TAX INCREMENT FINANCING DISTRICT:            

A taxing jurisdiction, the property of which is subject to the tax capture of a municipality's Downtown Development Authority Tax Increment Financing District, may "opt out" of the tax capture under MCL 125.1653(3) if the district's boundaries are altered or amended, but only with respect to property being added to the district.

Opinion No. 7246

March 29, 2010

Honorable Michael D. Bishop
State Senator
The Capitol
Lansing, MI 48913

You have asked whether a taxing jurisdiction, the property of which is subject to the tax capture of a municipality's Downtown Development Authority Tax Increment Financing District, may "opt out" of the tax capture under MCL 125.1653(3) if the district's boundaries are altered or amended.

The Downtown Development Authority Act (DDA Act), 1975 PA 197, MCL 125.1651 et seq, provides for the establishment of a Downtown Development Authority (DDA) by cities, villages and townships, and, inter alia, authorizes the levy and collection of taxes and the use of tax increment financing to finance DDA activities. After a DDA is established, it may "capture" all or a portion of ad valorem taxes assessed against property by the municipality and other taxing authority (including certain specific taxes) associated with the increase in the assessed or taxable value of properties in the district, realized since the district's creation. MCL 125.1651a.

A municipality that determines a DDA should be created within its jurisdiction initiates the procedures for establishing a DDA by adopting a resolution declaring the municipality's "intention to create and provide for the operation of an authority," under section 3 of the DDA Act. MCL 125.1653(1).

The resolution of intent must "set a date for the holding of a public hearing on the adoption of a proposed ordinance creating the authority and designating the boundaries of the downtown district." MCL 125.1653(2). The municipality must then follow specific notice requirements regarding the holding of the public hearing, including notification to the governing bodies of taxing jurisdictions that levy taxes that would be subject to capture by the proposed district. MCL 125.1653(2). The DDA Act provides that "[a] citizen, taxpayer, or property owner of the municipality or an official from a taxing jurisdiction with millage that would be subject to [tax] capture has the right to be heard in regard to the establishment of the authority and the boundaries of the proposed downtown district." MCL 125.1653(2).¹

After public hearing, the municipality, if it elects to proceed, must adopt by majority vote of the members of its governing body, an ordinance "establishing the authority and designating the boundaries of the downtown district within which the authority shall exercise its powers." MCL 125.1653(4). The ordinance, if adopted, must then be filed promptly with the Secretary of State, and its text must be published in a qualifying "newspaper of general circulation in the municipality." MCL 125.1653(4).

In addition to detailing the requirements for creating a DDA, section 3 of the DDA Act provides an opportunity for other taxing authorities levying taxes on property within the proposed district to exempt their taxes from capture by the DDA. MCL 125.1653(3). Section 3(3) provides:

               Not more than 60 days after a public hearing held after February 15, 1994, the governing body of a taxing jurisdiction levying ad valorem property taxes that
          would otherwise be subject to capture may exempt its taxes from capture by adopting a resolution to that effect and filing a copy with the clerk of the municipality
          roposing to create the authority. The resolution takes effect when filed with that clerk and remains effective until a copy of a resolution rescinding that resolution
          is filed with the clerk. [MCL 125.1653(3); emphasis added.]

Finally, section 3(5) of the DDA Act provides for the extension of a development district's jurisdiction to include additional lands, or for the contraction or exclusion of lands from within its jurisdiction:

               The governing body of the municipality may alter or amend the boundaries of the downtown district to include or exclude lands from the downtown district
          pursuant to the same requirements for adopting the ordinance creating the authority. [MCL 125.1653(5); emphasis added.]

Against this statutory backdrop, you ask whether a taxing jurisdiction subject to the tax capture of a DDA's financing district would be able to exercise its right under section 3(3) to "opt out" of the tax capture if a municipality seeks to alter or amend the district under section 3(5) to include or exclude land. In other words, may a taxing jurisdiction that did not originally take advantage of its right to opt out of the tax capture during the 60-day period set forth in section 3(3), do so in the context of amending the district's boundaries under section 3(5) so as to exempt the taxing jurisdiction from tax capture even within the original district.

In construing or applying the provisions of a statute, the first step is determining the legislature's intent in adopting them. The intent, if possible, is determined by the words of the statute alone. "The words of a statute provide 'the most reliable evidence of its intent.'" Sun Valley Foods Co v Ward, 460 Mich 230, 236; 596 NW2d 119 (1999), quoting United States v Turkette, 452 US 576, 593; 101 S Ct 2524; 69 L Ed 2d 246 (1981). If the provisions are unambiguous, as written, there is no room for "construction." Lake Carriers Ass'n v Dep't of Natural Resources Director, 407 Mich 424, 429; 286 NW2d 416 (1979). The words and provisions are to be applied as enacted. Dewan v Khoury, 477 Mich 888, 889; 722 NW2d 215 (2006). Further, words and phrases must be read in context and a statute must be read in its entirety. Sweatt v Dep't of Corrections, 468 Mich 172, 179; 661 NW2d 201 (2003).

The term "pursuant to the same requirements" used in section 3(5) is a clear reference to, and incorporation of, the same actions commanded of a municipality for creating an authority. Thus, the requirements for altering or amending a district are those set forth in section 3(1), (2), (3), and (4). In Village of Holly v Holly Twp, 267 Mich App 461, 475-476; 705 NW2d 532 (2005), the Court of Appeals construed these same provisions, concluding:

          Read as a whole, § 3 of the Act establishes the procedure for creating a DDA or amending the boundaries of an existing DDA. MCL 125.1653(1) and (5).
          Subsections 2, 3, and 4 of § 3 all dovetail harmoniously and indicate that "a public hearing held after February 15, 1994," in subsection 3 must refer to the
          public hearing necessary for purposes of subsections 1 or 5. Subsection 2 requires notice "to the governing body of each taxing jurisdiction levying taxes
          that would be subject to capture if the authority is established and a tax increment financing plan is approved" of "a public hearing to be held after February 15,
          1994 . . . ." Subsection 3 provides an opt-out opportunity within sixty days of a public hearing described in the same manner as in subsection 2: "a public
          hearing held after February 15, 1994 . . . ." Further, the sixty-day opt-out window of subsection 3 exactly corresponds to the sixty-day waiting period of
          subsection 4 before a municipality may adopt an ordinance creating a DDA or amending an existing DDA's boundaries as permitted by subsection 5. We
          therefore conclude that the most reasonable interpretation of these interlocking provisions is that "a public hearing to be held after February 15, 1994," in
          subsection 2 and "a public hearing held after February 15, 1994," in subsection 3, both refer to the same public hearing, one held to create a DDA or modify
          the boundaries of a DDA. Indeed, subsections 2, 3, and 4 provide the logical time sequence of establishing a DDA or modifying an authority's boundaries:
          (1) notice to taxpayers and taxing jurisdictions of a public hearing, (2) a public hearing, (3) a sixty-day period during which taxing jurisdictions may opt out
          and during which the governing body desiring to create or amend a DDA may not act, and (4) adoption of an ordinance creating a DDA or amending its boundaries.

Thus, the requirements or process for altering or amending a district include the "opt out" provision set forth in section 3(3).

The Court of Appeals in Village of Holly, however, did not address whether, in the context of altering or amending a district, the "opt out" opportunity applies to the entire district or simply to the lands added in the case of an expansion, or the lands remaining within the district after an exclusion of lands from the district.

While section 3 does not expressly address this issue, nothing in the text of the statute suggests that the Legislature intended the later process of altering or amending districts to provide a taxing jurisdiction with a second opportunity to "opt out" with respect to lands encompassed within an original district. It is with regard to including new land in an existing downtown district that subsections (3) and (5) extend an "opt-out" opportunity, just as an "opt-out" opportunity was allowed for land originally included in the district. Thus, in the case of an expansion, a taxing jurisdiction would only have the opportunity to "opt out" with respect to lands being added to the district. In the case of an exclusion or contraction of the district, the "opt-out" provision becomes irrelevant since the land being excluded from the district would no longer be subject to tax capture.

It is my opinion, therefore, that a taxing jurisdiction, the property of which is subject to the tax capture of a municipality's Downtown Development Authority Tax Increment Financing District, may "opt out" of the tax capture under MCL 125.1653(3) if the district's boundaries are altered or amended, but only with respect to property being added to the district.

MIKE COX
Attorney General

¹ A municipality cannot incorporate land into a DDA district that is "not included in the description contained in the notice of public hearing, but it may eliminate described lands from the downtown district in the final determination of the boundaries."  MCL 125.1653(2).

² The Michigan Department of Treasury has interpreted these statutes similarly.  See <http://www.michigan.gov/taxes/0,1607,7-238-43876-154689--F,00.html> (accessed March 4, 2010).