Editorial: Put priority on fixing Detroit tax system
Despite the progress Mayor Mike Duggan has made in fixing some of Detroit’s property tax issues, problems with tax policies and practices persist, hindering the full revitalization of neighborhoods and preventing the city from capturing revenue needed to support public services.
The city must focus more intensely on fixing a dysfunctional system that has contributed to high delinquency rates and the loss of residents.
That includes, among other measures, making sure assessments realistically reflect the value of property, stepping up collection efforts and offering smart, effective tax abatements that ensure the burden is spread more fairly across categories of property, including government properties that are currently tax-exempt. Those recommendations are included in a recent report by the Lincoln Institute of Land Policy.
Duggan slashed home assessments after taking office by 5 to 20 percent, which helped. But more needs to be done. According to the report, Detroit’s assessments still need to be reduced by as much as 70 percent in some categories.
In 2010, the institute found, assessed values were about five times the sales prices, according to the report. That gap has closed under Duggan’s measures, but remains out of whack.
Further, the assessments are inequitable. Assessments of lower-priced properties vary more than higher-priced properties, leading to resentment and refusal to pay by some residents, as well as a barrage of appeals to the Michigan Tax Tribunal. The tribunal heard 3,015 appeals of residential property assessments from Detroit property owners in 2012, according to the report.
In addition, city government is short-staffed, and assessors rely on outdated data and processing systems to do their work.
Detroit also has a problem physically collecting tax revenue. A Detroit News investigation in 2013 found that nearly half of the owners of Detroit’s properties failed to pay their taxes in 2012. That amounted to $246.5 million in uncollected taxes and fees, some of which was due to the city, some to Wayne County, Detroit public schools, and the library.
And the number isn’t improving; in 2014, 54 percent of taxpayers were delinquent.
Detroiters pay the highest property tax rates in Michigan. Even if residents paid no taxes to the city, they would still face a property tax rate above the statewide average just from levies to support the public library, Detroit Public Schools and Wayne County.
Additionally, almost 20 percent of Detroit’s land area contains parcels that are partially or totally exempt from property taxes — more than 11 percent of total assessed land value. Exempt parcels include government buildings — educational, cultural and city government buildings, as well as — cemeteries, religious buildings, and medical centers.
But Detroit’s dysfunctional tax system will continue to discourage people from moving into the city, or staying, and investing in property, and will encourage delinquency in tax payments. Faster progress must be made in getting the process right.