Caps, caps…what is really being changed?
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You are being asked to consider three items. They will be labeled on your ballot as Question 1, Question 2 and Question 3. Their actual text may be found on the “Ballot Language” page of this site. A brief explanation of each question follows below. Preceding the explanations and immediately following this paragraph, are quick information sets that touch on sometimes little known facts that might be useful in analyzing the impact of these proposals from a home owner’s perspective.
Quick Notes:
None of these caps, either individually or in concert, actually cap significantly an individual property owner’s total tax bill. In fact, between 1979 and 1994, while these caps were in place, total tax rates actually rose almost every year; climbing from $54 per thousand to $66 per thousand. Thus, based upon an unchanging taxable value, total taxes went up 22 percent while the City's operating taxes were capped.
The reason this happens is, these caps only restrict city of Saginaw Operating Millage rates --- those used primarily for services provided to Saginaw’s citizens. They do not limit any of the other taxing jurisdiction's powers.
Moreover, after the 1994 passage of Proposal A, a new entity was created that began levying brand new taxes (Saginaw Transit Authority); and the Public Libraries of Saginaw were disassociated from the public school system and began levying taxes on their own. So, the total tax burden on citizens who thought they were capping taxes, was increased by a minimum of five new mills (a 15 percent increase on current homestead rates) plus earlier tax increases. The only thing reduced by the caps was the number of city employees and city operating departments including street maintenance crews, forestry crews, rubbish crews, fire personnel and police personnel.
If you’d like to examine the impact of these proposals on your own circumstances, it is important to distinguish between the impact on homeowners and on commercial, industrial or other non-homestead classes of property. “Homesteads”, the legal term for one’s residence in Michigan, are taxed at a much lower millage rate than “non-homestead” property. In Saginaw, homesteads are taxed at a millage rate of about $32. Non-homestead rates are about $50. So, locally a homestead rate is only about two thirds of the non-homestead rate.
Individuals considering these ballot issues may also want to verify their chance for state property tax refunds. These are tied to your income taxes. Senior citizens may have any tax increase refunded by the state. Ordinary citizens who are homeowners may be entitled to a 60 percent refund of any potential raise..
Renters may also qualify for benefits under the senior citizen, disabled veteran or ordinary citizen provisions. Landlords, business people and others owning real or personal property usually don’t qualify for protection from rising property taxes based upon Michigan’s homestead laws. The state of Michigan participates in a refund program, because while property taxes are levied and used at the local level, taxes are permitted and in general, governed by state law.
One final issue – costs to a homeowner. There is a way to approximate typical costs for residential property owners. Using public records, average residential assessments in the city can be determined. An SEV for residential properties in the city of Saginaw averages about $21,000.
Therefore, if both caps were removed, the average annual cost to the owner of a home with an SEV of $21,000 would be about seven dollars per month. Some of you may have heard the statement: the total increase if both caps were removed is very small; less than a cup of coffee per day. These calculations illustrate the cost for homeowner’s with a $21,000 Taxable Value would be equivalent to about two cups of coffee per week. If only the first cap were removed the estimated monthly cost for the owner of a home with a $21,000 SEV would be about $3.30 per month. Of course, these figures presume the owner would not qualify for any of the state income tax refunds discussed above. If they do, their costs would be lower and might even be zero. The “How much will it cost me” section of this web page contains a chart with greater detail.
Question 1 asks that voters remove a restriction (a “cap”)
on the amount of dollars the city of Saginaw may collect each year. The cap has two components: a limit of $3.8 Million Dollar limit and a
7.5 mill cap on the city operating millage rate.
This cap is regarded as unfair by some because one of its effects is to deny the city new tax money when all the other taxing jurisdictions do get benefits from growth. It works like this, when new developments occur, the city must lower its millage rate so it collects no more than it did in 1978. Other taxing authorities may levy their normal tax rate and the bigger tax base produces more revenue. When the tax base rises, the city millage rate goes down. In 1978 the taxable value of the city was $510 Million. By 2001, it had risen to $684 Million and the millage rate has been reduced from 7.5 mills to about 5.6 mills. If the millage rate could have stayed at the 1978 level, citizens would have benefited from approximately $1.3 Million in new revenue to fund operations. If city property values should plummet due to blight or some other factor, with the Question 1 cap active, the city may raise its rate to about 7.3 mills maximum. Voting yes would permit the local millage rate to rise to up to 7.5 mills. Voting no continues the cap.
Question 2 asks that voters remove the 7.5 mill restriction and return the millage cap to its former value, 10 Mills. Few citizens realize that for decades Saginaw’s Charter had capped the permitted city millage rate at one half the rate permitted by Michigan’s constitution. The state permits home rule cities such as Saginaw to levy up to 20 mills. Proposal 2 asks citizens to return to the fifty percent cap. If the cap were removed and administrators raised the millage rate from its current 5.6 mills to 10 mills, new revenue for city operations of approximately $3 Million per year would result. Voting yes would permit the local operating millage to rise up to a maximum of 10 mills. Voting no would leave the 7.5 mill cap in place.
Question 3 asks that voters eliminate the
Charter provision for a 3 mill levy in an “emergency” is declared. This
provision has been around for decades and never been used. If both caps were removed, it would be
possible to have a total 13 mill levy.
Voting yes on this question will ensure 10 mills and not 13 mills is the
maximum operating levy.
More
Quick Notes:
·
There are several other types of tax rolls that exist.
These tax rolls are not effected by the ballot questions and should not be confused
with the ad valorem roll millage and dollar caps.
·
For example, many people are familiar with “special
assessments” for such things as new streets, sidewalks, water hookups et
cetera. There is a tax roll for
“special assessments.” There are also
tax rolls for tax levies on houses in Saginaw’s Neighborhood Enterprise Zones
and for properties with state issued Industrial Facilities Certificates.
·
Similarily, there are state imposed restrictions that
are not effected by a local vote. These
are commonly referred to as the Headlee Amendment and Truth in Taxation
regulations. Those taxing restrictions
exist in addition to local caps and will remain in place. They should be associated with the impact of
Proposal A and other state legislative efforts.
·
Perhaps the most inaccurate common belief, is that the
cap on actual dollars that the city of Saginaw may collect from property taxes
($3.8 Million) and the cap on city of Saginaw millages (7.5 mills as modified
by the Headlee Amendment) will reduce
or at least cap the tax bill of a property owner. Of course, that has never been true. A property tax bill can certainly rise even though city taxes are
capped. In fact, total taxes have risen
many times while the city remained frozen to the $3.8 Million.
·
Taxes rise because the caps do not limit the state of
Michigan Education Tax, Saginaw County, the public schools system, the public
library system, the transit authority, Delta College and the Intermediate
School District all levy taxes on residents of the city of Saginaw. Thus as
taxable values change, or new millages are added by any or all of the seven
non-capped taxing authorities, a property can see its total tax bill rise.
· Property taxes levied to provide basic services for Saginaw’s citizens have never been a major portion of the annual tax property tax bill. According to the Property Tax Cap Fact Finding Committee report issued on June 17, 2002 the independent accounting firm of Yeo and Yeo CPA’s certified that of all Non-Homestead taxes paid in 2001 sixteen percent went to the city of Saginaw for operating and Rubbish collection. The same study showed that when the 18 mill local public school taxes were removed as directed by Proposal A legislation, the city of Saginaw collected about twenty three percent of the total ad valorem levy.