HB-6348, As Passed House, December 21, 2018

HB-6348, As Passed Senate, December 18, 2018

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 6348

A bill to amend 2014 PA 86, entitled

"Local community stabilization authority act,"

by amending sections 17 and 18 (MCL 123.1357 and 123.1358), as

amended by 2018 PA 248.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 17. (1) The legislature shall appropriate funds for all

of the following purposes:

(a) For fiscal year 2014-2015 and fiscal year 2015-2016, to

the authority, an amount equal to all debt loss for municipalities

that are not a local school district, intermediate school district,

or tax increment finance authority, an amount equal to all school

debt loss for municipalities that are a local school district or

intermediate school district, and an amount equal to all tax

increment small taxpayer loss for municipalities that are a tax

increment finance authority. Funds appropriated under this

subdivision for fiscal year 2015-2016 may be used to pay a

corrected tax increment small taxpayer exemption loss for 2014 if a

tax increment finance authority submits before June 1, 2016 a

correction to a report that was filed under section 16a before

October 1, 2014.

(b) For fiscal ~~year 2014-2015 through fiscal year 2018-2019~~

years after 2013-2014, to the department, an amount equal to the

necessary expenses incurred by the department in implementing this

act.

thereafter, an amount ~~equal to the necessary expenses incurred by~~

~~the authority and the department in implementing this~~

~~act.~~sufficient to allow the authority to continue exercising its

powers, duties, functions, and responsibilities under section

11(1)(b), including, for fiscal year 2019-2020, an amount

sufficient for the creation of a database.

(2) In fiscal year 2014-2015 and fiscal year 2015-2016, the

authority shall distribute to municipalities those funds

appropriated under subsection (1)(a). However, in fiscal year 2014-

2015, if the authority is not able to make the distribution under

this subsection, the department shall make the distribution under

this subsection on behalf of the authority.

(3) For calendar years 2014 and 2015, the authority shall

distribute local community stabilization share revenue to each city

in an amount determined by multiplying the sum of the local

community stabilization share revenue for the calendar years and

the amounts calculated under section 14(3)(e) and (f) by a

fraction, the numerator of which is that city's amount calculated

under section 14(3)(d) and the denominator of which is the total

amount calculated under section 14(3)(d), and subtracting from the

result each city's amounts calculated under section 14(3)(e) and

(f).

(4) Beginning for calendar year 2016, the authority shall

distribute local community stabilization share revenue as follows

in the following order of priority:

(a) The authority shall distribute to each municipality an

amount equal to all of the following:

(i) 100% of that municipality's school debt loss in the

current year as calculated under section 13(4) and 100% of its

amount calculated under section 15.

(ii) 100% of that municipality's amount calculated under

section 16.

(iii) 100% of that municipality's school operating loss not

reimbursed by the school aid fund in the current year, calculated

by multiplying the operating millage rate reported under section

13(4) or the operating millage rate calculated under section 13(5)

by the local school district's personal property exemption loss for

the personal property subject to the respective millage reimbursed

under this subparagraph.

(iv) 100% of the amount calculated in section 14(2). For

calendar years 2016 and 2017 only, however, the amount distributed

to a municipality under this subparagraph shall not exceed the

amount calculated in section 14(1)(d). For all calendar years, all

distributions under this subparagraph shall be used to fund

essential services.

(v) For a municipality that is a tax increment finance

authority, 100% of its amount calculated under section 16a(2), as

confirmed or adjusted by the department. For calculations made

under section 16a(2), as modified by section 16b(2), in calendar

years 2016 and 2017 only, amounts claimed for increased captured

value shall be included as claimed.

(vi) 100% of that municipality's amount calculated under

section 14(4).

(vii) Beginning for calendar year 2019, for municipalities

with state facilities under 1977 PA 289, MCL 141.951 to 141.956,

100% of the amount calculated under 1977 PA 289, MCL 141.951 to

141.956. The department of licensing and regulatory affairs shall

certify to the department and the authority the amount to be paid

to each municipality under this subparagraph.

(viii) Beginning for calendar year 2019, for municipalities

that incur certain reasonable and allowable costs of required and

allowable health services described in section 2475 of the public

health code, 1978 PA 368, MCL 333.2475, $10,000,000.00 of those

costs not otherwise reimbursed pursuant to section 2475 of the

public health code, 1978 PA 368, MCL 333.2475, or other

appropriation. The department of health and human services shall

certify to the department and the authority the amount to be paid

to each municipality under this subparagraph.

(b) Beginning for calendar year 2021, after the distributions

under subdivision (a), and subject to subparagraph (viii), the

authority shall distribute an amount equal to ~~15%~~ 10% of the total

qualified loss for the current calendar year to each municipality

that is not a local school district, intermediate school district,

or tax increment finance authority in an amount determined as

follows:

(i) Calculate the total acquisition cost of all eligible

personal property in the municipality.

(ii) Multiply the result of the calculation in subparagraph

(i) by each individual millage levied by the municipality as

calculated under section 13(5) that is not used to calculate a

distribution under subdivision (a)(i) to (iv).

(iii) Divide the sum of the amounts calculated under

subparagraph (ii) for all municipalities subject to the calculation

by total qualified loss.

(iv) Multiply the result of the calculation in subparagraph

(iii) by the difference between the amount calculated under section

16a(2) for captured taxes for each individual millage levied by the

municipality not including taxes attributable to increased captured

value and the subtraction amounts calculated under section

14(2)(d), (2)(f), and (4)(d) for that millage.

(v) Subtract from the amount calculated under subparagraph

(ii) the amount calculated under subparagraph (iv) for the

individual millage levied.

(vi) Divide the result of the calculation in subparagraph (v)

by the sum of the calculation under subparagraph (v) for all

millages for all municipalities.

(vii) Multiply the result of the calculation in subparagraph

(vi) by the amount to be distributed under this subdivision.

(viii) For calendar year 2022, and each calendar year

thereafter, the percentage amount described in this subdivision

shall be increased an additional 5% 10% each year, not to exceed

100%.

in subdivision (a), the authority shall distribute the remaining

balance of the local community stabilization share fund for a

calendar year to each municipality in an amount determined by

multiplying the remaining balance by a fraction, the numerator of

which is that municipality's qualified loss and the denominator of

which is the total qualified loss. Beginning for calendar year

2018, after the distributions in subdivisions (a) and (b), the

authority shall distribute local community stabilization share

revenue under this subdivision to each municipality in an amount

determined by multiplying total qualified loss minus the total

amount distributed in subdivision (b) for a calendar year by a

fraction, the numerator of which is that municipality's qualified

loss and the denominator of which is the total qualified loss.

(d) After the distributions under subdivisions (a) to (c),

beginning for calendar year 2018, the department shall adjust the

amounts calculated under subdivisions (b) and (c) for a

municipality that is a county, township, village, city, or

community college district by the amount of any overpayment to that

municipality under those subdivisions for that calendar year and

the authority shall distribute the following:

(i) To a municipality, the amount of any underpayment

calculated under subsection (5) for calendar years after 2016.

(ii) A For calendar year 2018 only, a total of $13,600,000.00

to municipalities with state facilities under 1977 PA 289, MCL

141.951 to 141.956. The department of licensing and regulatory

affairs shall certify to the department the amount to be paid to

each municipality under this subparagraph.

(e) Except as otherwise provided in this subdivision, after

the distributions under subdivisions (a) to (d), the authority

shall distribute the remaining balance of the local community

stabilization share fund for the calendar year to each municipality

that is a county, township, village, city, or community college

district in an amount determined by multiplying the remaining

balance by a fraction, the numerator of which is the sum of that

municipality's amount received under subdivisions (b), (c), and

(d), only to the extent that the distribution under subdivision (d)

is for an underpayment of the current calendar year's subdivision

(b) or (c) amount, and the overpayment adjustment under subdivision

(d), and the denominator of which is the sum of the total amount

distributed to all counties, townships, villages, cities, and

community college districts under subdivisions (b), (c), and (d),

only to the extent that the distribution under subdivision (d) is

for an underpayment of the current calendar year's subdivision (b)

or (c) amount, and the total overpayment adjustments for all

counties, townships, villages, cities, and community college

districts under subdivision (d). For any municipality that, in

total, was overpaid under subdivisions (a), (b), and (c), the

distribution under this subdivision, which for purposes of this

calculation for any municipality other than a county, township,

village, city, or community college district shall be $0, shall be

reduced by any positive amount determined by subtracting the

corrected amounts under subdivisions (a) to (c) for that

municipality from the distributed amounts under subdivisions (a) to

resulting distribution amount is negative, the municipality has

been overpaid for the year by the amount of the negative balance.

The municipality shall pay to the authority the amount of the

overpayment in 3 equal annual payments, due by September 20 1 year

following notice of the overpayment and by September 20 of the

subsequent 2 years. A municipality may pay the amount of the

overpayment at any time during the 3-year period. If a municipality

fails to repay the amount of the overpayment as provided in this

subdivision, the authority shall add interest to the entire amount

of the original overpayment from the date of notice of the

overpayment and may reduce subsequent distributions to the

municipality under this section to recover the outstanding balance

of the overpayment and interest. Interest added under this

subdivision shall be at the rate determined under section 23 of

1941 PA 122, MCL 205.23. Any overpayment amounts repaid to the

authority under this subdivision by September 30 of each year shall

be added to the local community stabilization share revenue

available for distribution for the calendar year. If reductions to

distributions calculated under this section result in the authority

having a year-end balance of local community stabilization share

revenue, that revenue shall be added to the local community

stabilization share revenue available for distribution for the

subsequent calendar year.

(5) The department and authority shall administer overpayments

and underpayments as follows:

(a) For calendar years before 2016, if a municipality received

an overpayment under this section due to an error in reporting or

calculation, the authority may reduce a subsequent payment to the

municipality or bill the municipality to recover the overpayment.

(b) Before November 7, 2017, the department shall recalculate

2016 payments to correct any errors in reporting under section

13(3) or (4) and any calculation errors made by the department, and

adjust the 2017 payment to each municipality for any change in its

2016 payment.

section 13(3) or (4) in calendar year 2017 or 2018, any calculation

errors made by the department in calendar year 2017 or 2018, or any

prior year error adjustment used in the calculation of the calendar

year 2017 distributions, that resulted in an underpayment or

overpayment under this section to a municipality for the prior

calendar year or current calendar year, the department shall

calculate the amount of underpayment or overpayment. For each

municipality, the department shall add together the calendar year

2016 and calendar year 2017 underpayment and overpayment amounts.

If a municipality has a net underpayment for calendar years 2016

and 2017, the amount of the net underpayment shall be added to the

calendar year 2018 underpayment or overpayment amount for that

municipality. If a municipality has a net overpayment for calendar

years 2016 and 2017, the amount of the net overpayment shall be

excused by the authority and shall not be added to the calendar

year 2018 underpayment or overpayment amount for that municipality.

The following apply to determining underpayment or overpayment

amounts:

(i) For calendar year 2016, the underpayment or overpayment of

a municipality's qualified loss shall be calculated by multiplying

the municipality's qualified loss by 261.3820%.

(ii) For calendar year 2017, the underpayment or overpayment

of a municipality's qualified loss shall be calculated by

multiplying the municipality's qualified loss by 292.4677%.

(d) Beginning for calendar year 2019, for any errors in

reporting under section 13(3) or (4), and for any calculation

errors made by the department, that resulted in an underpayment or

overpayment under this section to a municipality for the current

calendar year, the department shall calculate the amount of

underpayment or overpayment. A calculation made under this

subdivision shall not recalculate a prior year payment.

(e) Except as provided in subsection (6), any underpayment

shall be paid to the municipality as provided in subsection (4)(d).

Any underpayment amount determined by the department to be the

fault of that municipality, by either the municipality reporting

inaccurate information or filing information after the reporting

due dates, shall not be included in any payment made under

subsection (4)(d) or (6).

(f) For any overpayment for which the state treasurer

determines that the municipality was at fault and acted in bad

faith, the department may calculate the amount of the overpayment

for all years to which the bad faith applied without any adjustment

and the municipality shall immediately repay the amount of the

overpayment and interest to the authority within 30 days following

notice of the overpayment. If a municipality fails to repay the

amount of the overpayment and interest to the authority, the

authority shall reduce subsequent payments to the municipality

under this section to recover the outstanding balance of the

overpayment and interest. Interest added under this subsection

shall be at the rate determined under section 23 of 1941 PA 122,

MCL 205.23. Any overpayment amounts repaid to the authority under

this subsection by September 30 of each year shall be added to the

local community stabilization share revenue available for

distribution for the calendar year. Any reduction of subsequent

payments due to municipalities failing to repay the amount of the

overpayment and interest shall be added to the local community

stabilization share revenue available for distribution for the

subsequent calendar year.

(6) If a municipality received an underpayment under this

section of $500,000.00 or more for calendar year 2017 due to an

error in reporting under section 13(3) or (4), or a calculation

error made by the department, including a prior year error

adjustment used in the calculation of the calendar year 2017

distributions, the municipality may notify the department of any

errors identified by providing substantiating documentation to

support an adjustment to the payment amount by August 1, 2018. Upon

the department's review of the substantiating documentation and

verification of the errors, the department shall calculate an

underpayment amount in accordance with subsection (5)(c). The

underpayment amount shall be calculated using the appropriate

proration factor provided for under subsection (5)(c). The

department shall determine if the substantiating documentation is

sufficient. The department shall notify the authority to make an

advance 2018 payment to the municipality for the amount of the 2017

underpayment. The advance payment shall be deducted from the

municipality's payment for calendar year 2018 that includes the

distribution under subsection (4)(d).

(7) For payments received beginning October 20, 2018, a

municipality shall do all of the following:

(a) Allocate payments received, up to 100% reimbursement,

under this section based on the portion of the municipality's

payment attributable to each millage levied by the municipality.

The portion of the payment allocated to each millage other than the

general operating millage shall be considered restricted and

recorded by the municipality in the same manner as the millage

levied. As used in this subsection, "100% reimbursement" means the

amounts received under subsection ~~(4)(a),~~ (4)(a)(i) to (vi), (b),

(c), and (d)(i), only to the extent that the distribution under

subsection (4)(d)(i) is for an underpayment of the current calendar

year's subsection ~~(4)(a),~~ (4)(a)(i) to (vi), (b), or (c) amount.

(b) For millage levied by a county under section 20b of 1909

PA 283, MCL 224.20b, the governing bodies of the cities and

villages in the county and the board of county road commissioners

shall agree to a formula that allocates a portion of the payments

under this section to each city and village based on the city and

village share of the losses and acquisition cost used to calculate

the payment to the county described in this subdivision and each

city's and village's portion of that share. The formula once

established will be in effect until the effective date of any

subsequent agreement. If the governing bodies of the cities and

villages and the board of county road commissioners described in

this subdivision do not agree on a formula by March 31 following

the receipt of the subsection (8)(b) payment, the department may

prescribe a formula for allocating the payments under this section.

subsection ~~(4)(d)(~~ii), (4)(a)(vii) and (viii) and subsection

(4)(d)(ii), to a municipality that is participating in an

intergovernmental conditional transfer by contract under 1984 PA

425, MCL 124.21 to 124.30, or any other interlocal agreement that

provides for a millage-based sharing of revenue, shall be allocated

between the parties based on the proportionate share of the payment

as it is attributable to the area subject to the agreement.

(8) The authority shall make the payments required by

subsection (3) not later than June 20, 2016, payments required by

subsection (6) not later than October 20, 2018, and payments

required by subsection (4) not later than on the following dates:

(a) Except as provided in subdivision (d), for county

allocated millage, November 20, 2017, and thereafter October 20 of

the year the millage is levied.

(b) Except as provided in subdivision (d), for county extra-

voted millage, township millage, and other millages levied 100% in

December of a year, February 20 of the following year.

November 20, 2017, and thereafter October 20 of the year the

millage is levied.

(d) ~~Payment~~ For payment under subsection (4)(d)(i) and (e),

~~shall be made on~~ May 20 of the year following the calendar year for

which the payments are calculated.

(e) ~~Payment~~ For payment under subsection (4)(d)(ii), ~~shall be~~

~~made on~~ November 30, 2018, and for payment under subsection

(4)(a)(vii) and (viii), November 30 every year.

(9) If the authority has insufficient funds to make the

payments on the dates required in subsection (8), the department

shall advance to the authority the amount necessary for the

authority to make the required payments. The authority shall repay

the advance to the department from the local community

stabilization share.

(10) For each fiscal year from fiscal year 2015-2016 through

fiscal year 2018-2019, the authority may use up to $300,000.00 of

the local community stabilization share revenue for purposes

consistent with implementing and administering this act. For each

fiscal year after fiscal year 2018-2019, the authority may use, for

purposes consistent with implementing and administering this act,

local community stabilization share revenue up to the amount of

local community stabilization share revenue authorized for use

under this subsection for the prior fiscal year multiplied by 1.01.

(11) The authority shall distribute local community

stabilization share revenue under this section as follows:

(a) From fiscal year 2015-2016 local community stabilization

share revenue, $19,200,000.00 for calendar years 2014 and 2015 and

$76,900,000.00 for calendar year 2016.

(b) From fiscal year 2016-2017 local community stabilization

share revenue, $297,400,000.00 for calendar year 2016 and

$83,200,000.00 for calendar year 2017.

share revenue, $321,500,000.00 for calendar year 2017 and

$89,000,000.00 for calendar year 2018.

(d) From fiscal year 2018-2019 local community stabilization

share revenue, $341,800,000.00 for calendar year 2018 and

$95,900,000.00 for calendar year 2019.

(e) From fiscal year 2019-2020 local community stabilization

share revenue, $364,500,000.00 for calendar year 2019 and

$101,400,000.00 for calendar year 2020.

(f) From fiscal year 2020-2021 local community stabilization

share revenue, $383,500,000.00 for calendar year 2020 and

$108,000,000.00 for calendar year 2021.

(g) From fiscal year 2021-2022 local community stabilization

share revenue, $405,700,000.00 for calendar year 2021 and

$115,600,000.00 for calendar year 2022.

(h) From fiscal year 2022-2023 local community stabilization

share revenue, $428,300,000.00 for calendar year 2022 and

$119,700,000.00 for calendar year 2023.

(i) From fiscal year 2023-2024 local community stabilization

share revenue, $438,900,000.00 for calendar year 2023 and

$122,800,000.00 for calendar year 2024.

(j) From fiscal year 2024-2025 local community stabilization

share revenue, $445,800,000.00 for calendar year 2024 and

$124,000,000.00 for calendar year 2025.

(k) From fiscal year 2025-2026 local community stabilization

share revenue, $447,100,000.00 for calendar year 2025 and

$124,300,000.00 for calendar year 2026.

(l) From fiscal year 2026-2027 local community stabilization

share revenue, $447,700,000.00 for calendar year 2026 and

$124,500,000.00 for calendar year 2027.

(m) From fiscal year 2027-2028 local community stabilization

share revenue, $448,000,000.00 for calendar year 2027 and

$124,600,000.00 for calendar year 2028.

(n) From the local community stabilization share revenue for

fiscal year 2028-2029 and each fiscal year thereafter, the

authority shall increase the prior fiscal year's 2 distribution

amounts under this subsection by the personal property growth

factor, the first amount for the calendar year in which the fiscal

year begins and the second amount for the calendar year in which

the fiscal year ends. As used in this subdivision, "personal

property growth factor" means that term as defined in section 2c of

the use tax act, 1937 PA 94, MCL 205.92c.

Sec. 18. (1) Beginning in fiscal year 2015-2016, and each

fiscal year thereafter, the department shall determine the amount

of the distributions under this act, except for the payments under

section ~~17(4)(d)(~~ii).17(4)(a)(vii) and (viii) and section

17(4)(d)(ii).

(2) Each municipality shall submit to the department

sufficient information for the department to make its calculations

under this act, except for the payments under section ~~17(4)(d)(~~ii),

17(4)(a)(vii) and (viii) and section 17(4)(d)(ii), as determined by

the department.

(3) The department shall annually make the distribution

calculations, except for the payments under section ~~17(4)(d)(~~ii),

17(4)(a)(vii) and (viii) and section 17(4)(d)(ii), and the

commercial personal property and industrial personal property

taxable values available on the internet.

(4) For calendar year 2018, each municipality may review the

prior year distribution calculations that the department posted on

the internet to determine if there are any errors in reporting

under section 13(4) or any calculation errors made by the

department. For calendar year 2018 and subsequent calendar years,

each municipality may review the current year distribution

calculations that the department posted on the internet to

determine if there are any errors in reporting under section 13(4)

or any calculation errors made by the department. A municipality

may notify the department of any errors identified by providing

substantiating documentation to support an adjustment to the

payment amount by March 31 of the year following the calendar year

for which the payments are calculated, except that for errors

identified in calculations under section 13(5) for the current

calendar year, a municipality shall notify the department by August

1 of the calendar year for which the payments are calculated. Upon

the department's review of the substantiating documentation and

verification of the errors, the department shall calculate an

underpayment or overpayment amount in accordance with section

17(5). The department shall determine if the substantiating

documentation is sufficient.

(5) Each municipality may review the annual commercial

personal property and industrial personal property taxable values

posted by the department on the internet to determine if there are

any errors in reporting under section 13(3) or any calculation

errors made by the department. A municipality may notify the

department of any errors identified by providing substantiating

documentation to support an adjustment to the payment amount, as

described in subdivisions (a) to (e). Upon the department's review

of the substantiating documentation and verification of the errors,

the department shall calculate an underpayment or overpayment

amount in accordance with section 17(5). The department shall

determine if the substantiating documentation is sufficient. Error

notifications under this subsection are subject to the following,

as applicable:

(a) For the 2013, 2014, and 2015 commercial personal property

and industrial personal property taxable values, as reported by the

county equalization director in calendar year 2015 under section

13(3), municipalities must report any inaccurate commercial

personal property and industrial personal property taxable values

to the county equalization director by August 1, 2018, except as

provided in section 17(6). County equalization directors shall

notify the department by August 13, 2018, of any corrected 2013,

2014, and 2015 commercial personal property and industrial personal

property taxable values, by providing substantiating documentation

to support the corrected values.

(b) For the 2013 and 2016 commercial personal property and

industrial personal property taxable values, as reported by the

county equalization director in calendar year 2016 under section

13(3), municipalities must report any inaccurate commercial

personal property and industrial personal property taxable values

to the county equalization director by February 28, 2019, except as

provided in section 17(6). County equalization directors shall

notify the department by March 29, 2019, of any corrected 2013 and

2016 commercial personal property and industrial personal property

taxable values by providing substantiating documentation to support

the corrected values.

property and industrial personal property taxable values, as

reported on July 10, 2017, under section 151(1) of the state school

aid act of 1979, 1979 PA 94, MCL 388.1751, municipalities must

report any inaccurate commercial personal property and industrial

personal property taxable values to the county treasurer by

February 28, 2019, except as provided in section 17(6). County

treasurers shall notify the department by March 29, 2019, of any

corrected 2013, 2014, 2015, and 2016 commercial personal property

and industrial personal property taxable values by providing

substantiating documentation to support the corrected values. For

purposes of this subdivision, the corrected 2013, 2014, 2015, and

2016 commercial personal property and industrial personal property

taxable values shall be the current taxable values on July 10,

2017.

(d) For the 2013 and 2017 commercial personal property and

industrial personal property taxable values, as reported by the

county equalization director in calendar year 2017 under section

13(3), municipalities must report any inaccurate commercial

personal property and industrial personal property taxable values

to the county equalization director by February 28, 2019, except as

provided in section 17(6). County equalization directors shall

notify the department by March 29, 2019, of any corrected 2013 and

2017 commercial personal property and industrial personal property

taxable values by providing substantiating documentation to support

the corrected values.

(e) For 2018 and subsequent years' commercial personal

property and industrial personal property taxable values, as

reported by the county equalization director by May 31 of each year

under section 13(3), municipalities must report any inaccurate

commercial personal property and industrial personal property

taxable values for the current year to the county equalization

director by February 28 of the following year. County equalization

directors shall notify the department by March 31 of each year of

any corrected prior year commercial personal property and

industrial personal property taxable values, by providing

substantiating documentation to support the corrected values.