Emergency manager Kevyn Orr wants tax reform in Detroit because he believes it’s ‘critical’ to the city’s future health.
Detroit — Detroit’s emergency manager wants to lower property taxes and acknowledges the city’s assessments are “likely overstated.”
Kevyn Orr, the city’s emergency manager, wrote in his proposal to city creditors Friday that he’s considering tax reform, even though it could reduce revenue in the short term because it’s “critical” to the city’s future health.
“The city believes that lowering selected tax rates — primarily income and property tax rates — to levels that are at least competitive with surrounding jurisdictions is critical to reversing the city’s crippling population and job losses,” the report reads.
He also wrote that the city has “not updated residential property values on a regular basis” and that “residential property values are likely overstated.”
The report quoted some of the findings of a February series by The Detroit News of the city’s property tax system that exposed widespread over-assessments, rampant tax delinquencies and dysfunction in the city’s Assessment Division. The series cited a recent study showing that many houses are assessed at more than 10 times their selling price, and found that city officials discarded 94 percent of the sales in the city last year before valuing Detroit’s residential properties.
City officials have defended their assessments, saying they lowered values significantly in response to the economic downturn. Mayor Dave Bing’s office had no comment Friday on Orr’s report.
The state Tax Commission announced this spring that it would launch an investigation into complaints Detroit is overtaxing property owners through inflated assessments in response to The News stories.
No specifics were given but Orr’s report said his analysis is “ongoing.”
“Although tax rate reform will likely lead to decreased revenue in the short term (which decreases may be partially offset by improved collection efforts), the city anticipates that the longterm benefits promise to render such reform at least revenue neutral over a reasonable time frame,” Orr wrote.
Orr’s report quotes the findings of The News series that found that only 53 percent of Detroit property owners paid their 2011 property taxes as of January 2012. Approximately $246.5 million in taxes and fees went uncollected for 2011 at that time, of which $131 million was due to the city.
Wayne County Deputy Treasurer David Szymanski said his office supports property tax reform. The department is so overwhelmed by property owners not paying taxes that officials refused to foreclose on about 40,000 properties in Detroit last year.
“We believe a move like that may improve tax collection,” Szymanksi said of lowering property taxes. “People believe they are underwater just with property taxes. Based on our experience, lower tax bills are likely to result in greater collection of revenue.”
Detroit ranked first among the 50 largest U.S. cities in taxes and last among property values in a 2011 study by the Lincoln Institute of Land Policy in Cambridge, Mass. 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.
Resident Gregory Henderson said lowering taxes makes sense. He said he pays nearly $2,600 a year for the East English Village home he’s lived in for 30 years and has little to show for it. The street light on his block has been out for 10 years.
“If you lower property taxes, then you are going to make more,” Henderson said. “More people will move into these vacant houses … that aren’t paying any taxes.”