Economic development: downtown development authorities; definition of downtown district; modify, the official text

Act
No. 5

Public
Acts of 2026

Approved
by the Governor

March
26, 2026

Filed
with the Secretary of State

March
26, 2026

EFFECTIVE
DATE:  March 26, 2026

state of michigan

103rd Legislature

Regular session of 2026

Introduced by Senator Hertel

ENROLLED SENATE BILL No. 581

AN ACT to amend 2018 PA 57,
entitled “An act to provide for the recodification and establishment of certain
tax increment finance authorities; to prescribe the powers and duties of the
authorities; to correct and prevent deterioration in residential, commercial,
and industrial areas and certain other areas; to authorize the acquisition and
disposal of interests in real and personal property; to authorize the creation
and implementation of development plans and development areas; to promote
residential and economic growth; to create certain boards; to prescribe the
powers and duties of certain boards; to authorize the issuance of bonds and
other evidences of indebtedness; to levy certain taxes; to authorize the use of
tax increment financing; to prescribe powers and duties of certain state
officials; to provide for rule promulgation; to provide for enforcement of this
act; and to repeal acts and parts of acts,” by amending section 201 (MCL
125.4201).

The People of the State of
Michigan enact:

Sec.
201. As used in this part:

(a) “Advance” means a transfer of funds made by a
municipality to an authority or to another person on behalf of the authority in
anticipation of repayment by the authority. Evidence of the intent to repay an
advance includes, but is not limited to, an executed agreement to repay,
provisions contained in a tax increment financing plan approved before the
advance, or a resolution of the authority or the municipality.

(b) “Assessed value” means 1 of the following:

(i) For valuations made before January 1,
1995, the state equalized valuation as determined under the general property
tax act, 1893 PA 206, MCL 211.1 to 211.155.

(ii) For valuations made after December 31,
1994, the taxable value as determined under section 27a of the general property
tax act, 1893 PA 206, MCL 211.27a.

(c) “Authority” means a downtown development authority
created under this part.

(d) “Board” means the governing body of an authority.

(e) “Business district” means an area in the downtown of a
municipality zoned and used principally for business.

(f) “Captured assessed value” means the amount in any 1 year
by which the current assessed value of the project area, including the assessed
value of property for which specific local taxes are paid in lieu of property
taxes as determined in subdivision (aa), exceeds the initial assessed value.
The state tax commission shall prescribe the method for calculating captured
assessed value.

(g) “Catalyst development project” means a project that is
located in a municipality with a population greater than 600,000, is designated
by the authority as a catalyst development project, and is expected to result
in not less than $300,000,000.00 of capital investment. There must not be more
than 1 catalyst development project designated within each authority.

(h) “Chief executive officer” means the mayor or city manager
of a city, the president or village manager of a village, or the supervisor of
a township or, if designated by the township board for purposes of this part,
the township superintendent or township manager of a township.

(i) “Development area” means that area to which a development
plan is applicable.

(j) “Development plan” means that information and those
requirements for a development plan set forth in section 217.

(k) “Development program” means the implementation of the
development plan.

(l) “Downtown district” means that part of
an area in a business district that is specifically designated by ordinance of
the governing body of the municipality under this part. Both of the following
apply regarding a downtown district:

(i) A downtown district may include more
than 1 separate and distinct geographic areas in a business district as
determined by the municipality if 1 of the following requirements is met:

(A) The municipality enters into an agreement with a
qualified township under section 203(7).

(B) The municipality is a city that surrounds another city
and that other city lies between the 2 separate and distinct geographic areas.

(C) The municipality is located on both the mainland and 1 or
more islands, and a body of water lies between the 2 separate and distinct
geographic areas.

(ii) If the downtown district contains more
than 1 separate and distinct geographic area in the downtown district, the
separate and distinct geographic areas are considered 1 downtown district.

(m) “Eligible advance” means an advance made before August
19, 1993.

(n) “Eligible obligation” means an obligation issued or
incurred by an authority or by a municipality on behalf of an authority before
August 19, 1993 and its subsequent refunding by a qualified refunding
obligation. Eligible obligation includes an authority’s written agreement
entered into before August 19, 1993 to pay an obligation issued after August
18, 1993 and before December 31, 1996 by another entity on behalf of the
authority.

(o) “Fire alarm system” means a system designed to detect and
annunciate the presence of fire, or by-products of fire. Fire alarm system
includes smoke detectors.

(p) “Fiscal year” means the fiscal year of the authority.

(q) “Governing body of a municipality” means the elected body
of a municipality having legislative powers.

(r) “Initial assessed value” means the assessed value, as
equalized, of all the taxable property within the boundaries of the development
area when the ordinance establishing the tax increment financing plan is
approved, as shown by the most recent assessment roll of the municipality for
which equalization has been completed when the resolution is adopted. Property
exempt from taxation when the initial assessed value is determined must be
included as zero. For the purpose of determining initial assessed value,
property for which a specific local tax is paid in lieu of a property tax is
not considered to be property that is exempt from taxation. The initial
assessed value of property for which a specific local tax was paid in lieu of a
property tax must be determined as provided in subdivision (aa). If a
municipality having a population of less than 35,000 established an authority
before 1985, created a district or districts, and approved a development plan
or tax increment financing plan or amendment to a plan that expired by its terms
December 31, 1991, the initial assessed value for the purpose of any plan or
plan amendment adopted as an extension of the expired plan must be determined
as if the plan had not expired December 31, 1991. For a development area
designated before 1997 in which a renaissance zone has subsequently been
designated under the Michigan renaissance zone act, 1996 PA 376, MCL 125.2681
to 125.2696, the initial assessed value of the development area otherwise
determined under this subdivision must be reduced by the amount by which the
current assessed value of the development area was reduced in 1997 due to the
exemption of property under section 7ff of the general property tax act, 1893
PA 206, MCL 211.7ff, but the initial assessed value must not be less than zero.

(s) “Municipality” means a city, village, or township.

(t) “Obligation” means a written promise to pay, whether
evidenced by a contract, agreement, lease, sublease, bond, or note, or a
requirement to pay imposed by law. An obligation does not include a payment
required solely because of default on an obligation, employee salaries, or
consideration paid for the use of municipal offices. An obligation does not
include those bonds that have been economically defeased by refunding bonds
issued under this part. Obligation includes, but is not limited to, the following:

(i) A requirement to pay proceeds derived
from ad valorem property taxes or taxes levied in lieu of ad valorem property
taxes.

(ii) A management contract or a contract for
professional services.

(iii) A payment required on a contract,
agreement, bond, or note if the requirement to make or assume the payment arose
before August 19, 1993.

(iv) A requirement to pay or reimburse a
person for the cost of insurance for, or to maintain, property subject to a
lease, land contract, purchase agreement, or other agreement.

(v) A letter of credit, paying agent,
transfer agent, bond registrar, or trustee fee associated with a contract,
agreement, bond, or note.

(u) “On behalf of an authority”, in relation to an eligible
advance made by a municipality, or an eligible obligation or other protected
obligation issued or incurred by a municipality, means in anticipation that an
authority would transfer tax increment revenues or reimburse the municipality
from tax increment revenues in an amount sufficient to fully make payment
required by the eligible advance made by the municipality, or eligible
obligation or other protected obligation issued or incurred by the municipality,
if the anticipation of the transfer or receipt of tax increment revenues from
the authority is pursuant to or evidenced by 1 or more of the following:

(i) A reimbursement agreement between the
municipality and an authority it established.

(ii) A requirement imposed by law that the
authority transfer tax increment revenues to the municipality.

(iii) A resolution of the authority agreeing
to make payments to the incorporating unit.

(iv) Provisions in a tax increment financing
plan describing the project for which the obligation was incurred.

(v) “Operations” means office maintenance, including salaries
and expenses of employees, office supplies, consultation fees, design costs,
and other expenses incurred in the daily management of the authority and
planning of its activities.

(w) “Other protected obligation” means any of the following:

(i) A qualified refunding obligation issued
to refund an obligation described in subparagraph (ii), (iii), or (iv), an
obligation that is not a qualified refunding obligation that is issued to
refund an eligible obligation, or a qualified refunding obligation issued to
refund an obligation described in this subparagraph.

(ii) An obligation issued or incurred by an
authority or by a municipality on behalf of an authority after August 19,
1993, but before December 31, 1994, to finance a project described in a tax
increment finance plan approved by the municipality in accordance with this
part before December 31, 1993, for which a contract for final design is entered
into by or on behalf of the municipality or authority before March 1, 1994 or
for which a written agreement with a developer, titled preferred development
agreement, was entered into by or on behalf of the municipality or authority in
July 1993.

(iii) An obligation incurred by an authority
or municipality after August 19, 1993, to reimburse a party to a development
agreement entered into by a municipality or authority before August 19, 1993,
for a project described in a tax increment financing plan approved in
accordance with this part before August 19, 1993, and undertaken and installed
by that party in accordance with the development agreement.

(iv) An obligation incurred by the authority
evidenced by or to finance a contract to purchase real property within a
development area or a contract to develop that property within the development
area, or both, if all of the following requirements are met:

(A) The authority purchased the real property in 1993.

(B) Before June 30, 1995, the authority enters a contract for
the development of the real property located within the development area.

(C) In 1993, the authority or municipality on behalf of the
authority received approval for a grant from both of the following:

(I) The department of natural resources for site reclamation
of the real property.

(II) The department of consumer and industry services for
development of the real property.

(v) An ongoing management or professional
services contract with the governing body of a county that was entered into
before March 1, 1994 and that was preceded by a series of limited term
management or professional services contracts with the governing body of the
county, the last of which was entered into before August 19, 1993.

(vi) A loan from a municipality to an
authority if the loan was approved by the legislative body of the municipality
on April 18, 1994.

(vii) Funds expended to match a grant received
by a municipality on behalf of an authority for sidewalk improvements from the
Michigan department of transportation if the legislative body of the
municipality approved the grant application on April 5, 1993 and the grant was
received by the municipality in June 1993.

(viii) For taxes captured in 1994, an
obligation described in this subparagraph issued or incurred to finance a
project. An obligation is considered issued or incurred to finance a project
described in this subparagraph only if all of the following are met:

(A) The obligation requires raising capital for the project
or paying for the project, whether or not a borrowing is involved.

(B) The obligation was part of a development plan and the tax
increment financing plan was approved by a municipality on May 6, 1991.

(C) The obligation is in the form of a written memorandum of
understanding between a municipality and a public utility dated October 27,
1994.

(D) The authority or municipality captured school taxes
during 1994.

(ix) An obligation incurred after July 31,
2012 by an authority, municipality, or other governmental unit to pay for costs
associated with a catalyst development project.

(x) “Public facility” means a street, plaza, pedestrian mall,
and any improvements to a street, plaza, or pedestrian mall including street
furniture and beautification, park, parking facility, recreational facility,
right-of-way, structure, waterway, bridge, lake, pond, canal, utility line or
pipe, building, and access routes to any of these places, designed and
dedicated to use by the public generally, or used by a public agency. Public
facility includes an improvement to a facility used by the public or a public
facility as those terms are defined in section 1 of 1966 PA 1, MCL
125.1351, which improvement is made to comply with the barrier free design
requirements of the state construction code promulgated under the
Stille-DeRossett-Hale single state construction code act, 1972 PA 230, MCL
125.1501 to 125.1531. Public facility also includes the acquisition,
construction, improvement, and operation of a building owned or leased by the
authority to be used as a retail business incubator.

(y) “Qualified refunding obligation” means an obligation
issued or incurred by an authority or by a municipality on behalf of an
authority to refund an obligation if 1 or more of the following apply:

(i) The obligation is issued to refund a
qualified refunding obligation issued in November 1997 and any subsequent
refundings of that obligation issued before January 1, 2010 or the obligation
is issued to refund a qualified refunding obligation issued on May 15, 1997 and
any subsequent refundings of that obligation issued before January 1, 2010 in
an authority in which 1 parcel or group of parcels under common ownership
represents 50% or more of the taxable value captured within the tax increment
finance district and that will ultimately provide for not less than a 40%
reduction in the taxable value of the property as part of a negotiated
settlement as a result of an appeal filed with the state tax tribunal.
Qualified refunding obligations issued under this subparagraph are not subject
to the requirements of section 611 of the revised municipal finance act, 2001
PA 34, MCL 141.2611, if issued before January 1, 2010. The duration of the
development program described in the tax increment financing plan relating to
the qualified refunding obligations issued under this subparagraph is extended
to 1 year after the final date of maturity of the qualified refunding
obligations.

(ii) The refunding obligation meets both of
the following:

(A) The net present value of the principal and interest to be
paid on the refunding obligation, including the cost of issuance, will be less
than the net present value of the principal and interest to be paid on the
obligation being refunded, as calculated using a method approved by the
department of treasury.

(B) The net present value of the sum of the tax increment
revenues described in subdivision (cc)(ii) and
the distributions under section 213b to repay the refunding obligation will not
be greater than the net present value of the sum of the tax increment revenues
described in subdivision (cc)(ii) and the
distributions under section 213b to repay the obligation being refunded, as
calculated using a method approved by the department of treasury.

(iii) The obligation is issued to refund an
other protected obligation issued as a capital appreciation bond delivered to
the Michigan municipal bond authority on December 21, 1994 and any subsequent
refundings of that obligation issued before January 1, 2012. Qualified
refunding obligations issued under this subparagraph are not subject to the
requirements of section 305(2), (3), (5), and (6), 501, 503, or 611 of the
revised municipal finance act, 2001 PA 34, MCL 141.2305, 141.2501, 141.2503,
and 141.2611, if issued before January 1, 2012. The duration of the development
program described in the tax increment financing plan relating to the qualified
refunding obligations issued under this subparagraph is extended to 1 year
after the final date of maturity of the qualified refunding obligations. The
obligation may be payable through the year 2025 at an interest rate not
exceeding the maximum rate permitted by law, notwithstanding the bond maturity
dates contained in the notice of intent to issue bonds published by the
municipality. An obligation issued under this subparagraph is a qualified
refunding obligation only to the extent that revenues described in subdivision
(cc)(ii) and distributions under section 213b to
repay the qualified refunding obligation do not exceed $750,000.00.

(iv) The obligation is issued to refund a
qualified refunding obligation issued on February 13, 2008, and any subsequent
refundings of that obligation, issued before December 31, 2018. Qualified
refunding obligations issued under this subparagraph are not subject to the
requirements of section 305(2), (3), (5), and (6), 501, 503, or 611 of the
revised municipal finance act, 2001 PA 34, MCL 141.2305, 141.2501, 141.2503,
and 141.2611. The duration of the development program described in the tax
increment financing plan relating to the qualified refunding obligations issued
under this subparagraph is extended to 1 year after the final date of maturity
of the qualified refunding obligations. Revenues described in subdivision (cc)(ii) and distributions made under section 213b in excess of the
amount needed for current year debt service on an obligation issued under this
subparagraph may be paid to the authority to the extent necessary to pay future
years’ debt service on the obligation as determined by the board.

(z) “Qualified township” means a township that meets all of
the following requirements:

(i) Was not eligible to create an authority
before January 3, 2005.

(ii) Adjoins a municipality that previously
created an authority.

(iii) Along with the adjoining municipality
that previously created an authority, is a member of the same joint planning
commission under the joint municipal planning act, 2003 PA 226, MCL 125.131 to
125.143.

(aa) “Specific local tax” means a tax levied under 1974 PA
198, MCL 207.551 to 207.572, the commercial redevelopment act, 1978 PA 255, MCL
207.651 to 207.668, the technology park development act, 1984 PA 385, MCL
207.701 to 207.718, and 1953 PA 189, MCL 211.181 to 211.182. The initial
assessed value or current assessed value of property subject to a specific
local tax is the quotient of the specific local tax paid divided by the ad valorem
millage rate. However, after 1993, the state tax commission shall prescribe the
method for calculating the initial assessed value and current assessed value of
property for which a specific local tax was paid in lieu of a property tax.

(bb) “State fiscal year” means the annual period commencing
October 1 of each year.

(cc) “Tax increment revenues”
means the amount of ad valorem property taxes and specific local taxes
attributable to the application of the levy of all taxing jurisdictions on the
captured assessed value of real and personal property in the development area,
subject to the following requirements:

(i) Tax increment revenues include ad
valorem property taxes and specific local taxes attributable to the application
of the levy of all taxing jurisdictions other than this state under the state
education tax act, 1993 PA 331, MCL 211.901 to 211.906, and local or
intermediate school districts on the captured assessed value of real and
personal property in the development area for any purpose authorized by this
part.

(ii) Tax increment revenues include ad
valorem property taxes and specific local taxes attributable to the application
of the levy of this state under the state education tax act, 1993 PA 331, MCL
211.901 to 211.906, and local or intermediate school districts on the captured
assessed value of real and personal property in the development area in an
amount equal to the amount necessary, without regard to subparagraph (i), to repay eligible advances, eligible obligations, and
other protected obligations.

(iii) Tax increment revenues do not include
any of the following:

(A) Ad valorem property taxes attributable either to a
portion of the captured assessed value shared with taxing jurisdictions within
the jurisdictional area of the authority or to a portion of value of property
that may be excluded from captured assessed value or specific local taxes
attributable to those ad valorem property taxes.

(B) Ad valorem property taxes excluded by the tax increment
financing plan of the authority from the determination of the amount of tax
increment revenues to be transmitted to the authority or specific local taxes
attributable to those ad valorem property taxes.

(C) Ad valorem property taxes exempted from capture under
section 203(3) or specific local taxes attributable to those ad valorem
property taxes.

(D) Ad valorem property taxes levied under 1 or more of the
following or specific local taxes attributable to those ad valorem property
taxes:

(I) The zoological authorities act, 2008 PA 49, MCL 123.1161
to 123.1183.

(II) The art institute authorities act, 2010 PA 296, MCL
123.1201 to 123.1229.

(III) Except as otherwise provided in section 203(3), ad valorem property taxes or specific local taxes
attributable to those ad valorem property taxes levied for a separate millage
for public library purposes approved by the electors after December 31,
2016.

(iv) The amount of tax increment revenues
authorized to be included under subparagraph (ii)
or (v), and required to be transmitted to the
authority under section 215(1), from ad valorem property taxes and specific
local taxes attributable to the application of the levy of the state education
tax act, 1993 PA 331, MCL 211.901 to 211.906, a local school district or an
intermediate school district on the captured assessed value of real and
personal property in a development area must be determined separately for the
levy by this state, each school district, and each intermediate school district
as the product of sub-subparagraphs (A) and (B):

(A) The percentage that the total ad valorem taxes and
specific local taxes available for distribution by law to this state, a local
school district, or an intermediate school district, respectively, bears to the
aggregate amount of ad valorem millage taxes and specific taxes available for
distribution by law to this state, each local school district, and each
intermediate school district.

(B) The maximum amount of ad valorem property taxes and
specific local taxes considered tax increment revenues under subparagraph (ii) or (v).

(v) Tax increment revenues include ad
valorem property taxes and specific local taxes, in an annual amount and for
each year approved by the state treasurer, attributable to the levy by this
state under the state education tax act, 1993 PA 331, MCL 211.901 to 211.906,
and by local or intermediate school districts, on the captured assessed value
of real and personal property in the development area of an authority
established in a city with a population of 600,000 or more to pay for, or
reimburse an advance for, not more than $8,000,000.00 for the demolition of
buildings or structures on public or privately owned property within a
development area that commences in 2005, or to pay the annual principal of or
interest on an obligation, the terms of which are approved by the state
treasurer, issued by an authority, or by a city on behalf of an authority, to
pay not more than $8,000,000.00 of the costs to demolish buildings or
structures on public or privately owned property within a development area that
commences in 2005.

(vi) Tax increment revenues include ad
valorem property taxes and specific local taxes attributable to the levy by
this state under the state education tax act, 1993 PA 331, MCL 211.901 to
211.906, and by local or intermediate school districts that were levied on or
after July 1, 2010, on the captured assessed value of real and personal
property in the development area of an authority established in a city with a
population of 600,000 or more to pay for, or reimburse an advance for, costs
associated with the land acquisition, preliminary site work, and construction
of a catalyst development project.

Enacting section 1. This amendatory act does not take effect
unless House Bill No. 5455 of the 103rd Legislature is enacted into law.

This
act is ordered to take immediate effect.

Secretary of the Senate

Clerk of the House of
Representatives

Approved___________________________________________

____________________________________________________

Governor