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Research council details neighborhood enterprise zones and obsolete-property abatements used in Michigan cities
Summary
The Citizens Research Council reviewed Michigan’s neighborhood enterprise zones (NEZ) and Obsolete Property Rehabilitation Act abatements, emphasizing that NEZs target distressed communities for small-scale residential and rehabilitation relief and that local governments must follow size and contiguity limits.
Eric Looper, president of the Citizens Research Council of Michigan, and Bob Schneider, senior research associate, told the Senate Finance committee that Michigan’s tax-abatement statutes include a range of local tools — industrial and commercial abatements, brownfield abatements, renaissance zones and neighborhood enterprise zones (NEZ) — that differ in purpose and eligibility.
Schneider said NEZs are limited to “qualified local government” areas that are economically distressed and generally target small projects. He explained that NEZ relief may be structured as a lowered tax on new principal-residence conversions or a freeze of taxable value for rehabilitated properties. Schneider described numerical limits and application rules: zones must cover contiguous parcels, cannot be used simply to benefit a single owner, and a unit of government’s total NEZ area generally cannot exceed 15% of the jurisdiction’s area without county participation.
On rehabilitation abatements under the Obsolete Property Rehabilitation Act (OPRA), Schneider said those programs can be used for larger commercial or residential buildings, require substantial improvement to qualify, and commonly freeze taxable value at pre-rehabilitation levels for a limited period (scholarship of the transcript: limited to up to 12 years in many cases). He emphasized that NEZ relief is aimed at the state’s most distressed communities and said, without endorsing effectiveness measures, that Detroit and other cities have used these tools to encourage reinvestment in buildings that otherwise would remain vacant.
Looper added context: NEZ eligibility and relief formulas differ from many other abatements because NEZs are purposely targeted to neighborhoods with stagnant tax bases; Looper observed that roughly 108 of Michigan’s approximately 1,800 local units were eligible under the definitions referenced in the statutes and that NEZs typically serve smaller developments (one to eight units for new units; one to two units for rehabilitations as stated in the CRC presentation).
Committee members asked for evaluations of effectiveness and for more detailed local examples; CRC said it had not conducted a comprehensive statewide effectiveness analysis but had recently reviewed Detroit’s use of abatements as a case study and offered to provide additional materials on request.
No votes or committee directives specific to abatements were taken during this hearing.
