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No-Penalty Property Tax Extension Passes House

June 23, 2020

A penalty- and interest-free property tax extension unanimously passed the House Thursday. The bills also allow local governments to borrow collectively an estimated $1 billion to help with cash flow. 

HB 5761 gives taxpayers until March 1, 2021 to pay their summer 2020 assessment without penalty or additional interest fees.  HB 5810 gives borrowing tools for delinquent taxes to schools and local government entities — at a rate hoped to be up to six months faster than the traditional system. 

As deadlines for summer property taxes are typically from late July to mid-September of this year, these bills will allow taxpayers until Aug. 28, 2020 to file for the extension. Local governments will have until Sept. 11, 2020 — as proposed — to submit applications for deferment to counties. 

Rep. James Lower (R-Cedar Lake) sponsored the bills. While presenting at Wednesday’s House Appropriations Committee meeting, he projected the questions, “Can the state borrow enough to meet this need? How much would that borrowing cost?” 

“Yes. With the help of county treasurers, we’ve estimated the potential need to be $800 million (to) $1 billion. This is well below the state’s capacity for short-term borrowing. The borrowing would only be for (six to eight) months,” Lower explained on his slideshow. 

According to the Michigan Department of Treasury, it would cost between $10 million to $18 million to borrow $1 billion for the program, collecting an issuance rate between 1.75% to 2.15%. 

Lower also said the Coronavirus Aid, Relief and Economic Security (CARES) Act could potentially be used to support the program’s borrowing expenses. 

“However, we do not need to answer that question today as the borrowing will not occur until late October or early November. These are potential fund balances and sources within the Department of Treasury’s current-year budget,” his slideshow explained. “Our goal is to have no fiscal impact on the current-year budget.” 

Lower summarized testimonies from a local theater owner — who has lost the majority of summer revenue as the facility remains closed — and the West Michigan Whitecaps, a minor league baseball team. 

He said he believed the baseball team is already expecting a $450,000 summer property tax bill. 

“As I said, they’re not paying this. They simply will not be able to pay that on time. Our bills offer them a penalty- and interest-free extension on that, but also make the local governments (and) schools in the staple,” Lower said. “I’m submitting to you that we have a fully big solution in front of you.” 

At the committee meeting, Rep. Thomas Albert (R-Lowell) said the bills were “much needed legislation.” 

“This is going to help so many families and so many business owners. It’s going to keep people in their houses, it’s going to help people be able to keep their jobs and their likelihoods going forward,” Albert said. “This is really necessary.” 

The bills have been moved to the Senate to be assigned to a committee. 

“If we don’t pass these bills, then you open up a whole host of cash-flow issues — not only for cities, villages and townships, but our schools who are also experiencing challenges with getting started in the fall,” Lower said.

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