TRANSIT-ORIENTED DEVELOPMENT S.B. 1234:
ANALYSIS AS REPORTED FROM COMMITTEE
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Senate Bill 1234 (as reported without amendment)
Sponsor: Senator Gilda Z. Jacobs
Committee: Commerce and Tourism
Date Completed: 8-30-10
RATIONALE
Because Michigan's economy has long been based heavily on manufacturing, which has declined severely in recent years, most people would agree that the State needs to diversify its economic base. At the same time, Michigan has lagged behind other states in the development and use of public transit; as a result, the State has obtained fewer of the available resources for transit development and Michigan residents have relatively poor access to transportation services. Several Michigan statutes authorize public authorities to issue bonds or "capture" tax revenue from incremental increases in property values, in order to fund various types of development projects. It has been suggested that the use of tax increment financing (TIF) through existing entities could help to encourage transit-oriented development in Michigan, thereby expanding the State's economy, improving the availability of public transportation, and enhancing Michigan's access to transit funding.
CONTENT
The bill would amend the Corridor Improvement Authority Act to include transit-oriented development and transit-oriented facilities in the activities allowed under the Act.
The Act allows a municipality to form a corridor improvement authority to "capture" the incremental growth in tax revenue from property located in a development area or a qualified development area. Among other things, an authority board may plan and propose the construction, renovation, repair, remodeling, rehabilitation, restoration, preservation, or reconstruction of a public facility. A board also may plan, propose, and implement an improvement to a public facility. The bill would include transit-oriented development and a transit-oriented facility in the Act's definition of "public facility".
The Act also provides for a "qualified development area" in the City of Detroit in which tax increment revenue subject to capture may include taxes under the State Education Tax Act and taxes levied by local or intermediate school districts, with the approval of the Michigan Economic Growth Authority. The qualified development area is not subject to a provision of the Act that allows a taxing jurisdiction's governing body to exempt its taxes from capture by a corridor improvement authority. Under the bill, the qualified development area would include a development area that contains transit-oriented development or a transit-oriented facility.
"Transit-oriented development" would mean infrastructure improvements that are located within one-half mile of a transit station or transit-oriented facility that promotes transit ridership or passenger rail use. "Transit-oriented facility" would mean a facility that houses a transit station in a manner that promotes transit ridership or passenger rail use.
MCL 125.2873
ARGUMENTS
(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
Transit-oriented development can benefit communities in many ways. Aiming economic development efforts at areas around transit facilities has a proven track record of spurring private investment in those areas. According to a Detroit Free
Press editorial, "[E]very dollar spent on transit spurs an estimated $4 to $7 of related private investment" ("State incentives provide a needed push for transit systems", 4-7-10). Transit-oriented developments in other states have demonstrated positive results. Since 2001, Portland, Oregon, reportedly has seen more than $1.4 billion of investment along the 4.7-mile loop of its streetcar system. A 1998 project in Silver Springs, Maryland, targeting for development a four-block area around a transit station reportedly generated a surge in economic activity, resulting in the investment of more than $400.0 million in public funds and $1.37 billion in private investment. The development area in Portland evidently ties a cluster of residential and commercial areas to the streetcar line, and the project reportedly has generated more than $1.3 million in property tax revenue for the city while increasing property value by almost 500%. Similar increased development in Michigan around transit facilities could help to bolster this State's sinking property values and increase much-needed tax revenue to local units and the State.
Engaging in transit-oriented development also would help to create dense, walkable communities around transit hubs. In turn, this could relieve congestion, conserve energy, reduce the costs of maintaining and expanding highways, and create jobs through development and greater mobility. Areas near transit hubs could attract new businesses, which also would create jobs and help to ease "brain drain" by keeping creative, knowledge-based workers in Michigan, and attracting them from other states.
In addition, improving development around transit facilities could help the State to recover more of the Federal resources available for public transit projects. According to the Free Press editorial, Michigan currently receives only about 46 cents in transit funding for every dollar it sends to Washington for that purpose. More transit development would mean more opportunities to secure those Federal funds.
By allowing corridor improvement authorities to use captured tax increment revenue for transit-oriented development and transit-oriented facilities, the bill would make transit development part of the focus of the State's economic development efforts.
Supporting Argument
The bill would offer local units an option to engage in transit-oriented development using existing funding mechanisms. The legislation would not raise taxes or require any community to invest in bus or rail systems, but would expand the use of economic development tools currently available to municipalities through TIF funding. This approach represents progress toward the development of effective regional transit systems, which are needed in communities across the State.
Response: The bill could reduce available TIF revenue for other deserving projects already funded in that manner. In addition, property values have been decreasing in Michigan in recent years. Unless property values in a district increase, there is no tax increment revenue to capture.
Opposing Argument
The bill, and similar legislation, essentially proposes the creation of new governmental units with taxing power, without first being approved by a vote of the people. As such, the legislation would violate the "Headlee Amendment" to Michigan's Constitution.
Response: The bill would not create new units of government or grant taxing authority, but would simply expand the purposes for which currently authorized entities may issue bonds and spend TIF revenue.
Legislative Analyst: Patrick Affholter
FISCAL IMPACT
By expanding the type of activities that are eligible under the statute to include transit-oriented development, the bill could result in a loss of State and local revenue. The potential lost revenue would depend on the amount and value of transit-oriented activity spurred by this change in law that would not have occurred otherwise. Potential lost revenue would include State and local education property taxes as well as local general property taxes. The State also would potentially incur increased expenditures due to the need to replace losses in school operating property taxes.
Fiscal Analyst: Eric ScorsoneAnalysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent. sb1234/0910