As talk over the 2013 budget continues, Mount Pleasant officials say they hope state tax legislation that could bruise the city’s revenue is clarified sooner rather than later.

Last week lawmakers introduced legislation to the state Senate with the aim to substantially reduce personal property taxes on multiple levels for businesses across Michigan. On Monday, city commissioners joined several other area government agencies and approved a resolution opposing such a cutback of local revenues.

Mount Pleasant Finance Director Nancy Ridley said the legislation could affect the city in a few major ways, though some uncertainty surrounds the cut to taxes as proposed, such as whether they’ll be adjusted and when they’d be implemented.

Total Impact • The legislation's aim is to eventually phase out all personal property taxes, which would cost Mount Pleasant $600,000 annually, or 7 percent of its revenue. • If Mount Pleasant wanted to make up that loss in revenue locally, it would have to increase the millage rate by 1.5 mils. • Currently, that rate is just below 16 mills. The city can raise it up to 20 mills without voters' approval.

“Obviously these are just proposals, so until something passes we don’t know for sure,” she said. “But at least from what I read the most immediate impact to the city is the one that talks about if a business has personal property (machinery and equipment) that is of a value of $40,000 or below that they are exempt from paying.”

And that exemption would, based on the proposals now in legislators’ hands, take affect in 2013.

Ridley said there are about 1,100 business in Mount Pleasant that pay personal property taxes, and of those, about 900 fall at the $40,000 or below value. The annual loss in revenue with so many businesses exempted, she said, would be 1 percent of the city’s general fund.

“It sounds insignificant,” she said, “but $110,000 is a lot of money.”

Plans also would affect several local tax capturing authorities, Ridley said, but the exact impact she hasn’t “been able to quantify quite yet.” There are also elements targeting a phase out for industrial tax payers, which she said would be a $170,000 loss a year.

Needing replacement revenue

At Monday’s City Commission meeting, City Manager Kathie Grinzinger recapped on the plight the city has seen financially before commissioners adopted the resolution.

She recounted the fall in state-shared revenue, as well as the loss of property value at large.

“And this doesn’t appear to be the end,” she said.

City Commissioner Jim Holton wore his “two hats” to Monday’s meeting — one being a city official and the other a local business owner.

He spoke to his experience in how bad the personal property tax is for business, calling it a “cobbled mess.” Along with other commissioners, he said the solution exists in the state’s finding a source of replacement revenue — something the proposal alleges will come in 2016, though local agencies would have to meet certain criteria to be eligible for.

“I want that tax eliminated,” Holton said. “But I also want to find a guarantee that those tax credits we’re giving away — I would say frivolously away — those items need to come back to the municipalities.”

Last week, Vice Mayor Kathy Ling joined other government leaders from across the state in Lansing to advocate for local governments’ concerns.

On Wednesday, she said the current list of proposed bills doesn’t provide any assurance to local government that money will be replaced, even factoring in the 2016 set up.

“The personal property tax has been one of the stable reliable sources of revenue for local government,” she said. “We’ve already taken so many hits because of the loss of property value and the change in revenue sharing, which has lopped off at least a third of what was a source of revenue cities could rely on.”

During a Monday work session, Ridley presented on next year’s budget to city commissioners, eventually getting their go-ahead to begin the budgeting process so soon in the calendar year.

Now city officials will move forward on two assumptions — that the city’s near-16 millage rate and current level of services would remain steady and they would fill any financial gaps with surplus or rain day funds. As this occurs, she said they’ll have to keep a close eye on how this property tax legislation evolves, if at all.

But the city is already looking into developing an income tax and expects a feasibility study to be completed in August.

Ridley told commissioners Monday that, if sought, an income tax could be put before voters in May or August in 2013 and, if approved, implemented the following January.