April 7, 2012
Changing how the mines are taxed in Michigan.
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Dan Adamini made comments on how the Marquette County Board of Commissioners are misbehaving, setting up the show with Rant 1 & 2. You could listen to either of these by clicking on them.
Click here Rant 1
Click here Rant 2
Today’s U.P. Eagle Mine is moving forward, with 7 years of legal fights behind them, actual mining should start next year. They will most likely start harvesting next year.
Republic representative Matt Huuki suggested a proposed change where the tax would come as the minerals are harvested. The company then pays as it takes the minerals.
This is important to the U.P. Because our prosperity depends on our the private sector, the jobs they provide, and the tax they pay.
Dan was upset with commissioner Gerald O. Corkin
District 4 from a Dec 31st article where he said a meeting with officials was very hard to arrange. Dan said it seems that this was not the case and actually Jerry simply didn’t wish to meet on this bill. Then the Marquette County Commissioners hired a lobby firm for $3,000 a month to speak on the boards behalf. “Why not work with Huuki,” said Dan?
COMMENTS FROM COMMISSIONER BILL NORDEEN
Commissioner Bill Nordeen called in. The way we do tax is as ad valor um . The term is when we tax the value of property, houses, garages etc. You pay a percentage of tax on property you own. That’s the default tax, even for non-ferrous items like Kennecott is seeking to mine. They are taxed on the value of the ore body. Rep. Huuki said they are going to tax the 2 billion dollars of ore in the ore body. The tax is front loaded in this scenario. The front load tax can stop a mine from coming in. It’s a legitimate argument. A steadier stream, like a little less tax now, pay as you go is the severance tax. But this is not collected locally. Local government entities are worried if you send this money to Lansing the dollars won’t come back. At the end of the day, it’s administrators in Lansing that control the departments and handle the dollars and we all are a little suspicious of what they do, and that we’d get less money then we sent down there even though they promise it will come back.
Hal Fitch did an evaluation of the ore body which came out different than we anticipated. They said it was worth 191 million dollars. Hal Fitch has a choice under ad valor um to value the ore in different ways. He can value on cost and sales approach. He assumed they were going to dig ore for 63 days this year, sell an amount, and then Hal came with a revenue sales approach. This way it’s not so front loaded. So sending dollars to Lansing could no longer be an issue, because of the way the treasurers office would be valuing these things.
Michigan has a cap, capping the values of certain properties limited by rate of inflation in many case. So if you say the ore body is worth a certain amount, or if there’s more, or if it goes up, are you limited by proposal A so it can’t be increased. The governors office and treasury office said they wish to make the municipality, and county and school district whole, but also not give more taxes to Kennecott.
They said Kennecott pays a lot of different tax, use tax, Michigan Biz Tax, etc, and Lansing would take all those taxes, make the county whole, then use the rest of the taxes for spending in the Upper Peninsula.
Do we really want the dollar to go to Lansing first? Will it come back to the U.P.? We all are afraid of Lansing? We’ve seen things happen in the past. However, we are very connected to Lansing also in many positive ways. Many prefer the money to stay in the district. We have a stagnant economic development in the U.P. Now. Matt Huuki is trying to help other mining companies to start up. Not every company has the deep pockets like Rio Tinto does. How do we really create more jobs up here? What’s a fair system? We are waiting to hear back in writing or in a written bill form that we’d get our dollars back just like under ad valor um.
DAN ADAMINI RESPONDED…
Vincent Gregory created a down state plan of proposing a 6% tax. But commissioners Deb and Jerry didn’t wish to meet on these topics. Why didn’t they take the time to discuss this and think about this? Bill Nordeen said I think we are really looking deeply into this and everyone is trying to do their best. Matt Huuki is a good guy and is trying to do his best. The only problem was he didn’t communicate well enough with the commissioners. He didn’t keep us all in the loop. The board realizes he came down harshly on him and now cooler minds prevail.
COMMISSIONER MIKE QUAYLE CALLED IN AND RESPONDS.
Commissioner Nordeen did a very nice job summarizing the issues. But some of the perceptions of what happened might be wrong. One thing is, anytime the money gets taken out of the U.P. or any jurisdiction, and goes to Lansing, it just may not come back. Even though if the bill passes, and it happens this year, it’s no forever. They can change that so next year or the year after it can be changed and the dollars won’t come back. That concerns me. I am in favor leaving this as an ad valor um pack. We were all panicking how it was valued. The constant income approach really accomplished what 110th Rep. Huuki is trying to accomplish. Kennecott through this whole process in Lansing with permitting was asking what the tax was going to be. They were looking for a stable tax or a knowing of what the tax was to be, and it seems they aren’t complaining about the tax what so ever.
The big thing that holds back getting investors is the amount of tax the company needs to pay. What Hal Fitch did here would help move things forward. The ad valor um tax can stay in affect, and then that doesn’t send the money to Lansing as the severance tax does. I am totally against the severance tax. Let’s not send our dollars down state and be at the mercy of them promising to send it back.
Another thing that’s been brought out in private conversations is that downstate finance people have said we are not sure that we, yoopers, know how to handle that money. The other side of the coin maybe in certain cases they should be modeled after us. The downstate model doesn’t seem better that the U.P. Model. It seems they are not good fiduciaries. We are not in a big deficit up here.
I think that Hal Fitch, unknowingly to us, did Huuki and the smaller counties a favor in that this approach. Questions on caps must be resolved and there seems to be definitions and equalization caps to discuss and how proposal A might impact this cost-income approach. That being said, what ever tax is being collected, let’s keep it here.
DAN ADAMINI SUMMARIES SOME PAST PROGRAMS:
The retiree re-hire issue remains at the board. With some well needed good change on the board, it seems like there’s more clear thinking. A song was written by Dan for the commissioners who still think this is a good idea. It began at 52minutes into the show.
OTHER UPDATES ON PAST SHOWS;
ON Union day care, those whom were forced into the union, don’t’ need to worry because there’s no more self unionization. 63 to 46 votes in house passed and the senate passed new rules. So no longer, if you receive state money to care for your child, will you be considered a state employee. The governor should sign this soon.
One of our most popular shows, Wild Pigs, which aired last week, as of Sunday they were going to be fining people who had these pig farms and were to fining people. Basically, the DNR is not attacking. There are 4 people that are a part of the law suit, and they are not going to be attacked. Dan asked that we still call. It’s a good idea to call the DNR and governors office. Either office could stop the mass execution of the pigs and allowing the DNR to enter AG land and make poor choices.