Governmental Affairs: October 30, 2015

The Michigan House approved yet another road funding plan last week, this time relying on $600 million in new revenue through a gas tax increase and registration fee increases and $600 million in general fund budget cuts. The plan also includes an income tax rollback and an expansion of the Homestead Property Tax credit, a move that allowed Republicans to find enough votes to approve the package with only one Democrat voting in favor.
This latest House plan calls for a 3.3-cent gas tax increase beginning in 2018 and a 4-cent increase for diesel fuel to create diesel parity by 2017 (HB 4614, 4616, 4738). Vehicle registration fees would increase by 40 percent for both commercial and passenger vehicles, and a registration surcharge would be applied to electric vehicles, raising a total of $400 million (HB 4736). To offset the higher taxes and fees, the plan increases the homestead property tax credit by raising the percentage of income affected from 3.4 percent to 3.5 percent and increasing the income cap to $60,000 (HB 4370). Beginning in 2019, if the general fund grows at a greater pace than inflation it would trigger an income tax rollback (SB 414). Competitive bidding requirements (HB 4610–4611) and road warranties (HB 4737) remain part of the plan as well. The overall plan is designed to eventually provide $1.2 billion annually by fiscal year 2020-2021.

Yet again, the Senate and governor’s office met this new plan with reservations. On Tuesday, the Senate attempted to muster the necessary votes for passage but failed to find a majority. Senators continue to discuss options and are expected to take another stab at a plan next week.

Secondary beer and wine sale permits

The House Regulatory Reform Committee took testimony this week on legislation that would allow retailers that also have fuel pumps on or adjacent to the main retail location to sell beer and wine in the gas station as well as at the main store. The bills, HB 4895 and 4896, would create a secondary permit for licensed retail locations with a gas station on or adjacent to the licensed premises.

A retailer would be able to use inventory at the primary licensed location toward the $250,000 minimum inventory requirement for beer and wine sales at the secondary location. The bills also reduce the 50-foot distance requirement between fuel pumps and cash register to five feet and eliminate the requirement for retailers in a neighborhood shopping center to have five private, off-street parking spaces for every 1,000 square feet of retail space.

MRA testified in support of the changes, since many of these properties are treated as one entity for property taxes and, as such, should not be required to obtain a separate license and meet separate standards from those met by the main store location. The bills seek to align Michigan law with standards seen in many of our neighboring states that give customers convenience and choice.

Committee members chose to reduce the inventory threshold from $250,000 to $50,000 in an effort to make it easier for smaller convenience stores with fuel pumps to also obtain a license to sell beer and wine. The committee did not take a vote on the legislation but is expected to act soon.

Legislation allowing pharmacists to substitute interchangeable biosimilar drugs, or drugs that have the same clinical effect as new biologic drugs, was discussed by the House Health Policy Committee over the last two weeks. The bill, HB 4437, follows the FDA guidelines for interchangeable drugs and does not include a notification requirement for substitution. MRA supports the legislation and testified before the committee on the need for a bill without a notification requirement.

Another bill that includes notification, HB 4812, was not the subject of the hearings but was mentioned several times as a “better alternative” by groups supporting HB 4812. Numerous questions came from supporters of HB 4812 over confusing language in HB 4437 that would require a pharmacist to notify the prescriber before substituting a noninterchangeable biosimilar. MRA had explained to both the committee and the bill sponsor that this language isunnecessary, because federal rules prohibit a pharmacist from dispensing a different brand name drug or a noninterchangeable biosimilar than what was prescribed. If a pharmacist were to change a prescription for a drug that is not a substitutable generic or interchangeable biosimilar, he would lose his license. The only way to change a prescription for a different drug that is not interchangeable or a FDA-deemed therapeutic equivalent (generic) is to get a new prescription from the original prescriber.

This confusion led to a stalemate between the two bills and it is uncertain if either bill will receive a vote. MRA continues to closely monitor the discussion on the two bills and has made it clear to legislators that we could not support a bill that includes a notification requirement, as that goes beyond the FDA guidelines and would create a barrier to substitution, increase the dispensing cost and hinder the creation of a competitive market for lower cost interchangeable biosimilars.

The House Tax Policy Committee will hold an informational hearing on the “assessor overreach” issue next Wednesday, November 4. Pending legislation, HB 4909 and SB 524, would prohibit deed restrictions on commercial property and seeks to change the way property is valued from using a comparable sales or market value approach to a cost-less-depreciation method, greatly increasing property taxes on affected properties. Most concerning is the fact that this could create a slippery slope affecting valuation of other property, given the uniformity clause in Michigan’s constitution that prohibits treating one type of property differently than another.

Proponents, including local units of government, have dubbed the issue the “dark store approach” and are attempting to retroactively change property tax appeal rulings that went in favor of retailers and lowered their valuations. Retailers have successfully shown that the use of comparable sales is the most accurate way to determine value for single-use retail buildings. At the heart of the issue are reductions in local government funding that have left cash-strapped local units desperate to find additional revenue.

MRA plans to testify at the hearing with an expert property tax witness to dispute the need for any legislative changes and answer committee members questions.

GROCERY/CONVENIENCE