Bill to cut university construction costs

State Rep. Kirk Profit proposed a bill last week intending to cut down red tape for state colleges and universities.

Profit's legislation, House bill 5274, would eliminate sales tax on all construction materials purchased by contractors doing work for public universities. Currently, there is not a tax on items purchased directly by state colleges and universities.

"If the University hires a contractor, then they have to pay a tax," said Profit (D-Ypsilanti), chair of the House Tax Committee, where the bill currently awaits hearing. "The cost gets inflated with the tax."

To avoid sales tax, a university must purchase the materials for the contractor. Profit, the father of an LSA junior, said that causes unnecessary hassle and bureaucracy.

"Nobody expects President Bollinger to go to Kmart and buy two-by-fours for every construction project," Profit said. "It's silly."

Department of Treasury officials, however, said it would be wrong to allow private contractors to be tax exempt.

"It's not the university's tax, it's a tax on the contractor," said Department of Treasury spokesperson Bobbie McKennon.

Other legislators on the tax committee said they agree the bills would reduce government bureaucracy.

"Non-profit and state organizations should not pay taxes," said state Rep. Charles Perricone (R-Kalamazoo). "That's wrong. Making the building of state infrastructure tax exempt is completely fair."

Although Profit is a Democrat, Perricone said most Democrats in the House will side with the Department of Treasury.

"Most Democrats will oppose it because they are less concerned with fairness and more concerned with tax money," Perricone said.

State Rep. Deborah Whyman (R-Canton), another member of the tax committee, said the bill would remove inconsistencies within the tax code.

The legislation was proposed a week after the state Legislature approved a state bond cap raise that will lead to $79 million in renovations on the University's Central Campus. The financing for the University renovations will be paid for by the sale of college savings bonds by the state building authority.

"The bonds we sell are not normally college savings bonds," said Department of Management and Budget spokesperson Maureen McNulty. "What's different in this case is that the college savings bonds are offered at a lower price."

While most bonds are only available in $5,000 increments, the college savings bonds are sold by every final $1,000 payoff.

"They're extremely safe," McNulty said. "They're very secure bonds."

The bonds have sold well so far, she said.

"There is tremendous interest," McNulty said. "There are banks that have run out of brochures."

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