DALLAS – A reappraisal of Detroit property taxes means that more than half of homeowners will see a reduction in taxes for the fourth year in a row, which could help the city's post-bankruptcy economic prospects.
"With many people seeing large assessment reductions, we expect to see an increase in the number of homeowners who pay their full taxes," Detroit's chief financial officer John Hill said in a statement. "In the near term, we expect this move to keep more taxpaying residents in 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."
Growth in the tax base is an important goal for the city's recovery following its exit from Chapter 9 in late 2014.
Property taxes out of sync with property prices led to more than a decade long foreclosure crisis in the city. Now for the first time in 60 years residential properties are being reassessed to bring property taxes more in line with the true value of homes in the area, Mayor Mike Duggan said on Tuesday.
These new assessments are based on actual property sales from October 2014 to September 2016, and other property-specific data.
Duggan said on Tuesday that an update to the city's property tax appraisals means that 53% of homeowners will see their property tax assessments reduced by up to 10%; 41% will see taxes increase by the same amount.
The reductions haven't hurt property tax collections because improved collection rates made the reduction possible.
"It turns out when people feel they are being assessed fairly they pay their taxes," Duggan said at a press conference on Tuesday.
Bringing more fairness to the property tax system in Detroit has driven a steady increase in collections from about 68% in 2012-14 to 79% in 2015 and a projected 82% in 2016, Hill said. From 2015 to 2016 alone, property tax collections increased approximately $8 million.
Duggan said that although property values are going up in the city, state legislation is keeping taxes from increasing too much.
"Because of the effect of Proposal A your increase can only go up with the rate of inflation," said Duggan.
Homeowners that will see taxes go down will see reductions averaging $263 and those that see taxes go up will see an increase averaging $80.
The city marked its two-year anniversary of its exit from bankruptcy on Dec. 10. Moody's last review of the city's credit shifted what had been a positive outlook on Detroit's still junk rating to stable but said the city had shown some modest economic recovery.
The rating agency affirmed the city's B2 issuer rating in July but shifted its outlook to stable based on what it called a very weak economic profile that make the city vulnerable to future downturns and population loss.