Tax break floated as way to slow Detroit exodus

[Allan]

Tax break floated as way to slow Detroit exodus

Plan would lower city's property levy

January 6, 2005

BY MARISOL BELLO

FREE PRESS STAFF WRITER

Some Detroit residents who bought their homes after 1998 may be in line for property tax relief.

In a move that could save homeowners as much as $3,000 a year, Detroit Mayor Kwame Kilpatrick wants to cut in half the city's portion of property taxes in 22 neighborhoods.

The administration has been working with Lansing legislators to introduce a bill this year that would allow the city to create neighborhood enterprise zones in the 22 areas. The zones need state and City Council approval to take effect and would cut the city's millage rate by 50 percent for 12 years.

"We need to provide relief, our taxes are just too high," Kilpatrick said Wednesday.

The mayor discussed the plan during the second of a two-day economic summit at Wayne State University convened to address the city's growing fiscal crisis. There is a projected $214-million shortfall for the 2005-06 budget, which begins on July 1, and could mean cuts of as many as 2,000 jobs.

The property tax breaks are just one proposal in a larger plan to help the city become solvent, city officials say.

The neighborhoods where the cuts would take effect include Palmer Woods, Rosedale, Bagley, Indian Village and Russell Woods. More neighborhoods would be phased in over successive years until the entire city is eligible for the tax breaks.

State Rep. Bill McConico, D-Detroit, introduced the legislation in December, but because it didn't come up for a vote he will have to reintroduce it in the new legislative session, which begins Jan. 12. The bill would apply to all Michigan cities, not just Detroit.

The mayor said the move for more neighborhood enterprise zones is an attempt to lure residents and home buyers who have fled the city, in part, because of the high tax burden.

The city has one of the highest tax rates in the metro area, said Beverly Burr, a Los Angeles economist and consultant who spoke during the two-day session.

But the tax breaks will further strain the city's general fund, which now gets only about 11 percent of its revenue from property taxes. The move could add another $7 to $8 million to the deficit.

Some question how the city can afford to lose more revenue, given its current condition.

"If you cut taxes, you run up the deficit and can't pay workers," said Ronald Donald, an 18-year city employee and president of American Federation of State, County and Municipal Employees Local 836, which represents many city employees.

Sean Werdlow, the city's chief financial officer, said the city is looking at ways to make up the lost revenue. But in the long term, he said the move will stabilize the city's population.

"It's part of stopping the exodus of people that is happening now," Werdlow said.

The city has lost almost 1 million residents over the last five decades. It is in line to lose another 50,000 in the next five years -- a loss that officials say could be devastating for the city.

The property tax savings would apply to residents who bought their homes after 1998 and is being prompted by a change that went into effect in 1994. Under the law, called Proposal A, when a home is sold, the assessment is readjusted to the market selling price of the house. That can lead to sharp property tax increases for the new owner.

Henry Sciortino, who heads a board that oversees Pittsburgh's finances, said the financially strapped Pennsylvania city also cut taxes as a way to spur investment. He said the city, which is under state control, cut its business tax rate after conducting detailed studies of its finances. It increased its income tax to make up for the shortfall.

He said Detroit must make a similar analysis of its services and costs before it makes any substantial changes.

"You want to spur development, but until you get a macro-picture, you may miss things," Sciortino said.

Contact MARISOL BELLO at 313-222-6678 or [email protected].

[bobliocatt]

I've always said the city needed to start offering tax breaks. Its time the city of Detroit give people an incentive to invest in the city. It might take a hit early on, but it will be well worth it.

[Allan]

Detroit definately has high taxes - 59 mils I think. That is extremely high. No wonder people can't afford to live there! The real estate is cheap, but the taxes are what kills you.

Proposal A is what did the city in. It locked in the undervalued assesments, which can now only be increased at the rate of inflation. The city can now only assess properties when properties when they are remodeled or sold. This creates huge variations in the taxes from neighborhood to neighborhood, and even house to house.

If the city does this, that's great, but they will then have to lay off some people in city government to make up for lost revenue. According to some estimates, for a city the size of Detroit, the government should be half the size that it is currently. The city needs to trim its government down. This isn't 1960...one million people have left the city since then.

[urban addict 20324]

I guess the city government played the tax game and they lost this one, hope this tax cut would move them back on track.

[Allan]

I guess the city government played the tax game and they lost this one, hope this tax cut would move them back on track. 

<{POST_SNAPBACK}>

The city has been playing the tax game since 1960 in an attempt to provide a decreasing number of citizens with the same services. It started with a small income tax and grew from there. With its aging infrastructure and shrinking residential tax base, the city struggles to provide its residents with basic services.

[PghUSA]

Kilpatrick a closet Supply-Sider!?! Go Detroit!

[urban addict 20324]

Well, they are feeling the effects of the game, hard. The city continues to bleed ppl (less ppl to tax; less revenues) and it lower taxes (less revenue, the city is already facing shortfalls despite the high tax). If they lower taxes too much, revenues would take a big hit, but there's the chance of a ppl moving in. Raise taxes too much, everyone flees. The city government is basically walking on a thin tightrope right now and I don't see signs that it would end soon for a city that loves to gamble on the tax game.

[PghUSA]

"We need to provide relief, our taxes are just too high," Kilpatrick said Wednesday.

When can this guy run for President? He already has my vote!

[Allan]

When can this guy run for President?  He already has my vote!

<{POST_SNAPBACK}>

There seems to be a growing number of citizens who are angry with the way he handles things. There have been quite a few scandals, and broken promises, unfortunately. It would be nice if he could just keep his big mouth shut sometimes. LOL.

[PghUSA]

Well he had me at "OUR TAXES OUR JUST TOO HIGH" . Don't know too much more about the scandals but maybe he's finally seen the light?

Supply Siders are HOTTIES!

[Jonzo]

Although I don't agree with everything that he has done, I do have to admit that I like him and think that he's a pretty good mayor. Of course that might just be because he's a democrat.

[baldy]

Although I don't agree with everything that he has done, I do have to admit that I like him and think that he's a pretty good mayor.  Of course that might just be because he's a democrat. 

<{POST_SNAPBACK}>

Kwayme a good mayor? You got to be kidding us!

[urban addict 20324]

Is that mayor really as good mayor? Or is it just b/c he is a democrat? ?????

[PghUSA]

Kilpatrick: " . . . our taxes are just too high."

Democrat or Republican that guy wins the Supply Sider trophy of 2005!

[Jonzo]

Oh relax, I was joking. I don't really base my opinions depending on what political party someone's part of.