January 28, 2014
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Home, Assessing Home. Detroit Mayor Mike Duggan expects, today, to announce double-digit property assessment reductions for three-quarters of city homeowners, joined by Gary Evanko, the Motor City’s chief assessor. Despite having one of the broadest tax bases of any city in the U.S., Detroit revenue collections have been plagued by inefficiency. According to Mayor Duggan’s office: “By and large, Detroit properties have been over assessed for years…Correcting this problem will help to bring property assessments and taxes back in line with their actual value and make Detroit a more appealing place to purchase a home.” Indeed, the property tax accounted for 13.3 percent of Detroit’s revenues in 2012, even though the city had the highest property taxes among big cities in the U.S. Perhaps, more than any other city, Detroit’s property tax collections were assaulted by the recession, with assessed valuations declining nearly 46 percent from 2007 to 2012. But the Detroit property tax revenue problem is also adversely affected by state limitations as well as a city property tax administration system described as “riddled with errors and waste, and overseen by a pair of double-dipping officials who work just two days a week,” and a singular inability to address delinquencies. The Detroit News two years ago reported that 47 percent of property owners were delinquent on their property taxes and fees in 2012—with some delinquency “so pervasive that 77 blocks had only one owner who paid taxes last year.” The Detroit News also found yet another property tax problem: high taxes and low values. In the 2011 50-state property tax comparison study, Detroit ranked first among the 50 largest cities in taxes – and last among property values. Detroit taxes on a $150,000 house were $4,885, twice the national average of $1,983. The city’s average house price, $16,800, was nearly 10 times lower than the next lowest, Mesa, Ariz. Last year, Michigan state regulators approved a plan to overhaul the troubled Detroit department that sets property taxes, so that post-municipal bankruptcy Detroit is now in the midst of a citywide reassessment of all 386,000 parcels—which it hopes to complete by December 2016 based on the corrective action plan state regulators have approved. Early last year, Mayor Duggan announced the city would lower residential property assessments 5 percent to 20 percent in a move to address the city’s dysfunctional tax system―the city’s assessed property values have sharply declined since the housing crisis of 2008. Assessments have decreased over the years, falling 2.5 percent to 13 percent last year, but Mayor Duggan said they have not kept pace with market value.
The Sky’s the Limit. The peripatetic Kevyn Orr, returned from the forlorn, snowed in Atlantic City casino land yesterday to speak at the Detroit Economic Club in what he termed his “exit interview,” discussed his optimism about the Motor City’s post-bankruptcy future—noting strong economic development levels and record attendance at the North American International Auto Show were prime indicators that the city was on the rise and that he now thinks the sky could be the limit for Detroit. Mr. Orr told the audience he is confident in the city’s potential for the short- and medium-term, albeit he is apprehensive about the potential for backsliding: what happens in the long-term if city leaders fall back into the same patterns of mismanagement that in part sent it on a downward spiral toward the largest Chapter 9 municipal bankruptcy in the nation’s history? Nevertheless, he said: “The eyes of the state and world are on (city leaders)…They have the resources to achieve that, but it isn’t over. It’s not the end, it’s the start. Short-term, great. Mid-term, five years, still good. Seven-10 years from now…” Mr. Orr noted
that he warns developers that they are “a little late to the party” if they are just now getting interested in Detroit’s development and redevelopment opportunities: “I think there is no reason Detroit, especially in the short term, should not achieve” rebounds the likes of which were seen in Miami and Washington, D.C., both cities where Mr. Orr has lived. On why the bankruptcy process was so successful: The work that went into the city prior to his appointment in March 2013, Judge Steven Rhodes running “an exemplary process” and the willingness of stakeholders to negotiate. “Everyone was handicapping that this would be a story of conflict,” he said. “The citizens of Detroit handled themselves in a way that was exemplary.”