Duggan proposes property tax cut in Detroit to adjust rates

Detroit — Mayor Mike Duggan is proposing a tax cut to address some of the highest property tax rates in the nation, a step supporters contend would reduce taxes for 97% of city homeowners while doubling rates for owners of empty or neglected land.

The proposal, known as the Land Value Tax Plan, would need the approval of the Michigan Legislature and city voters. State Rep. Stephanie Young, D-Detroit, said at a Thursday press conference at Rosemont-Acacia Park that next week she would introduce the legislation. It faces uncertain prospects in the state House and state Senate, where Democrats hold narrow majorities.

"It's time for us to not have to pay for all the boarded, blighted properties. It's time for those folks to pay their fair share," Young said. "The bill has come due, y'all. I'm grateful to be in partnership with the mayor and city council to do the right thing."

Under the plan, Detroit’s operating millage would be slashed by 70%, or by 14 mills, from 20 mills to 6 mills for improvements to all taxable property. The proposed reduction would apply to homes, apartments, retail stores, office buildings and land. A mill is equal to $1 of tax for every $1,000 of taxable value.

By contrast, taxes on empty land would more than double, from 85 mills to 189 mills, so owners of abandoned buildings, vacant land, and underbuilt property would be encouraged to develop. Owners of large tracts of property around the city, including entities connected to the powerful Ilitch and Moroun families, have been criticized for not developing their parcels and leaving certain parts of the city with blighted vistas.

The plan would put Detroit’s property tax rates in line with neighboring communities such as Ferndale, the Grosse Pointes, Southfield and Warren, city officials said.

Duggan said city officials have held more than 50 gatherings in the past three months, meeting with groups who would be affected by the Land Value Tax.

“The proposal we developed together provides homeowners with an average 17% property tax cut while protecting side lots and community land uses such as urban farms from seeing any tax increases," the mayor said.

City Council President Mary Sheffield, who has formed a campaign committee to run for mayor in 2025, said Thursday she would study Duggan's plan to ensure it would deliver real relief.

“Going on 10 years now, I have been on a personal crusade against the exorbitant millage rate and property taxes in Detroit,” Sheffield said in a statement to The Detroit News. “I certainly have my own thoughts on property tax reforms, and I will be thoroughly examining what has been laid out to ensure Detroiters get real relief and progress doesn’t become an unintended casualty."

Some residents wary

Detroit's property taxes are among the highest in the nation. Residents pay about 67 mills, according to the Citizens Research Council of Michigan. A mill is equal to $1 of tax for every $1,000 of taxable value.

The high tax rate comes on top of the decades of problems Detroit has had with inflated valuations that lead to higher tax bills for homeowners who end up in foreclosure.

Some residents said they are wary of the Duggan plan.

Demonstrators showed up at Thursday's press conference to protest what they consider to be the Duggan administration's inflated property tax assessments, which city officials vehemently reject. A Detroit News investigation in 2020 found Detroiters were overtaxed by $600 million over a seven-year period from 2010 to 2017 after the city failed to accurately lower property values in the years following the Great Recession.

Bernadette Atuahene of the Coalition for Property Tax Justice told Duggan her group has not taken a position on the new plan.

"The problem we have with the … plan is that you are now adding onerous administrative duties on top of an assessment division that's currently not doing its job," Atuahene said. "What you must do first is pass the property tax reform ordinance and clean up ... the assessment division before we can move to the Land Value Tax Plan. It's like we're putting a Band-Aid on a wounded knee before we put a cast on a broken arm."

Duggan responded: "We are going to put it before the voters and let the voters decide."

The mayor said he'd like to see the issue go before city voters in February 2024. If they approve, the new split tax rate would go into effect in 2025, he said.

There are an estimated 30,000 neglected pieces of properties that private owners view as “cheap lottery tickets,” Duggan said in May, when he first unveiled the outlines of the plan at the Mackinac Policy Conference. If approved, the new more than doubled tax rate would hit those parcels. The owners are waiting for the land value to rise while not actually investing in the property, the mayor contended.

"You got folks who are sitting on huge, abandoned apartment buildings, paying $1,000 a year in taxes, " Duggan said, citing one example. "Now, we are going to make them pay $2,200 a year in taxes."

Among other elements of the Duggan plan:

• The average vacant residential lot in Detroit, which currently pays $30 per lot, would see its taxes increase to an average of $67 per lot, according to the mayor's office.
• Urban farms, community gardens and community spaces would not be affected because they are deemed community spaces under the proposal.
• No homeowner would get an overall tax increase if they own four or fewer side lots. The average bill on a side lot would increase about $30 a lot, from $25 to approximately $55, according to the Duggan administration. City officials contended "the average homeowner will get a tax cut on their house that is much larger than that."
• A property owner would be able to keep a Neighborhood Enterprise Zone tax break instead of taking the proposed land value tax cut. But once the NEZ break expires, the owner would automatically be charged the land value tax rate.

Detroit-based developer Richard Hosey praised the city's process of reaching out to a wide range of groups and businesses since Duggan introduced the idea.

"Let's make sure that there is buy-in, there's understanding. That process, I found invigorating. This is a great thing for the city," Hosey said.

A spokesperson for Crown Enterprises LLC, the real estate arm of the Moroun family of companies, couldn't be reached late Thursday for comment.

Prospects in Lansing uncertain

On Wednesday, Gov. Gretchen Whitmer outlined her priorities for the rest of the legislative session, including a 100% clean energy goal and a paid family leave law. Duggan's idea was not mentioned.

But during the Thursday press conference, Rep. Young expressed optimism that the Legislature would approve Duggan's plan because of the Democratic majorities in the state House and Senate.

Duggan added that House Speaker Joe Tate, D-Detroit, "has been behind this since Day One."

Tate's office indicated Thursday the speaker is open to the plan but didn't fully embrace it.

"Speaker Tate is interested in exploring ways to help lower costs for Detroiters and residents across Michigan," Tate spokeswoman Amber McCann said in an email. "The Speaker has had multiple conversations with the Mayor about the proposal and looks forward to working on the issue this fall."

House Minority Leader Matt Hall, R-Richland Township, couldn't immediately be reached for comment.

Duggan said he hopes the Legislature would pass a bill with his tax plan by the end of October.

laguilar@detroitnews.com

Staff Writer Sarah Rahal contributed.