LANSING ? Michigan Senate Republicans on Thursday drastically changed legislation directing how local governments would receive reimbursement in exchange for curbing the personal property tax.

The key change cited by local government organizations, which have switched from opposition to neutral as a result, would reinstate the personal property tax to its current form if future legislatures failed to reimburse local governments for lost revenue as a result of reducing the tax.

Other changes address local government concerns about how reducing personal property tax revenue would affect bonded indebtedness, lack of reimbursement between 2013-15 and the amount of funding local governments must lose before they become eligible for reimbursement.

“We’ve been working on this for a long time and throughout the process we’ve been very sensitive to the loss of revenue that would be realized by local units of government,” said Sen. Dave Hildenbrand (R-Lowell), one of the key senators in developing the changes and sponsor of the repealer amendment. “The amendment I offered tries to give some assurance that the reimbursement mechanism and appropriations will happen.”

The changes began with a new substitute presented by Sen. Howard Walker (R-Traverse City) that requires the state cover the payment for all bonded indebtedness for the three years prior to the original 2016 reimbursement mechanism. Under the new substitute, the Department of Treasury will reimburse local governments for their debt mill loss starting in 2013.

An amendment by Sen. Mike Nofs (R-Battle Creek) broadened that proposal to cover all voter-approved dedicated millages, like those for police, fire, recreation and other services. The language would ensure 100 percent replacement of these revenues, but does not protect general operating millages.

Sen. Jack Brandenburg (R-Harrison Township) also added an amendment that called for the state to reimburse local governments who lose 2 percent or more of their general fund revenue with the curbing of the tax. Previously, the legislation set the threshold at 2 percent of all revenues, so the much smaller amount should make more communities eligible for reimbursement.

The changes to the tax on business equipment, hated for years, itself remain the same as introduced. The legislation would phase out the industrial portion of the personal property tax from 2016-21 and set a threshold so that businesses with less than $40,000 in taxable value of industrial or commercial personal property in any one local government no longer have to pay the tax.

The changes are substantial, given the outcry of many local government organizations such as the Michigan Municipal League, Michigan Association of Counties and Michigan Townships Association who expressed concern about the lack of immediate funding for their members.

With the new substitute and a pair of amendments included in it, all three of those organizations had changed their position on the package from staunch opposition to neutral. Meanwhile, business groups were unnerved by some of the changes.

Even so, some Republican senators and all Democrats voted against the bill, including Sen. Patrick Colbeck (R-Canton Township). Colbeck said that although he supported the concept of repealing the tax, he still felt there was not enough replacement revenue.

“I think it’s important for us to replace all the revenue that’s going to be lost out to our local taxable units,” he said on the floor. “While 1072 had made great strides since we first started … the bottom line is we do not have 100 percent coverage when this is all said and done for our communities. This still leaves about a $50 million hole that has to be made up for by our local taxable governments. These are civic organizations that have the closest interaction with our communities. A lot of people depend on them. I think it’s important that we’re sensitive to their needs.”

The revenue implications of the changes were unclear. A new analysis by the Senate Fiscal Agency was not available and a call seeking comment was not immediately returned. Prior to the changes, the legislation was expected to cut some $500 million or more of the $1.2 billion raised by the personal property tax.

Sen. Tom Casperson (R-Escanaba) said he voted against the bill simply because of the promise he made to his constituents.

“It’s a good package and it was getting really close,” he said. “But I had much a commitment to the people in my district that if it wasn’t fully funded I wouldn’t support it. (The bill) is hoping things happen at the end of the day, and I think it will, but I made a promise to my district.”

Many Democrats took the same stance that passing the package (SB 1065 , SB 1066 , SB 1067 , SB 1068 , SB 1069 , SB 1070 , SB 1071 and SB 1072 ) would assuredly mean local governments would have to make further cuts to their police and fire departments and taxes on individuals would increase. Sen. John Gleason (D-Flushing) was one of the handful of Democrats that spoke against the bill before it was sent to final passage.

“I don’t think there’s a person in this room that would say the personal property tax is a dog that just doesn’t hunt,” he said. “We’ve known it doesn’t work for a long time. But our cities and schools have worked for a long time and we’re making it more distressful on them with this bill. This is a troubling tax. I think the only thing that exceeds the trouble of this tax is us, again, putting our hands in purses of local governments.”

Both Sen. John Pappageorge (R-Troy) and Sen. Bruce Caswell (R-Hillsdale) scolded Democrats for their allegations.

“I’m not sure everybody heard what we did today,” Pappageorge said at the stand. “Let me just recap here for a minute: 100 percent reimbursement for any voter-approved special millage and it goes direct to the community that takes care of fire and police. There is a poison pill that says if we don’t come up with the money, the PPT legislation is repealed. The idea that after all these amendments we have this terrible bill out there simply is not factual.”

The latter of Pappageorge’s statement refers to an amendment brought forth by Sen. Dave Hildenbrand (R-Lowell) to other bills in the package, SB 1065 to SB 1069, which states that the legislation “does not apply if the Legislature fails to appropriate the amount of revenue lost to each local taxing unit as provided in the Personal Property Tax Exemption Reimbursement Act.”

Sen. Steven Bieda (D-Warren) tried to offer three amendments to SB 1072, all of which were defeated predominately along party lines. The first of his amendments assured that the owner of the personal property was not a debtor in bankruptcy receiving exemptions. The second tried to ensure that the tax-exempt employer increased total employment in the state by 5 percent or more in the immediately preceding 5-year period and similarly the last made sure a company that outsourced jobs out of the state did not receive the exemption.

Sen. Tory Rocca (R-Sterling Heights) and Sen. Judy Emmons (R-Sheridan) voted in favor of the last but the amendment was still defeated.

SB 1072 passed 22-15 with Colbeck, Casperson and Sen. John Moolenaar (R-Midland) joining Democrats in opposition. Sen. Mike Green (R-Mayville) was absent. The rest of the bills (SB 1065 through SB 1071) passed 23-14, with Casperson and Moolenaar voting against the package alongside Democrats. Moolenaar could not immediately be reached for comment.

The bills will now move to the House where they face an uncertain future. Brandenburg, a champion of the legislation, said he was pleased with the changes that were made, but said he did not want to speculate on how it would be handled there, where legislators, who are up for re-election in the fall, will move less quickly on the changes.

“I don’t want to comment on