Detroiters to See Property Assessments Up To 20% Lower

Detroiters to See Property Assessments Up To 20% Lower

Polk & Associates CPABy Matt Helms, Detroit Free Press 11:07 p.m. EST January 28, 2015

More than half of Detroit home owners will see their property tax assessments drop by 10% as officials make progress on a citywide reappraisal of real estate values in the aftermath of the national recession and the foreclosure crisis that hammered the Motor City, Mayor Mike Duggan said today.

Moving Detroit closer to equilibrium between market values and property tax assessments, Duggan said 25 neighborhoods will see no reduction in property tax assessment because real estate values have rebounded and are matching assessed values. Those neighborhoods include some of the city’s most stable: Grandmont-Rosedale, Green Acres, Sherwood Forest. Palmer Woods, Indian Village and Boston-Edison.

Areas that will see the largest decreases are on the northeast and near-west sides at 20%. The lowest reductions, at 5%, will come in the southwest and far east sides, Duggan said. The 10% reductions, excluding the neighborhoods with the strongest rebounds in market values, are near downtown and Midtown, the city’s west side and along its northern borders.

The reduced property tax assessments, far from drastically diminishing tax revenues to the city, are actually encouraging more people to pay their taxes and bringing in revenue above what the city had budgeted, Duggan said at a news briefing at city hall this afternoon. That’s noteworthy for a high-poverty city where as many as half of all residential property tax bills had gone unpaid in recent years.

“We think we are going to significantly reduce the number of people who can’t pay their tax bills going forward,” Duggan said. “You have a lot of people in this town living from paycheck to paycheck, and a 5 or 10% reduction in their property tax bill is a big deal.”

Property tax assessment notices are to arrive in the mail beginning Friday, allowing home owners to see what their reductions will be. The cuts will be in effect for property tax bills that will go out in June with due dates in August.

Duggan said Detroit’s two-year budget crafted during bankruptcy when Kevyn Orr was emergency manager factored in the reduced assessments and anticipated a drop in property tax revenue for the 2014-15 fiscal year to $102 million from $120 million. Instead, tax revenues are on pace to hit $115 million for the fiscal year, city officials said.

Duggan said he anticipates the new round of reduced assessments will result in the same effect for 2015-16, when the city had budgeted for $100 million in revenue but will bring in significantly more.

City Councilwoman Mary Sheffield, who represents the city’s 5th District, said she hears regularly from residents who complain their homes are taxed at far more than they’re worth, and reflecting that reality with more accurate assessments “is the right thing to do” to encourage more people to buy homes in Detroit.

“We also need to focus on retaining residents who have been there long term,” she said at the news briefing.

Detroit resident Ronnie Wimberley, 49, said the assessed value of a rental property he owns on the city’s northwest side does not reflect the blighted conditions surrounding it. There are about five vacant houses on the block, he said, and another seven or eight empty lots where houses have been torn down.

“For those reasons, it should be much less,” he said. “It was actually lower when the whole block had residency in every house.”

The ongoing reassessment of Detroit’s property values is a key part of the city’s efforts to recover from bankruptcy. Detroit’s property tax assessment rates have long been out of kilter with market values, and the city is undertaking a multi-year program to reduce assessments to better reflect market prices, particularly after city real estate values plummeted amid the 2008-2009 foreclosure crisis fueled in large part by subprime lending.

The city will take a financial hit through lowered property tax revenues, city officials say, but the bigger strategy is that property tax assessments more in line with market values will encourage more people to pay their taxes and even encourage people to move into the city. Property taxes go unpaid on as many as half of the homes in Detroit. Many of those home eventually land in tax foreclosure, putting even more of a burden on city coffers and lowers property values.

The loss in revenue is factored into long-term financial projections in the city’s plan of adjustment, the roadmap it will follow after exiting the nation’s largest-ever municipal bankruptcy in December.

“There is a big-picture strategy around it,” Detroit Chief Financial Officer John Hill told the Free Press in November. “One of the keys to stabilizing neighborhoods and property is for people to believe — because it’s true — that their property is fairly assessed. That will have an amazing effect on our ability to collect the taxes. It is the first time in a very long time that the city has had a citywide assessment of all its property.”

The city’s chief assessor, Gary Avenko, said Wednesday Detroit is in the process of individual, market-based assessments on every property in the city, a project he expects will be completed by the end of 2016.

As part of the program, the city is working to set up monthly payment plans for residential property taxes so homeowners don’t have to cough up large sums of money once or twice a year, a move the administration believes will help increase collections.

As part of the program, the city is working to set up monthly payment plans for residential property taxes so homeowners don’t have to cough up large sums of money once or twice a year, a move the administration believes will increase collections.

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