March 19, 2014 - There have been lots of legal opinions flying around lately and lots of discussion by various boards, but in the end, it appears if voters approve a millage for the North Oakland Transportation Authority (NOTA), the Oxford and Lake Orion Downtown Development Authorities (DDA) will capture a portion of the new property tax.
Both DDA boards rejected a formal request from NOTA to exempt from capture its proposed five-year, 0.25-mill tax to help support its operations. Oxford, Addison and Orion voters will face the tax question on the Aug. 5 ballot.
The Lake Orion DDA board voted 6-2 to decline the request at its March 11 meeting, while the Oxford DDA board voted 8-0 to turn it down at its March 17 meeting.
At its March 12, meeting, the Oxford Township Board voted 7-0 that its preference is to include the DDA capture in the NOTA ballot language.
The proposed millage would allow NOTA to replace the $425,000 in federal and state grant funding it will lose after this year, implement an ongoing vehicle replacement program and keep 13 vehicles on the road Monday through Friday.
NOTA provides low-cost, publicly-subsidized transportation for senior citizens, disabled individuals and low-income folks living in Oxford, Addison and Orion townships.
Neither the Oxford nor the Lake Orion DDA has its own dedicated millage, so they rely on capturing portions of other millages as their primary funding mechanism.
Basically, DDAs use what are called tax increment financing (TIF) plans to receive a piece of the property tax revenue that's meant to fund services provided by other government agencies and units such as fire departments, public libraries, municipalities and park/rec. departments.
According to figures compiled by NOTA Director Lynn Gustafson, in its first year of levy, the Oxford DDA would capture approximately $4,000 from the NOTA millage while the Lake Orion DDA would capture approximately $8,000.
During the life of the five-year NOTA millage, she estimated the two DDAs combined would capture approximately $66,000. That works out to about $44,000 for Lake Orion and approximately $22,000 for Oxford.
Both Robert Davis, attorney for Oxford Village and Addison Township, and Dan Kelly, attorney for Orion Township, issued written opinions indicating a DDA can exempt a millage from capture if its TIF plan already allows for it or it is amended to allow for it.
"A DDA may provide in their TIF plan that a specific individual millage, either in whole or in part, is not part of tax increment revenue calculations," Davis wrote in his March 13 opinion. "As a result, a DDA may exclude the capture of millage for NOTA transportation services if their TIF plan states that such a millage is not part of tax increment revenue calculations."
If a TIF plan has to be amended in order to exempt a millage, the DDA would have to take action, issue a public notice and conduct a public hearing, then the village council would ultimately have to approve any changes to the plan, according to Kelly's March 6 opinion.
Kelly noted whether or not the Lake Orion DDA has any bond debt could impact its ability to amend the TIF plan.
James Mills, manager of the Accounting and Auditing Section in the Local Audit and Finance Division of the Michigan Department of Treasury, agreed that DDAs can exclude certain millages from capture by specifically providing for it in their TIF plans.
"It is solely up to the DDAs to decide to use this provision; NOTA can't make them, nor do it itself," Mills wrote in a March 7 e-mail.
Lake Orion DDA says no
Lake Orion DDA board member and Orion Township Supervisor Chris Barnett, who voted against denying NOTA's exemption request, said the Lake Orion DDA board was primarily concerned about the potential expense involved in amending the TIF plan.
He said some DDA members felt it was "going to cost us $6,000 (to) $7,000 with attorneys and public hearings . . . to save (NOTA) the $8,000-a-year tax capture."
"There (are) a lot of hoops to amending the TIF plan and there's a lot of additional costs involved in doing that," said Lake Orion DDA Director Suzanne Perreault.
Perreault noted the Lake Orion DDA also didn't feel comfortable granting NOTA's request because "we did not have an opinion from our attorney."
"There was still, I think, some question (as to) can we legally exempt them," she explained. "Although we had this great opinion from Dan Kelly, who represents the township, we didn't have something from our own attorney."
Then Perreault said the question became "Did we want to start researching how to do it and spending our own money (to get) a legal opinion?"
"The answer was no, not at this time."
Barnett, who also serves on the NOTA board, noted there was some discussion about the possibility of allowing NOTA to recoup the captured monies by providing services to the Lake Orion DDA via a contract.
One idea was to use NOTA buses for shuttle services during special events held downtown. "I think that's certainly an option," Perreault said.
Perreault made it clear that the Lake Orion DDA's rejection of the exemption request is not a rejection of NOTA.
"I think there's a lot of support for NOTA on our board," she said. "I know myself and several of our board members plan on attending their next meeting on March 20 (to explain the Lake Orion DDA's position) . . . Yes, we said no, but we have a positive intention to work together in the future. They do provide a lot of benefit to people that live and work downtown."
Oxford DDA says no, too
DDA Chairman Bill Dunn, who's also the Oxford Township supervisor and vice chair of the NOTA board, said he's "totally for" the concept of granting NOTA an exemption because he knows "what good they do."
But ultimately, he couldn't support it because of the potential "real world' consequences.
"I think it's a bad precedent (to set)," Dunn said. "The library is going out for a new millage. If we allow this (exemption for NOTA), I can guarantee you they'll be in front of us, asking for their millage to be exempted."
The same is true for the Oxford Fire Department, which will be requesting a new 3.9-mill tax – a combination renewal, plus increase – in November (see story on Page 1).
"I guarantee you if (Fire Chief) Pete Scholz doesn't do it, I will (seek an exemption) because the DDA captures a large amount from any millages they collect," Dunn said.
Like Dunn, DDA board member Ed Hunwick said he, too, was initially supportive of exempting NOTA until he looked into it further and discovered the "possible ramifications."
"I wasn't looking at the whole picture," he said.
There was some discussion about seeking other ways to return the $4,000 capture to NOTA.
"If there's something we can do, I'd like to do it," said DDA board member Rod Charles. "Is there something else we could do to help NOTA?"
There was some discussion regarding the service contract idea being considered by the Lake Orion DDA.
But ultimately, the Oxford DDA decided it was best not to attempt any reallocation of funds to NOTA.
Dunn said the problem, again, is it sets a precedent. "How are you going to differentiate (between entities)?" he said. "Are you going to say NOTA's more (important) than the fire department, the library, the park and rec . . . You're making us choose one over another. And if you choose one, what about the rest of them?"
Oxford Village President Dave Bailey, who serves on the DDA board, was concerned about public perception.
"I would prefer not to have people getting the impression that funds are being transferred in an irregular manner, a nonstandard manner," he said. "Contracting with NOTA could be perceived as (an) irregular transfer of funds."
Despite the rejection, DDA officials made it clear they believe NOTA is an asset to the communities and riders it serves.
"I think, (based on) what I've learned over the last couple weeks, NOTA is engaged in a valuable community service," Charles said. NOTA's efficient service and good reputation is "a big contrast with some of the other government entities we see out there in the transportation world," he noted.
"I think they do a great job from what I understand," Hunwick said. "I think they're a great service to have."
Opening the door
Other local officials also opposed exempting NOTA from DDA capture because it could lead to similar requests from other government bodies and agencies.
"I don't think that should be considered, for one, because once you open the door for that, everybody's going to want an exemption," said Oxford Township Treasurer Joe Ferrari. "Everybody's going to be right in line to do the same thing."
Davis told the Oxford Village Council that granting an exemption for one millage doesn't automatically mean exemptions for all millages, but he does see how it could lead to more requests.
"I don't see anything in the law that says if you exempt one capture, that it's a slippery slope – that all the other ones could be exempt," he explained. "But I do agree with Supervisor Dunn – what's going to prevent the next entity who gets a new millage . . . from saying, 'We don't want the DDA to get any.' Well, again, I think that would require another TIF (plan) amendment."
Davis noted this only applies to new millages, not preexisting millages, which can't seek an exemption through a TIF plan amendment.
"It's a new millage that brings in the capture issue – it brings it to the forefront," he said. "A new millage will always trigger this issue."
Davis cautioned that if officials start considering exemptions for multiple new millages, they'd better have a clear "review standard" in place for those requests.
"What is it you're considering when you're analyzing this exemption issue?" he said. "I think, from a law standpoint, you might want to be consistent on that approach."
"Because at the end of the day, we don't want to pick winners and losers," said Oxford Village Councilman Bryan Cloutier. "Like if you say, 'Okay, we're going to exempt NOTA, but we're not going to exempt the fire department. We're going to exempt parks and rec., but we're not going to exempt the library.' That's where you get into the whole standards (issue)."
"You'd better have a standard to which people are being gauged against," Davis said.
Fear of lawsuits
Dunn was also concerned about the prospect of a NOTA exemption leading to potential legal troubles.
"Is this going to spark some lawsuits where we're going to spend thousands and thousands of dollars to try to defend something we've done, whether we're right or wrong? Is someone going to challenge this?" he said. "I'm in total support of (an exemption for NOTA), but I just don't want to create something that's going to be a real mess down the road."
To Dunn, "it's not worth it" to risk a lawsuit to save NOTA from a $4,000 capture by Oxford's DDA.
CJ Carnacchio is editor for The Oxford Leader. He lives in the Village of Oxford with his wife Connie and daughter Larissa. When he's not busy working on the newspaper, he enjoys cigars/pipes, Martinis/Scotch, hunting and fishing.