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Tax-exempt properties squeeze local coffers, but bring benefits

ANN ARBOR—Scrutiny of tax-exempt properties can intensify during budget crunches with 39 percent of Michigan's local leaders reporting that they represent a moderate or significant part of potential property tax revenues.

The most common tax-exempt properties in Michigan are church property, K-12 school system property and principal residence exemptions for people in poverty, according to a poll by the University of Michigan's Ford School of Public Policy.

"Our survey finds that while these properties put a dent in a community's revenues, local leaders are more likely to see them as assets than as liabilities," said Tom Ivacko, administrator and program manager for the Ford School's Center for Local, State, and Urban Policy.

Tax-exempt property may decrease tax revenues and increase service demands for
 a jurisdiction, such as the need for police protection, but they can also offset other demands by providing services such as homeless shelters, food pantries and housing for the elderly. They can also indirectly boost revenues by fostering higher community quality of life and helping attract or retain residents and businesses.

The poll, part of the center's Michigan Public Policy Survey, reports that:

  • 26 percent of local leaders said tax-exempt properties are financial assets overall, 15 percent said they are liabilities, and 40 percent said they are both assets and liabilities.
  • 46 percent said the properties were assets when it comes to the communities' quality of life, 7 percent said they are liabilities and 28 percent said they are both.

The study, conducted from April 8 to June 9, 2013, involved surveys sent via hardcopy and the Internet to top elected and appointed officials in all municipalities in Michigan. A total of 1,350 jurisdictions returned valid surveys, resulting in a 73-percent response rate. The survey had a margin of error of 1.4 percentage points either way.

 

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