Local levy increase limit calculations related to tax incremental districts. (FE)

Act 12 changed the standard for determining the “valuation factor” to include only 90 percent of new construction that occurs within TIDs created after December 31, 2024, (covered TIDs) and to exclude any improvements removed within these TIDs. That is, under Act 12, net new construction for a political subdivision is the percentage change in the political subdivision's equalized value due to new construction, including 90 percent of the value of new construction occurring within a covered TID, less improvements removed, other than improvements removed within a covered TID. The bill repeals these changes.

Also, under current law, when a city or village creates a TID, the Department of Revenue calculates the “tax incremental base” value of the TID, which is the equalized value of all taxable property within the TID at the time of its creation. If the development in the TID increases the value of the property in the TID above this base value, the amount by which the equalized value exceeds the base value is the TID's “value increment.” The taxes collected on this value increment pay for the project costs of the TID.

Prior to Act 12, the statutes provided for an increase in a political subdivision's levy limit upon the termination of a TID. If DOR did not certify a value increment for a TID for a year because the TID had terminated, the levy limit of the political subdivision in which the TID is located increased by an amount based on 50 percent of the previous year's value increment for the TID. (The actual amount was equal to the maximum allowable levy for the preceding year, multiplied by a percentage equal to 50 percent of the amount determined by dividing the terminated TID's value increment by the political subdivision's equalized value less any TID value increments.) Also under pre-Act 12 law, a similar increase in levy limit resulted when a political subdivision amended a TID to subtract territory.

Under Act 12, these existing standards for increasing the levy limit of a political subdivision upon the termination or amendment of a TID are limited to TIDs created before January 1, 2025. For covered TIDs, upon termination or amendment of the covered TID, the political subdivision's levy limit is increased by an amount based on 10 percent of the TID's lifetime equalized value increase. (The actual amount is equal to the aggregate of the annual amounts of new construction less improvements removed in the covered TID.) This levy limit increase may be further increased by an amount based on 15 percent of the TID's lifetime equalized value increase if the TID terminates earlier than anticipated at the time of the covered TID's creation.

The bill eliminates the changes made by Act 12.