We thought this email and out response would be of interest to more than the person that contacted us.

I’m writing in response to the article written by Mr. Lupher, president of the Citizens Research Council of Michigan, which appeared in the June 20 edition of the Detroit News.

I am certainly no fan of excess taxation, believing that there are plenty of cases in which government entities, not bearing the burden of competition for revenue that the private sector has to face, are not always as frugal as they could be in how they spend taxpayer money.

I will admit that the article was informative in how Township taxation works, but it has left me with a few questions.

For starters, Mr. Lupher describes “property taxes” as those things which fund “services such as police, and fire, libraries”, etc., and that these taxes are based on (a percentage rate of) “the value of our land and buildings. 

He then goes on to describe a financing tool described as the “special assessment” which he states is used when a “township creates a new road, builds a dam, installs new sidewalks, invests in street lighting or drains,”.   These are “used as a means of recouping the cost of these infrastructure improvements by apportioning at least a share of the cost among those benefiting from the projects”.  

I get that there is a difference, although exactly what method of determining how much to recoup from each of those deemed to be benefiting from the project isn’t stated.   Does the government entity take the total bill for an infrastructure project and split it up somehow among those who are deemed to have benefitted?  And if so, how might that be done?  Is some arbitrary amount selected for each beneficiary,  or is some “rate” determined and applied to the “taxable value” for all those entities?   This isn’t described.

In the next paragraph Mr. Lupher mentions a 1951 law (which was presumably legally passed by the Legislature) which “allowed special assessments to be based on the value of the property, like a property tax”.   This appears to answer my question above, but begs the question of how the bill for a person or entity against whom a special assessment was levied was previously determined.   A property value based system as described certainly seems to be a much more objective way to split the bill.

The 1951 law also appears to have “allowed revenue from special assessments to be used to pay for the most basic of local government services, police and fire protection.  Furthermore it allowed the special assessments to be apportioned on all properties in the jurisdiction.”

So what exactly is the problem here?

Mr. Lupher goes on to state that “state law limits charter townships to 10 mils of taxation.”   And that “Canton Township in Wayne County is able to levy 12.3 mils (2.8 mils of property tax and 9.5 mils of special assessment”).

What is NOT clear in the article, (perhaps an unintentional omission) is whether the 10 mils of taxation mentioned above is intended to be applied ONLY to “property tax” OR is it intended to apply to the combination of BOTH “property tax” AND “special assessments”.

So what does the law say?  Are special assessments legally supposed to be considered in the 10 mil limit or is the law silent on the matter?

If the FORMER is true, then as a 43 year resident of Canton Township, I can state with certainty (I’ve done my own research), that in that 43 year period, the total COMBINED tax rate levied by the township (for “TOWNSHIP, LIBRARY, FIRE, and POLICE) has exceeded 10.0  for 37 of those 43 years.  That includes every year but one since the 1983-1984 tax year, and once in 1979-1980.  It has exceeded 11.0  for 18 of 43 years, specifically continuously since 2010 – 2011,  and two separate 4 year periods, 1986-1990 and 1994-1998.  And it has exceeded 12.0 only for each of the last six years.

So are you saying that Canton Township has been in violation of State Law by exceeding the 10 mil limit for effectively the last 37 years and nobody noticed???  

Or does the 1951 (or other law) EXEMPT “special assessments” from inclusion in determining the total?

I’m certainly in favor of requiring the Township to follow the law, but are they in violation and have they been for 37 years??

Finally the article states that “The Headlee Amendment to the state constitution requires tax rates be ‘rolled back’ if property tax values increase faster than the rate of inflation.”

That is simply not true.  The Headlee Amendment doesn’t affect the tax RATE at all.   What it DOES, is limit the increase in the TAXABLE VALUE of the property to the rate of inflation should that exceed it. The effect may be the same but the method isn’t.  I’d say that is a subtle but clear difference.

Overall I appreciate the CRCM’s intention of providing information and informing citizens of how our government works.   I just feel that the article could have done a better job of presenting the case.

If Canton Township is in violation of LAW then they should be held accountable, but while the article IMPLIES that, it doesn’t EXPLICITLY state whether the law passed in 1951 is being violated or not.  

So does the 10 mil limit INCLUDE “special assessments” or not?

Sincerely,

Canton Charter Township Resident

Our Reply

Dear Canton Charter Township Resident:

Thank you for your email of June 20. Writing op-eds for the newspapers requires a level of conciseness that sometimes comprises details. It is evident from your questions that it affected some key details. My column was meant to call attention to our paper on this subject that covers all of the details.

Your first set of questions involve the special assessment revenue raising mechanism. Special assessments are meant to fund infrastructure. There is a science to apportioning the cost relative to the special benefits a property will receive that really gets down in the weeds. Property value might be appropriate some time but other measures are often better. The cost of sidewalks might better relate frontage (the sidewalk in front of a colonial might be twice the length of that in front of a bungalow) and the cost of water drains may differ based on how far each house is set back from the street and lines that the drains empty into.  

Explaining the problem of these unit-wide ad valorem special assessments is tricky. The governments using them are in compliance with state law, but we think it is a bad law.

The 1951 law cited breaks the relationship to infrastructure. Instead of funding one-time projects, they are funding services that will be provided in perpetuity. In doing so they take on all of the characteristics of the property tax except the name.

Because they work like a tax but are not considered taxes, they are not subject to the tax limitations in the constitution or statute that apply only to the property tax. Charter township residents should be assured that they will not be taxed above 10 mills, but the flawed treatment of ad valorem special assessments skirts this limitation.  All property owners should benefit from the limitations meant to keep them from being taxed out of their homes.  Because the tax limitations do not apply to special assessments, these problems are real.  The local governments are abiding by the letter of the law, but not the spirit of the law. We think the law needs fixed.

In your final point, you are confusing Headlee with the 1994 Proposal A. Headlee applies on a unit-wide basis and says that if the tax base of a city, township, county, etc. grows faster than the rate of inflation then the tax rate must be adjusted so that the net result is an inflationary increase in the tax bill. Proposal A applies to individual parcels and limits growth in value of each parcel to the lesser of inflation or 5 percent.  

If I stipulate that special assessments could be apportioned based on the value of property, to reflect the increased value of an infrastructure improvement (or service), they should be levied on state equalized value (a better reflection of market value) not taxable value.

Our paper and the op ed are meant to bring attention to a state law that we feel is bad policy. The state legislature has authorized unit-wide ad valorem special assessments to provide funding options for local governments. They are in most ways levied like property taxes, but not subject to the tax limitations that property taxes are subject to. These ad valorem special assessments have provided (sometimes) needed funding for local units and allowed state and local officials to avoid addressing the real problem — the broken municipal finance system.

Respectfully,

Eric Lupher, President