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Rep. Ray Franz
By Rob Alway. Editor-in-Chief.
Next Tuesday voters will be asked to decide on Proposal 1, officially known as Michigan Use Tax and Community Stabilization Share. In a nutshell, the proposal is providing an alternative source of income to municipalities in place of the state’s elimination of the personal property tax. It is not a tax increase, however.
Many people who have read the ballot language have stated that the language is confusing.
State Rep. Ray Franz, R-Onekama, was in Ludington Tuesday to talk about the proposal. Franz is encouraging voters to vote yes. Essentially, he said, the proposal is a formality.
“This proposal is about three things,” Franz said. “First, it’s about personal property tax, which most people don’t directly deal with.”
Personal property tax (PPT) mainly affects business and industry. At this time, when a company buys a piece of equipment, it generally pays sales tax on the equipment. It then also is accessed every year by the municipality in which it is based and pays a certain tax on the value of that equipment.
The PPT then accounts for a percentage of a municipality’s income; the state average is 7 percent.
But, PPT is rare among most other states. Many legislators and business people have blamed the PPT for discouraging business and industry from coming to Michigan. The legislature announced a few years ago that it would be eliminating the PPT. This had municipalities scrambling to find how they would replace the income.
“This accounts for 6 percent of our general fund, which is $33,436 a year,” said Scottville City Manager Amy Williams. “Without it, we would have to cut essential services and personnel. We are already at the bare minimum.”
The City of Ludington receives about $589,000 in PPT revenue, about 11 percent of its general fund revenues, according to Ludington City Manager John Shay.
Proposal 1 is a compromise.
“Phasing out PPT will encourage business in Michigan and create new jobs,” Franz said. “But, since PPT is an essential part of local government, we needed to replace it.”
Proposal 1 would take 1 percent of the state’s 6 percent use tax (not sales tax) and put that money into a fund that is controlled by a special authority. The use tax is paid when items are purchased from out of state and brought into Michigan.
“For instance,” Franz said. “If FloraCraft were to buy a new forklift from a company in Illinois. It would pay use tax on that forklift.”
The authority would then use the 1 percent of the use tax and reimburse municipalities based on their PPT assessments.
The reason the proposal had to go to the ballot, instead of made into law by the legislature, is because of the creation of the authority. The authority, Franz said, keeps the control of the money out of the hands of the state government. It is similar to the Mackinaw Bridge Authority. State law prohibits the creation of such authorities without the vote of the people.
Franz said a new authority will not be created. Instead, the existing METRO (Metropolitan Extension Telecommunication Right of Way Operations) Authority — which oversees telephone poles in the public right-of-way, among other items — would be expanded.
“Voting for this is essential,” Franz said. “I know the ballot language is confusing and that is what I’m concerned with. When people don’t understand something they have a tendency to vote no. But, this needs to pass in order to keep our local governments afloat.”
Williams said she fears the failure of the proposal. “The legislature is going to eliminate the personal property tax no matter what,” she said. “If they do that, and there isn’t another source of income, our local governments are in big trouble.”
Franz said there is no organized opposition to Proposal 1.
The primary election is Tuesday, Aug. 5. Polls are open from 7 a.m. to 8 p.m.
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