Personal Property Tax Exemption to Cost Farmington More Than $56,000
The new state law eliminates the personal property tax for 90 percent of the city's businesses.
The City of Farmington will lose $56,000 from the general fund and $4,000 from the street fund in 2014, as a result of a new state law that creates the most "bizarre and complicated millage and special assessment formula" city manager Vince Pastue said he has ever seen.
Pastue told city council members during a special meeting Monday that, while no one liked the state's personal property tax, which levied a tax on business furnishings and equipment, the new law is very complicated to understand. What's more, if Michigan voters fail to create a state-wide Metropolitan Authority in an August 2014 referendum, the personal property tax will be reinstated.
The Authority would collect around 1 percent of the state's 6 percent Use Tax to reimburse local governments for lost revenues, according to an issue brief published in December by the Senate Majority Policy Office.
The law, which aims to balance elimination of the unpopular tax while replacing the revenue it created for local governments, passed during the state legislature's "lame duck" session. It gives local officials the option to levy an "Essential Services Assessment" on certain manufacturing businesses, but Pastue said the city doesn't have many of those.
If the new law is phased in as written, Pastue said, the city will eventually lose about $250,000. The Personal Property Tax would be completely eliminated by 2023.
"It's very disappointing," Mayor Tom Buck said. "I am not a fan of the Personal Property Tax. I think they could have done a better job of replacing it."
"As a business person, I'm cheering," council member Greg Cowley said. "As a council person, it makes the job that much harder."
Pastue pointed out that Farmington is better positioned than neighboring communities with budgets more reliant on the Personal Property Tax. It accounts for about 7 percent of the city's tax base.