A ballot proposal requiring a public vote on all tax increment financing (TIF) plans in Traverse City violates state law in both its content and its length, according to a new opinion from the state attorney general’s office. That opinion prompted Governor Gretchen Whitmer to reject the proposed charter amendment this week. However, because the proposal is petition-initiated, state law requires it to still go to voters in November despite the governor’s objections – setting up a potential legal battle if the proposal passes.

City residents Fred Bimber and Karen Nielsen filed petitions in November in support of the charter amendment. The ballot language would add a section to the city charter stating: “We declare that tax increment financing ('TIF') plans shall be submitted to a vote of the people, since TIF plans divert local property tax revenue away from the general fund and basic city services such as police, fire, ambulance, streets and parks. Any proposal to create a TIF plan, or to modify, amend or extend an existing TIF plan, shall not be adopted or approved by the City or City Commission until after the proposal is submitted to and approved by a majority of the electors of the City at a regular election or at a special election held for that purpose.”

After City Clerk Benjamin Marentette verified petitioners had more than the 661 signatures required to put the issue to voters, city commissioners voted in January to put the amendment on the ballot. The amendment was then sent to the attorney general and governor, a mandatory review process that can sometimes take several months. In a July 1 email to Governor Whitmer, Assistant Attorney General George Elworth found multiple legal issues with the ballot language.

According to Elworth, the proposed amendment conflicts with the Recodified Tax Increment Financing Act and the Brownfield Redevelopment Financing Act, “which authorize local units, including cities, to participate in tax increment financing plans and projects. These acts contain no provision for voter approval of each determination by a city commission as to the extent and terms of the city’s participation or support of a proposed entity or project,” Elworth wrote.

In addition, the proposal violates Section 36 of the Home Rule City Act (HRCA), which states that no provision of any city charter “shall conflict with or contravene the provisions of any general law of the state,” Elworth wrote. He noted that the ballot language clocks in at 140 words, while the language circulated on petitions was even longer – another HRCA conflict since the limit is 100 words. Concurring with his opinion, Whitmer wrote in a memo Monday that “pursuant to the HRCA, I do not approve the proposed amendment.”

Despite Whitmer’s objections, the proposal will still go to voters November 5. Michigan law outlines two processes for charter amendments – one for amendments proposed by city commissions or other legislative bodies, and one for amendments initiated by petitioners. A governor’s disapproval of a city commission amendment would send it back to the board to reconsider, at which time commissioners could either change it or submit it as-is to voters if two-thirds of the board approved doing so. But an amendment initiated by petitioners “shall be submitted to the electors notwithstanding” a governor’s objections, the law states, which means it must be placed on the ballot either way.

While the governor’s disapproval doesn’t stop the amendment from going to voters, “if there is litigation over the legitimacy of a provision, that can be taken into consideration, as the state’s chief lawyer has looked at it,” Marentette says. City Attorney Lauren Trible-Laucht says she couldn’t rule out a lawsuit if the proposal passes. Entities ranging from the city, Downtown Development Authority (DDA), and the Brownfield Redevelopment Authority (BRA) to developers and other community groups would all be affected by the amendment – which would apply not only to downtown TIF plans but all city TIF plans, including brownfield plans.

Supporters and critics of the proposal weighed in Tuesday. Bimber, one of the petition submitters, dismissed the state’s opinion, saying Elworth’s “analysis and reasoning are woefully inadequate.” An attorney himself, Bimber says that “bigger principles of state law in the constitution and in statute” are at play, including those giving residents “a right to set up the city charter on whatever terms they choose and to give or limit powers to the city commission.” While state law may allow cities to enter into TIF plans, “residents and voters have the right to determine under what conditions they’ll allow” their commissioners to enter them, Bimber believes.

Traverse Together, a citizen group opposed to the amendment, said in a statement they were “not surprised to learn” the state rejected the proposal. “This news supports our position that the referendum goes too far,” the group wrote. “For a host of reasons, Proposal 1 threatens the city's ability to use tax increment financing to address urgent needs – critical items like streets, sidewalks, environmental clean-up, and affordable housing. This development is an opportunity to remind everyone to show up and vote no on TC Proposal 1 this fall. The TIF tool is not just how we paid for good things in the past; it’s how we create opportunities for future generations in Traverse City.”

Meanwhile, a second TIF-related charter amendment was certified by Marentette’s office Tuesday – but faces an uphill battle to get reviewed by the state in time to meet an August 13 deadline for the November ballot. Bimber and other members of the group TC Taxpayers for Justice submitted petitions on May 31 for a proposal specifically aimed at TIF 97, the DDA plan under consideration for extension this year. Concerned that city leaders might act to extend TIF 97 before the TIF ballot proposal goes to voters, the group submitted a second amendment to retroactively negate any city actions on TIF 97. The proposed language states:

“The City Commission shall not attempt to evade the petition rights and voting rights of City residents. Any and all ordinances of the City to extend, amend and/or modify Tax Increment Financing and Development Plan #97 ('TIF97'), which ordinance or ordinances were enacted or are enacted at any time after January 1, 2024 without first being submitted to and approved by a majority of the electors of the City at a regular election or special election held for that purpose are repealed and such ordinance or ordinances shall be void and of no effect.”

Marentette certified Tuesday that enough valid signatures were submitted to put the amendment on the ballot. He says a resolution to approve the language will appear on the city commission agenda Monday (July 15). From there, however, it must go to the attorney general and governor for review. Given that the first amendment took several months to review, Marentette says it’s a “very, very tight timeline" to meet the August deadline.  Even though it’s another petition-initiated amendment – and therefore must eventually go on the ballot – the state review process is still required to be completed first, Marentette says.

Since petitioners didn’t ask for a special election nor gather the signatures of 20 percent of registered voters required for one, the amendment would appear on the next general election ballot if not this year. That next election would be November 4, 2025, according to Marentette.

Bimber, however, rejects that timing, pointing to state law that says petition-initiated amendments must go before voters at the next general election that’s at least 90 days after petitions are filed. He believes that would be this November, regardless of whether the governor has completed her review in time. Bimber says he will sue to compel the city to put the amendment on the fall ballot if needed. Trible-Laucht told The Ticker she agrees with Marentette that the proposal can’t go to voters until the governor’s review is complete.