Notes on DDA Funding

I took the time to answer some questions about DDA funding and local business taxes in general.

 

1. Who pays business taxes in Berkley? (Owner of commercial building, person running business, both)
2. How are they taxed? Property valuation, revenue, combination thereof. Other methods.

There aren't business taxes per se (but see my answer to #3). There are property taxes and sales taxes. Berkley only gets a small part of the property tax. The rest goes to county, schools, DIA, zoo, etc.
It is unconstitutional for a "fee" to generate revenue, so for example the cost for a building permit can only be enough to cover the expense of administering that permit.

There isn't any tax on top of these that Berkley see. Our portion of sales tax isn't dependent on how much tax is collected in the city but rather based on our population.

3. How much tax money went back to the DDA in recent years? What percentage of that was from business tax?

DDA's operate under what is known as "Tax Increment Financing". The DDA was created in 1993 for 12 mile from Greenfield to Coolidge and Coolidge from 11 to 12.

When the DDA is created, the amount of property tax that will go to the city is fixed. They voted an additional 2 mil tax, and then the DDA receives everything above that first year's tax.

For example, let's say at the start the property tax collected was $100,000. Ignoring the 2 mils, if in the first year $110,000 was collected, the DDA would get $10,000 that year, in addition to the 2 extra mils.

The 2 mils gets more complicated because it is subject to Headlee, and right now is only actually 1.9084 mils.

By law, that money can only be spent in the DDA district to improve it.

The theory is that by giving the DDA the increase in property value, that will invest that money wisely in the district that will further increase property values.

Starting at page 145 of last year's budget, the estimated 2018-19 revenue is:

  • Tax Revenues, $2.00/thousand tax value, $39,735 (13.6%)
  • Tax Revenues – Capture, $193,756 (66.4%)
  • State Reimbursement – PPT, $26,750 (9.2%)
  • Investment Earnings, $2,029 (.7%)
  • Contributions/Donations, $29,650 (10.2%)

The PPT is "Personal Property Tax", a tax on things like manufacturing equipment that is being phased out, so that money is going to go away.
When the budget was approved I found the contributions/donations line item to be unrealistic. The fiscal year is almost over and I haven't seen that materialize anywhere yet.

So the DDA gets about $250,000 a year right now.

4. How much money did the DDA receive from residential property taxes?

I don't have it broken up on residential vs business, but for residential it would be close to zero. There are only a couple of small apartments inside the DDA district whose tax increment would go to the DDA.