County will try to find tax replacement

September 2, 2011
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One Kent Coalition’s proposed consolidation legislation wasn’t the only issue county officials spoke about with local legislators last week. The almost certain demise of the state’s personal property tax, which business owners pay annually, was also a topic for discussion.

But what county officials heard wasn’t what they wanted to hear.

County Administrator and Controller Daryl Delabbio told lawmakers that the personal property tax is worth $9.9 million in revenue to the county’s general operating fund each year. “It’s such an important source of revenue for us,” he said.

Without that revenue source, Delabbio said the county would have to cut its $160 million general fund by roughly $10 million. The county has already cut operational spending by almost $20 million from 2007 through this year. “To put another $9.9 million on top of that would be devastating,” said Delabbio.

But state Rep. David Agema, R-Grandville, said the overwhelming consensus in Lansing is the tax has to go. Agema, a former consultant to small businesses, said companies shouldn’t be forced to pay a tax on the same piece of machinery year after year.

“This one is going to be pushed,” Agema said of the personal property tax. “If you put this before us right now, we’d get rid of it in a heartbeat.”

So the only apparent option left for the county and other jurisdictions that collect property taxes is to come up with a replacement tax to make up for the lost income. Gov. Rick Snyder hasn’t offered one but has said a replacement shouldn’t affect business revenue. Legislative leaders haven’t publically come up with another revenue generator, either.

“It takes careful research and analysis to come up with a replacement. The issue is how do we get through that difficult transition time?” said Michael DeVries, Grand Rapids Township supervisor, who added that the state needs to create a replacement. Delabbio said he doesn’t have an idea on what type of tax could fill the gap from losing the personal property tax revenue. He said county officials would try to come up with one — but he also said if the state is going to take it away, then the state should replace it.

Then he made the lawmakers an offer. “You take over the courts and you can have the personal property tax and revenue sharing,” said Delabbio.

The personal property tax and revenue sharing from the state total about $22 million each year, but the county doesn’t receive its full revenue-sharing payment every year, which is supposed to be $12 million, as next year it’s expected to be around $9 million.

This year, the county is spending roughly $17 million from general operations on the state’s circuit court system, so trading the personal property tax and revenue sharing for a Lansing takeover of court operations would pretty much be a push. But Delabbio’s offer didn’t draw a response from state lawmakers.

The personal property tax represents nearly 9 percent of the county’s total property-tax revenue. Commercial businesses account for $4.2 million of the $9.9 million the tax draws in, while manufacturers pay $3.9 million. The rest comes from utilities.

Delabbio gave state legislators a list of potential spending cuts the county may make if the revenue from the personal property tax is taken away and not replaced. The zoo and parks topped the list at $4.4 million. Then came the sheriff’s road patrol ($2.85 million), prevention funding ($1.6 million), the MSU cooperative extension service ($400,000), fire dispatch service ($400,000), and then the Purchase of Development Rights program and West Michigan Sports Commission at $250,000 each.

“On the personal property tax issue, I think the message was pretty much loud and clear that our state legislators are interested in finding a solution to that. Our role, partly in that, is to help them find some other creative ways that we can create revenue,” said County Commission Chairwoman Sandi Frost Parrish. “So I think we’ll get to work on doing that.”

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