Gov. Gretchen Whitmer vetoed two bills that would have effectively deferred summer property tax payments to relieve struggling businesses and property owners during the pandemic.
Although the bills were negotiated between business groups and municipal government advocates and had broad support among lawmakers, Whitmer cited “fatal constitutional flaws” with the legislation. She also said she heard from taxable entities across the state an “overwhelming consensus that these bills create more problems than they solve.”
“This legislation purports to delay summer 2020 taxes to May 2021, but in their practical application they would jeopardize the availability of credit to local units of government,” Whitmer said in a veto letter today.
Sponsored by state Rep. Jim Lower, R-Greenville, House bills 5761 and 5810 were meant to provide financial relief to property owners, particularly business owners that had significant drops in revenue due to the pandemic. Bill supporters testified over the past six weeks that summer property tax bills can be among business’ largest expenses.
The bills would have waived penalties and interest on late property tax payments while creating a system in which the state issued short-term loans to counties. Counties would then work directly with local governments and property owners.
Business advocates had worked closely with municipalities to amend the initial proposal to avoid disrupting cash flow for local entities.
“This is extremely disappointing,” said Joshua Lunger, director of government affairs for the Grand Rapids Area Chamber of Commerce. “The government’s response to the pandemic asked the business community to accept significantly less revenue, lay off employees and create an uncertain future. The intent of the legislation was to give them a lifeline.”
Chris Hackbarth, director of state and federal affairs with the Michigan Municipal League, said the veto was “not unexpected” based on concerns from the state Treasury Department about the structure of the proposed financing.
The Michigan Municipal League has “consistently supported in concept” what lawmakers were attempting by providing both property tax relief and uninterrupted revenue streams for local taxing entities.
In her veto letter, Whitmer noted the state providing financing to counties would have violated the state constitution.
“Moreover, by piling hundreds of millions in uncollected taxes onto county budgets, this legislation would jeopardize county treasurer borrowing for the Delinquent Tax Revolving Fund,” Whitmer wrote. “Even if investors could tolerate the additional risk, the cost of borrowing would rise, leaving counties with unfunded liabilities and potential layoffs.”
Whitmer added that the financial strain from COVID-19 is a “serious problem that requires a serious solution.” She noted the state’s efforts in issuing unemployment benefits, rental assistance and helping with mortgage forbearance, along with various grant and loan programs.
Lunger said similar legislation that passed the Senate late last month would extend the summer property tax payment deadline and also help address the issue. Hackbart said Senate Bill 943 essentially combines the two House bills into one.
“We’ll address whatever flaws we can get to,” Lunger said. “If they’re real, we’ll seek to address them.”