A proposal on the Nov. 3 ballot to cut and cap property taxes over a five-year period in Michigan would cost the state's general fund budget $402 million in 1993, the first year of the tax cut, and climb to $1.6 billion by 1997, according to a study released last week.

Prepared by the Mackinac Center, a nonprofit Michigan-based research organization, the study compares two property tax cut proposals that will appear on the ballot.

The "Cut and Cap" proposal championed by Gov. John Engler would result in a permanent and significant tax reduction, the study said. Not only would it cut school operating property taxes by 30% over five years, but it would limit property assessment growth to 3% or the rate of inflation, whichever is less.

Under the governor's plan, the state would reimburse school districts for money lost from the phased-in tax cut. State officials have said the money would come from downsizing state government and tapping into the state's 5% of annual average revenue growth.

The study says second property tax cut proposal placed on the ballot by the state Legislature would increase property taxes its first year in effect. That proposal would limit annual property assessment increases to 5% or the rate of inflation, whichever is less.

The study attributes the property tax increase under the Legislature's proposal to the fact that it would allow assessments to grow at the rate of inflation over the previous two years instead of the currently allowed one year.

The planned pullout of Chrysler Corp. headquarters from Highland Park is expected to decrease property tax revenues currently used to pay debt service on $3.6 million of outstanding revenue bonds issued by the Highland Park School District.

Because the debt does not qualify for state backing in Michigan's School Bond Loan Program, it is rated BBB-minus by Standard & Poor's Corp. The loan program is a credit enhancement provided by the state.

The school district does have $4.75 million of debt included in the bond loan program that has a Standard & Poor's rating of AA with a negative outlook, based on Michigan's credit rating.

Greg Byndrian, spokesman for the school district, said Chrysler's move from the Detroit area is expected to occur over the next three years, allowing the school district more than enough time to work on alternative funding arrangements.

He added that the school district's payments on all of its debt is about $ 2 million annually.

Michael Forrester, an associate director at Standard & Poor's said the rating agency will be monitoring the "ability of the school district to maintain its positive operating performance" when Chrysler relocates it headquarters.

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