For Immediate Release:
January 31, 2013

Contact: Eric Lupher or
Jeffrey Guilfoyle
734.542.8001

CRC Looks at Issues Created by Capture of Taxes

The Detroit Free Press ran a series of articles last week that documented Wayne County communities diverting for their own economic development purposes taxes were levied to support the Detroit Zoo. Other governmental entities have asked the state Attorney General or the courts for clarification of issues similar to those raised by the zoo officials. Now the Citizens Research Council of Michigan has released a brief paper that asks: Can Dedicated Millages and Tax Increment Financing Coexist in Michigan?

Since 1975, Michigan law has authorized cities, villages, and townships to establish special authorities with the ability to “capture” taxes levied within a confined geographic district to be funneled back into that district as an economic development tool. These authorities include Downtown Development Authorities, Tax Increment Financing Authorities, Local Development Financing Authorities, Brownfield Redevelopment Authorities, Historic Neighborhood Tax Increment Financing Authorities, Corridor Improvement Authorities, and Water Resource Improvement Tax Increment Finance Authorities.

Tax increment financing takes tax revenues from where they were intended when they received voter approval and diverts them for economic development purposes. This practice has caused the governments from whom the revenues are being captured to levy taxes at artificially higher levels to yield sufficient revenues for their own purposes. It also creates a shadow government structure wherein resources are directed for economic development purposes without being subjected to the budgetary scrutiny that other resources and expenditures are put through.

“The ability of these authorities to capture the taxes levied by overlapping jurisdictions was tolerated during periods of economic growth and stable growth in the tax bases,” said Eric Lupher, CRC’s Director of Local Affairs. “The contractions of the tax base caused by the housing bubble burst and the scarcity of tax resources seems to have lessened the tolerance of officials in those jurisdictions.”

The full report is available at no cost on the Citizens Research Council’s website, www.crcmich.org.

Founded in 1916, CRC works to improve government in Michigan. The organization provides factual, unbiased, independent information concerning significant issues of state and local government organization, policy, and finance. By delivery of this information to policymakers and citizens, CRC aims to ensure sound and rational public policy formation in Michigan. For more information, visit www.crcmich.org.

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