IRON MOUNTAIN — Municipal leaders in Michigan are wary of a new tax cut for businesses that they say jeopardizes roughly $75 million in annual funding for local governments.

House Bill 5351 was included in a $1.5 billion package of business incentives signed into law in late December by Gov. Gretchen Whitmer. Beginning in 2023, the measure provides a tax cut for businesses that pay taxes on nonindustrial equipment and personal property. The exemption, based on the value of the equipment, rises from $80,000 to $180,000 per parcel.

At the urging of the Michigan Townships Association, the Michigan Municipal League and the Michigan Association of Counties, legislation was also passed to provide $75 million in replacement revenue for local governments, but it’s only for one year.

Beyond that, the erosion of funding may be permanent unless the Legislature and governor find a solution, municipal leaders warn.

“We fully intend to have our members hold the Senate, the House, and governor’s feet to the fire to devise a permanent funding solution that will preserve essential services in our local communities,” the MTA, MML and MAC said in a joint statement.

The municipal organizations lamented the state’s “long-standing practice of using local government funding to pay for other priorities.”

At a Dickinson County Board meeting last week, Commissioner Barbara Kramer reported on House Bill 5351 and the state’s one-year commitment to replacement revenue. “I don’t think we can count on that year after year,” she said.

Upper Peninsula legislators voted in favor of the bill, including Rep. Beau LaFave, R-Iron Mountain; Rep. Greg Markkanen, R-Hancock; Rep. Sara Cambensy, D-Marquette; and Sen. Ed McBroom, R-Waucedah Township.

In a statement on the Senate floor, Sen. Ruth Johnson, R-Holly, said she was concerned about the impact on local communities but voted yes because “I’ve been given a solid commitment that this body and our colleagues in the House will work to address the loss in revenue.”

No Senate Democrats supported House Bill 5351.

“By repealing this tax in perpetuity with no replacement to local communities beyond the first year, you are directly defunding the money that goes toward public safety,” Sen. Jeremy Moss, D-Southfield, said in a floor speech.

In a Michigan Municipal League blog shared among Iron Mountain City Council members, Chris Hackbarth, the league’s director of state and federal affairs, said replacement revenue will be a top legislative priority for 2022.

Jim Anderson can be reached at 906-774-3500, ext. 226, or janderson@ironmountaindailynews.com.