SB-0620, As Passed Senate, March 16, 2016

SUBSTITUTE FOR

SENATE BILL NO. 620

A bill to amend 1975 PA 197, entitled

"An act to provide for the establishment of a downtown development

authority; to prescribe its powers and duties; to correct and

prevent deterioration in business districts; to encourage historic

preservation; to authorize the acquisition and disposal of

interests in real and personal property; to authorize the creation

and implementation of development plans in the districts; to

promote the economic growth of the districts; to create a board; to

prescribe its powers and duties; to authorize the levy and

collection of taxes; to authorize the issuance of bonds and other

evidences of indebtedness; to authorize the use of tax increment

financing; to reimburse downtown development authorities for

certain losses of tax increment revenues; and to prescribe the

powers and duties of certain state officials,"

by amending sections 1 and 3 (MCL 125.1651 and 125.1653), section 1

as amended by 2013 PA 66 and section 3 as amended by 2005 PA 115.

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 in

anticipation of repayment by the authority. Evidence of the intent

to repay an advance may include, but is not limited to, an executed

agreement to repay, provisions contained in a tax increment

financing plan approved prior to the advance, 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, the taxable

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

act, 1893 PA 206, MCL 211.27a.

pursuant to this act.

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

(e) "Business district" means an area in the downtown of a

municipality zoned and used principally for business.

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

by which the current assessed value of the project area, including

the assessed value of property for which specific local taxes are

paid in lieu of property taxes as determined in subdivision (aa),

exceeds the initial assessed value. The state tax commission shall

prescribe the method for calculating captured assessed value.

(g) "Catalyst development project" means a project that is

located in a municipality with a population greater than 600,000,

is designated by the authority as a catalyst development project,

and is expected to result in at least $300,000,000.00 of capital

investment. There shall be no more than 1 catalyst development

project designated within each authority.

(h) "Chief executive officer" means the mayor or city manager

of a city, the president or village manager of a village, or the

supervisor of a township or, if designated by the township board

for purposes of this act, the township superintendent or township

manager of a township.

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

plan is applicable.

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

requirements for a development plan set forth in section 17.

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

development plan.

(l) "Downtown district" means that part of an area in a

business district that is specifically designated by ordinance of

the governing body of the municipality pursuant to this act. A

downtown district may include 1 or more separate and distinct

geographic areas in a business district as determined by the

municipality if the municipality enters into an agreement with a

qualified township under section 3(7) or if the municipality is a

city that surrounds another city and that other city lies between

the 2 separate and distinct geographic areas. If the downtown

district contains more than 1 separate and distinct geographic area

in the downtown district, the separate and distinct geographic

areas shall be considered 1 downtown district.

(m) "Eligible advance" means an advance made before August 19,

1993.

(n) "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.

(o) "Fire alarm system" means a system designed to detect and

annunciate the presence of fire, or by-products of fire. Fire alarm

system includes smoke detectors.

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

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

of a municipality having legislative powers.

(r) "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 ordinance 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

to be property that is exempt from taxation. The initial assessed

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

of a property tax shall be determined as provided in subdivision

(aa). In the case of a municipality having a population of less

than 35,000 that established an authority prior to 1985, created a

district or districts, and approved a development plan or tax

increment financing plan or amendments to a plan, and which plan or

tax increment financing plan or amendments to a plan, and which

plan expired by its terms December 31, 1991, the initial assessed

value for the purpose of any plan or plan amendment adopted as an

extension of the expired plan shall be determined as if the plan

had not expired December 31, 1991. For a development area

designated before 1997 in which a renaissance zone has subsequently

been designated pursuant to the Michigan renaissance zone act, 1996

PA 376, MCL 125.2681 to 125.2696, the initial assessed value of the

development area otherwise determined under this subdivision shall

be reduced by the amount by which the current assessed value of the

development area was reduced in 1997 due to the exemption of

property under section 7ff of the general property tax act, 1893 PA

206, MCL 211.7ff, but in no case shall the initial assessed value

be less than zero.

(s) "Municipality" means a city, village, or township.

(t) "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.

(u) "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 the municipality, or 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.

(v) "Operations" means office maintenance, including salaries

and expenses of employees, office supplies, consultation fees,

design costs, and other expenses incurred in the daily management

of the authority and planning of its activities.

(w) "Other protected obligation" means:

(i) A qualified refunding obligation issued to refund an

obligation described in subparagraph (ii), (iii), or (iv), 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 or on behalf of the municipality or

authority before March 1, 1994 or for which a written agreement

with a developer, titled preferred development agreement, was

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

July 1993.

(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 incurred by the authority evidenced by or

to finance a contract to purchase real property within a

development area or a contract to develop that property within the

development area, or both, if all of the following requirements are

met:

(A) The authority purchased the real property in 1993.

(B) Before June 30, 1995, the authority enters a contract for

the development of the real property located within the development

area.

authority received approval for a grant from both of the following:

(I) The department of natural resources for site reclamation

of the real property.

(II) The department of consumer and industry services for

development of the real property.

(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) A loan from a municipality to an authority if the loan

was approved by the legislative body of the municipality on April

18, 1994.

(vii) Funds expended to match a grant received by a

municipality on behalf of an authority for sidewalk improvements

from the Michigan department of transportation if the legislative

body of the municipality approved the grant application on April 5,

1993 and the grant was received by the municipality in June 1993.

(viii) For taxes captured in 1994, an obligation described in

this subparagraph issued or incurred to finance a project. An

obligation is considered issued or incurred to finance a project

described in this subparagraph only if all of the following are

met:

(A) The obligation requires raising capital for the project or

paying for the project, whether or not a borrowing is involved.

(B) The obligation was part of a development plan and the tax

increment financing plan was approved by a municipality on May 6,

1991.

understanding between a municipality and a public utility dated

October 27, 1994.

(D) The authority or municipality captured school taxes during

1994.

(ix) An obligation incurred after July 31, 2012 by an

authority, municipality, or other governmental unit to pay for

costs associated with a catalyst development project.

(x) "Public facility" means a street, plaza, pedestrian mall,

and any improvements to a street, plaza, or pedestrian mall

including street furniture and beautification, park, parking

facility, recreational facility, right-of-way, structure, waterway,

bridge, lake, pond, canal, utility line or pipe, building, and

access routes to any of the foregoing, designed and dedicated to

use by the public generally, or used by a public agency. Public

facility includes 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.

Public facility also includes the acquisition, construction,

improvement, and operation of a building owned or leased by the

authority to be used as a retail business incubator.

(y) "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 or more of the

following apply:

(i) The obligation is issued to refund a qualified refunding

obligation issued in November 1997 and any subsequent refundings of

that obligation issued before January 1, 2010 or the obligation is

issued to refund a qualified refunding obligation issued on May 15,

1997 and any subsequent refundings of that obligation issued before

January 1, 2010 in an authority in which 1 parcel or group of

parcels under common ownership represents 50% or more of the

taxable value captured within the tax increment finance district

and that will ultimately provide for at least a 40% reduction in

the taxable value of the property as part of a negotiated

settlement as a result of an appeal filed with the state tax

tribunal. Qualified refunding obligations issued under this

subparagraph are not subject to the requirements of section 611 of

the revised municipal finance act, 2001 PA 34, MCL 141.2611, if

issued before January 1, 2010. The duration of the development

program described in the tax increment financing plan relating to

the qualified refunding obligations issued under this subparagraph

is hereby extended to 1 year after the final date of maturity of

the qualified refunding obligations.

(ii) 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 (cc)(ii) and the distributions

under section 13b 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 (cc)(ii) and the distributions

under section 13b to repay the obligation being refunded, as

calculated using a method approved by the department of treasury.

(iii) The obligation is issued to refund an other protected

obligation issued as a capital appreciation bond delivered to the

Michigan municipal bond authority on December 21, 1994 and any

subsequent refundings of that obligation issued before January 1,

2012. Qualified refunding obligations issued under this

subparagraph are not subject to the requirements of section 305(2),

(3), (5), and (6), section 501, section 503, or section 611 of the

revised municipal finance act, 2001 PA 34, MCL 141.2305, 141.2501,

141.2503, and 141.2611, if issued before January 1, 2012. The

duration of the development program described in the tax increment

financing plan relating to the qualified refunding obligations

issued under this subparagraph is extended to 1 year after the

final date of maturity of the qualified refunding obligations. The

obligation may be payable through the year 2025 at an interest rate

not exceeding the maximum rate permitted by law, notwithstanding

the bond maturity dates contained in the notice of intent to issue

bonds published by the municipality. An obligation issued under

this subparagraph is a qualified refunding obligation only to the

extent that revenues described in subdivision (cc)(ii) and

distributions under section 13b to repay the qualified refunding

obligation do not exceed $750,000.00.

(iv) The obligation is issued to refund a qualified refunding

obligation issued on February 13, 2008, and any subsequent

refundings of that obligation, issued before December 31, 2018.

Qualified refunding obligations issued under this subparagraph are

not subject to the requirements of section 305(2), (3), (5), and

(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 program described in the tax increment financing

plan relating to the qualified refunding obligations issued under

this subparagraph is extended to 1 year after the final date of

maturity of the qualified refunding obligations. Revenues described

in subdivision (cc)(ii) and distributions made under section 13b in

excess of the amount needed for current year debt service on an

obligation issued under this subparagraph may be paid to the

authority to the extent necessary to pay future years' debt service

on the obligation as determined by the board.

(z) "Qualified township" means a township that meets all of

the following requirements:

(i) Was not eligible to create an authority prior to January

3, 2005.

(ii) Adjoins a municipality that previously created an

authority.

(iii) Along with the adjoining municipality that previously

created an authority, is a member of the same joint planning

commission under the joint municipal planning act, 2003 PA 226, MCL

125.131 to 125.143.

(aa) "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.

(bb) "State fiscal year" means the annual period commencing

October 1 of each year.

(cc) "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.

section 3(3) or specific local taxes attributable to such ad

valorem property taxes.

(D) 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(3), 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, 2015.

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

included under subparagraph (ii) or (v), 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 that 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, bears 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) or (v).

(v) Tax increment revenues include ad valorem property taxes

and specific local taxes, in an annual amount and for each year

approved by the state treasurer, attributable to the levy by this

state under the state education tax act, 1993 PA 331, MCL 211.901

to 211.906, and by local or intermediate school districts, upon the

captured assessed value of real and personal property in the

development area of an authority established in a city with a

population of 600,000 or more to pay for, or reimburse an advance

for, not more than $8,000,000.00 for the demolition of buildings or

structures on public or privately owned property within a

development area that commences in 2005, or to pay the annual

principal of or interest on an obligation, the terms of which are

approved by the state treasurer, issued by an authority, or by a

city on behalf of an authority, to pay not more than $8,000,000.00

of the costs to demolish buildings or structures on public or

privately owned property within a development area that commences

in 2005.

(vi) Tax increment revenues include ad valorem property taxes

and specific local taxes attributable to the levy by this state

under the state education tax act, 1993 PA 331, MCL 211.201 to

211.906, and by local or intermediate school districts which were

levied on or after July 1, 2010, upon the captured assessed value

of real and personal property in the development area of an

authority established in a city with a population of 600,000 or

more to pay for, or reimburse an advance for, costs associated with

the land acquisition, preliminary site work, and construction of a

catalyst development project.

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

determines that it is necessary for the best interests of the

public to halt property value deterioration and increase property

tax valuation where possible in its business district, to eliminate

the causes of that deterioration, and to promote economic growth,

the governing body may, by resolution, declare 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 ordinance creating the authority and designating the

boundaries of the downtown district. Notice of the public hearing

shall be published twice in a newspaper of general circulation in

the municipality, not less than 20 or more than 40 days before the

date of the hearing. Not less than 20 days before the hearing, the

governing body proposing to create the authority shall also mail

notice of the hearing to the property taxpayers of record in the

proposed district and for a public hearing to be held after

February 15, 1994 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.

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 of a property

taxpayer to receive the notice shall not invalidate these

proceedings. Notice of the hearing shall be posted in at least 20

conspicuous and public places in the proposed downtown district not

less than 20 days before the hearing. The notice shall state the

date, time, and place of the hearing, and shall describe the

boundaries of the proposed downtown district. A citizen, taxpayer,

or property owner of the municipality or an official from a taxing

jurisdiction with millage that would be subject to capture has the

right to be heard in regard to the establishment of the authority

and the boundaries of the proposed downtown district. The governing

body of the municipality shall not incorporate land into the

downtown district not included in the description contained in the

notice of public hearing, but it may eliminate described lands from

the downtown district in the final determination of the boundaries.

(3) Not more than 60 days after a public hearing held after

February 15, 1994, the governing body of a taxing jurisdiction

levying ad valorem property taxes that would otherwise be subject

to capture may exempt its taxes from capture by adopting a

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

municipality proposing to create the authority. The resolution

takes effect when filed with that clerk and remains effective until

a copy of a resolution rescinding that resolution is filed with

that clerk. If a separate millage for public library purposes was

levied before January 1, 2016, and all obligations and other

protected obligations of the authority are paid or defeased, 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 before January 1,

2016, and the authority alters or amends the boundaries of a

downtown district or extends the duration of the existing finance

plan, then the library board or commission may, not later than 60

days after a public hearing is held under this subsection, 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, 2015, 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, 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.

(4) Not less than 60 days after the public hearing, if the

governing body of the municipality intends to proceed with the

establishment of the authority, it shall adopt, by majority vote of

its members, an ordinance establishing the authority and

designating the boundaries of the downtown district within which

the authority shall exercise its powers. The adoption of the

ordinance is subject to any applicable statutory or charter

provisions in respect to the approval or disapproval by the chief

executive or other officer of the municipality and the adoption of

an ordinance over his or her veto. This ordinance 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.

(5) The governing body of the municipality may alter or amend

the boundaries of the downtown district to include or exclude lands

from the downtown district pursuant to the same requirements for

adopting the ordinance creating the authority.

(6) A municipality that has created an authority may enter

into an agreement with an adjoining municipality that has created

an authority to jointly operate and administer those authorities

under an interlocal agreement under the urban cooperation act of

1967, 1967 (Ex Sess) PA 7, MCL 124.501 to 124.512.

(7) A municipality that has created an authority may enter

into an agreement with a qualified township to operate its

authority in a downtown district in the qualified township under an

interlocal agreement under the urban cooperation act of 1967, 1967

(Ex Sess) PA 7, MCL 124.501 to 124.512. The interlocal agreement

between the municipality and the qualified township shall provide

for, but is not limited to, all of the following:

(a) Size and makeup of the board.

(b) Determination and modification of downtown district,

business district, and development area.

(d) Issuance and repayment of obligations.

(e) Capture of taxes.

(f) Notice, hearing, and exemption of taxes from capture

provisions described in this section.