Howes: Duggan embraces fiscal reality
Mayor Mike Duggan's reduction in property assessments for just over half of Detroit's residents is another necessary step in the city's path to financial reality.
Detroit spent way too many years practicing an economic creed that ignored the basic laws of economics; misunderstood the effect of high taxes and unrealistic assessments on taxpayers; and failed to appreciate the corrosiveness of inept public services.
Facing an exodus? Raise taxes and cut services. Losing revenue? Raise assessments to the highest point possible — and then express outrage that some 50 percent of homeowners fail to pay their property taxes.
Two words: doesn't work, as Detroit's experience and its historic bankruptcy detailed. Unlike its predecessors, a Duggan-led City Hall understands it cannot collect revenue from vacant houses any more than failing public schools can reap per-student funding from households that have decamped for the suburbs.
Nor can residents with options and eyes to see be expected to stay and take it, in perpetuity. The past decade proves they won't, and that efforts by previous administrations to keep doing the same thing and expecting different results all but guarantees continued decline.
Duggan's campaign — effectively his second property-tax cut in as many years — is a persuasive counter to a status quo discredited by high delinquency rates, low collection rates and the city's collapse into Chapter 9. The program already is showing signs of working.
The move announced Wednesday mirrors a similar effort last year that prompted City Hall to lower its property tax revenue projections to $102 million from $120 million. Old news, right, because lower assessments should mean reduced collection?
Actually, no. Last year's assessment cuts are on track to outperform expectations and should deliver an estimated $115 million in property tax revenue when the city closes its books on the fiscal year ending in June. The mayor expects next year to yield more of the same.
Early indications are that more realistic values combined with better collection efforts can be a net gain to the city and its residents, not a presumed guarantee of the continued hollowing out of a tight post-bankruptcy budget.
"I am confident that this will not have a negative impact on the two-year budget of Detroit," the mayor said. "We're seeing many of the neighborhoods starting to come back. With this change we are very close to fair assessments across the city."
It's about time. The mayor is not just delivering on a campaign promise. He's pushing the city's sclerotic bureaucracy and political culture one giant step closer to a radical concept tinged with — gasp! — a conservative ideal:
Appeal to the rational economic self-interest of residents, those who would be and their potential lenders. Property assessments more closely aligned with market value stand a better chance of wooing buyers and encouraging residents to pay their tax bills than fanciful assessments disconnected from reality.
Reductions range from 5 percent in southwest Detroit to 20 percent in the northeast near City Airport and the near west side. Twenty-five neighborhoods — from Palmer Woods and Boston Edison to Woodbridge and Indian Village — will see no change.
The second wave of reassessments closely follows a parallel plan to offer city employees, retirees and their families 50 percent discounts on houses acquired by the Detroit Land Bank.
City Hall wants people because people occupy property. And occupied property slows population decline, bolstering a tax base battered by recession, disinvestment and exodus.
Put another way: The mayor is conducting a running property sale to attract scarce customers and satisfy some existing ones. No doubt, the assessment cuts will not be enough for many of the folks expected to protest their assessments; and half-off land bank-controlled houses may not be enough to attract new residents.
But they're both smart starts that appeal to economic rationality with an assist from the downtown resurgence, consistent support from Lansing and the optimism engendered by Detroit's successful emergence from bankruptcy.
What's not to like? Without saying so, Duggan's property offensive represents a deliberate break from a failed past that assumed taxpayers could be squeezed indefinitely without eliciting a backlash. They can't.
This is another step in a long process grounded in hard financial analysis — and the recognition that people who have choices usually make them in their own best interest. What a surprise.
Daniel Howes' column runs Tuesdays, Thursdays and Fridays and can be found at http://detroitnews.com/staff/27151.