Taxes for Art
Since its inception, I’ve been stunned at the wrongheadedness and profligacy of the Ann Arbor Percent for Art program (based on a 2007 ordinance). (See our previous posts, For Art’s Sake and Money for Art’s Sake.) Now the subject is back under discussion by the Council (see AnnArbor.com’s coverage of the Council meeting and their earlier article about the issue). Rumor is (via email gossip) that a Council working session may be discussing the program on October 10. It is even more urgent in this time of scarcity to restructure this program, if not to eliminate it.
There are three problems with the Percent for Art program.
1. It is almost certainly illegal.
2. It is based on a false premise.
3. It erodes the public trust in government.
For this post, we’ll just stay with the first point.
Why Ann Arbor’s Percent for Art program is illegal
Supportive council members sometimes cite the existence of similar-sounding programs in other cities to justify the legality of Ann Arbor’s Percent for Art program. (Carsten Hohnke is thus quoted in the recent AnnArbor.com article.) But those programs are different from Ann Arbor’s in significant ways.
In Philadelphia, which was one of the first cities to adopt such a program, the ordinance states,
An amount not to exceed one percent of the total dollar amount of any construction contract for a building, bridge and its approaches, arch, gate or other structure to be paid for either wholly or in part by the City, shall be devoted to Fine Arts; provided that the Art Commission certifies in writing that said ornamentation is fitting and appropriate to the function and location of the structure.
That language clearly indicates that only major construction projects that have a monumental character will have art attached to them.
In New York, the program requires “that one percent of the budget for eligible City-funded construction projects be spent on artwork for City facilities”. Note that word “eligible”. Their website continues, “the Program began in 1983 with the development of a procedure for determining eligible projects…(the program) offers City agencies the opportunity to acquire or commission works of art specifically for City-owned buildings”. Again, we are talking about buildings, and not all are eligible.
New Orleans stresses that it engages local artists to supply public facilities with artworks. They are paid for with “funding generated by 1% of eligible municipal capital bonds“. Note that word “eligible” again? And if the project is paid for with a bond, it is likely a large project like a building.
The State of Wisconsin has had a program since 1980. While “two-tenths of one percent of the total construction budget for selected new state buildings or renovation projects is designated for the commission or purchase of artwork”, it notes that “Only state buildings with a high degree of public access are eligible for Percent for Art funding“. That word “eligible” again!
Our Ann Arbor ordinance, in contrast, says that the funding will be one percent of all capital improvement projects. That means just about everything in the Capital Improvement Plan.
In case we didn’t get the message, the ordinance specifies:
Capital improvement project means any construction or renovation of any public space or facility including buildings, parks, recreation areas, parking facilities, roads, highways, bridges, paths, sidewalks, streetscape improvements and utilities.
Ordinary maintenance and underground stormwater detention are specifically excluded, but otherwise all the construction of any kind done by the city is assessed 1% for the arts program. One percent may not sound like much, but those pennies add up – and subtract. It is not free money. It comes from whatever was funding the particular capital project and that money is then not available to do the work that it was intended to do. And while the other programs mentioned have as their objective ornamenting significant buildings or other important structures, it’s hard to hang a painting on a water main.
To be fair, there have been some programs in other states that access a broader range of public projects. See the excellent summary prepared by the Columbus (Ohio) Art Commission. But few of them have tapped restricted funds. According to A2Politico, the use of utility money for a Percent for Art program in Seattle was struck down in court. And none of these programs have had to be legal under Michigan law.
Michigan law that directly applies to the Percent for Art program
Michigan law has its peculiarities, as surely that of any state must. Since we are in Michigan, state law trumps practices in other states. There are two court decisions from Michigan courts that apply directly to the Percent for Art program.
First, let’s note where the money has actually come from to date. Thanks to CM Sabra Briere, a summary has been circulating that details collections and expenditures into May of this year. Here’s where the money has come from:
The amounts shown in red are from funds based on user fees.
(I’m not sure of the sources for Energy, Alternative Transportation, or Airport)
Note that most of the money has not been taken from funds that might be expected to pay for buildings, but rather funds that pay for services. The largest amounts are from road funds and water utilities. But the most important point is that most of the money has been taken from what should be considered restricted funds – that is, funds that are statutorily dedicated to a particular purpose. Such reallocation of dedicated or restricted funds should be illegal. And this is the case, as shown by a couple of well-known Michigan court decisions.
It might seem obvious that if you vote for a millage that says it is to pay for a well-defined purpose, you should be confident that government will spend that money for that purpose. But there is actual Michigan law to say so. It is the General Property Tax Act (Act 306 of 1893). That is where it says that millage proposals should include “A clear statement of the purpose for the millage”. In the South Haven case, though the way the ballot proposal itself was worded was probably illegal and was clearly unfair to the city, the Supreme Court in essence held that the funds could not be used in any way other than shown on the ballot because the legislature meant what they said in the General Property Tax Act. As the ruling states,
If funds that voters approved for the purpose stated on the ballot could be redirected to another purpose without seeking new approval, there would be no reason for including the purpose on the ballot. Indeed, voters could be lulled into voting for a millage for a popular purpose, only to have the funds then used for something they may well have never approved. (My italics.)
Clearly, this has happened in Ann Arbor. When citizens voted for a millage to repair roads, or to maintain our parks, nowhere on the ballot did it say “plus just a little tiny bit for the arts”.
2. Bolt vs. City of Lansing (1997), commonly called simply “the Bolt decision”.
Some services are not paid for by millages (based on property tax), but rather by user fees. User fees are not considered to be a tax because they are intended to pay for the service based on its usage, thus are in effect a purchase by the user. Mr. Bolt felt that his fees were being used to pay for services that he was not receiving. The Supreme Court agreed, and further, they said that any user fee that was not assessed for the stipulated service was an unlawful tax.
As explained in an analysis from SEMCOG, the court established a three-part test for whether a required payment is a user fee or a tax.
• The fee must serve a regulatory purpose rather than a revenue raising purpose.
In other words, a fee may not be imposed merely to raise revenue, but must be related to the way the service is administered.
• A user fee must be proportionate to the necessary costs of the service.
Again, the amount of the fee should be no more than it actually costs to deliver the service.
• A user fee must be voluntary – users must be able to refuse or limit their use of the commodity or
So if your water fees are eating you out of house and home, just conserve water and reduce your payment. The idea is that the fee is related to the amount of the service that you use.
The real crowning point of the court’s decision was that any fee that did not meet these criteria was an unlawful tax, not a user fee at all. And because it was a tax, it violated the Headlee Amendment – so it was unconstitutional.
The Headlee Amendment to the Michigan Constitution (1978) was intended to limit state and local taxation to 9.49% of total personal income. It does this through several mechanisms, but the provision relevant to our current discussion is this:
It requires that voters approve local government tax increases not authorized by law or charter prior to November 1978 (that is, any local taxes not already in place at the time the Headlee amendment was adopted have to be approved by the people who will pay them). (Quoted from Michigan in Brief, 6th edition.)
So if a municipality levies a “user fee” that is not properly constructed, and is thus actually a tax, it is illegal because it is a tax that has not been approved by the voters for the area where the fee is being levied.
Clearly using sewer and water fees to purchase art violates this standard. We cannot deduct the portion of our water bill used to pay for art. We did not vote for this tax. And art is not related to the service for which we are paying the fees. There is no wiggle room here. If the one percent that is being withdrawn for art is not needed, we are being overcharged for the service. If it results in even a minute decrease in needed construction and maintenance for the water utilities, the service is being compromised for a purpose unrelated to the service.
How hard can this be?
These are not abstruse legalities. These are simple, understandable, unambiguous conclusions based on clear court rulings, backed by clear legislative intent. Why has it been so hard for our city attorney’s office to make the same determination?
It is a mystery.Explore posts in the same categories: civic finance, politics