Duggan considers compensation for overtaxed Detroiters

Christine MacDonald / The Detroit News, Mark Betancourt / Special to The Detroit News

Detroit — Mayor Mike Duggan says he's in talks with the Detroit City Council on ways to compensate overtaxed homeowners, but only those who owned residences between 2010 and 2013.  

Duggan said he has the city's law department researching possible relief, including giving owners first dibs at city programs and returning foreclosed properties if they are owned by the Detroit Land Bank. But he says the effort would be restricted to those who owned their homes between 2010 and 2013. 

"From 2010 to 2013, the great majority of people, I believe were overassessed," Duggan said last week. "It was different then than each year that went by it was more individual cases as opposed to general overassessment.

"We will see where it goes. We are trying to be honest with people on what we can do and what we can’t do.”

It's the most specific Duggan has been to date in suggesting there might be ways to help Detroiters who whose properties were overtaxed between 2010 and 2016. It comes amid a groundswell of activism seeking recompense in a city that remains the most impoverished large city in the United States.

A Detroit News investigation published in January found that the city overtaxed homeowners by at least $600 million between 2010 and 2016, after officials failed to accurately assess properties to keep pace with falling property values during the Great Recession.

Duggan, whose administration has not contested that property values were inflated, contends the bulk of the overassessment problem was corrected in 2014, the year he came into office. Two researchers, the city's former assessor, and The News analysis indicated that the city was still correcting inflated home values after that.

Duggan has said he fulfilled a campaign promise to clean up the practice and lowered values after he took office, but he can't repay people because current law doesn't allow it and the city can't afford it. The city tumbled into bankruptcy in 2013 and exited a year later.

Of the $600 million overtax estimate, The News' analysis concluded $130 million was charged to homeowners between 2014 and 2016. 

In 2017, the city completed a state-ordered property-by-property reappraisal. That process hadn't been done in 60 years and was prompted by a 2013 Detroit News investigation revealing problems in the assessing department. The state recommends cities do that every five years. 

Former city assessor Gary Evanko told The News on Friday that "obviously, it was a continuing correction" of inflated values the city made between 2014 and 2017.

“If it wasn’t a correction, I wouldn’t have had to put a meat cleaver to values in 2014, 2015 and 2016," said Evanko, who was hired to lead the reappraisal in 2013 by then-emergency manager Kevyn Orr and left in 2016. That year, he settled a lawsuit against the city arguing it underpaid him after his contract wasn't renewed.

In Duggan's first month in office, the city lowered total residential assessments by 22%. That was followed by a 9% drop in 2015, a 15% decrease in 2016 and 5% drop in 2017.

Median sale prices of single-family homes citywide and in most ZIP codes were rising or steady over those three years, and by 2017, all ZIP codes had seen prices recover from post-recession lows, according to data from the property data company ATTOM.

The News' analysis presumes that when the city lowered an assessment in 2017 after its state-ordered reappraisal, it was because the city's value was too high and not because the property’s worth had decreased.

State law mandates assessments reflect the home's market value. Taxpayers can appeal, but housing advocates say the process is difficult to navigate for most owners, and many are not aware they have the option.

Current city assessor Alvin Horhn wrote in an email Friday that the 2014 drop of 22% "led to the 2015 residential assessment roll being fundamentally correct for the first time in years."

Drops in the following years were because some neighborhoods were still declining as the city recovered from bankruptcy, officials have said, though some reductions were made to improve the accuracy of assessments.

"We feel that the systemic issue was addressed in 2014 and the assessment reductions in subsequent years were more limited refinements based more so on neighborhood-by-neighborhood dynamics and a continual refinement of our methodology," he wrote.

City officials have argued conditions in Detroit can vary dramatically by area, and some areas might have seen declines in value over the time period The News analyzed.

"It is important to remember that during those years, the conditions of many homes in these areas, especially vacant homes, also deteriorated each year, which would bring down the assessment, without meaning that the prior year assessment was wrong," David Massaron, Duggan's chief financial officer, wrote in an email last month.

As time went on, Massaron said, the city was able to get better data on neighborhood conditions.

Evanko said the city did not have usable and reliable data on individual properties, including their physical conditions, until the reappraisal was completed in 2017, and so current officials have no way of knowing the city’s values were correct as of 2014.

The annual reductions brought some relief to homeowners while the reappraisal was being completed, but they were based on limited data, and as a result, had to be applied to entire neighborhoods at once, Evanko said.

“If it was fundamentally correct, why'd you have to spend ($8.5 million)?” he said, referring to the overall price tag of the reappraisal, which included commercial and industrial property. The residential portion cost $6 million and began in 2014.

City officials have said completing the reappraisal was "an important step" to improving city data and "rebuilding confidence in the city’s assessments."

The city has not done its own study of overassessment and doesn't plan to because it would be too costly, officials said. 

City Council President Pro Tem Mary Sheffield said she wants an independent review, possibly done by the city's Auditor General, in part to determine the years residents were affected.

"It's not enough to say, 'Sorry, it won't happen again,'" said Sheffield, who said she hasn't talked to Duggan on possible solutions for homeowners. "This issue is not going away." 

On Friday, residents demanded relief during a protest that disrupted the Coleman A. Young Municipal Center and led to the group's leader being dragged out by police while members chanted "cut the damn check." 

Sheffield's office and a group of activists with the Coalition for Property Tax Justice in mid-January proposed the ideas for homeowner relief that Duggan said he's considering. 

A member of the coalition, Bernadette Atuahene, is also a professor at the Chicago-Kent College of Law and has studied Detroit's overassessment. She said her research found that in 2014, the city overassessed 85% of homeowners. 

"The mayor's desire to provide compensation for people who owned houses in Detroit only between 2010 and 2013 is not based on data," Atuahene wrote in an email. "Rather, the mayor came into office in 2014 and wants to suggest that the overassessments did not happen on his watch. This is patently false."

A study of 2016 through 2018 values by Professor Christopher Berry at the University of Chicago found the city was still overassessing most of the lowest-valued homes, with sales prices less than $19,000.

In 2018, more than a third of the homes in Detroit were valued at less than $19,000, according to city data.

Horhn has said his office continues to watch low-valued properties carefully, and last year, the city reduced them further in part because officials didn't think the sales data they had accurately reflected those properties.

Resident JoAnn Osman said she's not expecting a lump sum payback, but the city should discount the tax bills of affected homeowners. The News estimates she was overtaxed by $7,000 in the home she's lived in for 26 years. 

"I don't feel that's enough," Osman said of what Duggan is considering. "What about us who paid our taxes on time?"

In a recent memo to the Detroit City Council, Massaron said the appeals window to challenge assessments is over and that any effort to repay people would be "so enormous" it would require higher property taxes, costing the city school district and libraries, along with the city.

The State Tax Commission has a regularly scheduled audit of Detroit this year. 

Meanwhile, the Detroit City Council will hold a public hearing on the overtaxation issue at 5:30 p.m. Tuesday on the 13th floor of the Coleman A. Young Municipal Center.