December 14, 2012 / 8:05 PM / 5 years ago

Michigan lawmakers vote to end tax, create local authorities

Dec 14 (Reuters) - The Michigan Legislature ended an active lame-duck session early on Friday, sending Governor Rick Snyder a flurry of bills, including one to phase out a tax that raises millions of dollars for local governments and schools.

The Republican-controlled legislature voted to gradually reduce the personal property tax levied on certain manufacturing and industrial equipment.

The tax raises about $470 million a year for members of the “Replace Don’t Erase” coalition, made up of the Michigan Municipal League, along with county, school board and other groups, according to Samantha Harkins, state affairs director at the municipal league.

In a blog post on Friday, Harkins said the legislation does not provide communities with full revenue replacement. However, it does tie the entire repeal of the tax to statewide voter approval of a plan to divert some of the state’s use tax revenue to the local governments, she added.

Governor Rick Snyder, a Republican, said in a statement other measures passed by lawmakers, including a regional transit authority for southeast Michigan, a lighting authority for Detroit and a new emergency manager bill, the state was “demonstrating a meaningful commitment to the stability, vitality and safety of our cities and towns.”

The emergency manager bill, which gives financially troubled cities like Detroit and school districts options, including Chapter 9 municipal bankruptcy, to achieve solvency, surfaced just weeks after Michigan voters repealed a 2011 law dealing with fiscal emergencies on Nov. 6.

For Detroit, lawmakers passed a package of bills that create a municipal lighting authority empowered to issue revenue bonds backed by utility user taxes to fund the construction, expansion or improvement of street lighting.

The legislation also sets a 2.4 percent income tax rate for Detroit residents and 1.2 percent rate for nonresidents as of Jan. 1, according to an analysis by the House Fiscal Agency. However, those rates would fall to 2.2 percent and 1.1 percent respectively once the lighting authority debt is paid off and utility user tax revenue is no longer pledged to the authority.

The legislature also sent the Republican governor bills to create a regional transit authority in the southeast Michigan counties of Wayne, which includes Detroit, Oakland, Macomb and Washtenaw. The transit agency would be authorized to issue bonds, according to a bill analysis.

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