DALLAS -- Several Michigan school districts that are asking voters Tuesday for 'sinking fund' millages, which are local property taxes that fund major repairs and renovations to school buildings, will miss out on the expanded uses of the tax.
House Bill 4388 expands the use of sinking funds to school buildings to include security and technology upgrades.
The legislation allows these funds to be used by schools to pay for the upgrades on a pay-as-you go basis instead of by issuing debt.
The bill was passed by the Michigan House in June and was subsequently passed the Senate on Oct. 20. It is expected to be enrolled on Nov. 9.
The Senate declined to grant the bill immediate effect, which means that it won't be applied to "sinking fund" millage proposals until 90 days after the legislature adjourns in December.
The wording of the bill means it can only apply to proposals authorized by the voters after the amendments become effective. That means that the handful of districts headed to the polls on Nov. 8 will miss out on the expanded use of the tax. It also means that pre-HB 4388 authorizations remain valid.
"School districts of course have the option to go back to the polls next year to replace their existing sinking fund millages but that requires the hassle of putting it back to the voters" said James Crowley, a principal at Miller Canfield Paddock & Stone PLC's public finance group in Michigan. Crowley said there are about ten school districts with sinking fund millage proposals in the ballot next week.
The law allows school districts across Michigan to impose a three-mill property tax for 10 years for a sinking fund that can be used to buy computer equipment, software and security equipment.
Under current law schools can levy up to five mills for 20 years that could be applied toward the purchase of real estate or the construction, renovation or repair of school buildings.
Crowley said that the terms of the millage shouldn't have much of an impact on districts since most millage proposals are done for ten years and for three mills and under.
"Anything more is too much to ask for," he said.
However the definition of what the millage can be applied to is somewhat more limiting than what schools across the state had anticipated.
For example schools were looking to include buses to the list of equipment. And while schools can buy instructional technology with revenues, the legislation prohibits the use of funds to purchase application software.
"Schools were hoping that it would be just equipment period, but the legislature decided to make a narrower definition of what that was" said Crowley.
