Deal To Cost Area A Big Chunk Of Property Tax Revenue

Deal to cost area a big chunk of property tax revenue

U-M's tax-exempt status will affect parks, library, city

BY TOM GANTERT AND STEFANIE MURRAY

The Ann Arbor News

Pfizer's lost taxes

This chart shows the amount of tax revenue Pfizer generates for local public entities during the current fiscal year, 2008-09. The property's new owner, the University of Michigan, is tax-exempt.

Ann Arbor $4,107,081
Ann Arbor Schools $3,899,344
Washtenaw County $1,353,322
Washtenaw Intermediate School District $943,347
State education $908,557
Washtenaw Community College $874,777
Ann Arbor District Library $456,044
Total $12,542,473

Note: Money for Ann Arbor Schools and state education go directly to the state, which then allocates money back to schools and educational programs across the state.

SONIA L. GOTTFRIED, THE ANN ARBOR NEWS

Ann Arbor City Administrator Roger Fraser said his first reaction after he heard the University of Michigan agreed to purchase Pfizer’s property was, “What about our money?”

Many local taxing authorities are thinking the same thing: millions of dollars a year in Pfizer taxes will disappear once U-M, an untaxed public entity, takes ownership of the property in 2010.

Though its tax assessment had already been reduced to reflect the removal of equipment from the facility over the last year, Pfizer is the county’s largest taxpayer. The pending shift in ownership to the tax-exempt university will erase 4 percent to 5 percent of the city’s tax base.

At city hall, the revenue loss would be reflected in the various taxes that support street maintenance, pensions, parks and the greenbelt. The $83.7 million general fund, which gets the biggest chunk of the total city tax bill, would lose about $1.4 million.

According to one city analysis, Ann Arbor’s parks could receive about $310,000 less in 2010 than in 2007 because of the loss of Pfizer.

“The U-M’s long-term investment in the region is tremendous,” said Ann Arbor City Council Member Leigh Greden. “But there will be serious short-term pain for the city, library and other local governments. It means even more cutbacks, which will affect the quality of life the U-M needs to recruit a highly skilled work force. We hope U-M works with us to mitigate the negative financial impact.”

Pfizer tax payments are expected to continue through 2009.

Ann Arbor District Library Director Josie Parker said the library will use that time to figure out how to deal with the revenue loss, which this year would be about $456,000.

Parker said the library has an operating budget of $12 million a year, meaning there will be about a 4 percent cut.

Washtenaw County Administrator Bob Guenzel says the deal's economic benefits for the area outweigh the loss of tax revenue.

“It’s a significant amount of money,” Parker said.

Ann Arbor Public Schools spokeswoman Liz Margolis said the loss of an estimated $3.9 million in Pfizer taxes paid in 2008 for the district would have minimal impact. That’s because property taxes for each school district in the Michigan are pooled by the state and doled out to each district on a per-pupil basis.

Washtenaw County Administrator Bob Guenzel said the county will lose $1.3 million in tax revenue annually, which will have to be resolved in upcoming budgets. But he said the U-M purchase is ultimately good for the community.

“I felt that while there is certainly some down side to this in terms of loss of property tax revenue initially, I think in the long run it will be good for this community, good for Ann Arbor,” he said.

The property tax loss will first hit the county in the 2010 budget, along with existing property tax declines.

“We’ll put this into the mix, and the mix is not good, because of property tax revenue, which is about 70 percent of our budget. And that’s going to go down whether Pfizer is there or not,” he said.

The important point of the U-M deal is the wider implications for the area, Guenzel said.

“Ultimately this will lead to greater economic development and I think (that) benefits the whole region. Jobs and companies that are spun out of that property and the University of Michigan will locate throughout this county, not only in the city of Ann Arbor,” he said.

Tom Gantert can be reached at tgantert@annarbornews.com or 734-994-6701.