By Thomas J. Faussett
A township’s main responsibility is to provide essential services for those residents that live within the township.
Essential services consist of police protection, fire protection, maintaining and upgrading county road services, library services, basic school funding within the township, and by keeping the peace by resolving complaints and enforcement of local regulations and ordinances. In order for these services to be provided to residents they are taxed via the property they own. Property taxes are the key revenue producing method to allow operation and maintenance of all essential services within a Township. When properties are lost via transfer to another governmental body, the only way to continue to maintain those services at the level residents are accustomed to is by increasing taxes or removing some the services. Annexation only puts more burdens upon the remaining residents to keep essential services at current levels.
When businesses request annexation there needs to be a good reason for the transfer. Usually companies require municipal water and sewer services for manufacturing. That is why for these situations; the State adopted Act 425 approximately 30 years ago to allow the conditional transfer of properties with temporary sharing of property tax revenues so the business may expand their operations. There are a number of methods to allow a company to obtain essential services. The first is to simply annex the property into another governmental party when the need arises. The second way is to allow the utilities to be extended into a township as needed by imposing double water rates, or to add a surcharge to the company’s utility bill. Several years ago the Greenville City Council decided that they would not allow any option outside of annexation. Many cities allow the sharing of utilities and in Greenville’s situation with the loss of manufacturing they now have a water system over designed for the current use in the city. This ultimately results in additional maintenance costs to prevent stagnation and contamination of the water supply system. Sharing of water would help keep their revenues up if they allowed services to reach within the Township.
One of the major reasons a Township prefers a 425 agreement is that certain conditions must take place before the transfer of property and setting of property tax revenue sharing. An example of a condition allowing the annexation to occur would be the actual expansion of a business requiring water and sewer services for additional manufacturing. Another condition that might be required in a 425 agreement could be a requirement to meet with the planning commissions of both governmental bodies to review similar properties within the same area. When the Wal-Mart properties were annexed a few years ago, one of the 425 conditions was that both communities’ planning commissions meet and come up with a Joint Development plan to review the properties surrounding Wal-Mart and determine how expansion of those properties could be developed to benefit both parties.
Cities do not want to wait for conditions to be met before an annexation can occur because if the conditions do not occur the transfer of the property also will not occur. Cities prefer using the Urban Cooperation 108 agreement that immediately transfers the property and sets the temporary property tax revenue sharing requirement immediately. Townships want to be sure that a business really needs the utilities before they are willing to allow the loss of the property and revenue.
Greenville area resident Thomas J. Faussett was the Physical Plant Manager for the Michigan Department of Corrections where he worked many annexation agreements conducted between cities and prison sites usually located in the surrounding townships.
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