Numbered Letter 2018-04

Debt Limit Calculation

Effective Date: November 1, 2018 (Revised June 23, 2023)

Summary

This numbered letter clarifies the debt limit calculation as it relates to creating an assessed value equivalent for eligible reimbursements made under the Local Community Stabilization Authority Act, Public Act 86 of 2014.

The following Acts were amended on March 26, 2018 by Public Acts 86-89 of 2018:           

•        The Charter Township Act, Public Act 359 of 1947, Section 14a(6)
•        The General Law Village Act, Public Act 3 of 1895, Chapter IX, Section 22(3)
•        The Home Rule Village Act, Public Act 278 of 1909, Section 26(2)
•        The Home Rule City Act, Public Act 279 of 1909, Section 4a(9)

The Acts above were amended to reference Public Act 86 of 2014 when calculating the assessed value equivalent for eligible reimbursements, thereby increasing a municipality’s debt limit.

Public Acts 86-89 of 2018 added a specific reference in the four Acts to Public Act 86 of 2014, Section 17(4)(c).  Public Act 86 of 2014 was itself amended on June 27, 2018 (Public Act 248 of 2018).  As a result of this amendment, while Section 17(4)(c) was left unchanged for calendar year 2017, for calendar year 2018 and subsequent calendar years what was under Section 17(4)(c) is now under Section 17(4)(e).  The four Acts above were not amended to reflect this change from Section 17(4)(c) to Section 17(4)(e).  Therefore, until the four Acts are amended, for calendar year 2018 and future years Section 17(4)(c) shall mean Section 17(4)(e) for purposes of calculating the assessed value equivalent.

Obtaining the Amount of Eligible Reimbursement

1. Go to michigan.gov/pptreimbursement.
2. Under “Reimbursements By Tax Year,” click on “20xx PPT Reimbursements.”
3. Under “Counties, Townships, Cities, Villages, Community Colleges, and Authorities,” you will need to click on two different links as described below.
4. First, click on “Distributions by Millage – May 20xx” and open the report.
1. Look up your municipality and obtain the “total” from the two following columns:  Eligible Manufacturing Personal Property (EMPP) Exemption and Qualified Loss in Excess of 100% Reimbursement – Operating AND Eligible Manufacturing Personal Property (EMPP) Exemption and Qualified Loss in Excess of 100% Reimbursement – Debt.  Add these two numbers together.  This is the amount in excess of the municipality’s qualified loss.
2. Obtain the “total” from the “May 20xx Distribution / (Amount Owed)” column.
5. Second, click on “Distributions by Millage – October 20xx and February 20xx” and open the report.  Look up your municipality and obtain the “total” from each of the two following columns: “October 20xx Distribution” AND “February 20xx Distribution.”
6. Add together the May distribution from 4.b. above and the October and February distributions from 5.  This is your total distribution.
7. Subtract the amount in excess of the qualified loss in 4.a. from the total distribution from 6. above.  This is the amount your assessed value equivalent will be based on.
8. Take the figure calculated in 7. above and divide by the municipality’s operating millage rate.  This will calculate the assessed value equivalent.

Calculation Example

Distributions by Millage – May 20xx

Distributions by Millage – October 20xx and February 20xx

1. A city is reimbursed for three millages and has an operating levy of 18.6177 mills. 
2. Add “Operating” and “Debt” EMPP Exemption and Qualified Loss in Excess of 100% Reimbursement. $635,775.47 + $21,741.54 = $657,517.01 Total EMPP Exemption and Qualified Loss in Excess of 100% Reimbursement
3. Add October, February, and May Distributions. $852,803.56 + $0.00 + 657,775.82 = $1,510,579.38 Total Distribution
4. Subtract Total EMPP Exemption and Qualified Loss in Excess of 100% Reimbursement from Total Distribution. $1,510,579.38 - $657,517.01 = $853,062.37
5. $853,062.37 / 0.0186177 = $45,819,965 assessed value equivalent
6. Add $45,819,965 to the assessed value of all the real and personal property in the municipality for purposes of calculating the debt limit.

If you have any questions, please contact our office at Treas_MunicipalFinance@Michigan.gov