Tax collections lag economic recovery
Clear signs of an improving economy are seen on many fronts these days, but in West Michigan at least, property tax collections tend to lag behind the growth rate of income tax revenues.
Grand Rapids City Income Tax Administrator John Schaut said, as of June 20, “net income tax receipts increased by $1,233,715, or 1.9 percent, over where we were the same period a year ago. We are tracking with the city’s FY2014 budget projection of a 1.5 percent increase in net income tax revenues.”
Property values in Kent County, however, are far below their high point prior to the start of the recession, according to county officials.
“Right now we’ve projected a modest increase (in property tax revenue) for 2015,” said Kent County Administrator/Controller Daryl Delabbio.
The current general fund budget is premised on expected 2014 property tax revenues of $82.6 million, while the number now projected for next year is between $84.25 and $84.5 million.
“Any increase we get is really based modestly on an increase in property values, but also any new construction — and we haven’t seen a whole lot of that activity yet,” said Delabbio.
Delabbio noted that tax collections by local units of government in Michigan generally lag behind the cycles of change in the economy by a couple of years, “so as the economy is going down, we lagged by a couple of years” before the full impact was felt.
“And as it starts to improve again, we lag by a couple of years.”
County Treasurer Ken Parrish said the anticipated 2014 increase over the $82.6 million in 2013 is so slight as to be “virtually flat.”
Parrish said the county’s highest property tax collection was in 2009, “when we brought in approximately $86,600,000.”
Changes in income tax revenue take place much more quickly than property tax changes, according to Parrish, and since the county only collects property tax, a turnaround “is sort of like turning a cruise ship instead of a speedboat.”
Grand Rapids City Assessor Scott Engerson said there may be an increase in 2014 in the size of the city’s taxable value of all real and personal properties — the first since 2009. But at an estimated 0.12 of a percent increase, he characterizes it as “very, very slight.”
According to his records, in 2008 the taxable value of real and personal property increased by 2.65 percent over the prior year. (Less than 4 percent is personal property, the rest is real property.) The decline began in 2009, with a drop of 0.25 percent. Each year after that was another decrease in the tax base: 2.88 percent in 2010, 2.68 in 2011, 2.76 in 2012 and 2.43 in 2013.
Engerson notes the actual assessed value of real property is now beginning to increase, but that is not fully reflected in tax collections because Proposal A passed by voters in 1994 caps increases in taxable value set by local government, the cap being the inflation rate or 5 percent, whichever is less.
According to MichiganPropertyTax.org, before 1994, property was valued for tax purposes at half its market value, the result being called its State Equalized Value, or SEV. Proposal A limited the growth of property tax assessments and also shifted some of the tax burden from property to the sales tax, which rose from 4 percent to 6 percent.
“Our tax revenues are very limited since the passage of Proposal A,” said Engerson.
Grand Rapids’ ten highest taxpayers
According to the city of Grand Rapids 2014 Assessment Roll Report, the 10 highest taxpayers in the city (both real and personal property) and their respective taxable values are:
Consumers Energy, $68.8 million
Spectrum Health Hospitals, $43.2 million
Amway Hotel Corp., $37.1 million
HP3 LLC (JW Marriott Hotel), $23.9 million
Centerpointe Partners LLC, $23 million
DTE Gas Co., $20.1 million
Fifth Third Bank, $19.5 million
Steelcase Inc., $18.3 million
Meijer Inc., $16.8 million
Autodie LLC, $15.3 million
The taxable value is multiplied by the millage rate to calculate the amount of tax paid, but millage rates vary depending on the type of property and investment incentives.