Over the last decade, Michigan municipalities have given more than a billion dollars in local tax breaks to industrial companies to keep the air clean.
But the reductions often haven’t fully materialized: The companies receiving the tax breaks have been cited by state and federal authorities dozens of times for environmental offenses. And a state oversight agency told BridgeDetroit it does not have the capacity to monitor compliance.
READ MORE:
- 5 things to know about the impact of the Air Pollution Control Act
- A law meant to clean Michigan’s air now costs the state billions with little oversight
- Michigan’s heavy industry receives hundreds of millions of dollars to control pollution. When they don’t, they keep the savings.
- Michigan cities lose millions to pollution tax breaks with no oversight, little say
Here’s what you need to know:
Who qualifies for the exemption?
Facilities that use any equipment for controlling or disposing of air pollution that, if released, would make the air harmful to public health or property within the state. Michigan has a similar law for facilities that control water pollution.
Who decides who gets an exemption certificate?
The State Tax Commission issues certificates after a review and recommendation from the Property Services Division and EGLE. Once an exemption certificate is created, it is sent to the local government, which has 21 days to object.
Are all property taxes exempt under the law?
No, just a portion of property taxes and sales taxes for the cost of the pollution mitigation equipment. One analysis found that since the air and water control exemption program’s inception, more than $17 billion of properties have been exempted from property taxes.
How does this law impact Detroit?
In Detroit, over the last decade, five companies – three owned by Marathon Petroleum – have received 28 exemptions under the law, equaling approximately $46 million in lost property tax revenue that could have otherwise gone to the county, libraries, the zoo, the Detroit Institute of Arts and other public services and infrastructure.
The receivers of these exemptions are: FCA US LLC (now Stellantis), Marathon Petroleum Corporation, Global Titanium Inc., MPLX Terminals LLC and Detroit Refining Logistics, LLC, two Marathon subsidiaries.
What if a company can’t control its pollution, i.e. violates air quality laws? Can a certificate be revoked?
Yes, it can be revoked under several conditions, including substantial noncompliance with the state’s air pollution control law. The State Tax Commission defers to the guidance of EGLE for air pollution noncompliance.
Many of the facilities with exemptions have violated air quality laws, while some are serial violators and have signed legal agreements with the state to stop polluting, but still violate them.
In the last decade, Detroit’s exemption recipients have violated state air quality laws dozens of times at their facilities and signed at least three legal agreements with the state that can include fines and a plan for air quality enforcement.
On the occasion a facility is fined for violating air quality laws, the fine goes to the state’s general fund, not to the municipality where the facility is located.
Has a certificate ever been revoked?
Both EGLE and the State Tax Commission said they did not have any records of a certificate ever being revoked for noncompliance.
EGLE said it does not have the capacity to review compliance, and the tax commission relies on EGLE for recommendations.
Why have I never heard about this exemption?
There is no statutory authorization for mandatory reporting in annual financial disclosure reports.
Because municipalities aren’t involved in granting the certificates, many haven’t calculated what it’s costing them and do not include it in their annual financial statements. Detroit’s Treasury Department told BridgeDetroit that the department has never calculated the cost to Detroit before.
Stephanie Davis, communications manager for the city of Detroit, said the value of the abatement is “trivial” for Detroit. BridgeDetroit calculated this amount at $46 million over 10 years.
Is this law unusual?
No, Michigan is one of several states that offer a similar program, including Alabama, New Hampshire, and Connecticut.
Is this exemption still used?
Yes, the most recent certificate was issued in December to Emerald RNG, LLC to exempt $700,000 of property at its new renewable natural gas facility in Salem Township in Washtenaw County. Emerald RNG initially requested an exemption of more than $69 million, state records show.
EGLE reviewed the request and assessed that only “the facility’s flare and thermal oxidizer met this criteria, and therefore were only able to approve the costs associated with this equipment,” said EGLE spokesperson Josef Stephens.
This project was an initiative of the Kozik Environmental Justice Reporting Grants funded by the National Press Foundation and the National Press Club Journalism Institute.
Methodology: To determine the amount of lost property taxes exemption certificates from the Michigan Department of Treasury online reportswere used. Each certificate lists the cost of the equipment exempted. Using the initial assessed value of the equipment and the depreciated value over time according to the state’s Machines and Equipment schedule a local millage rate for where each facility is located was applied to the equipment values. Violations were calculated by using Shelby Jouppi’s dataset that organizes data published online by the Michigan Department of Environment, Great Lakes, and Energy. The addresses listed for exempted facilities were matched to the addresses where air quality violations occurred. Isabella McLaury, and Ted Tansley and Alex Hill of DETROITography.com contributed to this report. Content was fact-checked by Jeremy Verdusco. Graphics were provided by Matt Daniels.