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HomeMy WebLinkAboutResolutions - 2007.05.24 - 9287MISCELLANEOUS RESOLUTION 107132 May 24, 2007 BY: Finance Committee, Mike Rogers, Chairperson IN RE: BOARD OF COMMISSIONERS - 2007 COUNTY GENERAL FUND PROPERTY TAX AND PARKS AND RECREATION TAX RATES To the Oakland County Board of Commissioners Chairperson, Ladies and Gentlemen: WHEREAS the County has a fixed millage rate of 5.2600 mills (voter approved 8/8/78) and a voter approved (8/8/00 - Term 2002-2011) rate of 0.2500 mill for Parks and Recreation; and WHEREAS Michigan Law (MCL 211.34d(16) permanently reduced the County's Maximum Allowable Tax Rates to the 2007 "Headlee" rollback (Article 9, Section 31 of the Michigan Constitution) tax rates of 4.2240 mills for Operating and 0.2415 mill for Parks and Recreation; and WHEREAS Public Act 42 of 1995, the "Truth in Budgeting" Act, allows the County Board of Commissioners to hold a single public hearing as a prerequisite to approve the Property Tax Levy (including "Truth in Equalization" and "Truth in Taxation" requirements) if the recommended property tax rate is necessary to support the operating budget ; and WHEREAS the Board of Commissioners, upon the recommendation of the County Executive, adopted Miscellaneous Resolution #98217 establishing a 1998 County Property Tax rate of 4.1900 mills, 0.0340 mill less than the 2007 Maximum Allowable Tax Levy as constrained by State law, equivalent to a total tax reduction of $10.7 million in 1998, the tax race of 4.1900, unchanged for tax years 1999 through 2006, has resulted in total tax reduction of $9.6 million in 1999, S7.9 million in 2000, $6.5 million in 2001, $5.0 in 2002, $3.7 million in 2003, 52.6 million in 2004, $2.0 million in 2005 and $2.1 in 2006 respectively, for a nine (9) year total taxpayer savings of $ 50.1 million; and WHEREAS the County Executive recommends that the County 2007 tax rate be set at 4.1900 mills, the same since 1998, 0.0340 mill below the 2007 Maximum Allowable Tax Levy as constrained by State law, equivalent to a tax reduction of $2.2 million, without jeopardizing the County's ability to deliver quality public services; and WHEREAS the Finance Committee recommends that the 2007 County General Fund Property Tax rate be set at 4.1900 mills, 0.0340 mills below the 2007 maximum allowable tax rate; and the Oakland County Parks and Recreation Tax rate be set at 0.2415 mill, the 2007 maximum allowable tax rate. NOW THEREFORE BE IT RESOLVED that each Supervisor of the various townships and Assessing Officers of the several cities of Oakland County are authorized and directed to spread on their respective township or city tax rolls for the year 2007 the following tax rates to be applied to the 2007 Taxable Value of all prcperty located within their respective jurisdictions: July, 2007 County General Property Tax Levy 4.1900 Mills December, 2007 County Parks & Recreation Tax Levy 0.2415 Mill Chairperson, on behalf of the Finance Committee, I move adoption of the foregoing resolution. FINANCE COMMITDEE FINANCE COMMITTEE: Motion carried unanimously on a roll call vote with Potter and Woodward absent. OAKLAND COUNTY, MICHIGAN 2007 BUDGET 2007 TAX RATE COMPUTATION Several State statutes impact the property tax rate computation and setting of the County's Ad Valorem Property Tax Rate, including: • The "Headlee" constitutional tax limitation amendment/P.A. 532 of 1978, adding section 211.34d of the Michigan Compiled Laws, subsequently amended. • The "Truth in Equalization" Act, P.A. 213 of 1981, amending section 211.34 of the Michigan Compiled Laws. • The "Truth in Taxation" Act, P.A. 5 of 1982, adding section 211.24e of the Michigan Compiled Laws, subsequently amended, which is further impacted by Convention Facility and Cigarette Tax Distributions. • P.A. 40, P.A. 41 and P.A. 42 all of 1995 which set forth the Public Hearing requirements for local units of government regarding budget adoption and property taxation to support budget appropriations. A capsule statement of the purpose of each statute as well as the computation of any related rollback fractions are provided in the attached Schedules I, II, III, IV and V. Prior to 1994 "Headlee" and the "Truth in Equalization" rollbacks were compound reductions based on the County's maximum authorized operating levy of 5.26 mills. Since 1995 the calculation of the COMPOUND MILLAGE REDUCTION FRACTION (CMRF) has no longer been required. Because MCL 211.34d (16) states that, starting in 1994, the "Headlee" millage reduction PERMANENTLY reduced the maximum rate(s) authorized by law or charter the current Millage Reduction Fraction (MRF) is all that is required under that section. "Headlee" Rollback Millage Permanently Reduced 2007 Millage Reduction Fraction "Headlee" Authorized Levy "Truth in Equalization" Rollback "Headlee" Authorized Levy 2007 Sec. 211.34 Rollback Fraction Allowable Tax Levy 4.2240 mills 1.0000 4.2240 mills 4.2240 mills 1.0000 4.2240 mills "Truth in Taxation" Rollback The "Truth in Taxation" Base Tax Rate is computed against the millage actually levied in the immediately concluded fiscal year. 2006 Actual Tax Rate 4.1900 mills 2007 Base Tax Rate Fraction 0.9759 2007 Base Tax Rate 4.0890 mills 2007 Adjusted Base Tax Rate mills (See Schedule IV) 1 The Board of Commissioners may levy a millage rate up to the Adjusted Base Tax Rate of 4.0890 mills without holding a Public Hearing. The Board has the further discretion of levying an additional millage rate, up to 4.2240 mills, only after holding a Public Hearing and adopting a separate resolution specifying the Increased Tax Rate (See Page 9 for optional Public Hearing requirements under P.A. 42 of 1995). The Board shall not levy a tax rate in excess of the Allowable Tax Levy of 4.2240 mills without a referendum. 2 SCHEDULE I "HEADLEE" COMPUTATION MILLAGE REDUCTION FRACTION (MRF) The "Headlee" Tax Limitation referendum amended Article IX of the Michigan Constitution by adding Section 31 which, in part, specifies: "If the assessed valuation of property as finally equalized, excluding the value of new construction and improvements, increases by a larger percentage than the increase in the General Price Level from the previous year, the maximum authorized rate applied thereto in each unit of Local Government shall be reduced to yield the same gross revenue from existing property, adjusted for changes in the General Price Level, as could have been collected at the existing authorized rate on the prior assessed value." The tax limitation is computed by determining the Millage Reduction Fraction (MRF)* for the current year. P.A. 415 of 1994 changed the formula for calculating the MRF by substituting Taxable Value (TV) for State Equalized Value (SEV). The Millage Reduction Fraction is not permitted to exceed 1.0000. The new formula is computed as follows: (2006 Total Taxable Value - Losses) X Inflation Rate (2007 Taxable Value Based on SEV- Additions) = 2007 MRF (62,133,415235 — 756.823,904) X 1.037** (64,719,908,597 - 1,829,862,512) = 1.0000 2007 MILLAGE REDUCTION FRACTION = 1.0000 *** • * - P.A. 539 of 1982, effective March 30, 1983, changed the formula for computing the MRF by subtracting losses from the numerator rather than adding losses to the denominator. This makes the computation consistent with the formula used for "Truth in Taxation". • ** - 2006 increase of 3.7% in the Inflation Rate reported by the United States Department of Labor. • *** - P.A. 145 of 1993. amended Section 211.34d (7), specifying that "For each year after 1993, a millage reduction fraction shall not exceed 1.0000". 3 64,719,908,597 64,719,908,597 = L0000 SCHEDULE II "TRUTH IN EQUALIZATION" ROLLBACK FRACTION P.A. 213 of 1981, the ''Truth in Equalization" Act, which applies to counties, villages and other taxing authorities (other than Cities, Townships and School Districts) amended Section 211.34 of the Michigan Compiled Laws so that the taxing jurisdiction would be restricted to an operating levy based on that unit's authorized valuation total rather than a full levy based on the State Equalized Valuation. The Act restricts the County to a levy rate for operating purposes which will yield no more revenue on the total State Equalized Valuation (SEV) of the County than the maximum authorized millage rate would have produced if levied on the total County Equalized Valuation (CEV). There is no provision for removal of the "Truth in Equalization" rollback other than by placing a valuation on County property equal to the State equalized level. Starting in 1995, the language of MCL 211.34 results in a different rollback fraction because taxes will be levied against Taxable Value (TV) not State Equalized Value (SEV). The following is the formula for calculating the "Truth in Equalization" rollback starting in 1995: Total Taxable Value Based on CEV for All Classes Total Taxable Value Based on SEV for All Classes = 211.34 Rollback Fraction 2007 SEC. 211.34 ROLLBACK FRACTION = 1.0000 4 SCHEDULE III "TRUTH IN TAXATION" BASE TAX RATE FRACTION (BTRF) P.A. 5 of 1982, the "Truth in Taxation" Act, added Section 211.24e to the Compiled Laws of Michigan which requires that any local unit of government which levied more than one mill in 2003 shall either reduce its 2004 levy rate to compensate for an increased tax base or advertise its intention to increase property taxes and hold a Public Hearing to allow for taxpayer intervention. No more than ten (10) days after the Public Hearing, the governing body may then increase taxes by a vote of its members, provided that in no case can the levy rate exceed the allowable rate which results from the reduction required by the "Headlee" Amendment (Section 211.34d) and the "Truth in Equalization" Act (Section 211.34). It is important to note that the Base Tax Rate that results from application of the "Truth in Taxation" Act is based on the rate actually levied in the concluding fiscal year whereas the "Headlee" and "Truth in Equalization" rollbacks are based on maximum authorized operating rates regardless of the rate which was actually levied in the preceding year. The primary change in the formula beginning in 1995, due to the implementation of "Proposal A", is the incorporation of Taxable Value (TV) rather than State Equalized Value (SEV). The 2007 Section 211.24e Base Tax Rate Fraction is computed as follows: (2006 Total Taxable Value - Losses) (2007 Total Taxable Value Based on SEV - Additions) = 2007 BTRF 62,133,415,235 — 756,823,940 64,719,908,597 - 1,829,862,512 2007 BASE TAX RATE FRACTION = 0.9759 = 0.9759 5 SCHEDULE IV CONVENTION FACITIY AND CIGARETTE TAX ACTS CONVENTION FACILITY TAX: P.A. 106 of 1985, the "State Convention Facility Development Act", provides for a tax to be imposed on room accommodations in a qualifying convention hotel located in Wayne, Oakland and Macomb Counties. P.A. 58 of 1998, the "Michigan Liquor Control Code", increases the tax on liquor sold to bar owners or retail outlets for consumption off the premises. The resultant revenues, placed in the Convention Facility Development Fund, are distributed to local governments for use as follows: • Acquiring, constructing, improving, enlarging, renewing, replacing or leasing a convention facility. • Repairing, furnishing and equipping the convention facility. • Refinancing an activity listed above. Counties share in the convention facility tax revenues generated by imposition of these acts when these revenues exceed the debt service requirements for convention facilities, as provided in P.A. 106 of 1985. As a result, Oakland County has received the following amounts since 1988: Year Amount 1988 $ 692,768 1989 $ 17.257 1990 $ 248,441 1991 $ 385,708 1992 $ 465,043 1993 $ 445.745 1994 $ 494.404 1995 $ 881.553 1996 $ 1.117.698 1997 $ 1.580.314 1998 $ 1.743.260 1999 $ 2.051.418 2000 $ 2,487.955 2001 $ 2.873.478 2002 $ 3.277.454 2003 $ 2.819.512 2004 $ 2.808.180 2005 $ 2,927.576 Est. The 2004 actual revenue is $ 61.247 less than the original estimate and therefore must be subtracted from the 2005 estimate of $ 2,927,576 for purposes of computing the total ($ 2,866,328) Convention Facility/Liquor Tax component of the 2004 "Truth in Taxation" adjusted base rate. 6 P.A. 2 of 1986 amends the "Truth in Taxation" law to require counties reduce their base tax rate by the estimated revenues (adjusted for the difference between prior year estimate and actual) distributed under P.A. 106 of 1985. Counties may follow the "Truth in Taxation" Public Hearing process to use the revenues for increased spending; however, 50% of the revenue not used to reduce the millage rate is required to be used for substance abuse programs. CIGARETTE TAX: P.A. 327 of 1993, the "Tobacco Products Tax Act", provides for the levy of taxes on the sale of tobacco products. The resultant revenue, placed in the Health and Safety Fund, is distributed as follows: • 25% is distributed for indigent volume adjusters for hospitals within the Medicaid program. • The first $ 16,000,000 of the remaining 75% is distributed to a county that received a loan under the emergency municipal loan act to the extent necessary to satisfy obligations of a county. • The balance is distributed among the remaining counties based upon ratios tied to the most recent census. The State Department of Treasury originally estimated that 82 Michigan counties, excluding Wayne County, would share 5.3 % of cigarette tax revenue (approximately $ 17,000,000) on a per capita basis using the decennial federal census figures. As a result, Oakland County has received the following amounts since 1989: Year Amount 1989 $ 2,335,583 1990 $ 2,194,033 1991 $ 2,210,837 1992 $ 2,078,173 1993 $ 2,006,736 1994 $ 1,604,090 1995 $ 1,258,810 1996 $ 994,709 1997 $ 1,144,903 1998 $ 767,028 1999 $ 921,107 2000 $ 1,176,549 2001 $ 926,520 2002 $ 993.127 2003 $ 678.099 2004 $ 718,165 2005 $ 746,602 Est. 7 Adjusted Revenue Base Total Taxable Value Adjusted Base Tax Rate 224,278,633 55,986,490,872 = 0.0040595 X 1,000 = 4.0595 mills The 2003 actual revenue is $ 96,625 more than the original estimate and therefore must be added to the 2005 estimate of $ 746,602 for purposes of computing the total ($ 843,227) Cigarette Tax component of the 2004 "Truth in Taxation" adjusted base tax rate. P.A. 264 of 1987 requires a county further reduce its base tax rate for "Truth in Taxation" purposes by the estimated cigarette tax revenues (adjusted for the difference between prior year estimate and actual). The cigarette tax revenue, to the extent not used to reduce the counties millage rates, must be used for the following purposes: • 12/17 of the distribution to the County Health Department for public health prevention programs and services. This distribution is in addition to and is not intended as a replacement for any state or county payments to these health departments. • 5/17 of the distribution shall be used for one (1) or more of the following: Operation, maintenance or expansion of an existing county jail or juvenile facility; for acquisition, construction and equipping of a new jail or juvenile facility; or for court operations. Total 2004 Taxable Value 55,986,490,872 Unadjusted Base Tax Rate 0.0040722* Unadjusted Revenue Base $ 227.988,188 Less Convention Facility Tax Revenue 2.866,328 Less Cigarette Tax Revenue 843.227 Adjusted Revenue Base $ 224,278,633 2005 ADJUSTED BASE TAX RATE = 4.0595 mills * - 0.0040722 X 1,000 = 4.0722 mills 8 SCHEDULE V PUBLIC HEARING REQUIREMENTS FOR LOCAL UNITS OF GOVERNMENT P.A. 40 of 1995 - Budget Hearings for Local Government This act amends the law that requires local governments hold a Public Hearing on their proposed budget and give notice of the budget hearing by publication in a newspaper of general circulation at least six (6) days before the hearing. The act specifies that the notice shall include the time and place of the hearing and state the place where a copy of the budget is available for public inspection. The notice must also include the following statement printed bold faced in 11-point type: "THE PROPERTY TAX MILLAGE RATE PROPOSED TO BE LEVIED TO SUPPORT THE PROPOSED BUDGET WILL BE A SUBJECT OF THIS HEARING." P.A. 41 of 1995 - Truth in Budgeting Act The Uniform Budgeting Act (Section 16) has been amended to require that the General Appropriations Act adopted by the legislative body of a local unit of government must set forth the total number of mills of Ad Valorem property taxes to be levied and the purposes for which the millage is to be levied. This subsection is known as and may be cited as the "TRUTH IN BUDGETING ACT". P.A. 42 of 1995 - Notice and Public Hearing Requirements This act specifies that if the taxing unit COMPLIES WITH SECTION 16 of the Uniform Budgeting Act, P.A. 2 of 1968, as amended (Section 141.436), it need not comply with the notice and public hearing requirements of the "Truth in Taxation" section of the General Property Tax Laws and is exempt from holding a "Truth in Taxation" Public Hearing. N\Budget\BudgetProcess\taxrateMRbackup.doc 9 Rah Johnson, Courili-a-eik Resolution #07132 May 24, 2007 Moved by Rogers supported by Coleman the resolutions (with fiscal notes attached) on the Consent Agenda, be adopted (with accompanying reports being accepted). AYES: Burns, Coleman, Coulter, Crawford, Douglas, Gershenson, Gingell, Gosselin, Gregory, Greimel, Hatchett, Jacobsen, KowaII, Long, Middleton, Nash, Potter, Potts, Rogers, Scott, Spector, Suarez, Woodward, Zack, Bullard. (25) NAYS: None. (0) A sufficient majority having voted in favor, the resolutions (with fiscal notes attached) on the Consent Agenda, were adopted (with accompanying reports being accepted). I HEREBY APPROVE TIE FORMS RESOLUTION STATE OF MICHIGAN) COUNTY OF OAKLAND) I, Ruth Johnson, Clerk of the County of Oakland, do hereby certify that the foregoing resolution is a true and accurate copy of a resolution adopted by the Oakland County Board of Commissioners on May 24, 2007, with the original record thereof now remaining in my office. In Testimony Whereof, I have hereunto set my hand and affixed the seal of the County of Oakland at Pontiac, Michigan this 24th day of May, 2007.