Above: The Ingham County courthouse.
East Lansing voters who are tuned in to ELi already know that on November 7, they can vote on City Council membership and the paired local proposals for a City income tax and City property tax reduction. Many may not realize that, for East Lansing voters who live in Ingham County, there will be another item on the ballot: a question about whether to raise Ingham County property tax rates.
The Ingham County proposal, called “Establishing Separate Tax Limitations for Ingham County, the Townships and the Intermediate School District,” asks voters whether the County should return the aggregated millage rate to 8 mills. That was the amount that voters approved back in 1970. This aggregated millage rate includes Ingham County, townships (for those who live in one), and Intermediate School District millages. Currently these combined millages bring in approximately 7.5 mills.
According to an information sheet provided by Ingham County, if the proposal passes, for a house with a taxable value of $50,000 (that is, a house with a market value of about $100,000), the taxes would go up about $19 per year. The average taxable value of a house in East Lansing is closer to $90,000 (about $180,000 in market value), which would mean an increased liability of about $35 per year.
Why did the aggregated millage rate fall since 1970? The change in rate is due to the effect of the Michigan Constitutional Amendment known as the Headlee Amendment. Ratified in 1978, the Headlee Amendment says that if property values go up community-wide at a rate greater than inflation, the millage rate must be “rolled back” so the total taxes paid are not allowed to grow at a rate faster than inflation.
When the Headlee Amendment was originally passed, there was a provision allowing local governments to “roll-up” their millage rates when property values increased faster than inflation, allowing communities who had experienced a dip in property values to reclaim some of their property tax revenue as the economy improved. Millage rates could only be raised up to the previous maximum. But this provision was eliminated in 1994 when Proposal A was adopted.
Property values in Ingham County (including East Lansing) took a large dip in 2007 when the recession hit. For the most part, property values in Ingham County have recovered to pre-2007 levels, but under Proposal A, the income generated from property taxes has been limited to a 5% increase over the previous year’s tax revenue (or inflation, whichever is lower).
Ingham County Commissioner Teri Banas describes property tax revenue in the County as “stagnant.”
In addition to stagnant property tax revenues, “more and more property is being exempted from tax,” according to Ingham County Commissioner Mark Grebner, “by various mechanisms like brownfield credits, and tax increment financing. So, every year, we have to shave a little bit from the services we provide.”
Grebner is referring to properties whose taxes are being diverted through tax increment financing (TIF) plans to reimburse developers and municipalities for expenses related to redevelopment. East Lansing has a large number of TIF plans which are diverting taxes that would go to Ingham County, the Intermediate School District, Lansing Community College, CATA, and East Lansing’s general fund, using those taxes instead for large-scale real estate redevelopment. East Lansing’s City Council recently approved a $55 million TIF for the Center City District Project and a $1.5 million TIF for the Costco store. In the case of Center City, County taxes will be diverted for 30 years, and in the case of Costco, for up to 15 years. Meanwhile, some properties owned by non-profits, like Michigan State University, produce no property taxes.
The County is also facing the problem of unfunded pension liability. Readers who have been following ELi's coverage on the proposed income tax will be familiar with East Lansing’s problems with unfunded pension liabilities. The same retirement system mandate that is forcing East Lansing to act more aggressively to fully fund its pension liabilities is having the same affect at the County level. So, just as East Lansing is facing a budget crisis over the need to put more money into retiree obligations, so is Ingham County.
“We were getting along, if not really well, until we were told we had to put away increasingly large amounts of money to fund pension and retiree healthcare, which we had previously been allowed to pay as we went,” says Grebner. “The Finance Committee has recommended that if the voters approve the [County ballot proposal] this November, we’ll use virtually the entire amount to cover the pension and retiree healthcare costs.”
The Ingham County ballot proposal, if it passes, will result in about $2.77 million more revenue per year for Ingham County.