REALTOR® victories
Hard work leads to exciting legislative year

The end of 2004 was a success for REALTORS®, as our association was instrumental in helping to pass some significant legislation. Years of brainstorming, hard work and attention to detail were rewarded with the passage of the streamlined platting and contract zoning bills. It was a busy and exciting legislative year, but these two very important issues finally passed across Gov. Jennifer Granholm’s desk.

First, the years of demanding and difficult work devoted to streamlined platting by MAR’s Land Use Task Force and the Public Policy Committee finalized in a huge success, as Governor Granholm signed PA 525 to take effect July 1, 2005. The process of getting it to pass both the House and Senate finished smoothly, but only because of years of difficult negotiation beforehand. The end result is rewarding and encouraging for the future of REALTORS® statewide.

This new law allows the platting timeline to be reduced dramatically and makes it simpler to get preliminary approval subject to conditions. It is estimated that, on average, the process of approval will be reduced by over a year. Not only is this process frontloaded, but is now constituted by concurrent approvals rather than the slower sequential process of the past.

Bureaucratic redundancies are also now reduced. Proprietors now submit a request to the county plat board for a pre-application review meeting. The new law also provides for the various authorities to review a preliminary plat simultaneously. Again, the bill takes legal effect on July 1.

The second land use issue, contract zoning, also went through the legislative process of passing both the House and Senate to reach Granholm’s desk, and was assigned the titles of Public Acts 577, 578 and 579.

The three-bill package gives local units of government the authority to enter into contracts with private landowners to specify certain land uses as conditions to rezoning. An owner of land could now voluntarily offer in writing, and the local unit of government could then approve, certain use and development of the land as a condition to a rezoning of the land, or an amendment to a zoning map.

This package, through rezoning contracts, also offers the ability for new designs, mixed use, and high-density development. Local governments and developers will now have equal footing in the bargaining process, which ultimately creates better redevelopments and smarter land use. These bills took immediate effect, and are now law.

The New Challenge

While the end of the year brought about some positive legislative news, the short term future for the state budget and Michigan’s economy remains unpredictable at best. For the fourth year in a row, legislators are faced with a budget deficit approaching half a billion dollars or more, and state revenues show little sign of growth. To make matters worse, 2005 came with Michigan tied (with Alaska) for the title of having the highest unemployment rate in the nation, an unflattering 7.3 percent. As we have discussed in this forum and in others, there is an instability that exists within our state budget due to these revenue shortfalls. “One time fixes” and accounting tricks have essentially run out. And yet our elected officials are faced with another year of budget shortfalls.

Granholm formally offered one part of her proposal to correct the state’s deficit with the announcement of her Single Business Tax restructuring plan. By the time this article goes to print, MAR’s public policy committee and a newly created task force will have had time to thoroughly review the governor’s tax restructuring plan and lay out a thoughtful reaction to her proposal. While a substantive and complete analysis of the proposal is unfolding, the popular sentiment around Lansing is one of cautiousness.

The heart of the proposal is a cut in the Single Business Tax (SBT) rate from 1.9 percent to 1.2 percent. It then places a greater emphasis on a company’s profits by shifting the tax to a 100 percent profits base. Currently, the SBT is weighted 90 percent on profits, 5 percent on payroll and 5 percent on property. Additionally, the plan calls for a 35 percent personal property tax credit for manufacturers that can be applied against the SBT.

The manufacturing sector hailed the proposal, but it comes with some strings attached. Not the least of which is a $110 million dollar, according to a 2004 estimate by the Michigan Department of Treasury, increase in commercially leased properties, as we had already fought and won twice over the last year. With certainty, some businesses will see an increase in their taxes or no relief at all. The governor has maintained over the last year that any tax restructuring proposal she offered would be revenue neutral, and I certainly do not doubt her sincerity; however, there is some doubt as to how the numbers add up. Out-of-state insurance companies are the target to offset the SBT rate reduction by eliminating the insurance tax that is based on gross receipts and replacing it with a premiums tax of two percent. While details of the proposal will be clarified and analyzed over the coming weeks, it is evident that businesses benefiting from the proposal will do so at the considerable expense of others.

The governor’s tax restructuring proposal is just one step in what is expected to be a long and contentious journey toward solving Michigan’s consistent budget struggles. The buzzword around Lansing these days is “budgeting for our priorities” and House Speaker Craig DeRoche (R-Novi) routinely reminds the legislature that “living within our means” is his focus going into future budget negotiations. Going back to last year’s legislative session, Senate Majority Leader Ken Sikkema (R-Wyoming) introduced his caucus to a book titled The Price of Government, written by David Osborne and Peter Hutchinson, which became the popular reference for all things budget related. The central theme of the book is a “budgeting for outcomes” approach, or in other words, to spend the taxpayers’ money on prioritized results, not by parsing through last year’s baseline budget.

Leadership in the House and Senate has publicly expressed a desire to change Michigan’s budget process to reflect this “budgeting for outcomes” approach. Such an undertaking is no small feat, especially politically, since this new approach would likely result in the elimination of, or reduced funding for, some government programs. To assist in this project, our association has taken a leadership role in partnering with the Michigan Chamber of Commerce to bring in Hutchinson and his consulting team to work with the legislature on implementing this rebudgeting approach.

This partnership will call for a considerable amount of financial resources, but the opportunity to participate in this project is important in making sure that additional taxation on the real estate industry is not considered as a way to increase state revenues. Overall, if Michigan REALTORS® can play a positive policy role in keeping government within its means, today’s sacrifice on that level will be dwarfed by the longtime tax savings Michigan’s homeowners, and you, the real estate practitioner, will enjoy.