Detroit’s top lawyer on Monday poured cold water on any suggestion that the city use general fund dollars to compensate homeowners previously overtaxed by some $600 million, saying it’s prohibited under state law.

Acting Corporation Counsel Chuck Raimi noted the limitations that prevent the city from providing Detroiters with any direct payments or tax credits during a budget hearing. The Detroit City Council is facing pressure to alleviate the strain on residents whose property values were incorrectly measured in the years following the Great Recession. 

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Council President Mary Sheffield stressed that Detroiters have continued to raise the issue during budget hearings, demanding the city fix its mistakes and make residents overassessed over a six-year span from 2010 to 2016 whole by paying them directly. 

Raimi’s assessment was straightforward. It can’t happen without a change in state law.

“There’s simply no legal support or legal ability to do that,” Raimi told council members.

State law prohibits municipalities from giving away public funds in most cases, Raimi said. Though Detroit could argue that repaying overtaxed residents is a public good, the expenditure would most likely be “illegal,” he said, because state law lays out a separate process for homeowners to seek a change in assessment.

The “very specific” process can be complicated and is time-sensitive, but essentially calls for homeowners to appeal to the Detroit Board of Assessors and, if the local review doesn’t pan out, they can appeal to the Michigan Tax Tribunal, he said. The statutory time period to protest incorrect tax assessments from 2010 through 2016 has already passed.

“Unfortunately there are people who have not been able to take advantage of that process because they didn’t fully understand the process and how to go about it,” Raimi said. “To propose that people (who) did not engage in that process be compensated out of the general fund, the simple answer is you’d have to change state law to be able to do that. Without a change in state law, it would not be legal.”

A massive influx of federal American Rescue Plan Act funding can’t be used to remedy the issue either, Raimi said, because that money can’t be spent on issues that predate COVID-19.

Sheffield previously 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. The draft resolution noted that overtaxed Detroiters have “no remedy under the current law” and calls on the state Legislature to enact legal reforms. Sheffield could not be reached Monday for comment on whether Detroit’s representatives in Lansing are pursuing a bill to address the overtaxation problem. 

The City Council has earmarked $6 million to fund a property tax overassessment program for legacy Detroiters using one-time surplus funds from the previous budget year. The funding is not aimed at compensating residents. Instead it seeks to “address the issue of over-assessment,” Sheffield said Monday. 

Detroit’s prior council in November 2020 narrowly rejected a plan from Detroit Mayor Mike 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. 

Some Detroiters who tuned in to the Monday hearing were not pleased with Raimi’s news. 

“If someone overtaxed you and did it illegally, how is it fair that a state law must be passed to refund what was taken from you?,” said Bobbi Johnson, a Detroiter who addressed the council during public comment. “All this outreach (only to) get the same corporations or planning studies that you do and nothing changes; take some of that money and start paying some of these people back, especially ones that lost their homes.”