Michigan proposal threatens local bond ratings by eliminating property tax authority

The Board of State Canvassers meeting on December 2, 2024, highlighted significant concerns regarding a proposed constitutional amendment that could impact local government financing in Michigan. The discussion centered on the potential elimination of property taxes and its implications for existing bonds and local government credit ratings.

A key point raised during the meeting was the concern that the proposed amendment would prohibit local units of government from levying property taxes, which are often used as collateral for bonds. This change could violate the terms of existing bond agreements, potentially leading to devastating consequences for local governments' ability to borrow funds. The discussion emphasized that property taxes are a primary funding source for many local units, and the removal of this authority could jeopardize their financial stability.

Participants noted that previous constitutional amendments, such as those in 1963 and 1978, included provisions to protect bondholders and ensure local governments could meet their financial obligations. The current proposal, however, appears to delete or alter these protections, raising alarms about the potential for lowered credit ratings for the state and local governments if voters approve the amendment.

The board members expressed the need for transparency, urging that voters be fully informed about the potential impacts of the proposal on local government financing and bondholder protections. The meeting concluded with a call for careful consideration of the language in the proposal, as inaccuracies could mislead voters about the financial implications of the amendment.

As the proposal moves forward, the discussions from this meeting underscore the importance of understanding how changes to tax authority could affect local governance and financial health across Michigan.