Government and Real Estate

Businesses may have more to do on PPT

Voters who are upset with RTW law can squelch tax break in two years.

December 22, 2012
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Kent County and other local government officials are beginning to crunch the numbers in an effort to determine where they will stand when the state’s Personal Property Tax is first phased out and then eliminated.

It’s not a simple task, due to the innuendos found in current legislation and the alterations that are expected to be made early next year.

“But we’re going to go forward with the worst case in mind, which is what we did for 2013,” said County Administrator and Controller Daryl Delabbio.

However, all that number crunching, not to mention the effort local governments and business groups put into creating the new legislation, could be for naught if voters say no in 2014 when a key element of the bill goes on the ballot. The legislation requires the creation of a new tax authority to distribute the replacement revenue that counties, municipalities and school districts would get to cover the income loss suffered when industrial and commercial machinery and equipment are removed from the tax list.

The revenue the authority would distribute would come from the business portion of the state’s Use Tax. Currently, those dollars go to the state’s general fund, but would be shifted to cover the PPT loss. An initial estimate placed the total at $500 million, or about $100 million short of the projected total loss.

Voters statewide will have to approve the tax shift and the new authority for the legislation to fully take effect, and they may have a reason not to do that, which would mean the PPT would still be in place and industrial and commercial companies would still be taxed.

If the anger toward the way the right-to-work legislation was handled is still alive in two years, many Democratic voters may see their votes on the PPT measure as a way to send a message to the governor and Republican lawmakers for how they maneuvered the RTW bills, which were supported by business groups who will gain from the PPT.

Democrats may have the voting power to do just that. In the November election, voters statewide cast more votes for Democrats running in the state House and U.S. House races. Although Republicans won a clear majority of those seats in both races, it was because of redistricting. The party’s total in both was about 300,000 less than what Democrats received. That large margin was reflected in the presidential and U.S. Senate races, statewide ballots without districts serving as voting boundaries, and Democrats easily won both.

So business groups that supported RTW might have to spend some money to convince voters that approving the tax shift and the authority is in their and the state’s best interest if they want the PPT to go away, and that may be a challenge if many Democrats are still angry in 2014.

As for the PPT’s impact on the county, County Fiscal Services Director Stephen Duarte said the bill guarantees a 100 percent replacement of the revenue for “essential services.” For the county, that means the Sheriff’s Department right now and the jail later, as lawmakers have reportedly agreed to add county jails to the essential category early next year. For municipalities, essential services are defined as police, fire and ambulance services.

Duarte also said the legislation would provide the county with replacement revenue totaling 80 percent of all non-essential services, which is everything but the jail and the Sheriff’s Department. He added that the law allows the county to impose a special assessment on industrial properties above its property-tax millage limit to recover the other 20 percent. But county commissioners would have to approve the assessment. “That’s our understanding,” said Delabbio.

On average, the county receives $10 million annually from the PPT. Not all of that, however, will go away if voters support the ballot measure, because utilities will still be required to pay the tax.

“We’re still trying to determine what that impact is going to be,” said Delabbio, adding that he hopes to have the figures available during the first quarter of next year.

The county, the cities of Grand Rapids and Wyoming, and Ottawa County teamed to provide input into the PPT legislation.

“We were able to develop a much better policy than we would have gotten,” said GR Deputy City Manager Eric DeLong.

“There still is some clean-up work to be done on it,” said GR Mayor George Heartwell. “But this (legislation) is so much better than the original Senate bill.”

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