City of Plymouth Proposed 2022-2023 Budget - Flipbook - Page 281
CRC Memorandum
Fundamentally, need is defined either in terms of
the capacity of a government to raise revenues or
in terms of the demands placed on a government
to provide services. Revenue sharing distribution
programs that are designed to address fiscal capacity attempt to help local governments that are less
capable of helping themselves.
hosting tax exempt properties as part of an effort to
assist local governments less able to raise revenues
from own-source revenues. Two options would be
to fund each parcel of tax exempted property at flat
amounts or fund each parcel of tax exempted property according to the amount of square footage or
acreage encompassed by those properties.
Options for Reform
Demand for Services
Alternative methods of revenue distribution are
based on assessments of the services provided.
These assessments are best if they are based on
measures of units served – people or properties – or
measures of services provided – crimes responded
to, fires put out, park acreage, etc. They should not
be based on the cost of serving people or property,
or the cost of providing specific services. To do so,
creates perverse incentives for local governments to
inflate costs to enhance payments from the state.
The options for reform that follow are divided into
• those that account for inequities in local government tax bases,
• those that are based on differences in service
needs,
• those that recognize key places that contribute
to the state’s economy, and
• those that fund the local government services
most valued by the state.
Equalize Tax Bases
Taxable Value per Capita. This formula divides the
state average taxable value per capita by each local
government’s taxable value per capita and the result
is multiplied by the unit’s population to obtain the
unit’s weighted population.
Tax Yield Equalization. Rather than measuring the
adequacy of each government’s tax base on a per
capita basis, this measure assessed the productivity
of one mill of taxation in yielding revenues. Local
governments for whom a mill of taxation does not
generate revenues at the state average receive funding. Those for whom one mill generate revenue in
excess of the state average receive nothing.
Evaluation of Tax Base Factors. The primary difference between taxable value per capita and tax yield
equalization is that the first measure is more heavily
predicated on the idea that local government services
are provided to people, while the second measure is
indifferent to whether the services are provided to
people or properties. Certainly, much of the services
provided to local governments are provided to people, but things like garbage collection, fire protection,
planning and zoning, and others are less dependent
on the number of people in the community.
Tax Exempt Properties. The state revenue sharing
program could compensate local governments for
On a macro level, there are no services universally provided by all cities, villages, and townships
throughout Michigan. Many functions – property
assessing, tax collection, accounting, planning and
zoning, etc. – are nearly universally performed by
local governments. However, these are fundamental responsibilities of local governments, the cost of
which should be borne locally. Not all cities, villages,
and townships in Michigan provide police and/or
fire protection, provide parks and recreation, collect
refuse, or engage in other activities commonly associated with local governments.
Because of the difficulty in weighing one unit of
local government’s needs against another’s and because of the lack of uniformity in services provided,
governments tend to use “pseudo” measures that
are commonly accepted as indicators of heightened
demand for services.
Nighttime Populations. Michigan, and most other
states, have historically used data compiled by the
U.S. Department of Commerce’s Census Bureau for
the distribution of constitutional revenue sharing.
However, this approach for state revenue sharing
(beyond the per capita constitutional revenue sharing distributions) has several shortcomings. Since
the census counts people in their residence, it is
essentially only counting the nighttime population
of each community.
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