HB-4369, As Passed Senate, November 3, 2005

SUBSTITUTE FOR

HOUSE BILL NO. 4369

     A bill to provide for the establishment of commercial

rehabilitation districts in certain local governmental units; to

provide for the exemption from certain taxes; to levy and collect a

specific tax upon the owners of certain qualified facilities; to

provide for the disposition of the tax; to provide for the

obtaining and transferring of an exemption certificate and to

prescribe the contents of those certificates; to prescribe the

powers and duties of certain local governmental officials; and to

provide penalties.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 1. This act shall be known and may be cited as the

"commercial rehabilitation act".

     Sec. 2. As used in this act:

     (a) "Commercial property" means land improvements classified

by law for general ad valorem tax purposes as real property

including real property assessable as personal property pursuant to

sections 8(d) and 14(6) of the general property tax act, 1893 PA

206, MCL 211.8 and 211.14, the primary purpose and use of which is

the operation of a commercial business enterprise. Commercial

property shall also include facilities related to a commercial

business enterprise under the same ownership at that location,

including, but not limited to, office, engineering, research and

development, warehousing, parts distribution, retail sales, and

other commercial activities. Commercial property also includes a

building or group of contiguous buildings previously used for

industrial purposes that will be converted to the operation of a

commercial business enterprise. Commercial property does not

include any of the following:

     (i) Land.

     (ii) Property of a public utility.

     (b) "Commercial rehabilitation district" or "district" means

an area not less than 75 acres in size of a qualified local

governmental unit established as provided in section 3.

     (c) "Commercial rehabilitation exemption certificate" or

"certificate" means the certificate issued under section 6.

     (d) "Commercial rehabilitation tax" means the specific tax

levied under this act.

     (e) "Commission" means the state tax commission created by

1927 PA 360, MCL 209.101 to 209.107.

     (f) "Department" means the department of treasury.

     (g) "Qualified facility" means a building or group of

contiguous buildings of commercial property consisting of 1,000,000

or more square feet of space that is 40% or more vacant for 12 or

more consecutive months immediately preceding the date of

application for the certificate and that is 15 years old or older.

A qualified facility does not include property that is to be used

as a professional sports stadium. A qualified facility does not

include property that is to be used as a casino. As used in this

subdivision, "casino" means a casino or a parking lot, hotel,

motel, or retail store owned or operated by a casino, an affiliate,

or an affiliated company, regulated by this state pursuant to the

Michigan gaming control and revenue act, the Initiated Law of 1996,

MCL 432.201 to 432.226.

     (h) "Qualified local governmental unit" means a city, village,

or township.

     (i) "Rehabilitation" means changes to a qualified facility

that are required to restore or modify the property, together with

all appurtenances, to an economically efficient condition.

Rehabilitation includes major renovation and modification

including, but not necessarily limited to, the improvement of floor

loads, correction of deficient or excessive height, new or improved

fixed building equipment, including heating, ventilation, and

lighting, reducing multistory facilities to 1 or 2 stories,

improved structural support including foundations, improved roof

structure and cover, floor replacement, improved wall placement,

improved exterior and interior appearance of buildings, and other

physical changes required to restore or change the obsolete

property to an economically efficient condition. Rehabilitation

shall not include improvements aggregating less than 10% of the

true cash value of the property at commencement of the

rehabilitation of the qualified facility.

     (j) "Taxable value" means the value determined under section

27a of the general property tax act, 1893 PA 206, MCL 211.27a.

     Sec. 3. (1) A qualified local governmental unit, by resolution

of its legislative body, may establish 1 or more qualified

rehabilitation districts that may consist of 1 or more parcels or

tracts of land or a portion of a parcel or tract of land, if at the

time the resolution is adopted, the parcel or tract of land or

portion of a parcel or tract of land within the district is a

qualified facility.

     (2) The legislative body of a qualified local governmental

unit may establish a commercial rehabilitation district on its own

initiative or upon a written request filed by the owner or owners

of property comprising at least 50% of all taxable value of the

property located within a proposed commercial rehabilitation

district. The written request must be filed with the clerk of the

qualified local governmental unit.

     (3) Before adopting a resolution establishing a commercial

rehabilitation district, the legislative body shall give written

notice by certified mail to the county in which the proposed

district is to be located and the owners of all real property

within the proposed commercial rehabilitation district and shall

afford an opportunity for a hearing on the establishment of the

commercial rehabilitation district at which any of those owners and

any other resident or taxpayer of the qualified local governmental

unit may appear and be heard. The legislative body shall give

public notice of the hearing not less than 10 days or more than 30

days before the date of the hearing.

     (4) The legislative body of the qualified local governmental

unit, in its resolution establishing a commercial rehabilitation

district, shall set forth a finding and determination that the

district meets the requirements set forth in subsection (1) and

shall provide a copy of the resolution by certified mail to the

county in which the district is located.

     (5) Within 28 days after receiving a copy of the resolution

establishing a commercial rehabilitation district, the county may

reject the establishment of the district by 1 of the following

methods:

     (a) If the county has an elected county executive, by written

notification to the qualified local governmental unit.

     (b) If the county does not have an elected county executive,

by a resolution of the county board of commissioners provided to

the qualified local governmental unit.

     Sec. 4. (1) If a commercial rehabilitation district is

established under section 3, the owner of a qualified facility may

file an application for a commercial rehabilitation exemption

certificate with the clerk of the qualified local governmental unit

that established the commercial rehabilitation district. The

application shall be filed in the manner and form prescribed by the

commission. The application shall contain or be accompanied by a

general description of the qualified facility, a general

description of the proposed use of the qualified facility, the

general nature and extent of the rehabilitation to be undertaken, a

descriptive list of the fixed building equipment that will be a

part of the qualified facility, a time schedule for undertaking and

completing the rehabilitation of the qualified facility, a

statement of the economic advantages expected from the exemption,

including the number of jobs to be retained or created as a result

of rehabilitating the qualified facility, including expected

construction employment, and information relating to the

requirements in section 8.

     (2) Upon receipt of an application for a commercial

rehabilitation exemption certificate, the clerk of the qualified

local governmental unit shall notify in writing the assessor of the

local tax collecting unit in which the qualified facility is

located, and the legislative body of each taxing unit that levies

ad valorem property taxes in the qualified local governmental unit

in which the qualified facility is located. Before acting upon the

application, the legislative body of the qualified local

governmental unit shall hold a public hearing on the application

and give public notice to the applicant, the assessor, a

representative of the affected taxing units, and the general

public. The hearing on each application shall be held separately

from the hearing on the establishment of the commercial

rehabilitation district.

     Sec. 5. The legislative body of the qualified local

governmental unit, not more than 60 days after receipt of the

application by the clerk, shall by resolution either approve or

disapprove the application for a commercial rehabilitation

exemption certificate in accordance with section 8 and the other

provisions of this act. The clerk shall retain the original of the

application and resolution. If approved, the clerk shall forward a

copy of the application and resolution to the commission. If

disapproved, the reasons shall be set forth in writing in the

resolution, and the clerk shall send, by certified mail, a copy of

the resolution to the applicant and to the assessor. A resolution

is not effective unless approved by the commission as provided in

section 6.

     Sec. 6. (1) Not more than 60 days after receipt of a copy of

the application and resolution adopted under section 5, the

commission shall approve or disapprove the resolution.

     (2) Following approval of the application by the legislative

body of the qualified local governmental unit and the commission,

the commission shall issue to the applicant a commercial

rehabilitation exemption certificate in the form the commission

determines, which shall contain all of the following:

     (a) A legal description of the real property on which the

qualified facility is located.

     (b) A statement that unless revoked as provided in this act

the certificate shall remain in force for the period stated in the

certificate.

     (c) A statement of the taxable value of the qualified

facility, separately stated for real and personal property, for the

tax year immediately preceding the effective date of the

certificate after deducting the taxable value of the land and

personal property other than personal property assessed pursuant to

sections 8(d) and 14(6) of the general property tax act, 1893 PA

206, MCL 211.8 and 211.14.

     (d) A statement of the period of time authorized by the

legislative body of the qualified local governmental unit within

which the rehabilitation shall be completed.

     (e) If the period of time authorized by the legislative body

of the qualified local governmental unit pursuant to subdivision

(b) is less than 10 years, the exemption certificate shall contain

the factors, criteria, and objectives, as determined by the

resolution of the qualified local governmental unit, necessary for

extending the period of time, if any.

     (3) The effective date of the certificate is the December 31

immediately following the date of issuance of the certificate.

     (4) The commission shall file with the clerk of the qualified

local governmental unit a copy of the commercial rehabilitation

exemption certificate, and the commission shall maintain a record

of all certificates filed. The commission shall also send, by

certified mail, a copy of the commercial rehabilitation exemption

certificate to the applicant and the assessor of the local tax

collecting unit in which the qualified facility is located.

     Sec. 7. (1) A qualified facility for which a commercial

rehabilitation exemption certificate is in effect, but not the land

on which the rehabilitated facility is located, or personal

property other than personal property assessed pursuant to sections

8(d) and 14(6) of the general property tax act, 1893 PA 206, MCL

211.8 and 211.14, for the period on and after the effective date of

the certificate and continuing so long as the commercial

rehabilitation exemption certificate is in force, is exempt from ad

valorem property taxes collected under the general property tax

act, 1893 PA 206, MCL 211.1 to 211.157.

     (2) Unless earlier revoked as provided in section 12, a

commercial rehabilitation exemption certificate shall remain in

force and effect for a period to be determined by the legislative

body of the qualified local governmental unit. The certificate may

be issued for a period of at least 1 year, but not to exceed 10

years. If the number of years determined is less than 10, the

certificate may be subject to review by the legislative body of the

qualified local governmental unit and the certificate may be

extended. The total amount of time determined for the certificate

including any extensions shall not exceed 10 years after the

completion of the qualified facility. The certificate shall

commence with its effective date and end on the December 31

immediately following the last day of the number of years

determined. The date of issuance of a certificate of occupancy, if

required by appropriate authority, shall be the date of completion

of the qualified facility.

     (3) If the number of years determined by the legislative body

of the qualified local governmental unit for the period a

certificate remains in force is less than 10 years, the review of

the certificate for the purpose of determining an extension shall

be based upon factors, criteria, and objectives that shall be

placed in writing, determined and approved at the time the

certificate is approved by resolution of the legislative body of

the qualified local governmental unit and sent, by certified mail,

to the applicant, the assessor of the local tax collecting unit in

which the qualified facility is located, and the commission.

     Sec. 8. (1) If the taxable value of the property proposed to

be exempt pursuant to an application under consideration,

considered together with the aggregate taxable value of property

exempt under certificates previously granted and currently in force

under this act or under 1974 PA 198, MCL 207.551 to 207.572,

exceeds 5% of the taxable value of the qualified local governmental

unit, the legislative body of the qualified local governmental unit

shall make a separate finding and shall include a statement in its

resolution approving the application that exceeding that amount

shall not have the effect of substantially impeding the operation

of the qualified local governmental unit or impairing the financial

soundness of an affected taxing unit.

     (2) The legislative body of the qualified local governmental

unit shall not approve an application for a commercial

rehabilitation exemption certificate unless the applicant complies

with all of the following requirements:

     (a) The commencement of the rehabilitation of the qualified

facility does not occur earlier than 6 months before the applicant

files the application for the commercial rehabilitation exemption

certificate.

     (b) The application relates to a rehabilitation program that

when completed constitutes a qualified facility within the meaning

of this act and that shall be situated within a commercial

rehabilitation district established in a qualified local

governmental unit eligible under this act.

     (c) Completion of the qualified facility is calculated to, and

will at the time of issuance of the certificate have the reasonable

likelihood to, increase commercial activity, create employment,

retain employment, prevent a loss of employment, revitalize urban

areas, or increase the number of residents in the community in

which the qualified facility is situated.

     (d) The applicant states, in writing, that the rehabilitation

of the qualified facility would not be undertaken without the

applicant's receipt of the exemption certificate.

     (e) The applicant is not delinquent in the payment of any

taxes related to the qualified facility.

     Sec. 9. The assessor of each qualified local governmental unit

in which there is a qualified facility with respect to which 1 or

more commercial rehabilitation exemption certificates have been

issued and are in force shall determine annually as of December 31

the value and taxable value, both for real and personal property,

of each qualified facility separately, having the benefit of a

certificate and upon receipt of notice of the filing of an

application for the issuance of a certificate, shall determine and

furnish to the local legislative body the value and the taxable

value of the property to which the application pertains and other

information as may be necessary to permit the local legislative

body to make the determinations required by section 8(2).

     Sec. 10. (1) There is levied upon every owner of a qualified

facility to which a commercial rehabilitation exemption certificate

is issued a specific tax to be known as the commercial

rehabilitation tax.

     (2) The amount of the commercial rehabilitation tax, in each

year, shall be determined by adding the results of both of the

following calculations:

     (a) Multiplying the total mills levied as ad valorem taxes for

that year by all taxing units within which the qualified facility

is located by the taxable value of the real and personal property

of the qualified facility on the December 31 immediately preceding

the effective date of the commercial rehabilitation exemption

certificate after deducting the taxable valuation of the land and

of personal property other than personal property assessed pursuant

to sections 8(d) and 14(6) of the general property tax act, 1893 PA

206, MCL 211.8 and 211.14, for the tax year immediately preceding

the effective date of the commercial rehabilitation exemption

certificate.

     (b) Multiplying the mills levied for school operating purposes

for that year under the revised school code, 1976 PA 451, MCL 380.1

to 380.1852, and the state education tax act, 1993 PA 331, MCL

211.901 to 211.906, by the taxable value of the real and personal

property of the qualified facility, after deducting all of the

following:

     (i) The taxable value of the land and of the personal property

other than personal property assessed pursuant to sections 8(d) and

14(6) of the general property tax act, 1893 PA 206, MCL 211.8 and

211.14.

     (ii) The taxable value used to calculate the tax under

subdivision (a).

     (3) The commercial rehabilitation tax is an annual tax,

payable at the same times, in the same installments, and to the

same officer or officers as taxes imposed under the general

property tax act, 1893 PA 206, MCL 211.1 to 211.157, are payable.

Except as otherwise provided in this section, the officer or

officers shall disburse the commercial rehabilitation tax payments

received by the officer or officers each year to and among this

state, cities, school districts, counties, and authorities, at the

same times and in the same proportions as required by law for the

disbursement of taxes collected under the general property tax act,

1893 PA 206, MCL 211.1 to 211.157.

     (4) For intermediate school districts receiving state aid

under sections 56, 62, and 81 of the state school aid act of 1979,

1979 PA 94, MCL 388.1656, 388.1662, and 388.1681, of the amount of

commercial rehabilitation tax that would otherwise be disbursed to

an intermediate school district, all or a portion, to be determined

on the basis of the tax rates being utilized to compute the amount

of state aid, shall be paid to the state treasury to the credit of

the state school aid fund established by section 11 of article IX

of the state constitution of 1963.

     (5) The amount of commercial rehabilitation tax described in

subsection (2)(a) that would otherwise be disbursed to a local

school district for school operating purposes, and all of the

amount described in subsection (2)(b), shall be paid instead to the

state treasury and credited to the state school aid fund

established by section 11 of article IX of the state constitution

of 1963.

     (6) The officer or officers shall send a copy of the amount of

disbursement made to each unit under this section to the commission

on a form provided by the commission.

     (7) A qualified facility located in a renaissance zone under

the Michigan renaissance zone act, 1996 PA 376, MCL 125.2681 to

125.2696, is exempt from the commercial rehabilitation tax levied

under this act to the extent and for the duration provided pursuant

to the Michigan renaissance zone act, 1996 PA 376, MCL 125.2681 to

125.2696, except for that portion of the commercial rehabilitation

tax attributable to a special assessment or a tax described in

section 7ff(2) of the general property tax act, 1893 PA 206, MCL

211.7ff. The commercial rehabilitation tax calculated under this

subsection shall be disbursed proportionately to the taxing unit or

units that levied the special assessment or the tax described in

section 7ff(2) of the general property tax act, 1893 PA 206, MCL

211.7ff.

     Sec. 11. The amount of the tax applicable to real property,

until paid, is a lien upon the real property to which the

certificate is applicable. Proceedings upon the lien as provided by

law for the foreclosure in the circuit court of mortgage liens upon

real property may commence only upon the filing by the appropriate

collecting officer of a certificate of nonpayment of the commercial

rehabilitation tax applicable to real property, together with an

affidavit of proof of service of the certificate of nonpayment upon

the owner of the qualified facility by certified mail, with the

register of deeds of the county in which the qualified facility is

situated.

     Sec. 12. The legislative body of the qualified local

governmental unit may, by resolution, revoke the commercial

rehabilitation exemption certificate of a facility if it finds that

the completion of rehabilitation of the qualified facility has not

occurred within the time authorized by the legislative body in the

exemption certificate or a duly authorized extension of that time,

or that the holder of the commercial rehabilitation exemption

certificate has not proceeded in good faith with the operation of

the qualified facility in a manner consistent with the purposes of

this act and in the absence of circumstances that are beyond the

control of the holder of the exemption certificate.

     Sec. 13. A commercial rehabilitation exemption certificate may

be transferred and assigned by the holder of the certificate to a

new owner of the qualified facility if the qualified local

governmental unit approves the transfer after application by the

new owner.

     Sec. 14. Not later than October 15 each year, each qualified

local governmental unit granting a commercial rehabilitation

exemption shall report to the commission on the status of each

exemption. The report must include the current value of the

property to which the exemption pertains, the value on which the

commercial rehabilitation tax is based, and a current estimate of

the number of jobs retained or created by the exemption.

     Sec. 15. (1) The department annually shall prepare and submit

to the committees of the house of representatives and senate

responsible for tax policy and economic development issues a report

on the utilization of commercial rehabilitation districts, based on

the information filed with the commission.

     (2) After this act has been in effect for 3 years, the

department shall prepare and submit to the committees of the house

of representatives and senate responsible for tax policy and

economic development issues an economic analysis of the costs and

benefits of this act in the 3 qualified local governmental units in

which it has been most heavily utilized.

     Sec. 16. A new exemption shall not be granted under this act

after December 31, 2015, but an exemption then in effect shall

continue until the expiration of the exemption certificate.