Proposed Tax Elimination Could Hurt Dearborn Libraries, City Revenue

The Michigan Legislature is poised to take up legislation to eliminate personal property tax on Wednesday.

A package of bills pending in the Michigan Legislature that will pare about $600 million in tax dollars paid by businesses that benefit municipal entities could result in big cuts within the City of Dearborn if there is no mechanism put into place for revenue recovery.

The legislation—which would eliminate the tax businesses pay on equipment—is gaining favor as a way to stimulate the state economy, but for local governments, the potential loss of yet another revenue source is a daunting one. If passed, they would work in a phased-out approach, with Dearborn's revenue losses beginning in 2015.

It's expected that the bills will be taken up by the state Senate as early as Wednesday, according to Dearborn Sen. Morris Hood.

What does Dearborn stand to lose?

Based on the city’s total taxable value, Dearborn would lose $12.9 million in operating revenue and $492,274 in city facility debt service, for a total of $13.4 million in losses. If the federally mandated combined sewage overflow debt service is added, the total would rise to $17 million.

Additionally, Dearborn Public Schools could lose upwards of $2.5 million.

One of the areas that could be heavily impacted is the Dearborn Public Library system, which would lose up to $780,000 in revenues from its dedicated 1-mill if the proposal is approved in the lame duck session, according to the Dearborn City Assessor’s office.

The mill now generates around $3.4 million in revenue for the system, which has a $5.45 million annual budget.

Library Director Maryanne Bartles said the funds could trigger the closing of one, or possibly both, of the satellite branches.

“It would be a tremendous hit,” she said. “I’m not ready to concede that, if it comes to pass, there won’t be replacement revenue. But it’s a lot of money and there’s no other place to cut, so it would likely mean that we’d have to look at closures. But it’s not something we want to do.”

Cautious optimism about revenue replacement

As the bill is written, there is potential for revenue replacement if personal property tax is done away with.

Rep. George Darany (D-Dearborn) explained that revenue replacement would happen through a complex reimbursement mechanism that would be set up by the state.

"It depends on who you believe, but we think there could be 80 percent of revenue replacement over time," he said. "But I don't think there's any way that this package of bills will move through both chambers with 100 percent revenue (replacement)."

Dearborn Mayor Jack O'Reilly said Tuesday night that he's cautiously pleased to hear that options for revenue replacement are a part of the package at this time.

"Compared to where we’ve been … if the replacement of things work the way they’re intended to, it’s not going to be a huge impact," he said.

However, O'Reilly thinks the bill needs more work to hash out exactly how that revenue replacement will happen.

"In a perfect world, they know (the legislation) is not ready," he said. "The best case would be to wait and do personal property in the next session, but I don’t think that’s going to happen."

Dearborn will have three years to sort out replacing the revenue.

Bartles said that it’s likely, if the funding losses are significant, there could be time to identify solutions at the local level because the impact of the change will not felt immediately.

“Dearborn has a history of having branch library system; it’s something the public is used to,” she said. “I’ve been doing this for 40 years, and in that time we’ve had ups and downs. But I’ve never seen something like this.”

Ben Bachrach December 12, 2012 at 12:44 PM
The whole funding mechanism for cities needs to be changed. The amount of taxes the city raises should not be determined by assessments that as we have learned can go up and down. The ability for a home owner to pay a property tax do not change when the assessment of their house changes. We could get rid of the whole assessors office, and all the related appeal activities, and remove opportunities for corruption by setting tax rates based strictly on the square footage of the property. The city council should set the total property taxes needed through its budgeting process, then each properties tax would just be its faction of the city's total square footage. Such a system would also result in the optimal use of land in the city. Since how the land was used would not affect the taxes assessed, so people would have incentive to maximize the utility of their property.
Pam December 12, 2012 at 12:55 PM
"Sort out replacing the revenue" means huge increases in residential and commercial real estate millages. This is a disaster for Dearborn, which relies on this tax much more than other communities. I can't wait for the arguments to begin that businesses will use savings on this tax to hire more workers.
laplateau December 12, 2012 at 01:24 PM
If O"Reilly is worried about a loss of revenue, why does he continue to insist on buying a new building for city hall? Just recently, voters in Dearborn voted to change our Ciry Charter to allow a higher millage rate that O"Rielly insisted we needed because of our loss of revenue from state and federal sources. We beleived him and voted in favor of higher taxes. The several months later he buys a new building for his new digs and wants to abandon city hall before he has any signed agreement to sell. STIIL doesn't have any sale agreement. Dishonest and misleading regarding the new millage rate and the need for it...YOU BET. More than dishonest..I would call it lying! O"Rielly and his go-along-to get along council need to go!
bitsy08 December 12, 2012 at 02:37 PM
Dearborn's not the only one with a Mayor who says one thing and does completely the opposite. Dearborn Heights mayor (I don't capitalize it because he doesn't deserve it) made initial cuts before we voted in the Headlee Override and promised more would be coming. Have we gotten any? Absolutely not. And he wants to run again when his term is up in December 2013. As to Dearborn's problems, don't be surprised that this "lame duck" session votes it in. They've been continuously running over us from the get go. Now do you see why voting in a business man as Governor was the wrong thing to do? He's for business. Not for us.
Maureen Pawelek December 12, 2012 at 03:11 PM
Will the last one out of Dearborn please turn off the lights? Oh....wait. By the time this Republican legislature and governor are done with us the lights will have been shut off anyway due to unpaid electric bills. But don't worry! THEY'LL still get paid! And their campaign coffers will continue to get filled by corporations and billionaires while they continue to march Michigan towards third-world status. They are a disgrace to the hardworking people of this state. Shameful.
laplateau December 12, 2012 at 04:58 PM
Gee Maureen...those huge Repblican coffers you refer to that are filled with money from corpoaratins and rich people...well seesm the Dems out-spent enough from their union and special interest group to stay in the White House. What is it these day that progressives like Maureen seem to think being rich is a societal sin, and gee, corporations, well they should be destroyed! Maureen and most othrs that rail against rich people wlould, in the blink of an eye, be rich themselves if they could. People do one of 3 things with their money...A. Spend it, B, Save it, and C. Invest it. Maureen, I don't thnk anyone burns it. Now, rich people have more money so they spend more moeny..cars, buliding their large homes, buying goods and service. All those things put money into the system (non-government money). Someone has to build the homes, the car, and provide all the other goods and srervice they want. That helps provide jobs, retail jobs, skilled trade jobs, jobs in the service industry, and LOTS of tax revenue!
laplateau December 12, 2012 at 04:59 PM
And Maureen, Saving money also is healthy for the economy. It puts money into banks that helps provide other with loans for the goods and services thye want. Investing in stocks and bonds are great because it provides capitol for the companies they are investing in with funds to expand their busnesses, thereby creating more jobs. So you see Maureen, we need more rich people and corporations and you should not be demonizing them. You are simply spouting a bunch of left wing tripe that does no one any good.
POWDERBURNER December 12, 2012 at 09:14 PM
So, did some of you misguided individuals just crawl off the SS AMERICAGOODGOOD and bang your head on a rock and got some enlightenment? You keep voting for these idiots but life ain't so sweet when it affects you. Now you know how 6 million feel about obongo and his welfare state mentality. I got food, water, shelter, and defense mechanisms, I don't care. This city is only a bump in the road. And in waco, we have many.
POWDERBURNER December 12, 2012 at 09:22 PM
Here we go with the anti - republican blah - blah goose step speak. Have you ever taken a serious look at how years of democrat control harms a city? Like decades of coleman young in Detroit, or the last crook, kwame, who those idiots would vote for agin' 'cuz he been done wrong by the man... What's disgraceful is while we can recover from the temporary dwellers of public orrifice and their policies, we'll never recover from the attitude of the socialists who elected them. CLOSE THE BORDERS.
Nickel December 13, 2012 at 04:23 AM
I did not even read this article. All I could think of was the city council giving approval to the Chief of Police to create 2 new positions (captains) where they make 8% more in salary than a lieutenent. What a screwed up city. By the way, the police union negotiated a contract that requires a staffing in the police department that equals what it was before the voters amended the City Charter back in 2004. Charter says staffing should be at 205, currently the city has 184 police officers, same as 2004.
Nickel December 13, 2012 at 04:26 AM
Laplateau is right on. TIME for a change. TIME FOR A CHANGE! Does this mayor and council really think through how they spend their money?


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