Clinton Township, Macomb Township
Proposed bond law hands taxpayers debt bill
CVS residents could see property taxes jump
Posted December 21, 2012
CLINTON TOWNSHIP — While not as severe as its earlier version, a bill awaiting the governor’s signature still could mean a steep property tax increase throughout the next couple of years for residents living within heavily indebted school districts.
If signed, residents of the Chippewa Valley Schools district — one of about 60 school districts that would be affected by the bill’s passage — will see their property taxes go up next year. Further, they could see their tax bill increase by $200 within the next couple of years, according to the House Fiscal Agency.
The bill would revise the School Bond Qualification and Loan Program, a program that has been in existence since the 1960s. Through the program, school districts have been able to pay for large capital-improvement projects with bond money borrowed from the program’s revolving fund. The only stipulation was that the districts raise at least 7 mills from its residents to refund the state.
But at least 60 school districts are projected not to refund the program on time. Targeting those districts, the state Senate passed the original version of the bill largely based on the $143 million that CVS now owes the program. A wide range of critics from school superintendents to Republican lawmakers criticized that original version because it placed a $1.8 billion cap on the bond program, which HFA estimated would essentially close the program until 2040 because it estimates the program would not fall below that cap until that time.
Opponents also criticized the bill because, for residents living in one of the 60 districts, it called for a sudden increase in property taxes to meet that deadline.
CVS’ repayment date is 2040. But with the amount it collects annually from the 7.65 mills it levies for debt, it is not projected to pay the state back until 2058, according to HFA. The original bill would have increased the millage to about 10 mills next year, to meet the 2040 repayment date. That would have meant, for a house valued at $100,000, the household would pay an extra $275 a year in property taxes.
While no other school district owes nearly as much as CVS, the impact would have been harder on residents of behind-payment school districts with ever-decreasing house values.
“Some were probably going to hit 13 mills,” said Ben Gielczyk, a senior analyst from HFA.
The current bill, which passed in the House of Representatives and concurred in the Senate before landing on Gov. Rick Snyder’s desk, would peel back the $1.8 billion cap in 2016. Also, it would increase the millage on residents living within one of the 60 districts more gradually, but nonetheless, it would raise taxes.
Sen. John Pappageorge, R-Troy, the original author of the bond program bill, said he immediately supported the modifications made in the House.
“The whole time they were working on it, I was paying attention, and soon as it came over (to the Senate) I said ‘Pass it, guys,’” Pappageorge said. “The changes are necessary, and it softens the blow on Chippewa Valley, for example. They still will have to pay, but it won’t be as stark.”
The millage increase in the bill is based on a formula suggested by CVS administrators.
CVS Superintendent Ronald Roberts said they requested that the formula be included in the bill so that it would have less impact on CVS residents.
The formula, according to the proposed bill, would take into account the percentage of decrease or increase of the district’s property values during the last five years.
“In the first year, whatever change occurred in taxable property value over the last five years, that change will be the (millage) increase in the first year,” Gielczyk said.
Essentially, the Department of Treasury will multiply the percentage of change by the district’s current millage to determine the increase limit.
In the following years, the formula will look only at property values of the previous year. If house values continued to decrease in that previous year, the millage increase for the next year would again be capped. If property values increased even slightly, the millage would jump that year to whatever rate is required for the district to pay back the state on time.
“The second it goes positive, that’s when it bumps up,” Gielczyk said.
As of print time, Snyder had not signed the bill, but Pappageorge believed it was only a matter of time, saying the governor was a supporter of the measure.
Because the degree of property tax increases will be based on future projections, the school district is not sure how the bill would affect its residents.
“I think, when January comes, we’ll really have a clearer picture of how this impacts Chippewa Valley,” Roberts said.
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