January 27, 2014 / 10:31 PM / in 4 years

Detroit mayor plans to get more tax by cutting property assessments

Jan 27 (Reuters) - With Detroit’s revenue from property taxes expected to come in at only $118.4 million in the current fiscal year, Detroit Mayor Mike Duggan announced a plan on Monday to lower property assessments and taxes this summer, with an eye toward boosting home ownership and, ultimately, tax collections.

Property taxes for city homeowners would drop by 5 percent to 20 percent following a realignment of the assessment system, according to a statement from Duggan’s office.

Property assessments are a political issue in Detroit, where a slew of homeowner complaints led the Michigan Tax Board to investigate if the city had inflated property values.

A review of current assessments and actual home sales between Oct. 1, 2011 and Sept. 30, 2013 found some areas of the city were over assessed by at least 20 percent, according to the mayor’s statement.

“It left no doubt in my mind that these reductions are not only warranted, but the right thing to do by our residents,” Duggan said, adding that the city will conduct individual assessments of homes over the next three to five years to improve assessment accuracy.

Property taxes, Detroit’s fourth biggest revenue source, have slipped by almost 20 percent over the past five years and contribute less to Detroit’s budget than income taxes, state revenue sharing, and casino taxes.

The city collected only 68.3 percent of property taxes owed in 2011, down from a 76.6 percent collection rate in 2008, according to a June report by Kevyn Orr, the city’s state-appointed emergency manager. Detroit was expected to take in almost $135 million in property taxes in fiscal 2013, which ended June 30. In the current fiscal year, collections were projected to drop to $118.4 million.

The city, which filed for municipal bankruptcy in July, is also littered with about 78,000 vacant structures, as well as thousands of vacant lots.

The report noted Detroit has not updated residential property values on a regular basis.

Chief Assessor Gary Evanko said in a statement the city expects more homeowners pay their full taxes once assessments are lowered.

“In the near term, we expect this move to keep fewer taxpaying residents from leaving the city. In the long term, we believe it will help to bring in more new homeowners and help to start growing our residential tax base,” he said.

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