The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL


Opinion No. 6896

April 24, 1996

SPECIAL ASSESSMENT MILLAGE:

Special assessment levied on an ad valorem basis under 1951 PA 33

A millage-based special assessment imposed under 1951 PA 33 must be levied on the true cash value of the affected property.

Honorable Leon Stille

State Senator

The Capitol

Lansing, Michigan

You have asked whether a millage-based special assessment imposed under 1951 PA 33, MCL 41.801 et seq; MSA 5.2640(1) et seq, must be levied on the true cash value or upon the taxable value of the affected property.

In 1951 PA 33 the Legislature has authorized township boards to establish special assessment districts for fire protection services. One of the methods that may be used to collect the special assessment is to levy an ad valorem millage on the properties benefited. The statute is silent on whether the special assessment millage should be levied on the true cash value or taxable value of the affected property.

Before its amendment by Proposal A on March 15, 1994, Const 1963, art 9, s 3, directed that property be assessed at true cash value. The concept of assessing property at taxable value was introduced when Const 1963, art 9, s 3, was amended by Proposal A to provide:

The legislature shall provide for the uniform general ad valorem taxation of real and tangible personal property not exempt by law except for taxes levied for school operating purposes. The legislature shall provide for the determination of true cash value of such property; the proportion of true cash value at which such property shall be uniformly assessed, which shall not, after January 1, 1996, exceed 50 percent; and for a system of equalization of assessments. (1) For taxes levied in 1995 and each year thereafter, the legislature shall provide that the taxable value of each parcel of property adjusted for additions and losses, shall not increase each year by more than the increase in the immediately preceding year in the general price level, as defined in section 33 of this article, or 5 percent, whichever is less until ownership of the parcel of property is transferred. When ownership of the parcel of property is transferred as defined by law, the parcel shall be assessed at the applicable proportion of current true cash value. The legislature may provide for alternative means of taxation of designated real and tangible personal property in lieu of general ad valorem taxation. [Emphasis added.]

At the time 1951 PA 33 was passed and last amended by 1990 PA 102, the term taxable value was not part of Michigan's property tax vocabulary. Thus, it cannot be said that the Legislature, in 1951 PA 33, authorized the millage assessment to be levied on the taxable value of the affected property.

Moreover, the cap on assessments in Const 1963, art 9, s 3, only applies to taxes. OAG, 1995-1996, No 6851, p 49 (May 25, 1995), concluded that property taxable under Const 1963, art 9, s 5, and 1905 PA 282 is not subject to the cap on taxable value contained in Const 1963, art 9, s 3. In reaching that result, the opinion stated:

The operative new language of Const 1963, art 9, s 3, provides an annual cap on property tax assessments of the rate of inflation or 5%, whichever is less, until ownership of the property is transferred. This language was not added to Const 1963, art 9, s 5. The cap on assessments in Const 1963, art 9, s 3, only applies to the general ad valorem property taxes imposed by 1893 PA 206, the General Property Tax Act. Taxes imposed under Const 1963, art 9, s 5, and 1905 PA 282 are not general ad valorem property taxes imposed under Const 1963, art 9, s 3. [Citations omitted.] [Emphasis added.]

The law is settled that special assessments are not taxes. As stated by the Michigan Supreme Court, quoting from 1 Cooley on Taxation (4th Ed.), s 31:

"While the word 'tax,' in its broad meaning, includes both general taxes and special assessments, and in a general sense a tax is an assessment, and an assessment is a tax, yet there is a recognized distinction between them in that assessment is confined to local impositions upon property for the payment of the cost of public improvements in its immediate vicinity and levied with reference to special benefits to the property assessed. The differences between a special assessment and a tax are that (1) a special assessment can be levied only on land; (2) a special assessment cannot (at least in most States) be made a personal liability of the person assessed; (3) a special assessment is based wholly on benefits; and (4) a special assessment is exceptional both as to time and locality. The imposition of a charge on all property, real and personal, in a prescribed area, is a tax and not an assessment, although the purpose is to make a local improvement on a street or highway. A charge imposed only on property owners benefited is a special assessment rather than a tax notwithstanding the statute calls it a tax."

Blake v Metropolitan Chain Stores, 247 Mich 73, 77; 225 NW 587 (1929). See also, OAG, 1979-1980, No 5562, p 389, 389-391 (September 17, 1979), which concluded that the tax limitations of the Headley Amendment do not apply to special assessments.

Since special assessments are not taxes, and the taxable value provisions of Const 1963, art 9, s 3, only apply to taxes, the Michigan Constitution does not apply the term taxable value to special assessments.

The Michigan Supreme Court has upheld, under 1951 PA 33, the levy by a township of a two mill special assessment on a township wide special assessment district voted by the people for fire protection services "based on valuation" of the parcel provided that the improvement "be of value to the property assessed in reasonable relationship to the assessment." St. Joseph Twp v Municipal Finance Comm, 351 Mich 524, 533-534; 88 NW2d 543 (1958).

The rationale of special assessments is that the amount of the special assessment on each parcel should be in reasonable relationship to the benefit conferred on each parcel by the public improvement. The Michigan Supreme Court explained this rationale as follows:

Further, we deal here with a special assessment statutorily authorized to provide fire protection. Unless the township deliberately sought for reasons which are not suggested in this record to provide fire protection for a portion of the township only, it is difficult to conceive a fairer basis for determination of benefit from the creation of a fire department than one based upon value....

 

 

We by no means desire to be understood as holding that local assessments based on valuation would be uniformly upheld. It is an essential of a special assessment that the improvement concerned should be of value to the property assessed in reasonable relationship to the assessment. [Emphasis added.]

St. Joseph Twp v Municipal Finance Comm, 351 Mich at p 533.

Taxable value, as determined under the mandate of Const 1963, art 9, s 3, has no consistent rational relationship to the true cash value of the property to which it applies. It is a mathematical exercise, designed to limit the growth of a property's tax bill. With the passage of time, absent a transfer of the property, any correlation that taxable value has with the true cash value of property is lost. True cash value, on the other hand, is an accurate estimation of the property's current value. It is still, as it has been in the past, an estimate of value based upon the current market for the property. It is a close approximation of what the property is currently worth in the open market.

If a millage based special assessment is levied against taxable value, properties worth the same in the market, but having different taxable values because of being transferred at different times, would have different amounts levied for the special assessment. Each property would receive the same amount of benefit, but the amounts charged for the benefit would be different. This would be improper. St. Joseph Twp v Municipal Finance Comm, 351 Mich at p 533. The millage based special assessment levied against the taxable value of property would not bear a reasonable relationship to the benefit received. If millage based special assessments are levied against the true cash value of property, the rational relationship between the amount of the assessment and the benefit received from the improvement would be maintained.

In summary, the Michigan Supreme Court has upheld a special assessment based on valuation under 1951 PA 33. St. Joseph Twp v Municipal Finance Comm, 351 Mich at p 533. The amendment to Const 1963, art 9, s 3, concerning taxable value only applies to taxes, not special assessments.

It is my opinion, therefore, that special assessment millage imposed under 1951 PA 33 must be levied on the true cash value of the affected property.

Frank J. Kelley

Attorney General

(1) The state equalized valuation of taxable property is 50 percent of true cash value.