Around the Dome

by Del Chenault, Senior Vice President, Government Affairs
Scofes & Associates Consulting, Inc. (S&A)

May 7, 2003

BOMA MEMBERS LOBBY LANSING'S TOP LEADERS

Members of BOMA Detroit and BOMA Grand Rapids united at the state's Capitol last week to raise legislative awareness on issues important to members of the industry. Held in the prestigious Senate Appropriations room in the State Capitol, the day's events were a unique opportunity for BOMA members to discuss issues directly with top legislative leaders as identified by the BOMA Government Affairs Committee.

Several legislators attended the session to speak directly with BOMA members including House Speaker Rick Johnson, Granholm Chief of Staff Rick Wiener, Sen. Burton Leland, Rep. Gene DeRossett, Sen. Gilda Jacobs, and MEDC Dep. Director Robert Johnson, to name a few.

BOMA members directly addressed several issues with legislators such as MEDC budget cuts, tax "loophole" closures, urban sprawl, insurance and toxic mold. The Speaker informed members that the House was set to begin considering several bills dealing directly with the Governor's proposed $129 million in tax loophole closures. BOMA members expressed concern that changes in the Single Business Tax (SBT) structure via loophole closures could be harmful to business generation in the state. The Speaker expressed similar concerns.

Further, BOMA members expressed support for continuation of the Brownfield Redevelopment Act as an important tool for business growth.

Members also addressed the newly formed Land Use Council and concerns that the commission may find ways to dictate land use to private landowners and developers. Many legislators stated it was too soon to form opinions on the direction of the council but looked forward to seeing any new proposals.

BOMA members also strongly expressed support for continuation of MEDC budget funding. Earlier in the week, the Senate cut an additional $5.7 million from the MEDC budget for a total cut of over $14 million. Legislators acknowledged the leadership of BOMA and its Government Affairs Committee in expressing their support for MEDC budget funding.

All legislative leaders applauded BOMA for actively participating in the legislative process by strongly advocating for its membership on issues seen as adversely impacting the industry. BOMA was encouraged to continue with its advocacy efforts.

The day was capped off with a synopsis of current legislative packages by BOMA’s lobbyists Steve Scofes and Del Chenault.

REP. PASTOR OPPOSES DEQ FEE HIKES

A tentative recommendation from the lawmaker in charge of the Department of Environmental Quality's budget in the House would cut the DEQ's programs by 15 percent and administration by 30 percent.

The proposal is designed to use deeper cuts than recommended by Governor Jennifer Granholm to offset the apparent opposition of the Republican-controlled House to fee increases Ms. Granholm recommended as a replacement for general fund revenue.

The Democratic governor is calling for hikes in the solid waste and groundwater discharge fees as well as a new water pollution fee – moves that would raise about $9.6 million for the DEQ's budget and allow scarce general fund money to be spent elsewhere. But opposition to those fee increases is mounting among the GOP, spurring Rep. John Pastor (R-Livonia), chair of the House Appropriations DEQ Subcommittee, to recommend steeper cuts.

FIRST LOOPHOLE BILL MOVES

Out-of-state visitors winning money at Michigan casinos and horse race tracks would have to pay state income tax on their winnings under a bill approved by a House committee. The House Tax Policy Committee also approved a bill that would broaden the definition of business income, yielding more revenue from businesses with earnings covered by the income tax.

The bills are the first of those proposed by Democratic Governor Jennifer Granholm closing so-called tax loopholes to see movement in the Republican-controlled Legislature. Ms. Granholm's 2003-04 budget, which seeks to close a $1.57 billion general fund shortfall, is partly built on raising $129 million in new revenue from loophole-closing bills.

Taxing the gambling winnings of nonresidents would raise $8.8 million in new revenue, according to the Department of Treasury. Broadening the definition of business income would raise an additional $6 million. About one-quarter of the new revenue in both cases would go to the school aid fund with the remaining going to the general fund.

Applying to those multi-state small business partnerships that derive their business earnings through their personal income, the bill would extend the state's income tax to currently untaxed areas. Unlike standard businesses and corporations, which pay the single business tax, these businesses' "business tax" is paid through the income tax.

The bill is designed to ensure that any entity's business activities in Michigan are taxed.

TAX LOOPHOLE PACKAGE NEARS VERDICT IN SENATE PANEL

The Senate Finance Committee heard another round of attacks on Governor Jennifer Granholm's $130 million tax loophole package on Wednesday, with the committee chair planning to conclude discussions on the proposals next week. Representatives of small businesses and insurance companies reiterated complaints that have been registered by others that some of the proposals are new tax burdens and instead demanded further cuts in state spending.

Sen. Nancy Cassis (R-Novi) is of that view herself, saying, "Not all of these (HB 4556 HB 4576 and SB 401-SB 409) are loopholes and some don't meet her own definition. That will be our touchstone as we move ahead."

The committee held its hearing the same day a House panel moved some loophole bills. Among the governor's definition of a loophole is whether a provision in the tax code allows taxpayers to circumvent original legislative intent. State Farm, Farm Bureau Insurance and Frankenmuth Mutual Insurance all zeroed in on a proposal to impose the use tax on insurers and a separate proposal that particularly affects vehicle insurers through an increase in the state charge to provide copies of driving records.

Linda Jolicoeur of Target Equipment Leasing in Farmington Hills and a member of the Small Business Association of Michigan said most proposals seem to eliminate small business tax credits, which are crucial elements in development of small businesses. She singled out schools as an area ripe for some budget cutting as a preferable strategy to increasing tax collections from businesses.

Ms. Cassis also said she would be asking all persons testifying on the package for a better definition of what constitutes a tax loophole. She added the proposals would not be felt fairly and equally among all taxpayers, adding, "Small businesses in our communities are really feeling the pain and we've got to recognize that."

TRANSPORTATION BUDGET MOVES WITHOUT DIESEL TAX INCREASE

The 2003-04 Department of Transportation budget is moving through the committee process, but without Governor Jennifer Granholm's proposed diesel fuel tax increase funding any of the $3.16 billion budget.

The Senate Appropriations Committee rejected, in SB 265, an effort to boost the budget's revenues by including expected revenue increases from the tax increase, should it be approved by the Legislature. Ms. Granholm has called for the tax to be boosted by 4-cents a gallon to 19-cents to put it on a par with the gasoline tax.

Democrats criticized this budget, as well as others, for moving ahead without all the assurances that the necessary revenues would be in place to fund them.

The budget total is $62 million more than the current year's appropriation, but is still $44 million less than Ms. Granholm's proposal. None of the budget is general fund money.

The budget also cuts $10 million of the allocation that would have gone to the Detroit Department of Transportation and the suburban SMART bus system. Most of the budget's discussion centered on mass transit with Committee Chair Sen. Shirley Johnson (R-Royal Oak) saying those systems are poorly run compared to systems across the state.

Detroit needs a good mass transit system, she said, but it makes no sense to put more money into a system that is currently inefficient and unsuccessful.

BOMA’S KEY STATE LEGISLATIVE ISSUES

The BOMA Governmental Affairs Committee reviewed and discussed major issues facing its membership in the State Legislature. The Government Affairs Committee chose the following issues to be lobbied and monitored by BOMA lobbyist, Steve Scofes and Del Chenault.

We will be reporting the status of these issues on a weekly basis.

Service Taxes – BOMA strongly opposes ANY type of new service taxes in Michigan. This would have a harmful ripple effect on the building and real estate industry and we vehemently oppose efforts to raise state revenues through any new Service Taxes.

Single Business Tax Cuts – We support efforts to further reduce the SBT in Michigan or maintain the tax at its current level. We understand the state’s requirement to balance its budget but this must be balanced against the need for job creation sparked by lower business taxes.

Mold – BOMA promotes high standards to protect the health and safety of building occupants. To that end, BOMA supports additional research to examine potential health effects of mold in indoor environments. BOMA opposes state initiatives to write model building codes and standards regulating mold and moisture. Building codes and standards designed to address mold and moisture should be developed through the industry standards consensus processes.

Utility Deregulation – BOMA fully supports the transition towards a competitive marketplace for electricity through the unbundling of generation, transmission and distribution. The generation of electricity must become competitive as soon as possible so that all Michigan consumers may realize the benefits of lower prices and enhanced services.

Urban Sprawl/Smart Growth – We encourage the use of the Brownfield’s law for redevelopment of urban areas and adaptive re-use of obsolete buildings. We feel the restrictions of local zoning boards and planning commissions are adequate to deal with urban sprawl issues and while we do not oppose state efforts at a cohesive plan for Smart Growth, we feel the best government in this case is the local government.

MEDC Funding Cuts – While sympathetic to the tough decisions that must be made during today’s budget crunch, BOMA Michigan is opposed to efforts to reduce or eliminate funding for the Michigan Economic Development Corporation. We view any such moves as shortsighted and contrary to the steps Michigan needs to make to keep our state attractive to the development or re-location of businesses to our area.

Brownfield Tax Extension – We applaud the Michigan Legislature for extending the Brownfield’s Tax Credit in December through 2008. This is the type of tax law that will spark urban development and curtail suburban sprawl. We encourage the state to invest more in Brownfield Development as future funding allows.

Read previous Around the Dome reports