Why do the Downtown Development Authorities and Tax Increment Finance Authorities capture part of the millage?,
Why do all these Tax Increment Finance Authorities (TIF) such as the Downtown development Authorities, receive a portion of the millage and how much?
The short answer is: They are permitted by law (PA 197 of 1975) to capture a portion of the taxable value based on the economic growth.
[a] tax increment financing (TIF) plan allows a local government to finance public improvements in a designated area by capturing the property taxes levied on any increase in property values within the area. Under a TIF plan, a base year is established for the project area. In subsequent years, any increase in assessments above the base year level is referred to as the captured value. All, or a portion, of the property taxes levied on the captured value (SEV) is diverted to the area's development plan. [Department of Treasury, Analysis of Tax Increment Financing in Michigan for 1986 (April, 1987), pA2.]
Tax increment financing "is premised on the theory that, without the redevelopment project, property values would not increase," or "that increases in land values and assessments in the project area are caused by the redevelopment authority's own construction of economic activity in the district.
* * *
In Advisory Opinion on Constitutionality of 1986 PA 281, supra, pp 111115, the court concluded that transmitting the millage revenues levied on the "captured assessed value" to the authority was consistent with the first paragraph of Const 1963, art 9, Sec. 6. The court rejected the argument that this was an unlawful diversion of funds from the purposes for which they were approved by the voters and levied by the local governmental units. The court found it was within the power of the Legislature to alter the purposes for which tax revenues are expended and that the Legislature had done so.
It is my opinion, therefore, that voted millages for specific purposes which are levied on the "captured assessed value" must be transmitted to the authorities created pursuant to 1980 PA 450 and 1975 PA 197."
1991 Michigan Attorney General's Opinion # 6687
This excerpt from the Michigan Attorney General's Opinion #6657 is helpful in understanding the purpose and justification of the tax capture, as well as its mandatory nature. This was also more recently reconfirmed by the current Attorney General in 2014 Michigan Attorney General's Opinion # 7280.
As noted in the ballot language, it is only a small portion of the millage that is subject to this tax capture. The exact amount is dependent upon how much the authorities' need for their proposed plans, and the captured, or increased, value in the authorities' districts. In 2016, the total captured value is about $170 million; in 2015 it was around $206 Million. That equates to about 2% of the total County taxable value, or twenty-eight cents (28¢) per year for a property owner with $100,000 of taxable value, at the proposed Veterans' Services 0.139 mill rate, for a total capture of about $23,707.00.
Any unused funds captured must be returned to the County Department of Veterans' Services.