What Dowagiac potentially loses in personal property tax (PPT) revenue equates to three to four more full-time positions, City Manager Kevin Anderson said Monday.
“Cassopolis is going to get hit hard, and it’s going to hurt,” said Village Manager Meg Cluckey, who had been crunching numbers to prepare a memo for her village council sorting out the issues and options.
Gov. Rick Snyder told a statewide gathering of local municipal officials Oct. 6 in Grand Rapids  “the goal is not to harm you. The reason we bring up the personal property tax is to make you more competitive.”
Instead of longing for the good old days, Snyder encouraged officials to regard their situation as a “crisis of opportunity.”

Not an overnight move
Snyder’s pronouncements that personal property tax will not be eliminated overnight have stopped short of promising a dollar-for-dollar replacement.
Lansing lawmakers are talking in broad “concepts” about making business taxes fairer and more competitive, but, for now, the bottom line is  local officials lack a “firm proposal,” Anderson said.
“All signs point to major revisions to the system being made before the calendar year ends.”
The Snyder administration may unveil its plan to overhaul the personal property tax in a couple of weeks.
Dowagiac relies on PPT revenue in the current fiscal year for $188,848, according to Anderson’s analysis, including $165,979 for the general fund, $6,449.97 for the Dial-A-Ride Transit (DART) fund and $16,419 for the solid waste fund.
Personal property tax is assessed on business and utility equipment, such as machinery and computers.
According to the Michigan Municipal League, the PPT makes up more than 50 percent of the taxable value of some Michigan communities.
The average Michigan community gets about 11 percent of its revenues from personal property tax. MML pegs Dowagiac at 12 percent.
MML figures show $73,593, or 13.49 percent, for Cassopolis and $7,347, or 6.65 percent for Edwardsburg.
Declining real property values drained hundreds of millions of dollars from local budgets as property tax revenues plummeted.
Cluckey estimates a $79,000 hole in her budget if PPT is lost, coupled with notification from the Cass County Equalization Department of an 11-percent decline in property tax revenue.
“That’s huge,” she said of the total, $140,820, which would amount to a substantial blow to an $850,000 budget.
She said the village is looking at extending its budget cycle by four months, from March to July as well as evaluating services with an eye toward “how to fix with the least amount of damage.”

Restricted revenues
Both managers said Michigan, with the Headlee tax-limitation amendment and Proposal A school finance reform is very restrictive when it comes to creating local revenue streams. Anderson had more latitude when he managed in Wisconsin.
Cluckey pointed to Illinois, where a home rule unit with 25,000 population could add taxes as it saw fit to provide necessary services.
“It’s extremely frustrating,” she said. “From a realist perspective, I don’t agree with it. They’re unduly taxed by the state, I don’t disagree.”
Anderson said the problem for municipalities is that this funding mechanism has been in place for 15 to 20 years, changing it affects revenue streams and the “trick” for legislators will be determining a fair replacement.
MML argues that the Legislature and governor have repeatedly reneged on state promises to provide revenue sharing to local communities across Michigan.
In the past decade, state lawmakers cut more than $4 billion in revenue sharing to local communities, causing deep reductions in police and firefighter levels.
and other basic services such as road repair and maintenance, lawn mowing for safety and snow plowing.
Cluckey quoted an IBM white paper which suggested the 100 largest cities, given the magnitude of real estate losses, could see tax revenues disintegrate 12 percent a year for five years.