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City officials are facing pressure to compensate residents whose property values were incorrectly measured in the years following the Great Recession.

The Coalition for Property Tax Justice wants the state Attorney General’s Office to weigh in on a city legal finding that state law prevents Detroit from repaying previously overtaxed residents. 

The group’s request comes days after Detroit’s acting Corporation Counsel Chuck Raimi told the City Council that state law prevents the city from compensating Detroit homeowners who were collectively overtaxed by about $600 million over a six-year span. 

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Raimi said Monday that there is “simply no legal support or legal ability” to provide direct payments or tax credits for the individuals who’d been overtaxed between 2010 and 2016. But Bernadette Atuahene, a professor at Chicago-Kent College of Law and an organizer with the grassroots tax justice coalition, claims that legal logic is “flawed.”

Bernadette Atuahene, a professor at Chicago-Kent College of Law (Coalition for Property Tax Justice screenshot)

“There’s all kinds of programs where money and resources go to various individuals, not to speak of the tax credits and tax subsidies given to corporations,” Atuahene said during a virtual news conference Thursday. “There seems to be no lending of credit issues when money is being distributed directly to various corporations and the corporate welfare that’s occurring in Detroit, but when the money is going to illegally assessed and dispossessed populations, now we have a lending and credit issue.”

Attorney General Dana Nessel’s office did not immediately respond to a Thursday request for comment. 

Detroit Chief Financial Officer Jay Rising said he doesn’t expect Nessel’s interpretation of state law to differ from the city’s.

“Neither legislature nor council can change the constitution,” Rising said in a statement. “And many prior AGs have recognized this constitutional restriction on spending public money for private purposes. We’d expect this AG to agree, though AG opinions are not technically binding on local units of government.”

The administration of Mayor Mike Duggan and Detroit’s council are facing pressure to compensate residents whose property values were incorrectly measured in the years following the Great Recession. Atuahene said the city must “suture the wound.”

Detroit resident Sandra Bradley said she had been overtaxed by $4,000. She wants the city to compensate her, but also asked for flexibility so people can decide what form it will take.

“I’ve been a longtime resident here in this city, I know the city of Detroit has its issues,” Bradley said. “Basically, just do what’s fair. Let people decide on how they want to be compensated.”

Private citizens don’t have the ability to seek an Attorney General opinion, but state lawmakers can. Atuahene said the coalition asked state Sen. Stephanie Chang, D-Detroit, to request an opinion from the Democratic attorney general. 

Separately, City Council President Mary Sheffield asked the council’s Legislative Policy Division to draft a resolution urging a change in state law that would allow for tax credits to be used by those who were over assessed. Detroiters should be credited up to a certain amount per year based on the amount they were overtaxed, according to the resolution.

Detroit City Council President Mary Sheffield. (Coalition for Property Tax Justice screenshot)

“There’s various legal opinions,” Sheffield said. “Some people, from a legal standpoint, disagree with this. But because that is a larger fight, right now, as a direct kind of immediate relief, we’re looking at ways that we can provide some programmatic support until we address the legal issues that are before us.”

The council is set to vote Thursday on amendments to Duggan’s proposed 2022-23 budget. Within those, Sheffield has included a $2 million allocation request for the “issue of overassessing.” The funding would go toward a Detroit Land Bank Authority lending program, home repair grants and small business development, among other things.

“We’ve tried to explore ways that we could provide grants for individuals, we always seem to run against this lending of credit issue,” Sheffield said. “ We will continue to explore various ways to get around these legal hurdles, but as to date, there is no grant program that we’ve been able to create that will get around this lending of credit issue that we’ve been faced with from the law department.”

Sheffield said council members also approached Chang about pursuing legislation to change the state law. The goal, she said, is to garner support from a group of Detroit-area lawmakers who will champion a bill. 

Meanwhile, Detroiters expect to be repaid for what Atuahene described as “illegally inflated property tax assessments” that disproportionately hurt vulnerable homeowners. 

The mayor’s office has noted that the gap between home prices and assessments in Detroit was largely closed when Duggan took office in 2014 and dropped assessments by more than 20%.

The Coalition for Property Tax Justice released a report Thursday that summarized the feelings of residents who joined a January forum. 

The report found overtaxed Detroiters have a clear preference for cash payments, though property tax credits and home repair grants are other acceptable forms of compensation. Many respondents indicated a desire for the city to invest in their communities. Overtaxation stripped Detroiters of their dignity, advocates said, especially those who were foreclosed on for nonpayment due to inflated property tax bills.

A working group convened by Sheffield and the coalition in 2019 determined the city should prioritize relief for people who are living at or below the federal poverty level, do not own property, still live in Detroit despite foreclosure or were longtime residents before foreclosure and those who were foreclosed on while eligible for an income-based property tax exemption.

Detroit’s prior council in November 2020 narrowly rejected a plan from Duggan’s administration that would have provided certain preferences including home-buying discounts and job opportunities to residents who were overtaxed between 2010 and 2013. But some council members argued the proposal didn’t go far enough. 

Since then, housing advocates have continued to call on Gov. Gretchen Whitmer and local leaders to investigate the city’s inflated property taxes and provide overassessed homeowners options for relief.

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