State of Michigan
JENNIFER M. GRANHOLM governor	DEPARTMENT OF NATURAL RESOURCES Lansing	K. L. COOL director

BILL ANALYSIS

BILL NUMBER: SB 1105/HB 5736, as Introduced

TOPIC: These bills would establish limitations in the amount owed for Payments In Lieu of Taxes (PILT) and move PILT to revenue sharing.

SPONSOR: Senator Shirley Johnson

CO-SPONSORS: Senator Robert Emerson

COMMITTEE: Appropriations

Analysis Done: April 1, 2004

POSITION

The Department supports these bills.

PROBLEM/BACKGROUND

The Department has approximately 1,000,000 acres of purchased lands. Currently, the Department makes PILT at the ad valorem property tax rates on these acres from a combination of General Fund and restricted revenue sources. As the value of property continues to increase, as additional mills are levied and more land is purchased, the PILT obligations continue to grow. The restricted revenue portion of the appropriations for the payments have continued to increase accordingly; however, the General Fund appropriations have been insufficient. These bills would reduce and cap the PILT obligations and move the payment obligation to revenue sharing. The manner in which the PILT would be made under revenue sharing is addressed in SB 1104.

DESCRIPTION OF BILL

These bills would do the following:

• Move the PILT to revenue sharing
• Freeze millages for PILT obligations at 2003 levels
• Remove the State Education Tax from the PILT obligation
• Freeze property values at the 2003 level, or for property purchased after 2003, at the initial property level when it was purchased

• No PILT payments under $500.00 would be made

SUMMARY OF ARGUMENTS

Pro

These bills would remove the Department’s PILT obligation and would lower PILT by capping it at 2003 levels and removing the State Education Tax obligation.

Funding the entire obligation from General Fund would free up approximately $4,700,000 Game and Fish Fund, $1,200,000 Natural Resources Trust Fund, and almost $400,000 Waterways revenue that could be directed to Department programs.

Con

Local units of government oppose any reductions in PILT and revenue sharing.

FISCAL/ECONOMIC IMPACT

Are there revenue or budgetary implications in the bill to the --

(a) Department

Budgetary:

The Department’s Fiscal Year 2004 General Fund PILT obligation is expected to be under-funded by almost $3,000,000. If these bills do not pass and PILT does not move to revenue sharing, the Department would have more than a $5,000,000 General Fund PILT shortfall in its Fiscal Year 2005 budget as recommended by the Governor and passed in the Senate. If the Department was required to make up the shortfall, it would cause dramatic programmatic reductions and in some cases elimination.

Revenue:

None.

Comments:

None.

(b) State

Budgetary:

The State would need to allocate additional General Fund to pay its PILT obligations for FY 2004 and FY 2005 if these bills are not adopted. If these bills are adopted, it will result in a reduction in revenue sharing to cities, villages, and townships of approximately 0.7%.

Revenue:

These bills would reduce School Aid Fund revenue by approximately $2,500,000 since the State Education Tax would be removed from the PILT obligation.

Comments:

None.

(c) Local Government

Comments:

Cities, villages, and townships would see their revenue sharing payments reduced by approximately 0.7% in order for the State to pay its PILT obligation. The freeze and cap on the PILT payments would eliminate any future increases in PILT payments to local units of government.

OTHER STATE DEPARTMENTS

The Department of Treasury administers the revenue sharing payments and would administer the PILT payments if these bills become law.

ANY OTHER PERTINENT INFORMATION

The Department’s Fiscal Year 2005 budget passed the Senate under the assumption that PILT would move to revenue sharing.

ADMINISTRATIVE RULES IMPACT

Administrative rules would not need to be promulgated.

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Rebecca A. Humphries

Director

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Date

BSS