Study: Taxes hinder Detroit comeback

Christine MacDonald
The Detroit News

A new report finds Detroit still is plagued by a broken property tax system, with owners paying too much and businesses given tax breaks that don’t help the city.

The researchers recommend property tax reductions of up to 70 percent in some areas, according to the report released Monday by the Lincoln Institute of Land Policy.

“Detroit has an opportunity to restore the basic covenant that should exist between every city and its residents — fair and efficient taxes in exchange for good public services and reliable infrastructure,” said co-author, Mark Skidmore, a professor of economics at Michigan State University, in a press release.

Mayor Mike Duggan has lowered assessments 5 percent to 20 percent in some neighborhoods for the last two years and officials say they continue to try to properly value properties through a citywide reassessment.

The report recommends Detroit cut its tax rate, which is the highest of any major U.S. city and more than double the average rate for neighboring cities. The rate for homeowners is 69 mills, $69 for every $1,000 of assessed value.

The system’s “structural flaws” are tied to the record number of tax foreclosures in Detroit, the researchers found. In 2015, Wayne County foreclosed on a record 28,000 properties, the vast majority in Detroit. An estimated 8,000 were thought to be occupied.

“Vastly over-assessed properties have contributed to Detroit’s historically high property tax delinquency rate, which has been improved but is still about 30 percent, or 10 times the median rate for major cities in the U.S.,” according to the report that was co-written by Gary Sands, Wayne State University professor emeritus of urban planning.

City officials on Tuesday said reforms are underway but most of its recommendations would require changes to state law.

“Under Mayor Duggan, the city already is well under way addressing the issue it can control: providing fair property assessments,” Gary Evanko, chief assessor, wrote in a statement.

“For the first time in at least 50 years, we are doing a citywide reappraisal of all properties, which will bring fairness back to a process that has been broken for decades. Homeowners will see these changes in their notice of proposed assessment form they will receive in January 2017.”

Detroit has granted property tax breaks to about 11,400 properties, or 3.5 percent of all taxable private properties, the report also found.

“Research shows that the fiscal benefits of abatements are often outweighed by the costs, suggesting this tool should be used more judiciously,” the report said.

Among the report’s recommendation is implementing a land-based tax. That is based on the value or size of a piece of land, with no additional tax for new development or improvements.