Mayor Mike Duggan has a $2.6 billion budget plan that calls for residential property tax cuts over the next two years.
The tax reduction was among the proposals highlighted by the mayor Friday during his 2024 fiscal budget presentation to the Detroit City Council. The overview, which also carves out funding to increase pay for city police officers and bus drivers, kicks off a series of 46 budget hearings before the council is expected to vote in early April.
Duggan said his budget factors in an overall 2-mill decline for Detroit residents, which would include a 1-mill drop in their summer property tax bill and another 1-mill cut next year.
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Detroit residents currently pay 69.6 mills in property taxes, which includes 19.952 mills for city operations and 9 mills for debt service. Detroit’s millage rate is twice the state average, putting the city at a competitive disadvantage to attracting residents and preventing longtime residents from generating wealth.
Duggan said the debt service tax can be reduced from 9 mills to 7 mills over the next two years, noting that the city’s debt is decreasing while the tax base is increasing. Under the proposal, homeowners of property with a taxable value of $50,000 would save $50 this year and $100 next year.
The mayor’s plan also calls for increased spending on workforce development, emergency demolitions, freeway and alley cleanup, a criminal record expungement program and raises for police officers.
The proposed budget is up 6% from the $2.45 billion budget adopted for 2023. Duggan said it’s the ninth balanced budget since Detroit exited bankruptcy in 2014.
Deputy Chief Financial Officer Steve Watson said higher than projected revenues and workforce investments mean Detroit is well-protected from a looming “mild national recession” predicted by a University of Michigan forecast, but “there’s economic risks still ahead.”
“We’re in a very uncertain time, inflation is still very high,” Watson said. “It’s definitely having an impact on our budget, as well as our revenues. We certainly have to be mindful of those risks and make sure that we’re building up our reserves.”
Detroit’s $1.3 billion General Fund, which represents half of the city’s budget, is 7% larger than the previous year. Income taxes are expected to create $393 million in revenue in the next fiscal year, along with $224 million from state revenue sharing, $258 million in wagering taxes collected from casinos and online gambling, and $137 million in property taxes.
The city has built up a $473 million Retiree Protection Fund to prepare for the start of legacy pension payments by June 2024. The city had been relieved of much of its pension payment obligations under the terms of its bankruptcy Plan of Adjustment. Duggan’s budget plan adds $100 million to the retiree fund.
Duggan said the city is bucking predictions that the start of pension payments would signal a “financial doomsday.”
“The feared fiscal cliff is a hill,” Duggan said. “It’s a steep hill, and it’s not easy to manage, but because of the discipline of the last eight years, you have a budget that handles it and balances … without any cuts or crisis.”
Friday’s budget presentation shows $149 million in pension payments will be made in the upcoming fiscal year, including $73 million from the General Fund and $57 million from the Retiree Protection Fund.
Watson said the General Fund will become a larger source of legacy pension contributions until it is the sole source of funding by 2041. Watson said the Retiree Protection Fund ensures a gradual ramp up, so pension payments don’t put too much strain on the General Fund.
“We knew this bill was going to come due, and by layering this in over time we can phase it in as our revenues grow,” Watson said.
New recurring spending proposed includes $7 million in workforce investments for more competitive wages, including for bus drivers, $3.5 million for a maintenance partnership for the Joe Louis Greenway, $1.6 million to hire additional staff for a new animal shelter, $1 million for health department staff, $600,000 for Detroit’s Project Clean Slate expungement program and $500,000 for neighborhood economic development initiatives.
Duggan is proposing a $15 million increase to the Department of Transportation Budget. Part of that would increase wages for bus operators amid a labor shortage. Duggan said negotiations are in progress with the Amalgamated Transit Union.
“I’m hopeful in the next month or two that we’ll reach an agreement with ATU in which they help us with some of the rules of efficiency, and we pay our operators fairly,” Duggan said. “We need to put more service on the road. We’ve got the buses, we’ve had the shelters, we’ve got the facilities. What we need is to make sure we fill the positions.”
The mayor noted planned spending to boost police officer salaries ($26 million), merge firefighter and emergency medical services ($18 million), raise wages for city employees ($13 million) and replace DDOT fare losses and expiring federal relief dollars ($11 million).
Duggan proposed using $73 million in surplus funds from the previous year for one-time spending on: Public safety equipment and vehicles ($13.5 million); emergency demolitions ($13.3 million); cleaning up state-owned freeways ($6 million); city alleys ($5 million) and commercial corridors ($2.4 million); maintenance of vacant properties ($2.6 million); park amenities and equipment for the Joe Louis Greenway ($2 million); boosting the Affordable Housing Development and Preservation Fund ($1.8 million); and neighborhood planning ($1.4 million).
Lawmakers who represent Detroit in the state Legislature are lobbying to reimburse the city for the $6 million freeway cleanup, he noted.
“In the meantime, we have to start getting those freeways clean,” Duggan said. “When people drive down the freeway, they think it’s the City of Detroit that doesn’t care about all this garbage. We’re saying let’s start with (using) the General Fund. I’m optimistic that our legislative delegation is going to take that burden on long-term.”
The city is planning to take an active role in demolishing privately-owned abandoned homes, Duggan said. He said the Proposal N bond fund has been an “extraordinary success” in reducing the number of vacant homes owned by the Detroit Land Bank Authority from 16,000 to 7,000. In the next two years, 4,000 land bank properties will be torn down and 3,000 will be sold, he said.
“By the end of 2024, I think it’s really possible the land bank is going to own zero vacant houses,” Duggan told council members.
However, Duggan said there’s an estimated 4,000 to 5,000 privately-owned vacant houses that still need to be addressed. Duggan said the city’s building and safety department is stepping up inspections and requesting emergency demolitions.
“The city has never taken primary responsibility for demolishing private, abandoned houses and it’s challenging legally to use municipal bond money to spend money on an individual’s private property,” Duggan said. “We are going to shift over the next 18 months from demolishing and selling land bank houses to demolishing or selling private houses.”
Several residents who addressed the council Friday expressed disappointment over the lack of funding for Detroit’s Right to Counsel program, which offers free legal representation for renters who are below the poverty line and facing eviction.
Duggan said state law prevents the city from using General Fund dollars for initiatives that benefit individuals, and federal American Rescue Plan Act (ARPA) funds are not a long-term solution because those dollars expire in 2026. The Right to Counsel program is backed by $6 million in ARPA funding over the next three years.
“I have not understood from the beginning why the Right to Counsel focus was on the one level of government that can’t use its general funds, this could have been done at the county or state level with no legal problem,” Duggan said. “We can’t build up some big program that is going to collapse because it can’t be funded two years from now.”
Duggan suggested a combination of state, county and philanthropic funds could keep the legal aid program running. The Detroit Right to Counsel Coalition, a community group which pushed for the adoption of an ordinance creating the program, asked Attorney General Dana Nessel to determine whether the law prevents Detroit from using General Fund dollars.
Council President Mary Sheffield said she’s having extensive conversations about funding the program with Duggan.
Tonya Myers-Phillips, an attorney and project leader for the coalition, cited a report that has estimated fully implementing the program would cost around $17 million annually. That number could rise as high as $27 million as eviction cases are rising, she said.
“We have to have an honest conversation,” Myers-Phillips told BridgeDetroit after Duggan’s presentation. “What Mayor Duggan was doing in there was some kind of political dance. People are coming to court, as we have more people coming into the system and asking for an attorney … but the city is letting people down.”
The Friday presentation was an opportunity for council members to ask questions before hearings start next week. Council Member Gabriela Santiago-Romero asked Duggan about violence intervention strategies as the city has grappled with mass shootings over the last year and with a recent spike in mental health-related emergency calls.
Duggan said Friday that the police department is working on an $8 million violence intervention strategy and mental health response plan that should be revealed in the next month.
Council Member Latisha Johnson inquired about how the city is working to address flooding in east side neighborhoods along the Detroit River. Duggan said crews are clearing storm drains and debris from sewer lines to prevent backups.
Council President Pro Tem James Tate pressed Duggan for an update on the city’s legal challenge to census population estimates. Tate said some $150 million was “left on the table” due to an alleged undercount of the city’s residents. Duggan said litigation is advancing on “multiple fronts.”