Editorial: Lowering Detroit taxes will increase revenue

Mayor Mike Duggan and the city of Detroit will continue this year to slash property tax assessments for large swaths of homes between 5 and 15 percent, although bustling areas like Midtown and downtown will see a slight increase.

It’s the right move for the city, particularly if it wants to encourage new residents to move into some of Detroit’s less stable neighborhoods. More accurate tax assessments also mean fewer Detroiters will face tax foreclosures.

Last year the city cut assessments by about 20 percent in some areas, and the move is paying off. Duggan said collection rates are rising, which is critical to sustain the city’s revenue. In recent years up to half of Detroit residents have neglected to pay residential taxes — in part because they didn’t reflect actual home values — and the city hasn’t had the capability to pursue the funds.

But in 2015, 72 percent of homeowners paid their property taxes, up from 67 percent in 2014. This year 78 percent of homeowners are expected to pay.

And the city is on track to be ahead of projected property tax revenues by $10 million. Last year the city expected to see revenue decline to $102 million from $120 million, but it actually came in at $115 million.

With the latest round of adjustments, assessments on 95 percent of homes in Detroit will have decreased.

Large portions of the northwest and northeast sections will see 15 percent reductions, and the southwest, near west and lower east neighborhoods of the city will receive 5 percent reductions.

But some neighborhoods where property values have been rising — including much-desired Boston-Edison, Indian Village and Sherwood Forest — will see increases of 15 percent.

As Detroit continues to rebound — and focus on revitalizing individual neighborhoods — it’s imperative the city’s taxes and policies are welcoming to prospective residents and businesses.

But the property tax reassessments are also important for Detroiters who haven’t been able to pay taxes in the past and faced foreclosure. Resolving property tax issues is a way to help solve that ongoing crisis as well.

An investigation by The Detroit News in 2013 found Detroit was over-assessing homes by about 65 percent. Additionally, a report from the Lincoln Institute of Land Policy recommended Detroit cut its tax rate, which is the highest of any major U.S. city and more than double the average rate for neighboring communities at $69 per $1,000 of assessed value.

That rate still needs to be addressed, and could make further headway in attracting new Detroit residents and retaining the existing population.

The combination of an extraordinarily high tax rate and poorly assessed properties contributed to the foreclosure crisis currently facing Detroit and Wayne County.

These changes by the Duggan administration should begin fixing the structural flaws that have made Detroit’s tax code an impediment to living in city.