425 Agreement

425 Agreement

The legislature of the State of Michigan enacted Public Act 425 of 1984 which is also known by the title Intergovernmental Conditional Transfer Of Property By Contract Act. It became effective March 29, 1985 and was subsequently amended in 1998. It is often simply referred to as “Act 425” and contractual agreements entered into pursuant to this statute are frequently called “425 Agreements.”

The purpose of Act 425 is to provide for a means for two local units of government to share tax revenues resulting from new or expanding development in the areas of their jurisdiction. Most typically a city and a nearby township are the parties to such an agreement. Because of the limited ability for a city in Michigan to annex adjacent territory, development that takes place outside of the city limits would normally deprive that city of any added revenue benefit. In those cases where the affected township receives its supply of water from the city, the city is given a degree of leverage to negotiate with the township by Act 425.

In the eyes of the Census Bureau, 425 Agreement lands effectively count as annexations, and are included in any calculations of land area and population. The land and population counts toward the party that initiated the agreement.