 1993, for which a con- 19 tract for final design is entered into by the municipality or 20 authority before March 1, 1994. 21 (iii) An obligation incurred by an authority or municipality 22 after August 19, 1993, to reimburse a party to a development 23 agreement entered into by a municipality or authority before 24 August 19, 1993, for a project described in a tax increment 25 financing plan approved in accordance with this act before 26 August 19, 1993, and undertaken and installed by that party in 27 accordance with the development agreement. 06716'02 10 1 (iv) An ongoing management or professional services contract 2 with the governing body of a county that was entered into before 3 March 1, 1994 and that was preceded by a series of limited term 4 management or professional services contracts with the governing 5 body of the county, the last of which was entered into before 6 August 19, 1993. 7 (aa) "Public facility" means 1 or more of the following: 8 (i) A street, road, bridge, storm water or sanitary sewer, 9 sewage treatment facility, facility designed to reduce, elimi- 10 nate, or prevent the spread of identified soil or groundwater 11 contamination, drainage system, retention basin, pretreatment 12 facility, waterway, waterline, water storage facility, rail line, 13 electric, gas, telephone or other communications, or any other 14 type of utility line or pipeline, or other similar or related 15 structure or improvement, together with necessary easements for 16 the structure or improvement. Except for rail lines, utility 17 lines, or pipelines, the structures or improvements described in 18 this subparagraph shall be either owned or used by a public 19 agency, functionally connected to similar or supporting facili- 20 ties owned or used by a public agency, or designed and dedicated 21 to use by, for the benefit of, or for the protection of the 22 health, welfare, or safety of the public generally, whether or 23 not used by a single business entity. Any road, street, or 24 bridge shall be continuously open to public access. A public 25 facility shall be located on public property or in a public, 26 utility, or transportation easement or right-of-way. 06716'02 11 1 (ii) The acquisition and disposal of land that is proposed 2 or intended to be used in the development of eligible property or 3 an interest in that land, demolition of structures, site prepara- 4 tion, and relocation costs. 5 (iii) All administrative and real and personal property 6 acquisition and disposal costs related to a public facility 7 described in subparagraphs (i) and (iv), including, but not 8 limited to, architect's, engineer's, legal, and accounting fees 9 as permitted by the district's development plan. 10 (iv) An improvement to a facility used by the public or a 11 public facility as those terms are defined in section 1 of 1966 12 PA 1, MCL 125.1351, which improvement is made to comply with the 13 barrier free design requirements of the state construction code 14 promulgated under the STILLE-DEROSSETT-HALE SINGLE STATE CON- 15 STRUCTION CODE ACT,of 1972,1972 PA 230, MCL 125.1501 to 16 125.1531. 17 (v) All of the following costs approved by the Michigan eco- 18 nomic development corporation: 19 (A) Operational costs and the costs related to the acquisi- 20 tion, improvement, preparation, demolition, disposal, construc- 21 tion, reconstruction, remediation, rehabilitation, restoration, 22 preservation, maintenance, repair, furnishing, and equipping of 23 land and other assets that are or may become eligible for depre- 24 ciation under the internal revenue code of 1986 for a business 25 incubator located in a certified technology park. 26 (B) Costs related to the acquisition, improvement, 27 preparation, demolition, disposal, construction, reconstruction, 06716'02 12 1 remediation, rehabilitation, restoration, preservation, 2 maintenance, repair, furnishing, and equipping of land and other 3 assets that, if privately owned, would be eligible for deprecia- 4 tion under the internal revenue code of 1986 for laboratory 5 facilities, research and development facilities, conference 6 facilities, teleconference facilities, testing, training facili- 7 ties, and quality control facilities that are or that support 8 eligible property under subdivision (p)(iii), that are owned by a 9 public entity, and that are located within a certified technology 10 park. 11 (vi) Operating and planning costs included in a plan pursu- 12 ant to section 12(1)(f), including costs of marketing property 13 within the district and attracting development of eligible prop- 14 erty within the district. 15 (bb) "Qualified refunding obligation" means an obligation 16 issued or incurred by an authority or by a municipality on behalf 17 of an authority to refund an obligation if the refunding obliga- 18 tion meets both of the following: 19 (i) The net present value of the principal and interest to 20 be paid on the refunding obligation, including the cost of issu- 21 ance, will be less than the net present value of the principal 22 and interest to be paid on the obligation being refunded, as cal- 23 culated using a method approved by the department of treasury. 24 (ii) The net present value of the sum of the tax increment 25 revenues described in subdivision (ee)(ii) and the distributions 26 under section 11a to repay the refunding obligation will not be 27 greater than the net present value of the sum of the tax 06716'02 13 1 increment revenues described in subdivision (ee)(ii) and the 2 distributions under section 11a to repay the obligation being 3 refunded, as calculated using a method approved by the department 4 of treasury. 5 (cc) "Specific local taxes" means a tax levied under 1974 PA 6 198, MCL 207.551 to 207.572, the obsolete property rehabilitation 7 act, 2000 PA 146, MCL 125.2781 TO 125.2797, the commercial rede- 8 velopment act, 1978 PA 255, MCL 207.651 to 207.668, the enter- 9 prise zone act, 1985 PA 224, MCL 125.2101 to 125.2123, 1953 PA 10 189, MCL 211.181 to 211.182, and the technology park development 11 act, 1984 PA 385, MCL 207.701 to 207.718. The initial assessed 12 value or current assessed value of property subject to a specific 13 local tax is the quotient of the specific local tax paid divided 14 by the ad valorem millage rate. However, after 1993, the state 15 tax commission shall prescribe the method for calculating the 16 initial assessed value and current assessed value of property for 17 which a specific local tax was paid in lieu of a property tax. 18 (dd) "State fiscal year" means the annual period commencing 19 October 1 of each year. 20 (ee) "Tax increment revenues" means the amount of ad valorem 21 property taxes and specific local taxes attributable to the 22 application of the levy of all taxing jurisdictions upon the cap- 23 tured assessed value of eligible property within the district or, 24 for purposes of a certified technology park, real or personal 25 property that is located within the certified technology park and 26 included within the tax increment financing plan, subject to the 27 following requirements: 06716'02 14 1 (i) Tax increment revenues include ad valorem property taxes 2 and specific local taxes attributable to the application of the 3 levy of all taxing jurisdictions, other than the state pursuant 4 to the state education tax act, 1993 PA 331, MCL 211.901 to 5 211.906, and local or intermediate school districts, upon the 6 captured assessed value of real and personal property in the 7 development area for any purpose authorized by this act. 8 (ii) Tax increment revenues include ad valorem property 9 taxes and specific local taxes attributable to the application of 10 the levy of the state pursuant to the state education tax act, 11 1993 PA 331, MCL 211.901 to 211.906, and local or intermediate 12 school districts upon the captured assessed value of real and 13 personal property in the development area in an amount equal to 14 the amount necessary, without regard to subparagraph (i), for the 15 following purposes: 16 (A) To repay eligible advances, eligible obligations, and 17 other protected obligations. 18 (B) To fund or to repay an advance or obligation issued by 19 or on behalf of an authority to fund the cost of public facili- 20 ties related to or for the benefit of eligible property located 21 within a certified technology park to the extent the public 22 facilities have been included in an agreement under section 23 12a(3), not to exceed 50%, as determined by the state treasurer, 24 of the amounts levied by the state pursuant to the state educa- 25 tion tax act, 1993 PA 331, MCL 211.901 to 211.906, and local and 26 intermediate school districts for a period not to exceed 15 27 years, as determined by the state treasurer, if the state 06716'02 15 1 treasurer determines that the capture under this subparagraph is 2 necessary to reduce unemployment, promote economic growth, and 3 increase capital investment in the municipality. 4 (iii) Tax increment revenues do not include any of the 5 following: 6 (A) Ad valorem property taxes or specific local taxes that 7 are excluded from and not made part of the tax increment financ- 8 ing plan. 9 (B) Ad valorem property taxes and specific local taxes 10 attributable to ad valorem property taxes excluded by the tax 11 increment financing plan of the authority from the determination 12 of the amount of tax increment revenues to be transmitted to the 13 authority. 14 (C) Ad valorem property taxes exempted from capture under 15 section 4(3) or specific local taxes attributable to such ad 16 valorem property taxes. 17 (D) Ad valorem property taxes specifically levied for the 18 payment of principal and interest of obligations approved by the 19 electors or obligations pledging the unlimited taxing power of 20 the local governmental unit or specific local taxes attributable 21 to such ad valorem property taxes. 22 (E) The amount of ad valorem property taxes or specific 23 taxes captured by a downtown development authority under 1975 24 PA 197, MCL 125.1651 to 125.1681, tax increment financing author- 25 ity under the tax increment finance authority act, 1980 PA 450, 26 MCL 125.1801 to 125.1830, or brownfield redevelopment authority 27 under the brownfield redevelopment financing act, 1996 PA 381, 06716'02 16 1 MCL 125.2651 to 125.2672, if those taxes were captured by these 2 other authorities on the date that the initial assessed value of 3 a parcel of property was established under this act. 4 (iv) The amount of tax increment revenues authorized to be 5 included under subparagraph (ii), and required to be transmitted 6 to the authority under section 13(1), from ad valorem property 7 taxes and specific local taxes attributable to the application of 8 the levy of the state education tax act, 1993 PA 331, MCL 211.901 9 to 211.906, or a local school district or an intermediate school 10 district upon the captured assessed value of real and personal 11 property in a development area shall be determined separately for 12 the levy by the state, each school district, and each intermedi- 13 ate school district as the product of sub-subparagraphs (A) and 14 (B): 15 (A) The percentage that the total ad valorem taxes and spe- 16 cific local taxes available for distribution by law to the state, 17 local school district, or intermediate school district, respec- 18 tively, bears to the aggregate amount of ad valorem millage taxes 19 and specific taxes available for distribution by law to the 20 state, each local school district, and each intermediate school 21 district. 22 (B) The maximum amount of ad valorem property taxes and spe- 23 cific local taxes considered tax increment revenues under sub- 24 paragraph (ii). 25 (ff) "Urban township" means a township that meets 1 or more 26 of the following: 06716'02 17 1 (i) Meets all of the following requirements: 2 (A) Has a population of 20,000 or more, or has a population 3 of 10,000 or more but is located in a county with a population of 4 400,000 or more. 5 (B) Adopted a master zoning plan before February 1, 1987. 6 (C) Provides sewer, water, and other public services to all 7 or a part of the township. 8 (ii) Meets all of the following requirements: 9 (A) Has a population of less than 20,000. 10 (B) Is located in a county with a population of 250,000 or 11 more but less than 400,000, and that county is located in a met- 12 ropolitan statistical area. 13 (C) Has within its boundaries a parcel of property under 14 common ownership that is 800 acres or larger and is capable of 15 being served by a railroad, and located within 3 miles of a 16 limited access highway. 17 (D) Establishes an authority before December 31, 1998. 18 (iii) Meets all of the following requirements: 19 (A) Has a population of less than 20,000. 20 (B) Has a state equalized value for all real and personal 21 property located in the township of more than $200,000,000.00. 22 (C) Adopted a master zoning plan before February 1, 1987. 23 (D) Is a charter township under the charter township act, 24 1947 PA 359, MCL 42.1 to 42.34. 25 (E) Has within its boundaries a combination of parcels under 26 common ownership that is 800 acres or larger, is immediately 27 adjacent to a limited access highway, is capable of being served 06716'02 18 1 by a railroad, and is immediately adjacent to an existing sewer 2 line. 3 (F) Establishes an authority before March 1, 1999. 4 (2) ELIGIBLE PROPERTY DEFINED IN SUBSECTION (1) DOES NOT 5 INCLUDE A FACILITY, PLANT, OR OTHER PROPERTY THAT HAS AS ITS PRI- 6 MARY PURPOSE THE PACKAGING, PRODUCTION, OR BOTTLING OF WATER 7 INTENDED FOR HUMAN CONSUMPTION IN SEALED CONTAINERS LESS THAN 1 8 GALLON IN SIZE AND THAT HAS NO ADDITIONAL ADDED INGREDIENTS. 06716'02 Final page. 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