Harbor Springs, Emmet County continue tax-capture discussion

HARBOR SPRINGS — With the Harbor Springs Downtown Development Authority continuing discussions with Emmet County over a disputed tax-increment financing (TIF) program exemption, city council members decided on Monday not to request an attorney general’s opinion in the matter as recommended by the DDA.

The DDA had decided during its Oct. 4 meeting to recommend seeking the legal opinion. At that meeting, city manager Tom Richards also reported that county administrator John Calabrese had filed a Freedom of Information Act request for records showing all legal fees paid by the city for DDA- and TIF-related services provided by city attorney James Ramer.

“In the end, the (DDA) board chose to recommend that the council consider and approve a resolution asking a legal opinion from the state attorney general as to whether the county is actually eligible for that exception that they have claimed,” Richards said.

The problems between the city and Emmet County regarding the DDA’s TIF started months ago when the five-year TIF plan was still in development.

The city’s TIF originally contained an opt-in requirement, meaning no taxing entity’s new tax revenue from the DDA district could be captured for downtown purposes unless the entity formally agreed to it. Lakeview Cemetery agreed to participate in the plan, but both North Central Michigan College and Emmet County decided to opt out.

The city council finalized an ordinance change in early August that eliminated the opt-in requirement, allowing the capture of tax revenues from all the entities regardless of whether they had opted in or out. The TIF plan would only capture tax revenue on properties from within the DDA district. It does not decrease the amount received by taxing entities, but instead captures the growth in taxable value on those properties from the set base year.

Following that decision, both the county and the college sought exemptions through a state law that allows taxing entities to exempt themselves from a proposed TIF if they pass a resolution within 60 days of the public hearing for that TIF.

However, research by Ramer indicates the claims of exemption only apply under specific circumstances.

The attorney general has already issued an opinion related to this question, Ramer said, in a 2010 case that stated taxing jurisdictions may only opt-out if the district boundaries of a DDA are being altered or amended.

“The ability to opt-out only applies if there has been a recent adoption of a DDA district boundary, and Harbor Springs’ has been in existence essentially since 1984,” Ramer said on Monday.

North Central Michigan College trustees voted in September to rescind their previous decision to opt-out and will now be part of the TIF plan. That leaves Emmet County as the only entity still seeking an exemption.

Council member John Lio questioned whether a request for another opinion from the attorney general would be useful, as an opinion on the matter had already been rendered.

“It sounds like if the attorney general agrees to do it, odds are he would tell us what’s already documented,” Lio said. “It seems a bit redundant.”

Lio added he would prefer delaying a request for an attorney general opinion so the DDA could have more time to discuss the matter with county officials. The council had previously decided they did not want to challenge the legality of the exemptions, but rather try to solve the issue by diplomatic means.

“I’m hesitant to agree with moving forward if it’s in fact going to act counter to what we had all agreed to do, and that is to pursue a non-litigious solution with the county,” Lio said.

Richards said the DDA is working to “change minds” about the TIF and its benefits.

“I think it’s fair to sum it up, the goal of the DDA either is to convince the (county) commissioners that they were wrong and legally they can’t do this, or to have them reconsider on the basis of making what the DDA feels is the right decision in the first place for the right reasons,” Richards said. “It’s kind of a dual-pronged approach. They’re working on trying to change minds on the basis of what the TIF is and the benefit for not only the DDA but the county and so forth.”

Council members ultimately agreed to hold off on approving the recommendation for an opinion until more discussions could take place with the county.

In other business on Monday, the council:

— approved marina rate increases for 2019. The seasonal lease rate for docks and moorings increased by 3 percent. The fee for 200-series transient moorings increased from $15 to $20 per day. The fee for 300-series transient moorings increased from $20 to $30 per day. All other rates remained the same

— discussed use of the promotional banner display at Tourist Park. The current guidelines only allow an event organizer to use the display to promote their event for up to one week before that event. The council decided to also allow use of the banner display to promote events at other times of the year, so long as there is not a conflict with another event that is happening in that time frame

— authorized the city manager’s vote for board representatives on the Michigan Municipal League’s Property and Liability Board.

— heard a request from council member Lio for a more comprehensive policy regarding sidewalk repair and maintenance in the city. It was suggested that the Department of Public Works could be more active in identifying broken sidewalks that are in need of repair.