Crain's Detroit Business - July 2009 Holiday Edition - (Page 8)

Page 8 CRAIN’S DETROIT BUSINESS Holiday Edition House bill would end TechTown program’s goal: Link use of occupancy to set creatives with the business world a building’s taxable value BY DUSTIN WALSH SPECIAL TO CRAIN’S DETROIT BUSINESS BY AMY LANE CAPITOL CORRESPONDENT LANSING — Opponents call it a tax loophole in need of a fix. Supporters call it upholding Proposal A and the state constitution. Whatever the label, lawmakers in the state House have taken another stab at a 2002 court decision that prevents local governments from raising the taxable value of commercial rental property when occupancy increases. At the heart of the issue is property tax revenue, and the fact that property owners can request devaluations based on declines in occupancy. It’s a factor that building owners say is relevant to market value but that can lead to less local government tax collections. House Bill 4456, passed recently by the House, would eliminate the use of occupancy additions and losses in determining a property’s taxable value. It is the latest in years of attempts to address what local governments say is an inequitable situation handed to them by the Michigan Supreme Court: Minnick Taxable value can drop because of a decrease in occupancy, but can’t rise when occupancy increases. “It’s just a question of fairness. If you can use a metric to go in one direction … it should apply to go in the other direction,” said Summer Minnick, director of state affairs for the Michigan Municipal League. But the Building Owners & Managers Association of Metropolitan Detroit says that the bill would increase taxes on Michigan’s commercial real estate businesses, including landlords and businesses that rent space in the impacted buildings. That’s because businesses could no longer take the occupancy loss that potentially reduces taxable value. And, said Janet Langlois, executive director of Farmington Hills-based BOMA, “once again, it seeks to legislate around a constitutional issue, and it just can’t be done.” The court, in WPW Acquisition vs. the city of Troy, struck down the use of what are known as occupancy additions in determining the taxable value of commercial property. The court said an expanded definition of additions to include occupancy rates, passed by the Legislature in measures to enact 1994’s voter-approved Proposal A, was inconsistent with Proposal A and unconstitutional. The court case did not address the issue of occupancy losses, thus occupancy-related reduc- tions in a property’s taxable value remained allowable. WPW led to assessment challenges that have gone to the Michigan Tax Tribunal, although BOMA says the majority of cases before the backlogged tribunal involve true cash value, reflective of the declining economy, and are not based on occupancy. BOMA says that at a time when commercial real estate is stressed due to tight credit markets, vacancy rates and tax increases under the Michigan Business Tax, the industry does not need additional burdens. Langlois added that “where vacancy is high right now, it’s going to get higher” as the economic fallout from Michigan’s auto industry restructuring continues to unfold. But local governments, facing falling property values and revenue, also are feeling pressure. Minnick said that one change from some past WPW legislation is that the current bill is not retroactive to the 2002 court decision and allows occupancy additions to be included in calculations of taxable value. Brad Ward, director of public policy and legal affairs for the Michigan Association of Realtors, said the absence of retroactivity has eliminated a major problem the Realtors had with some past legislation. He said retroactivity would have “taxed building owners for additions in occupancy that the WPW case said were unconstitutional.” The Realtors are neutral on the current bill. The bill, sponsored by Rep. Vincent Gregory, D-Southfield, limits the use of occupancy additions to before Dec. 31, 2001, and limits the use of occupancy losses to before Dec. 31, 2009. Ward said the current tax benefit “really only helps you when there is a big gap between your taxable value and SEV (state equalized value.) And since that gap is nonexistent, or very small at this time, there is no benefit to be given.” The bill, which passed the House on June 16 in a 69-38 vote, is likely to see discussion in the Senate Finance Committee, chaired by Nancy Cassis, R-Novi. Cassis said it “is an important issue both to local governments and also the commercial office building sector,” and she is interested in pursuing a solution. “I’m not sure that we’re right there with this legislation, but if we can reach something that is amenable to the parties, we move forward,” Cassis said. She said lawmakers’ top priority for the summer is working through the state budget, but her committee “will be looking to resolve some of the WPW issues this summer” and hold a hearing this fall, if not sooner. Amy Lane: (517) 371-5355, alane@crain.com TechTown, the Wayne State University-supported business incubator, will launch the second session of its business development program, SmartStart, on July 14 with three additional slots for creative ventures. Like the first session, which began in January, SmartStart offered 25 slots for burgeoning entrepreneurs to move their companies toward growth and profitability. Judy Johncox, SmartStart program director, said the 25 general slots have been filled for the July session. For the first time, an additional three slots will be sponsored by TechTown’s creative business incubator, Arts Impact. Johncox Two of the three already are filled. The deadline for the remaining slot was July 3, said Sharon Vasquez, dean of the College of Fine, Performing and Communication Arts at Wayne State. The Arts Impact-sponsored companies will receive 12 months of guidance from the TechTown team and will be mentored by those working in creative industries, Vasquez said. The standard SmartStart program runs 24 months. “There is an application chal- lenge between the creative and TechTown also provides particibusiness sectors,” she said. “Arts pants with office space at its 440 Impact is trying to bridge Burroughs St. fathat gap.” cility, technology SmartStart is a business expertise from boot camp that offers entreWSU faculty and preneurs workshops on access to the Websubjects such as based Angelsoft product develop- This database to find ment, marketing and story angel investors. funding. Students originally appeared on “They are going to are paired with busi- Detroit Make it Here get training and acness mentors to de- (www.detroitmakeithere cess to resources,” velop a viable busi- .com), a Web site for Johncox said. “But the ness plan and can area creatives powered CEO or company apply for financial by Crain’s and founders make the deassistance through sponsored by Detroit cisions and control the TechTown — Detroit Renaissance Inc. If you amount of TechTown Micro-Enterprise Fund seek creative talent or programs they will manages the loans. services, you can find utilize.” Interest accrues at 2 more than 1,000 Olu Oloju, president percent over prime people and 2,000 of Lightsource Studios, a rate after the pro- companies on the site. 3D animation, digital gram concludes. media and video game SmartStart’s first session is six development firm, will begin the months in, and some of its compa- program this month. nies already have third-party in“I signed on to make sure that my vestors, while others are organiz- business documents are airtight ing materials to get a TechTown and that my business plan is fundloan, Johncox said. able (to outside investors),” he said. Carole Johnson, CEO of TechOloju said he hopes to keep his Town-based CYJ Enterprises L.L.C., costs through the program under expects to have nearly $30,000 in $100,000. Because Lightsource is a loans through SmartStart. She technology-based company, he exstarted in January. pects to owe more than other par“I’m getting services from Tech- ticipants. Town that I couldn’t get without Johncox said new SmartStart the program,” she said. “The fact sessions will begin in August, Septhat they believe in us enough to tember and October. give us that kind of financial supVasquez said Arts Impact plans port is something you’re not going to sponsor slots in the upcoming to get at a bank.” SmartStart sessions, as well. ‘We want to be the absolute best’ New WSU supply chain program aims to leverage its location BY BILL SHEA CRAIN’S DETROIT BUSINESS Wayne State University launches a new global supply chain management major in its college of business later this summer and has lured a former professor back to run it. John Taylor, who left WSU in 2002 after a decade to run a supply chain program at Grand Valley State University, is coming back to Detroit to run the new major as an associate professor. Taylor Taylor also is expected to be heavily involved in a proposed U.S.-Canada border transportation and policy institute at the school that’s been advocated by the Detroit Regional Chamber. Few details are available on the institute, which would be similar to a University of Windsor venture, but it’s known that WSU is seeking federal funding for the project. Meanwhile, Taylor will concentrate launching the new major, which he expects to have 100 stu- dents in this fall and four full-time faculty members running it. Classes will include global logistics and transportation (which covers freight rail, truck, ocean and air freight and transportation policy), global strategic procurement, supplier management and total quality management. Students also will learn about regulatory issues, customs, duties and security requirements, along with marketing distribution, purchasing and production operations. Courses also will be available through Macomb Community College, thanks to an articulation agreement between the schools. “We want to be the absolute best in terms of turning out students that http://www.detroitmakeithere.com http://www.detroitmakeithere.com http://www.detroitmakeithere.com

Table of Contents for the Digital Edition of Crain's Detroit Business - July 2009 Holiday Edition

Crain's Detroit Business - July 2009 Holiday Edition
Contents
Isotope in Short Supply
Biz Groups Petition Drive Fails
Tourism-Marketing Funding Plan Opposed
Historic Black-Owned Bank Holds Off Federal Takeover
New York Investor Builds Major Stake in Radio's Saga
Cell Phone Chain Gains Ground in Metro Detroit
Bill would Nix Occupancy as a Factor in Setting Building's Taxable Value
Federal Funds to Overhaul Unemployment Insurance Computers
IT Company Made Most of Dot-Com Bust
Focus: Power Sellers

Crain's Detroit Business - July 2009 Holiday Edition