However the controversy over the tax-exempt status of the Traverse City Convention & Visitors Bureau plays out, it has helped create some positive action.
Discussion of the Bureau’s tax status prompted city officials to wonder about the status of the other entities exempt from paying local property taxes. The city has now sent audit letters to governments, churches and nonprofit organizations that claim a property tax exemption to see if they still qualify or if their status has changed.
There is also long-overdue talk of creating a policy for deciding who gets an exemption and why, and, hopefully, for checking those exemptions from time to time. That’s something the city should have done long ago.
About 335 properties — the great majority of them owned by the city, county, state or federal governments, public schools or churches - are fully tax-exempt; a number of nonprofits have exemptions for personal property.
City officials want the agencies to explain any changes to their organization or how the property is used. Nonprofits are also being asked to provide supportive documentation, such as tax returns, bylaws, balance sheets, and nonprofit designation by the Internal Revenue Service.
This isn’t just another layer of government meddling. A cornerstone of society is that everyone is supposed to pay his or her fair share of the cost of maintaining community services like police, fire, street and sidewalk repair, providing clean water and dealing with sewage.
Tax exemptions, then, need to be carefully weighed and doled out fairly. Making government buildings exempt makes sense, since taxpayers have already paid for them. The same for schools. Churches get a pass because the First Amendment bans prohibiting the free exercise of religion. Nonprofits are given breaks because — in theory anyway — the good they do outweighs what their property taxes would contribute.
But things change, and the city is well within its rights to look at exemptions from time to time to ensure that the circumstances under which an exemption was granted, often decades ago, still apply.
The audit will likely be a pain for some, including nonprofits that don’t have paid professional staff to look after such things. But the city is obligated to do its business as fairly and openly as possible.
Assessor Polly Cairns said tax-exempt properties should be regularly reviewed and changes of use reported to her office. Mayor Michael Estes said the city should create a policy on how tax-exempt requests are handled.
Those are both good ideas, both long overdue.
City property owners pay a lot in taxes; keeping it fair is the least the city must do.