CHICAGO -- A bill that would allow Wayne County, Mich., to place a package of proposed taxes to finance a new baseball stadium on the ballot in March was approved last week by the Michigan House.
But some state officials are questioning the constitutionality of one of the taxes in the package.
If approved by voters, county officials plan to use the $14 million to $18 million in annual revenues from a 1% tax on hotel-motel rooms and restaurant meals, and a 2% tax on car rentals in the county, to back bonds for a new stadium for the Detroit Tigers baseball team.
Gary Wolfram, deputy state treasurer for taxation and economic policy, said the 1% tax on restaurant meals could violate the state constitution if it is considered an increase in the sales tax above the constitutional limit of 4%. If it is a sales tax, another concern raised by Mr. Wolfram is compliance with a constitutional provision that calls for 60% of sales tax revenues to go to the state's school aid fund.
"Obviously, [the county] will need bond counsel opinion that it is constitutional," he stated.
State Sen. John Kelly, D-Grosse Pointe, a leading opponent of the bill, agreed there is "absolutely" a constitutional question raised by the proposed tax. "Voters in a county cannot override a constitutional provision," he said. "It would require statewide approval."
But Jay Rising, a senior attorney with Miller, Canfield, Paddock & Stone and counsel to the county, contended the restaurant tax, like the two other proposed taxes, is an excise tax. He added that while the constitution allows local governments to impose excise taxes, the matter would continue to be examined "before any bonds are sold."
Sen. Kelly said the measure is expected to be taken up by the Senate the first week in December. At that time, he said he would try to amend the bill to allow for a ballot proposal on renovating the existing stadium. He added that he had other bills pending that would prohibit the county from using property taxes or its general obligation pledge to help finance the ballpark.
The House version of the bill, which was passed in a 63-42 vote last Wednesday, was amended to allow Muskegon County to place a similar tax package before voters in order to finance a professional hockey facility.
Gov. John Engler has not yet taken a position on the legislation, according to Nick Khouri, chief deputy state treasurer.
In a request for qualifications sent out to potential senior managing underwriters in June, Wayne County outlined a plan to issue $150 million to $200 million of tax-exempt bonds backed by county revenues and taxable bonds backed by team revenues.
While the 1986 Tax Reform Act ended the use of tax-exempt financing for sports facilities, one public finance source said the deal could be structured to flunk the private security test in the law, while meeting the private use test. Both tests must be met before the use of tax-exempt bonds is excluded.
The source said the tax-exempt bond issue could be large enough to build the stadium, which the Tigers could then be asked to improve using taxable debt or other sources of non-tax-exempt financing.
Meanwhile, supporters of the present Tiger Stadium had enough signatures certified by the Detroit city clerk earlier this month to place its own measure on the ballot, according to Brian Tremain, a member of the Tiger Stadium Fan Club's executive committee.