STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5726

June 17, 1980

CONSTITUTIONAL LAW:

Const 1963, art 9, Sec. 3

Const 1963, art 9, Sec. 31

TAXATION:

Equalization of assessments

Excessive increases in assessed valuation

Public utilities tax

Revenue sharing

Rollbacks of tax rates

Both the rollback required by the ratification in 1978 of Const 1963, art 9, Sec. 31 and the rollback compelled by 1893 PA 206, Sec. 34 giving meaning to Const 1963, art 9, Sec. 3 are independent of each other and a county board of commissioners is required to observe both rollbacks, where applicable, in certifying the tax rate to be levied by local units of government.

The computation of the average tax rate for the purposes of the public utilities tax, revenue sharing and reimbursement for lost taxes due to the inventory exemption must be made by utilization of legally authorized millage levies resulting from application of a mandatory double rollback where applicable.

Mr. Edward W. Kane

Secretary

State Tax Commission

4th Floor

Stevens T. Mason Building

Lansing, MI 48922

You have requested my opinion on the following questions:

The first two questions are related and will be considered together.

Const 1963, art 9, Sec. 31, in pertinent part, provides as follows:

It should be noted that Const 1963, art 9, Sec. 31, was ratified by the people in November of 1978 as part of an amendment to Const 1963, art 9 to add Secs. 25 to 34 thereto and to amend art 9, Sec. 6, as a portion of a proposal to place a limitation upon the increase in collection and spending of state and local tax funds without the approval of the electors.

The legislature has implemented Const 1963, art 9, Sec. 31 by enacting 1979 PA 35 to amend 1893 PA 206, Sec. 34d; MCLA 211.34(d); MSA 7.52(1). As a result of the 1979 amendment, section 34d now imposes a duty upon the county equalization director to compute, when applicable, the millage reduction fraction for each unit of local government in the county for the current year and the financial officer of each taxing jurisdiction is required to calculate compounded millage reduction fractions to give meaning and effect to Const 1963, art 9, Sec. 31.

The rollback mandated by the people in Const 1963, art 9, Sec. 31 and implemented by the amendment to 1893 PA 206, Sec. 34d, supra, requires reductions in the amount of the property tax rate of a local unit of government if the amount of increase in the assessed valuation of property within the governmental unit over the previous years assessments exceeds the amount of the increase in the United States Consumer Price Index from the previous calendar year, unless the electors vote an approval of the increased tax rate.

In addition to the rollback mandated in Const 1963, art 9, Sec. 31, Const 1963, art 9, Sec. 3 also provides:

1893 PA 206, Sec. 34(1); MCLA 211.34(1); MSA 7.52(1) implements Const 1963, art 9, Sec. 31, the provision requiring ad valorem taxation on the equalized valuation of property, and, in part, provides:

Thus prior to the adoption by the people of Const 1963, art 9, Sec. 31, the law was well-settled that, as required by Const 1963, art 9, Sec. 3, assessment values fixed by a local assessor and a local board of review are tentative assessments only and do not become final until equalized by the county board of commissioners and, following an appeal, by the State Tax Commission. School District No. 9, Pittsfield Township, Washtenaw County v Washtenaw County Board of Supervisors, 341 Mich 388; 67 NW2d 165 (1954). As implemented by the legislature, county equalization fixes an identical assessment level for all local governmental units within the county by adding or subtracting from the aggregate assessed valuations of such local units. Consumers Power Co v City of Muskegon, 13 Mich App 334; 164 NW2d 398 (1968). Thus, the rollback, if any, compelled by 1893 PA 206, Sec. 34, supra, fulfills the requirement of the people as set forth in Const 1963, art 9, Sec. 3, that 'assessments be equalized as between various assessing units.' Address to the People, 2 Constitutional Convention 1961, p 3398.

While Const 1963, art 9, Secs. 3 and 33 are related to each other in that each concerns the levy of ad valorem taxes on property, the purpose of each is separate and distinct. Const 1963, art 9, Sec. 31 requires reduction in ad valorem tax rates on real and personal property if assessed valuations as finally equalized increase in an amount in excess of the increase of United States General Price Index for the previous year.

The rollback required by Const 1963, art 9, Sec. 31, as implemented in 1893 PA 206, Sec. 34d, supra, is independent of and does not displace the rollback compelled by 1893 PA 206, Sec. 34, supra, giving effect to the equalization required by Const 1963, art 9, Sec. 3. Meaning and effect must be given to each provision. People v Case, 220 Mich 379; 190 NW 289 (1922).

It is my opinion, therefore, that both rollbacks, where applicable, are to be observed by a county board of commissioners in certifying the tax rate to be levied by local units of government.

Turning to your last question, 1905 PA 282, Sec. 13, as amended, MCLA 207.13; MSA 7.263(1), provides that:

In 1905 PA 282, Sec. 12, MCLA 207.12; MSA 7.262, the legislature has provided:

Only such taxes as have been determined in compliance with law are to be used for purposes of computing the average rate which is a necessary component of the formulae for revenue-sharing and for the reimbursement for lost taxes due to the inventory exemption, 1975 PA 228, Sec. 131; MCLA 208.131 et seq; MSA 7.558(131), et seq; and the tax imposed upon public utilities by 1905 PA 282; MCLA 207.1, et seq; MSA 7.251, et seq.

It must be assumed that county boards of commissioners will perform their duties in accordance with law and where both the rollback provided for in Const 1963, art 9, Sec. 31 as implemented by 1893 PA 206, Sec. 34d, supra, and the rollback provided for in 1893 PA 206, Sec. 34, supra, if applicable, will be used in determining the tax rates which are to be levied and reported to the State Tax Commissioner.

As indicated in OAG, 1977-1978, No 5206, p ___ (August 4, 1977), it is within the Department of Treasury's power to recalculate the millage rate reported by a local unit when that millage rate is not computed according to law. If a county board of commissioners should fail or refuse to carry out the 'double rollback', where applicable, it would obviously levy an excessive tax rate not authorized by law. That tax rate, even though actually levied, may not be used to determine the 'average tax rate'. Instead, the tax rate resulting from the mandatory rollbacks must be utilized.

Therefore, in answer to your third question, it is my opinion that the computation of the average tax rate for the purposes of public utilities tax, revenuesharing and reimbursement for lost taxes due to the inventory exemption, must be made by utilization of legally authorized millage levies resulting from a mandatory double rollback, in the case when a county board of commissioners fails or refuses to observe the double rollback.

Frank J. Kelley