(Source: MIRS.news, Published 05/31/23) (MACKINAC ISLAND) -- Detroit Mayor Mike Duggan announced a new property tax plan Wednesday that would increase taxes on land while reducing building taxes, which he said would address the persistence of blighted and abandoned properties in the city.
During his Wednesday afternoon keynote address at the Mackinac Policy Conference, Duggan dove into the proposal, which has been coined the Land Value Tax Plan.
Duggan is proposing cutting the tax on buildings in Detroit by 30% while simultaneously tripling land taxes.
A change to the system is necessary, Duggan said, because Detroit’s property tax system is a “ticking bomb” that threatens to destroy the city’s progress.
He said the current system prioritizes a tax on buildings, not land, meaning it’s more expensive to build a house on vacant land than to keep it vacant.
This system was put into place after population growth pushed Detroit manufacturing plants into the suburbs where they could spread out, Duggan said. But people followed the jobs, leaving abandoned residential and commercial properties behind.
To combat the decrease in revenues, the overall tax rate was raised, Duggan said, but the value of land with abandoned property remained low, and so did the taxes on that property.
Duggan said in many cases, property owners today will hold onto vacant lots because taxes are so cheap, using them as “cheap lottery tickets” in case developers are interested in buying them up.
He said the average bill on a vacant lot in Detroit is $30 annually, while the cost of cutting the grass on those lots for the city is closer to $100.
For abandoned lots that do still have buildings, Duggan said an exemption to the law mandates that if a property deteriorates to a certain point, the assessor must reduce the tax to $0.
With a very low tax on land and now no tax on blighted buildings, property owners are also incentivized to let their buildings crumble, Duggan said.
“The greatest deal in the world is to let the building decline,” he said, which has resulted in nearly 1,000 abandoned commercial and industrial buildings across the state that have stayed that way for an average of 20 years.
Duggan said that Detroit has demolished and renovated many abandoned homes, from 47,000 in 2014 to a remaining 6,000 in 2023.
He said the city’s public works department spends $5 million annually on 14 crews to continually remove illegal dumping from vacant lots.
For blighted commercial properties, Duggan said the city launched a $10 million, two-year enforcement program on blight across the city by notifying property owners of violations, cleaning up the problem if they don’t respond within a week and billing them for it.
“I’m still trying to collect, but I’m working on it,” Duggan said, adding that the program is expected to renovate 1,000 dilapidated buildings in the next two years.
However, that doesn’t get to the root of the problem, he said, which is continued low taxes on vacant lots and blighted properties.
“Blight is rewarded. Building is punished,” Duggan repeated several times throughout his keynote speech.
His property tax plan would address the problem by phasing in the tax over three years, with another ⅓ change each year.
Duggan said this was intended to give property owners time to get in compliance and understand the change.
He said there would be “winners and losers.” The winners are small property owners and neighborhood developers. The losers would be vacant lot owners, owners of vacant commercial buildings, scrapyards and parking lot owners.
However, he said the change won’t be too painful for smaller property owners.
The guy paying $30 a year for his vacant lot would be paying closer to $85, Duggan said, and “I’m still paying $100 to cut his damn lot.”
For larger commercial property owners who aren’t already paying property taxes, along with scrapyards, Duggan said the change will be a harder hit.
But for the winners, Duggan said the proposal could be the “biggest building of wealth for Detroiters in history” by cutting taxes on their homes.”
He said House Speaker Joe Tate (D-Detroit) has agreed to lead the charge on the legislation, which Duggan said he wants passed this fall.
Without legislative support, he hinted at a voter initiative in 2024.
In the meantime, Duggan said he plans to set up workgroups intended to hammer out the finer details of the plan.
