Property ValueTax Gap Growing

May 14, 2004
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GRAND RAPIDS — The Citizens Research Council of Michigan reported the monetary distance between the state equalized value, which is supposedly half a property’s cash value, and a land’s actual taxable value is growing larger.

For local jurisdictions, the widening gap means townships and cities are capturing fewer property tax dollars at a time when most governmental units are scrambling to balance their annual budgets.

“It’s a growing problem,” said Don Stypula, executive director of the Grand Valley Metro Council, the region’s planning agency with 32 local communities onboard.

The 21 townships and nine cities in Kent County captured 86 percent of the SEV in 2003. Only four of the 30 units, or 13 percent, had their taxable value reach or exceed 90 percent of their SEV last year.

Cascade Township led that short list with nearly 95 percent, while Grandville, Kentwood and Rockford eked above 90 percent.

But more than twice as many units, nine, had less than 80 percent of their SEVs in their taxable values for 2003. Bowne, Lowell, Nelson, Oakfield, Solon and Tyrone townships fell into that group. So did East Grand Rapids and the city of Lowell.

The widest gap, however, between SEV and taxable value was in Grattan Township. There the TV was at 69.8 percent of the SEV for last year’s property tax roll.

The city of Grand Rapids had a taxable value that was slightly under the county average at 84.7 percent. (See related chart at bottom of story.)

The dollar difference between the SEV and the TV for all of Kent County last year was $2.74 billion. For Grand Rapids, that figure was $102.3 million.

According to the Citizens Research Council, the dollar gap is growing because an increase on the taxable value of a property has been held to the inflation rate since 1995. Only once since then has that rate exceeded 3 percent. It was under 2 percent for two of those years. Home values have risen at a much higher rate.

The council reported that the passage of Proposal A in 1994 is largely responsible for the gap between the two. It limits a property tax hike to whichever is lower: the inflation rate or 5 percent. And since 1994, the rate of inflation has easily been under 5 percent.

The report from the council added that if properties were taxed at the SEV, communities across the state would see their property tax revenues climb by more than 18 percent.

The finding from the Livonia-based research council mirrored a recent report that Plante and Moran did for the Michigan Municipal League. The MML study said that Lansing’s fiscal policy was leading townships, cities and villages toward financial ruin by forcing rollbacks to their millage rates.

The current fiscal policy, according to the study, also punishes communities that try to improve their properties.

“If a community is doing everything it can to become a type of community that everyone will want to come to, and the property values rise, it will be hurt more. The better it does in terms of developing that type of a city, the worse it is punished,” said Summer Minnick, a legislative associate with the MML.

Stypula said a new bill on home sales, which could help close the tax-dollar gap, got updated recently for the third time and could be going to a House committee soon. He also said that he would be inviting those who wrote the MML report to a Metro Council meeting in the near future to explain the complexities of that study.

In the meantime, Stypula said the council would continue to try to help lawmakers understand how their fiscal policies undermine local units of government.

“It’s a matter of education,” he said. “That’s all it is.”           

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