Sept. 15, 2023 | This Week in Government: House Tax Policy Considers Duggan’s Land Tax Plan

Detroit property taxes took center stage during Wednesday’s House Tax Policy Committee.

The committee heard testimony on a bill package that would create the Land Tax Equity Act, which would allow cities and local government units to designate qualified taxes to be replaced by an equivalent land tax rate to be levied on all parcels of land not specifically exempted by the bill.

Practically, this legislation means that land taxes in Detroit would be more than doubled, and building taxes would be cut by about 30%.

The plan was outlined by Detroit Mayor Mike Duggan during the Detroit Regional Chamber Mackinac Policy Conference earlier this year.

On Wednesday, Duggan came before the House panel to pitch the legislation.

The wide-ranging package includes HB 4966, HB 4967, HB 4968, HB 4969, and HB 4970, which detail taxation for side lots, vacant lots, scrap yards, warehouses, and new and expanded developments.

The legislation will incentivize property owners to put blighted or vacant land into productive use, said Rep. Stephanie Young (D-Detroit), one of the bill sponsors. It will also put Detroit’s property taxes on par with neighboring cities.

“The Land Tax Equity Act is laser focused on helping Detroiters keep their hard-earned money in their pockets by way of a property tax reduction,” Young said.

The legislation would operate the same as a fire millage or road millage, Duggan said.

“Voters can approve it. Voters can subsequently rescind it,” he said. “If the voters didn’t like it, they could just come back and undo it.”

Although the bill package is primarily aimed at Detroit, the current language provides the opportunity for other communities to opt into the program.

Committee Chair Rep. Cynthia Neeley (D-Flint) raised concerns about how the legislation would affect small business owners who may face more hurdles in trying to develop property.

Duggan said Detroit planned to have someone in place to help small businesses through the development process.

“This is good for small business,” Duggan said. “It drops the property tax on their businesses, on the building, by 17%.”

There also would be carve-outs for homeowners who purchased a side lot.

When Duggan presented his original plan in May, he said the change in tax structure would necessarily pick winners and losers, but he backed away from that on Wednesday.

“We absolutely do not pick winners and losers. We are going to levy on every square foot of the city exactly the same millage,” he said. “But if you look at what has happened in the city of Detroit because there is virtually no value in land, you’ve got three movie theaters, 20-some grocery stores and 420 scrap yards … because why? They could spread over the land at virtually no cost.”

Several Detroit development groups submitted their support for the legislation.

No action was taken on the bill package during committee, and Duggan also addressed the Democratic caucus during session on Wednesday.

 

Senate Democrats announced wholescale revisions Thursday to their high-profile energy legislation that push back the date to get to 100% carbon-free power and redefine the types of energy that would qualify to achieve that goal.

Lawmakers said Thursday that the evolving proposal would require utilities to get to 100% carbon-free power by 2040 and 60% renewable energy by 2032 under substitutes still being drafted.

Previously, the bills would have required 60% renewables in 2030 through 2034 and 100% by 2035.

While the substitutes were not yet ready on Thursday, the carbon-free standard appears looser than a renewable-only standard originally sought. Renewables are tightly defined in statute, and going to the definition key Senate Democrats described Thursday would likely include nuclear, natural gas, and other forms of energy besides the currently qualifying solar, wind, water, and waste-to-energy.

The latest substitutes for the bills are still being drafted, so the legislation wasn’t formally before the panel, but Sen. Sam Singh (D-East Lansing) and Sen. Erika Geiss (D-Taylor), in an update on SB 271 and SB 273 to the Senate Energy and Environment Committee, said they would require utilities to detail carbon-free and renewable plans in their Integrated Resource Plans with the Public Service Commission. Also, Geiss said the PSC would need to study and implement a community solar tariff pilot program focused on low-income communities and households, which would be supported by federal funding.

Geiss said current biomass operations would be grandfathered in as renewable systems.

The substitute includes a new electricity storage component requiring utilities to obtain 2500 megawatts of energy storage systems by 2030, she said.

Singh said the upcoming substitute for SB 273 would increase energy waste reduction from the current 1% to 1.5%. There will also be an incentive goal of 2% waste reduction.

The natural gas target would be 1% from 0.75%, with financial incentives for utilities to meet those pieces.

Singh said he expects the latest version of the bills to be fully drafted by next week and for stakeholders to be ready to discuss the proposals then. He said lawmakers and stakeholders had many conversations on the legislation during the summer.

“The things that we talked about with stakeholders across the board, we wanted to make sure that we were working to ensure that reliability was a key factor here,” he said. “We wanted to make sure that we were making sure that cost was going to drive a lot of the decision making.”

Singh said driving goals were bringing down costs for families, making the grid more reliable, and bringing down carbon emissions.

The discussion in committee Thursday came after Gov. Gretchen Whitmer called for a 100% clean-energy standard and for siting changes for renewable projects from local governments to the PSC.

The siting issue and ability for utilities to get the land they need for solar and wind projects came up Thursday. Singh said that the proposal would be starting in the House.

Sen. Stephanie Chang (D-Detroit), when discussing costs, said if the Legislature doesn’t act on climate change proposals, it will cost families in the long run.

“I think that we’ve got a lot of families across Michigan who are asking us to take urgent action and I think that the cost of doing nothing (is more than) the cost of doing something very good,” she said.

Republicans, however, remain skeptical of the proposals being pushed by Democrats.

“Radical ideology is no way to govern; this short-sighted push – now being unveiled in the Senate at the direction of our governor and other far-left Democrats – to force an extreme California-style Green New Deal upon the people of Michigan is a bad deal for everyone,” Senate Minority Leader Aric Nesbitt of Porter Township and Rep. Dan Lauwers of Brockway said in a joint statement.

The utilities were general in their comments in statements on Thursday as the bills continue to move through the process.

Katie Carey, spokesperson for Consumers Energy, said the utility is already working aggressively to phase out coal and build out solar, storage, and energy efficiency initiatives.

“We have concerns with ongoing efforts to rewrite Michigan’s energy law and will advocate for policies that address climate change while continuing to balance clean, reliable and affordable energy to our customers,” Carey said. “We will continue to work with the Legislature and all stakeholders on this important issue to make sure Michigan gets this right.”

Peter Ternes, with DTE Energy, said similarly that the DTE is already working toward being carbon-free by 2050 and is seeking to balance reliability and cost with its other goals.

“We will work with the Legislature on the proposed bills but it’s important to note that the significant achievements we have reached to date demonstrate that existing Michigan energy law will provide continued opportunity to advance DTE and the state’s carbon reduction goals,” Ternes said.

A bill that would extend for 10 years a program that allows community colleges and partner employers to fund training new employees by collecting those employees’ income tax withholdings came up for discussion Thursday at a Senate committee.

The Senate Economic and Community Development Committee took no action on HB 4573, which has the backing of the state’s community colleges, Michigan Works! and the Detroit Regional Chamber. Much of the hearing focused on questions about a change in the wages employers must pay to qualify.

Under current law, the employer must pay the employee at least 175% of the state minimum wage. That wage currently is $10.10 per hour, so it would take a wage of $17.68 to qualify.

The bill would allow employers to instead use their county’s Asset Limited, Income Constrained, Employed rate, also known as the county ALICE rate, in those counties where the county ALICE rate is less than 175% of the state minimum wage. ALICE is designed to indicate a living wage as opposed to the government-set minimum wage.

The change to the ALICE rate is designed to encourage participation in the program, Katie Witkowski, director of government and external affairs for the Michigan Community College Association, said. Employers in counties with a lower average wage might be more inclined to participate in the New Jobs Training Program if they could opt for a wage more in line with their area, supporters said.

“It actually expands the job pool and ensures that folks have access to more jobs,” Rep. Carol Glanville (D-Walker), the bill sponsor, said.

Sen. Mallory McMorrow (D-Royal Oak), the committee chair, asked Witkowski about the idea of using solely the county ALICE rate as the threshold. Witkowski said the MCCA prefers it as an option to 175% of the minimum wage.

Delta College President Michael Gavin told the committee the program can “change family trees.” The ALICE option could allow colleges to tailor the program for their areas, he said.

“For our rural areas, some of our smaller colleges, the 175% is great. The ALICE is also good,” he said.

Workers are hoping the force is strong with legislation to repeal laws that restrict local government’s control over labor.

The Michigan AFL-CIO held a rally at Lansing City Hall across from the Capitol building Wednesday to urge the Legislature to pass bills repealing local preemption laws and bans on local project labor agreements.

The bills – HB 4231, HB 4237, and the Senate’s corresponding SB 170 and SB 171 – would roll back former Gov. Rick Synder-era policies that prohibit local governments from entering project labor agreements or setting minimum wage and benefit requirements (See Gongwer Michigan June 15, 2023). Derek Dobies, chief of staff for Michigan AFL-CIO, had sharp criticism for the current laws, specifically PA 105 of 2015, which prevents local governments from requiring things, including a local minimum wage or paid sick days.

“Aptly named the Death Star bill, it was the ultimate weapon to weaponize and advance worker suppression at the local level. It was a partisan power grab for the empire of the wealthy and well-connected,” Dobies said. “This is one of the most destructive policies designed to remove tools from the hands of local elected officials that are trying to make their cities, their townships or counties more competitive.”

Republicans and others who supported the policy when it passed and oppose the rollback Democrats have introduced say the ability for locals to set minimum wage and sick leave policies would be a deterrent to businesses located in the state. In part, they say, because of the patchwork of regulations it could create.

Rep. Jenn Hill (D-Marquette), sponsor of HB 4231 that would repeal the ban on local governments entering project labor agreements, spoke at the rally.

“Lansing getting in the way with nonsense rules about local governments can and cannot make? We’re working to stop that practice,” Hill said. “The state ban on project labor agreement sends a message to local government. We don’t trust you to make decisions on the behalf of the people who elected you.”

Before joining the House, Hill served on the Marquette City Commission, and she said state laws governing what local government can do for labor prevent residents from getting the best services.

“My goal has always been to provide quality services to residents while saving them money, but we did not have that option when we were banned from using project labor agreements,” Hill said. “It is time to give that option back to local governments. It is time that we let communities across the street, across the state, get back to making the choices that meet their needs. That’s the purpose of local government. That’s the purpose of democracy.”

Porcha Perry is a member of SEIU Local 1 in Detroit. She spoke in favor of the legislation saying that local governments should be able to respond to labor in their communities.

“Local communities should have the power. The power to decide what’s best for us. And our local leaders should be able to help raise wages, pass paid sick leave and improve conditions for working people like us,” she said.

Rep. Joey Andrews IV (D-Saint Joseph) is the sponsor of HB 4237. The representative is a former policy analyst for the Michigan AFL-CIO.

“When they put this preemption in place, they made sure that cost of living adjustments could not be made for wages and benefits in cities like Ann Arbor, that have a significantly higher cost of living than other cities … and that’s not right,” Andrews said. “By repealing this local preemption, or as I affectionately like to say, ‘blowing up the Death Star,’ we’re going to return power, not just for our communities, but to the residents. To the people who live in those communities.”

Andrews said that although there was a lot of focus on the minimum wage piece of the legislation, giving communities the ability to establish paid leave and establish prevailing wage were equally important.

“I represent border communities, and we have to constantly compete against the state of Indiana, the city of South Bend, when it comes to work, in all forms,” he said. “By being able to set local prevailing wages, by being able to set minimum training and apprenticeship standards, we give our communities the ability to out-compete our neighbors and make our communities prosper.”

Berrien County Commissioner Chokwe Pitchford said taking action for local control is critical now more than ever.

“The social fabric, in my option, is tearing. And it’s our job to start to weave a narrative of labor back into the narrative of union, back into the conversation, because that’s what’s going to hold us together for generations to come,” Pitchford said. “What we need to start to do is figure out how average, ordinary people can be the bedrock of this economy.”

Repealing local preemption laws is step one, Pitchford said.

“We don’t need people in the Legislature always telling us exactly where and when money should be spent,” he said. “We hit the damn potholes every day.”

Sam Inglot, executive director of Progress Michigan, also spoke at the rally.

“This law is anti-worker and anti-voter and has no place in Michigan,” Inglot said. “We have to continue to empower the people of Michigan so that folks want to stay in their communities and so that others want to come to our great state. The force is with us on this one.”

Repealing the legislation is a matter of increasing local control, said Mike Jackson, Jr., a union leader and carpenter.

“All we’re asking is that local government have the option to consider whether PLAs make sense for their communities for projects that use these public resources,” Jackson said.

The House Labor Committee 

already has had two hearings on the bills, and Andrews said he was hopeful that the legislation would move forward this fall. He said he also expected the Senate to move on its bills, which are identical to those in the House. “It’s a really busy schedule, so who knows?” he said. “I’m hopeful we’re going to get this done before the end of the year. … I think we can walk and chew bubble gum at the same time.”

Andrews didn’t expect to get support from his Republican colleagues on the bill, though.

“Republicans talk – I think rightfully so in some cases – about the importance of local government, and it strikes me as somewhat hypocritical that they would support removing power for local governments,” he said. “But you know, we all have our things.”

Repealing local preemption laws wasn’t a policy point highlighted by Gov. Gretchen Whitmer during her “What’s Next?” speech at the beginning of the month, but Andrews said he wasn’t concerned.

“I’ve always felt the governor is very pro-labor, and I assume that she supports what we’re working on here,” he said.

Andrews said that when the bill was originally introduced at the beginning of the term, the administration was supportive of it.

The fact that the governor has asked the Legislature to work on a state paid-leave plan shouldn’t interfere with these bills, Andrews said.

“The state will set a guideline, and then, if local municipalities feel like they need a little bit more for their communities, it frees them up to do that,” he said.

The city of Ann Arbor has expressed interest in these policies being repealed, with several city council members, the mayor, and the mayor pro-tem signing a letter of support for the legislation.

Andrews said that communities in his district also were interested in the change in policy.

“We’ve got a whole long border that deals with competition from Indiana and Ohio, so being able to raise those wage standards and force them to play by our rules, I think that’s the way to go,” he said.

Legislative fixes to the state’s controversial no-fault auto insurance reforms passed in 2019, which have led to court battles and cries for further changes given new hardships for the catastrophically injured, are coming before the House Insurance and Financial Services Committee.

During the committee’s Thursday morning meeting, Rep. Brenda Carter (D-Pontiac) addressed the push to reform the reforms, so to speak, with an emphasis on adjusting the medical fee schedule.

She did so before a group, FAIR Health, which she described as a neutral party in the debate, presented ways in which the Legislature could use their assistance to bring stakeholder groups– including patients, providers, insurers, and insureds– together to craft bills that would solve what some have called glaring flaws with changes to auto no-fault.

“The intent of these changes were to lower our auto insurance rates, which were some of the highest in the nation at the time. We wanted to bring costs down while continuing to protect Michigan drivers,” Carter said. “What I hope to communicate clearly is that I want every member of this committee and every Michigander to know that this is our goal, (but) we owe it to the people in Michigan to fix the problems with auto no-fault.”

Carter said that process would begin in her committee on Sept. 28.

“We will dedicate time during our committee meetings to address how to best move forward regarding our no-fault laws,” she said. “We will continue educating ourselves more deeply on the nuance of this complex system. We will hear from various stakeholders and of course we will hear stories from Michigan drivers who are most affected by the 2019 change that went into effect.”

That would include a look at the fee schedule, she added.

As a primer, Carter invited FAIR Health to the meeting on Thursday. Presenting were Donna Smith, the group’s chief client officer, and Allison Snyder, the group’s deputy general counsel.

Smith said the group’s goal was to support all stakeholders in the insurance ecosystem, focusing on transparency in commercial data and other datasets related to the 2019 changes. It also has experience parsing this data for other state and federal agencies and prides itself on its independence, Smith added.

She said that their data and services would be available to the committee should they need it.

Snyder, in turn, said that it has specific expertise working with other states on fee schedule development, whether that was research or analysis.

She also said that they have already been working closely with the Department of Insurance and Financial Services over the last few years, providing them with charge data from their benchmark products. This was done to provide DIFS with data annually to apply required consumer price index adjustments.

Smith added that it has also provided over the years information about billing codes. She emphasized again that FAIR Health was not a lobbying group.

“We do not go in and really facilitate and start marketing. What we try to do is help inform and be invited as we’ve been today,” Smith said. “We go through an educational process. We learn more about what your stakeholders are saying, what are the pushes and pulls; what’s some of the information that’s actually causing angst? We bring that forth and share what the different rates and things would be based on (Michigan’s data).”

Rep. Kelly Breen (D-Novi) asked if they had any current contracts or business relationships with auto insurers or home health care providers – the two entities along the battlelines of changes to auto no-fault. Smith said generally, she’s sure they do but could not disclose their identities.

Breen pressed further, asking if they were currently working with any of the home health care or post-acute care providers in Michigan that have been at the center of opposition to the medical fee schedule that went into effect years after the reforms took hold.

“I will say that I know that we licensed the data to all stakeholders,” Smith said. “I can almost positively guarantee that there’s some of those kinds of providers who are in our licensee pool because again, with respect to the data that we’re currently providing to Michigan DIFS, we also make that data available to the marketplace. The same data set, So, I know many of those kinds of providers have also sought that dataset from FAIR Health.”

Breen said she found the presentation helpful but assumed their services didn’t come for free, and she wanted to ensure that there were not any glaring conflicts from those relationships.

Rep. Mike McFall (D-Hazel Park) also wanted to know where they got their funding from. Smith said there are various licensees who use their data. That could include some of those providers and insurers mentioned earlier.

Rep. Mike Harris (R-Waterford Township) pressed the issue further by asking if they were brought on board to work with the committee, could they be fair given their licensing data and helping to develop fee schedules for so many different clients – and potentially those who might have a stake in influencing the process.

“Absolutely. We’re fair or neutral,” Smith said. “There have been times when some have asked, ‘What do you think? What would you do?’ And we always say, ‘we’re neutral, independent, we cannot make that choice, but let us provide you with more information so that you can make the choice in a sound supporting manner.’”

McFall also asked what the cost would be if the committee sought their services to develop a new fee schedule. Smith said that depends on how far the group goes in providing services to the committee and the Legislature.

“Is it going to be something that’s going to be very specific, very narrow, or is it going to be broad? Are you going to just do medical professionals? Are you going to do facilities? Are you going to do complete basis based on a Medicare plus some commercial analysis?” Smith said. “It really just depends. I can tell you based on our experience, it’s not very expensive from the state’s perspective, from a funding perspective. … I’m guessing at this point, but nothing over $180,000. That would be all based on a lot of different work, so don’t hold me to that.”