Township Summary of State Law – Act 197 of 1975
To: Oshtemo Charter Township Board
From: James Porter
Date: August 25, 2003
Subject: Downtown Development Authorities
This Memo has been prepared in response to our discussion at the public comment portion of your meeting of August 12, 2003. At the time we initially spoke, I had not recently reviewed the Downtown Development Authority Act so some of my comments may have been based upon more recent work with the Economic Development Corporation Act. To clarify those issues, I did review Act 197 of 1975 and provide the following to you as a basic outline for establishing and operating a DDA within your Township.
Creation and Limitation of DDA.
Pursuant to Section 2 of the Act, the Township may establish one Authority, except in those cases where there was more than one Authority prior to November 1, 1985, or the municipality annexes an area with a preexisting DDA. The area of the Downtown District is defined as “an area in a business district that is specifically designated by ordinance of the governing body of the municipality pursuant to this act.”
Resolution of Intent.
If the Township determines that it is necessary for the best interests of the public to halt property valuation deterioration, increase property tax evaluation in its business district and to promote economic growth, the governing body may, by resolution, declare its intent to create a DDA. To do so, the Board must:
I. Set a date for holding a public hearing.
II. Notice the public hearing.
A. By publication twice in a newspaper of general circulation – not less than 20 nor more than 40 days for the hearing.
B. Mail notice to the property tax payors of record in the proposed District, and to each governing body of each taxing jurisdiction levying taxes that would be subject to capture if taxing financing is approved – not less than 20 days before the hearing.
C. Post notice in at least 20 conspicuous places within the proposed DDA area not less than 20 days before the hearing.
D. The notice should state the date, time and place of the hearing, describe the boundaries of the proposed District.
III. Hold the public hearing and allow public comment.
The Township may decrease the District, but may not increase the District for those last provided for in the public notice.
IV. Exemption from TIFA financing.
Not more than 60 days after the public hearing a governing body of a taxing unit may exempt its taxes from capture by adopting a resolution to that effect and filing it with the Township Clerk.
V. Establishment of DDA by Ordinance.
Not less than 60 days after the public hearing, if the Township intends to proceeds, it shall adopt by a majority vote of its members an ordinance establishing the Authority designating the boundary of the District over which the DDA will exercise its power. The Ordinance must be filed with the Secretary of State and Notice of Ordinance of Adoption must published at least once in a newspaper of general circulation.
VI. Amendment of District Boundaries.
The boundaries may be altered or amended in the same manner that the DDA was established.
VII. Board Membership Qualification and Terms.
- The Authority is to be under the supervision and control of a board consisting of the chief executive officer of the Township and not less than eight and no more than twelve members as determined by the Township Board. The members are to be appointed by the Chief Executive Officer of the Township subject to the approval of the Township Board. The Board is subject to the following:
- Not less than a majority of the members must be persons having an interest in property located in the DDA.
- Not less than one of the members shall be a resident of the Downtown District if there are more than 100 persons residing within the Downtown District.
- An equal number of members shall be appointed for one, two, three and four year terms; thereafter, each member shall serve a four year term.
- All officers must qualify by taking and subscribing to the constitutional oath of office.
- All Board meetings are subject to the Open Meetings Act.
- Members of the Board may be removed for cause by the Township.
- All expense items must be published monthly and financial records open to the public.
VIII. Board of Directors – powers and duties.
- The Board may employ and fix compensation for a director. The director serves at the pleasure of the Board.
- The Board can employ and fix compensation for a treasure.
- The Board may employ and fix compensation for a secretary.
- The Board may retain legal counsel.
- The Board may employ other personnel deemed necessary by the Board.
- The Board has the power to analyze economic changes taking place in the Downtown District.
- Study and analyze effect of metropolitan growth upon the District.
- Plan and propose construction, renovation, repair, remodeling and rehabilitation of public facilities in any existing building or multifamily dwelling unit.
- Plan, prepare and implement an improvement to a public facility within development area to comply with barrier free design requirements.
- Develop long range plans to halt deterioration of property values and promote economic growth.
- Implement a plan for development in the DDA area.
- Enter into contracts incidental to the exercise of its power.
- Acquire by purchase or otherwise land or other property, real or personal property, including leases thereof.
- Improve land and construct, reconstruct and rehabilitate and operate buildings including multifamily dwellings.
- Fix or charge, collect fees, rents or other charges for the use of any building or property under its control.
- Lease any building or property under its control.
- Accept grants and donations of property, labor or otherwise.
- Acquire and/or construct public facilities.
IX. The DDA is an instrument of the Township.
Under the Act, the DDA is to be considered an instrument of Oshtemo Charter Township pursuant to Act 227 of the Public Acts of 1972.
X. Transfer of Property.
The Township has the Authority to take private property under Act 149 of Public Act of 1911 and transfer that to the Authority if it is necessary for a public purpose and public benefit.
Section 11 of the Act states that the Authority finances its activities through donations, proceeds of a tax imposed pursuant to Section 12 of the Act, money borrowed under Sections 13, 13(A) of the Act, revenues from any property it holds, proceeds from tax increment financing under Sections 14-16 of the Act, proceeds from a special assessment district created under the law, or any other sources approved by the Township, includes revenue from Federal Facility Development Act and other federal programs. All money received should be deposited to the credit of the Authority and subject to disbursement under the Act. Also, except as provided for in the Act, the Township is not obligated, nor shall it ever be obligated, to pay any sums from public funds other than the money received by the municipality pursuant to this section for or on account of the activities of the Authority.
Taxing Power. The Authority does, with the Township’s approval, have the Authority to levy an ad valorem tax on real and tangible personal property not otherwise exempt within the DDA area. It is limited to 2 mil and taxes are to be collected in the same manner as the Township collects all other ad valorem property taxes. A municipality may borrow money pursuant to tax anticipation notes under the Municipal Finance Act for taxes levied by the DDA.
Revenue Bonds. The Authority may issue revenue bonds and the same will not be deemed a debt of the municipality, but they must be issued in accordance with Act 94 of the Public Acts of 1933. However, please note these are not generally issued or are not considered saleable without the Township pledging its full faith and credit which is allowed under Section 13 of the Act. Section 13 of the Act allows the Authority, with the approval of the Township to borrow money and issue revenue bonds or notes, to finance costs of acquiring and constructing the property in connection of the implementation of a development plan in the Downtown District.
Tax Increment Financing. The Authority has the ability, when it determines it is necessary, to prepare and submit a tax increment financing plan to the Township. The plan must include a detailed explanation of the tax increment procedure, the maximum amount of bonded indebtedness is to be incurred, the duration of the program and it has to be in compliance of Section of 15 of the Act. The plan must also contain a statement of estimated impact of tax increment financing on assessed values of all the taxing jurisdictions. The plan may provide for use of part or all of the captured assessed value, but the part intended to be used by the Authority must be clearly stated in the plan. The Authority or the Township may exclude from capture assessed value growth due solely from inflation. The plan must set forth the method for excluding growth in property value resulting solely from inflation.
There are limitations on the percentage of taxes levied for school operating purposes which can be captured. The Act also provides for covering any shortfall from TIFA revenues.
The plan may only be approved after a notice and a hearing as provided for in Section 18. The hearing shall provide a reasonable opportunity for all taxing jurisdictions subject to the captured, have input on the plan.
Under Section 15, the Authority has to submit to the Township and the State Tax Commission a detailed report on the status of the tax increment financing.
Under Section 16, the Township, by resolution, may authorize general obligation bonds to finance the development program supported by tax increment financing or refund bond s issued under that Section and pledge its full faith and credit for the payment of those bonds.
XII. Development Plan.
When a Board decides to finance a project in the Downtown District area through the use of revenue bonds as authorized in Section 13 or tax increment financing as authorized in Section 14, 15 and 16, it must prepare a development plan which must provide:
A. The boundaries of the development area in relation to the highways, streets, streams or otherwise.
B. The location and extent of existing streets or other public facilities including the location, character and extent of categories of public and private land uses then existing and proposed for the development area, including residential, recreational, commercial, industrial, etc.
C. A description of the existing improvements to be demolished, repaired or altered and the time required to do so.
D. Location, extent and character of the estimated costs of the improvements including rehabilitation and an estimate of time for completion.
E. Statement of construction stages; estimated time for each stage.
F. Description or any part of the development area to be left as open space.
G. Description of any portions of the development area that the Authority intends to sell, donate or exchange, or lease to and from the Township.
H. A description of the desired zoning changes and changes in streets, street levels or intersections and utilities.
I. Estimate of the costs of the development and method of financing the development, including the ability of the Authority to arrange financing.
J. Designation of the person or persons natural or corporate for whose benefit the project is being undertaken.
K. The procedures for bidding for the leasing, purchasing shall convene in any manner all or a portion of the development upon its completion.
L. Estimate the number of persons residing in the development area and the number of families and individuals to be displaced if any.
M. Plan for establish and priority for relocation of persons to be displaced.
N. Provision for costs for relocating for persons displaced by the development and financial assistance, including litigation expenses.
O. A plan for complying with Act 227 of the Public Acts of 1972.
P. Other material the Authority or Township considers pertinent.
Q. The development plan may provide for improvements outside of the development area, but within the District when need to be constructed, renovated or rehabilitated.
XIII. Public Hearing Regarding Development Plan. There must be a public hearing pursuant to the notice provisions of Section 18 of the Act. At the hearing, the governing body of the Township must determine whether the development plan or tax increment financing plan serves a public purpose. If it does, then it must approve or reject the plan or approve it modifications based on conditions set forth in Section 19 of the Act.
XIV. Development Area Citizens Council. If the proposed development area has more than 100 residents, a development area citizens council must be established 90 days before the public hearing on the development or tax increment and financing plan. The Council shall consist of not less than nine members and they must be residents of the development area and appointed by the Township. Provisions of Sections 22 and 27 deal with the meeting provisions, findings and possible dissolution of the citizen’s council.
XV. Budget. The Director of the Authority is to prepare a budget pursuant to Section 28 of the Act. The budget must be approved by the Township. Please note the Township may assess a reasonable pro-rata share of the funds for the costs of handling and auditing the funds of the Authority, which shall be paid annually by the Board pursuant to a line item in the budget.
XVI. Dissolution. Once the Authority has completed the purposes for which it was organized, it can dissolve. The property and the assets held by the Authority then become assets of the municipality.
This is a general overview of the Act and I hope it will assist you and your Planning Commission as you look at the possibility of establishing a Downtown Development Authority.