Detroit assessments to fall 5-20 percent
Detroit Mayor Mike Duggan announced Wednesday that residential property assessments citywide will decline 5 to 20 percent, the second consecutive year he's cut taxes.
The change is in addition to last year's assessment reductions of up to 20 percent. It follows years of complaints from homeowners that home assessments, on which taxes are based, bore little relation to market value, significantly increasing taxes and leading to waves of tax foreclosures.
"When we assess people honestly, a lot more start paying taxes, which is going to mean a significant reduction in foreclosures and that cycle we've been at over and over," Duggan said Wednesday at a City Hall press conference. "With this change, we are very close to fair assessments across the city, and I really do think we are going to be growing from here."
The changes follow a yearlong investigation by The Detroit News in 2013 that concluded Detroit was over-assessing homes by an average of 65 percent, according to a review of state tax appeals. The series prompted state regulators last year to overhaul Detroit's Assessment Division.
The cuts will mean residents will pay an estimated $10 million to $15 million less in property taxes, city officials say.
The city expected a similar decrease last year, but the loss to Detroit's budget coffers was offset because more property owners paid their taxes, said John Naglick, Detroit's finance director.
The reductions aren't a one-time gimmick. They're the new baseline for calculating taxes, and Councilwoman Mary Sheffield said lowering assessments is "the right thing" to do.
"For far too long, residents of this city have been over-assessed," she said.
Duggan described the relief to residents as modest but said it would help those living paycheck to paycheck.
Assessments are half of market value. Owners of homes assessed at $25,000, for example, would save nearly $340 a year if they live in neighborhoods with 20 percent assessment drops.
Homeowners will receive notices of the reductions by the end of the month. Here's a breakdown of them:
■About half of the city's 220,000 parcels will see 10 percent cuts.
■Nearly a quarter of parcels will be reduced by 20 percent. They are in two areas: The city's northeast side and an area from Davison to Warren and the Lodge to Wyoming.
■Fourteen percent parcels will get a 5 percent cut. They are in two neighborhoods: much of southwest Detroit and a swath of the east side, south of Interstate 94 and east of Mt. Elliott.
■There is no reduction in 9 percent of properties in 25 neighborhoods where officials said assessments are accurate. Among those are Arden Park, Grandmont East and West, Greenacre, Indian Village, LaSalle Gardens, Palmer Woods, Midtown Brush Park and Woodbridge
"We're seeing many of the neighborhoods starting to come back," Duggan said. "I really do think we are going to be growing from here."
The changes should help people such as E. Jean Matthews, 74. Her west-side neighborhood is in line for a 10 percent reduction. She said that would help her keep a rental home she owns two doors down from her house. The retiree relies on the income, but the nearly $2,000-a-year tax bill on the 800-square-foot rental home eats away at any profits.
The city assessed the house at almost $30,000, which Matthews said is too high. Two vacant, boarded homes are nearby. Matthews said finding tenants is difficult: One stopped paying rent, but she let the person stay for nearly a year so she wouldn't have to worry about scrappers plundering the home.
"It would mean a lot," Matthews said of an assessment cut. "Maybe I could save something, like this house."
"After you have lived 74 years and you don't have that much money, to lose a property to taxes is bad."
Critics of the city's assessment practices welcomed the change.
"Genuine reform such as bringing the taxes down to affordable amounts will allow more people to pay their taxes," said Jonathan Werner, of Added Value Realty, a company that appeals assessments for property owners. "This will increase the total tax revenue collected. It is simple. Less people will be forced to leave their homes empty. Property values will stabilize and eventually increase."
Duggan's announcement comes as nearly 56,000 properties throughout Detroit face tax foreclosure.
County officials have scheduled seven days of hearings at Cobo Center in hopes of saving homes by arranging payment plans. The hearings begin 9 a.m. Thursday and continue on weekdays through Feb. 6.
Legislation signed this month by Gov. Rick Snyder is trying to reduce those numbers.
Treasurers can now work with homeowners to enter into repayment plans that lower interest on debt from 18 percent to 6 percent. In many cases, the new laws would also cap the amount a homeowner has to pay to a quarter of the market value of the home.