CHICAGO - The Michigan Senate has overwhelmingly passed legislation that would allow cities to use income tax revenues for bond issuance designed to attract U.S. Defense Department jobs.

Sen. Phil Arthurhultz, R-whitehall, the chief sponsor of the fivebill package, said the bill would allow local bonding authorities to issue bonds backed by revenues from the state's 4.6% income tax, and if applicable, city income taxes collected from employees at proposed Defense Department facilities.

The bond proceeds would be used to build local facilities for the Pentagon's finance and accounting operations, Sen. Arthurhultz said. He added that the communities chosen by the federal government also could help back the bonds using sales tax or property tax proceeds.

Sen. Arthurhultz said he did not expect significant opposition to the bills in the House. The legislation was passed by the Senate June 25.

House Speaker Lewis Dodak, D-Birch Run, "would be more than willing" to look at the legislation, according to his spokeswoman, Mary Detloff. She added that the speaker is supporting Detroit's bid for the Pentagon facility.

Seven Michigan cities, including Detroit, have applied for the sites. Those cities will be competing with more than 200 communities across the nation that also submitted incentive packages to the Pentagon before the June 1 deadline. The communities are vying for thousands of federal jobs as the Defense Department tries to cut costs by consolidating its finance and accounting centers to a handful of sites.

Between 4,000 and 7,000 jobs paying an average salary and benefit package worth $35,000 a year would be.located at each center, according to the Defense Department's request for proposals.

The chosen sites are expected to be announced in March 1993, according to a Pentagon spokeswoman. In exchange for locating thousands of jobs in chosen communities, the federal government expects to receive office facilities for free or at low cost.

Sen. Arthurhultz said a proposal submitted by Muskegon, Mich., a city in his district, encouraged him to draft the legislation. He said the Muskegon plan includes the renovation of a state center for the developmentally disabled that is scheduled to close this fall.

"Muskegon couldn't do it without $40 million of improvements." Sen. Arthurhultz said. This legislation "is a creative way to make those improvements, therefore making the proposal viable in the Defense Department's eyes."

The other Michigan communities that have submitted proposals are Sterling Heights, Saginaw, Jackson, Monroe, and Kalamazoo, Sen. Arthurhultz said.

Detroit's bid, which calls for renovation of a vacant downtown department store, has the backing of Gov. John Engler, who went to Washington, D.C., last month to lobby for the city's proposal. The city's $80 million renovation plan calls for the issuance of revenue bonds, also backed by income tax revenues from employees at, the facility.

John Truscott, the governor's spokesman, said the governor would probably have "a pretty favorable response" to the legislation.

Mayor Coleman Young of Detroit also supports the legislation, according to Bob Berg, his spokesman.

A similar measure in lowa was signed by Gov. Terry Branstad in May. The new law allows lowa to capture 2% of the revenues brought in by the state's 3% income tax from employees at a proposed Pentagon facility in the Quad Cities area, which consists of 14 communities on the Iowa-Illinois border. The revenues would be used to pay off revenue bonds issued to finance part of the cost of a $45 million renovation project.

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