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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)



Opinion No. 5699

May 1, 1980


Power to impose charges for fire and police protection

An economic development corporation is without authority to impose a charge upon its lessees and purchasers for police and fire protection.

Honorable Donald E. Bishop

State Senator

The Capitol

Lansing, Michigan

In your letter you state:

'There is a municipality in my district which has an Economic Development Corporation ('EDC') which was formed and operates under the Economic Development Corporations Act (P.A. 1974, No. 338, MCLA 125.1601). The EDC proposes to assist a particular company (the 'Company') pursuant to Act 338 throught the issuance of tax-exempt bonds. The proceeds of the bond offering will be used by the EDC to acquire certain property and facilities which will be the subject of a lease-purchase agreement between the EDC and the Company. The municipality additionally intends to grant the Company property tax relief for those new facilities under the Plant Rehabilitation Industrial Development Act (P.A. 1974, No. 198, MCLA 207.551).

'The EDC proposes to annually charge the Company a certain sum for the fire and police protection services which are provided by the municipality. The Company is agreeable to paying such a charge. The EDC intends to disburse the funds so received to the municipality. . . .'

You request my opinion on the following question:

May an economic development corporation impose a charge on a lessee or purchaser for fire and police protection services furnished by a municipality?

The Economic Development Corporations Act, 1974 PA 338, as amended; MCLA 125.1601 et seq; MSA 5.3520(1) et seq, Sec. 7, lists the powers of economic development corporations (1) ('EDCs') as follows:

' (a) Construct, acquire by gift or purchase, reconstruct, improve, maintain, or repair projects and acquire the necessary lands for the site therefor.

(b) Acquire by gift or purchase the necessary machinery, furnishings, and equipment for a project.

(c) Borrow money and issue its revenue bonds or revenue notes to finance part or all of the cost of the acquisition, purchase, construction, reconstruction, or improvement of a project or any part thereof, the cost of the acquisition and improvement of the necessary sites therefor, the acquisition of machinery, furnishings, and equipment therefor, and the costs necessary or incidental to the borrowing of money and issuing of bonds or notes for such purpose.

(d) Enter into leases, lease purchase agreements, or installment sales contracts with any person, firm, or cooperation [sic] for the use or sale of the project.

(e) Mortgage the project in favor of any lender of money to the corporation.

(f) Sell and convey the project or any part thereof for a price and as a time as the corporation determines.

(g) Lend, grant, transfer, or convey funds, described in section 27, (2) as permitted by law, but subject to applicable restrictions affecting the use of those funds.'

None of these specific powers include the power to either provide for or to charge for police or fire protection.

1974 PA 338, supra, Sec. 32, provides:

'. . . The corporation shall possess all the powers necessary to carry out the purpose of its incorporation and those incident thereto. The enumeration of any powers in this act shall not be construed as a limitation upon the general powers of the corporation.'

This provision specifies that the enumerated powers of an EDC as contained in 1974 PA 338, Sec. 7, supra, are not to be interpreted as precluding a recognition that an EDC has all general powers necessary to carry out its corporate purposes. However, an EDC has neither the power to tax nor the power to provide police and fire services. These powers are specifically authorized by the applicable statutes and charters to local governmental units.

Decisions about the level of taxation may be made by the local governmental unit which formed the EDC. Tax abatement may be granted under 1974 PA 198; MCLA 207.551 et seq; MSA 7.800(1) et seq, in varying amounts depending on the project for up to twelve years, subject to concurrence of the Department of Commerce and approval of the State Tax Commission. Any concerns about the cost of fire and police protection can be addressed by the local governmental unit when considering a tax abatement request under 1974 PA 198, supra, as well as when it considers a project application submitted by an EDC. One of the criteria in evaluating an EDC project under 1974 PA 338, supra, Sec. 9(f) is whether public services, such as fire and police protection and utilities, are or will be adequate to service the project area.

It is, therefore, my opinion that an EDC may not charge its lessees and purchasers for police and fire protection.

Frank J. Kelley

Attorney General

(1) The 1979 edition of Michigan Tax and Financial Incentives, p 7, published by the Michigan Department of Commerce, summarizes the role of the Act:

'This act permits a county, city, village or township to establish a public Economic Development Corporation (EDC) which helps business or industry acquire land, buildings and equipment on advantageous terms.

'The potential users of EDCs are diverse but primarily complement state and local development efforts through the issuance of tax-exempt revenue bonds.

'From the proceeds of these bonds, an EDC may acquire, maintain and develop the land, buildings, machinery, furnishings and equipment necessary to complete a designated project. The EDC may enter into leases, lease-purchase agreement or installment sales contracts with any person, firm or corporation for the use or sale of the project.'

(2) 1974 PA 338, supra, Secs. 27(b) and (f) permit municipalities to lend, grant, transfer, and contribute funds to an EDC in furtherance of its public purposes.


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