Sterling Heights City Council: State bills put city revenue at risk

STERLING HEIGHTS — Officials are pushing back against proposed state legislation that would take a nearly $5 million bite out of the city’s annual revenue.

If enacted, the result could lead to reduced city services and higher local taxes.

At issue are eight bills introduced in the Michigan House of Representatives that are tied to overarching legislation aimed at cutting taxes statewide. The legislation was introduced by state Republicans. The package would, among other things, repeal state taxes for schools and on real estate transfers and expand personal property tax exemptions.

According to background material prepared for the June 2 Sterling Heights City Council meeting, the legislation poses a potential negative impact on the city’s revenue, financial planning and administrative operations.

“The main concern for local governments is that this package creates fiscal uncertainty without providing guaranteed long-term replacement funding,” a document submitted by the city’s budget and finance division claimed.

The estimated annual impact for Sterling Heights is close to $5 million, the administration said. Other risks identified include:

• Reduced stability in revenue structures that support local services.

• Possible erosion of the local property tax base.

• Added administrative and reporting requirements for local tax and assessment staff.

• Greater uncertainty in long-range budgeting and financial planning.

In response to the proposed legislation, the City Council unanimously adopted a resolution opposing the bills, saying in part that the city “has a responsibility to protect its residents, businesses, and taxpayers from state actions that could reduce local revenue, disrupt sound budgeting, and threaten essential public services.”

Although officials acknowledged that the legislation is unlikely to ever be signed into law under Gov. Gretchen Whitmer, they believed there was an obligation to speak out.

“I appreciate this being brought to the City Council for our input,” said Mayor Michael Taylor. “We are the closest elected officials to the people. We are more than capable of making requests and even demands on state or federal legislators and I don’t think it’s inappropriate at all that we do that. … I think we should add our voices to the chorus out there saying that this is a ridiculous attempt to cripple cities for some political points.”

Councilman Robert Mijac said he objects to the legislation because it could force Sterling Heights to raise taxes in order to continue providing existing services.

“It’s basically a shift in taxes,” he said, noting that the fallout could be the loss of up to 50 employees and reduction in services.

“You would have to raise taxes in the city to offset (the lost revenue),” he said. “This is a tax shift from businesses to people.”

Councilman Michael Radtke called the legislation “bad policy” and “one more example of the unseriousness of representatives in Lansing.”

“It’s a terrible idea because it’s going to kill your public schools. More than that, it’s going to kill your police and fire departments,” he said. “Look, if we have to cut $5 million from the budget, the first thing we’re going to lay off is police and fire. They make up the largest share of our budget.”

The resolution council members passed calls the proposed legislation “fiscally irresponsible.”

“When the State reduces tax revenue without guaranteed replacement funding, the costs do not disappear; instead, the financial burden is shifted to local governments, which may then be forced to cut services, delay projects, place pressure on staffing, or seek other revenue sources,” the resolution reads. “The City Council finds that these bills create serious financial risk for local governments and could weaken the ability of municipalities across Michigan to plan responsibly and continue providing essential public services.”

Lawmakers who represent Sterling Heights in the Legislature, however, said the legislation is desperately needed.

“Michigan’s affordability crisis demands bold action. I voted for the largest tax relief plan in state history because families need help now,” state Rep. Ron Robinson, R-Utica, said in a statement to C & G Newspapers. “This plan would deliver immediate and lasting tax relief for homeowners while also lowering monthly electric bills for everyone. I appreciate the City Council looking out for their budget, and so am I. That’s why this plan completely protects schools and local governments.”

Republican state Rep. Tom Kuhn, whose district covers portions of Sterling Heights, Troy and Madison Heights, said in a phone interview that he supports the tax reform effort.

“Sterling Heights residents deserve a break,” he said. “They’re paying more for groceries, utilities, housing and just about everything else.”

As of June 4, Kuhn said he had not been contacted by Sterling Heights officials regarding the legislation. “They haven’t called me, and I haven’t heard from them. So I can’t tell you what their concerns are.”

The city’s resolution specifically targets House Bills 5872, 5873, 5874, 5875, 5876, 5877, 5878 and 5879. It notes that lawmakers have not sufficiently explained how the city would be held harmless from losing money.

“It is the Legislature’s intent to appropriate general fund dollars each year to replace the lost revenue,” the resolution says, “which is not the same as a permanent legal guarantee.”