Statewide ballot proposal will repeal PPT, replace revenue

OSCEOLA COUNTY — To keep or not to keep the Michigan's Personal Property Tax — that is the question for voters in August.

Proposal 1 is a statewide ballot initiative to officially remove personal property tax (PPT), which is a tax levied annually that applies to furniture, computers and other property owned by businesses, while guaranteeing that cities and towns will have a source of revenue that will replace the tax.

If Prop 1 is voted down, the city of Big Rapids would lose approximately $500,000 revenue from the repeal of the PPT, said City Manager Steve Sobers.

“Michigan’s Legislature put in motion the repeal of this tax,” Sobers said. “The Legislature, in their wisdom, has set in motion to allow voters of the state to approve replacement revenues from different sales tax revenues. If we lose this revenue it would be very catastrophic to our budget and to our community as a whole.”

Passing Prop 1 supports the Legislature’s actions to repeal the personal property tax and replace the revenues lost to communities with a portion of the state’s 6 percent special use tax.

The personal property tax is paid by businesses and manufacturers and is based on the value of equipment that a business has. Many communities with a large business presence rely heavily on the tax to fund public services. Other communities don’t receive any revenues from the PPT.

Michigan’s Legislature passed the bills eliminating the tax last year. Subsequent legislation to fix the revenue shortfall for communities was passed earlier this year.

But the whole issue still needs voter approval. It will be the only statewide proposal voters will face on the August primary ballot.

“It is a important issue for local governments,” Sobers said.

If Prop 1 passes, the measure effectively repeals the PPT, said State Sen. Darwin Booher, R-Evart.

“The PPT was not a fair tax,” Booher said. “By repealing this tax mom-and-pop shops up and down main streets will see relief from this unfair tax.”

The proposal also creates a community stabilization share from tax revenues to distribute in communities.

“Prop 1 will create an authority, which will keep the money out of the hands of the state government so it can be distributed to Michigan cities and counties to make up the revenue loss from the PPT repeal,” Booher said.

The general idea is to reduce the state-use tax and replace it with “a stabilization share to modernize the tax system,” which is meant to help small businesses grow and create jobs.

Concerns about Prop 1 and voter approval were brought up during Big Rapids City Commission meetings in June and July. Commissioner Tom Hogenson believes growing businesses in Michigan is good for the state, but Lansing has backed out on its responsibility to the voters.

“The likelihood of the voting public passing this to help beleaguered cities is slim to none,” Hogenson said. “I think this represents failure at the highest level of the state. I don’t think you take away that much revenue from cities without finding an alternative.”

State Sen. Judy Emmons, R-Sheridan said the intention of the state legislature is to make sure the municipalities are funded fully after the repeal of the PPT.

”We understand much of this revenue went to public safety a fire protection and we are not taking that away from them,” Emmons said. “Prop 1 does not increase taxes. It repeals the PPT and creates a way to pay for services.”

Mecosta County will lose approximately $70,000 in revenue from the repeal of the PPT. County Administrator Paul Bullock said the board would move forward despite the revenue reduction if the state did not come up with a funding source.

“We would have to prioritize our budget going forward,” Bullock said. “Less money would result in us not being able to provide full funding for some departments.”

State Rep. Phil Potvin, R-Cadillac, said Prop 1 should not concern cities across Michigan with revenue loss.

”Once the PPT is removed, we have already put in place the replacement dollars the cities as well as our schools,” Potvin said.

Constituents have brought up their concerns to Potvin about how Prop 1 is explained.

“There is no doubt that is a complicated ballot proposal,” Potvin said. “The ballot language was chosen very carefully to give a big picture of what this is trying to do. We know it was a challenge to try to persuade voters with limited ballot language, but voters need to know to vote yes on this proposal.”