ST. JOSEPH — Residents in a Harbor Shores neighborhood should know within a few weeks if they have to pay Benton Harbor’s new city income tax, even though they vote in St. Joseph.
The Fairways at Harbor Shores neighborhood association and several residents sued the cities of Benton Harbor and St. Joseph last June 15, saying that if they have to pay the income tax, it equals taxation without representation. Benton Harbor voters approved the city income tax in November 2017. It took effect Jan. 1, 2018.
But residents of the Fairways neighborhood didn’t get a chance to vote, said their Grand Rapids attorney, Laura Genovich, during a Tuesday hearing in front of Berrien County Trial Court Judge Dennis Wiley.
Residents in the Fairways neighborhood vote in St. Joseph but pay property taxes temporarily to Benton Harbor due to an agreement made between the cities and Harbor Shores in 2005 using Public Act 425 of 1984. The pact, which expires in 2025, allows Harbor Shores to capture property tax growth for infrastructure work that was done. The 425 agreement area includes the Inn at Harbor Shores and Harbor Village.
At the time the 425 agreement was made, there was no city income tax and no one was living in the neighborhood.
Genovich said the part of the 425 agreement about income taxes is illegal because it separates voting from having to pay a city income tax. She said the law concerning city income taxes is very clear that it requires voter approval.
“We’re not disputing that my clients have to pay property taxes to Benton Harbor,” she said after the hearing. “My clients pay plenty of property taxes.”
During the hearing, Grand Rapids attorney James Komondy for Benton Harbor and St. Joseph attorney Laurie Wightman Schmidt said the 425 agreement is legal, saying that the benefits for each party were clearly stated in the pact.
“It’s clear that this is authorized by law,” Schmidt said.
Wiley and the attorneys agreed to cancel a bench trial set for next week because all parties agree on the facts.
“It’s an issue of law, not a question of fact,” Genovich said after the hearing. “Trials are for questions of facts.”
Wiley didn’t say when he would issue his written opinion.
“It’s going to be a question of law that’s going to end up in the appellate court at some time, anyway,” Wiley said.
Benton Harbor residents are required to pay a 1 percent tax on their income no matter where they earn it. Non-residents who work in the city are required to pay a 0.5 percent tax on the portion of the income they earn in the city. People with second homes in Benton Harbor are not required to pay the tax.
In addition to voting in St. Joseph, residents in the 425 area receive police and fire services from St. Joseph and are subject to St. Joseph’s construction ordinances.
Contact: lwrege@TheHP.com, 932-0361, Twitter: @HPWrege