Coverage in Bridge this week focuses on the “Shadow Tax Cut” — a $1.6 billion drop in taxes due to the huge decline in property values across the state.
This tax drop has eased the bills for many taxpayers, but it, of course, has meant less money for local governments that rely heavily on property taxes. On Thursday, Bridge will report on that consequence.
Tom Ivacko at U-M’s Center for Local, State and Urban Policy recently flagged to me another negative consequence for local governments — and the residents who rely on them — via the economic crunch:
“Charge backs.”
Here’s how Ivacko tells it: “When taxes are not paid on particular parcels (tax delinquencies), many times the county government will in effect loan the missing revenues to the city, village, or township where the delinquency originated, to ‘hold them harmless.’ These are basically county loans to help the finances of the lower jurisdictions. The county will then attempt to collect the tax revenue, or may eventually try to sell the property at auction. If the county is unable to do this, it will eventually ‘charge back’ the losses to the originating jurisdiction.”
So, some local governments are going to need to pony up more dollars — dollars that could be spent on services.
“According to the 2011 MPPS fiscal survey, 23% of Michigan’s cities, 21% of its villages and 14% of it townships expect to face such charge-backs this year,” Ivacko wrote. “The problem is most common in Southeast Michigan, where 31% of jurisdictions face the problem. By comparison, only 10% of jurisdictions in the Northern Lower Peninsula and in the U.P. face the problem.
“And among jurisdictions that do face such charge-backs, 53% say they will present either somewhat of a fiscal problem or a significant fiscal problem.”
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