Our client was one of the United States leading engineering and manufacturing companies, specialized in water and wastewater treatment and industrial processes, defense electronics and services, electronic components such as connectors and switches, and a wide range of other industrial products.
When our client sold a subsidiary that provided components to automotive manufacturers, the State of Michigan charged the firm with a very large Single Business Tax (“SBT”) liability. The SBT is a value-added tax (VAT), unique within the United States, though common in Europe and Canada. For a suit filed against the State of Michigan, we prepared a report and affidavit which described how the application of the tax in this manner would violate the Commerce Clause of the United States Constitution. For the report, we:
-Reviewed value-added taxation in general
-Reviewed Michigan’s SBT in particular
-Reviewed the past interstate commerce cases relating to taxation and state actions violating interstate commerce
-Summarized the structure of the auto industry
-Analyzed how the application of the Michigan SBT in this matter infringed interstate commerce, was contrary to the purpose of the SBT, and resulted in perverse tax treatment of this company and, potentially, many others.
Before the report was presented in court, the State made an acceptable settlement with our client, based partially on the record established by our report.
The City of Cincinnati, founded in 1788, is one of the leading cities in the Midwest, and is home to 320,000 people in the City itself, and over 1.6 million people in the metropolitan area. Cincinnati was a pioneer in incorporating planning in the government, and adopts a biennial operating budget of about $731 million, plus a capital budget of about $251 million. The main sources of funds are income and property taxes.
To ensure the City Council and Finance Department have the best available information on current and likely future tax revenue, the City retained Anderson Economic Group to provide forecasts of income and property revenue, as well as state-funded local government revenue, for the next six years. AEG evaluated the economy of Ohio and its relationship to the US economy, and the local economy, demography, geography, and fiscal structure. AEG then used a sophisticated statistical methodology to determine how economic fluctuations in the past had affected the most important revenue sources for Cincinnati.
AEG developed a dynamic forecasting model for the City, including an independent assessment of likely future economic conditions. Assuming stable fiscal policies, the resulting general fund revenues from major sources. Using this model, and professional judgement on the current state of the economy, AEG forecasted tax base and tax revenue for the City, based on reasonable policy and economic assumptions, for the succeeding six years.
AEG prepared a lengthy report, which was presented to the City Finance Department and to the City Council in a public hearing. The report included a discussion of the methodology, assumptions, and revenue forecasts.
Public School Per-Pupil Funding Disparity Analysis
Equity in Education Foundation – Michigan
The Equity in Education Foundation was established by the Word of Faith International Christian Center to address the inequality of per-pupil funding between Michigan’s public school districts.
Anderson Economic Group helped the Foundation understand the constitutional argument against funding inequality, and organize legal and public relations campaigns. As part of this process, AEG issued a report analyzing the funding characteristics of all public and charter school districts within the state. The analysis included a comparison between Michigan’s “hold-harmless” school districts and non hold-harmless districts, a look at the change in disparity since the passage of Proposal A in 1994, an assessment of the relationship between different types of funding and student performance, and a geo-spatial analysis of funding information through the use of our Geographic Information System (GIS) facility.
Property Tax Analysis
Federal and State Non-Profit Regulatory Advice
PG&E Generating – Michigan
PG&E Generating is a national energy provider that owns and operates merchant generating plants across the country.
Anderson Economic Group assisted PG&E by conducting an economic assessment of a proposed development site. The assessment was used by PG&E, as well as the local community, to secure a tax free Renaissance Zone designation for the site. Furthermore, we provided a sophisticated analysis of the likely property tax burden on the $500 million project. We created a simulation model to project tax burdens under various scenarios, and identified specific strategies to minimize tax costs. We also identified tax levies that were outside legal limits.
Finally, we assisted PG&E in identifying the proper structure for a $1 million contribution to aid the citizens of the local area, given state and federal laws regarding tax-exempt organizations, and eligibility for state tax credits.
Ilhan K. Geckil
Article in NABE by Ilhan Geckil on CAFÉ.
On October 8, 2005, Delphi Corporation filed for bankruptcy protection in New York. Given the difficulties of the company, including unprofitable operations and repeatedly severe statements by the company’s management about its uncompetitive cost structure, especially its “legacy costs,” the action was not unexpected.
Delphi, the largest auto parts supplier in the U.S. (and number two worldwide), employs 50,600 workers in the United States and Canada. Headquartered in Troy, Michigan, Delphi is an integral component of Michigan’s economy and the national auto industry. Given its size, Delphi’s bankruptcy filing was widely expected to have far-reaching consequences for not only Delphi’s workers, but also the state and national economy, automakers, and auto parts suppliers.
The purpose of this analysis is to provide an early indication of the likely consequences of the Delphi bankruptcy. Given our past analyses of work stoppages, interruptions, blackouts, and other events that have shut down production in the United States; and our extensive knowledge of the automobile industry; we have background knowledge from which to draw some preliminary conclusions. This is a preliminary assessment of likely events that will be played out over a two or three-year period, and useful for planning and the assessment of risks. However, we caution readers that the future is, of course, unknowable.
Anderson, Geckil, Watkins
A report on the economic benefits of Wayne State University
An analysis of the Life Sciences Industry’s employment, economic, and fiscal contributions to the Michigan economy