A coalition of community groups is calling on Attorney General Dana Nessel to weigh in whether or not it’s legal to provide cash payments and property tax credits to compensate overtaxed Detroit homeowners.
U.S. Rep. Rashida Tlaib and Detroit City Council President Mary Sheffield joined the Coalition for Property Tax Justice Thursday to request an opinion from the state’s top lawyer on compensating overtaxed Detroiters. Advocates take issue with the City of Detroit’s stance that it would violate the state constitution to reimburse residents for over taxation and laid out ways they would like to see Detroiters who lost their homes due to overassessment and economically suffered, made whole again.
“This is such an important step as we fight every single day to ensure that individuals, families, residents that were overtaxed receive justice,” Sheffield said during a virtual news conference.
The city overtaxed homeowners by at least $600 million between 2010 and 2016, a Detroit News investigation found. More than 92% — of the 173,000 Detroit homes reviewed — were found to be overtaxed by an average of $3,800. Over assessments lead to inflated property tax bills and tax foreclosures.
“For far too long Detroit homeowners have been overtaxed and foreclosed upon for taxes that they never should have had to pay for in the first place. The City of Detroit was one of the hardest hit cities when the Great Recession happened,” said Bonsitu Kitaba, deputy legal director at the American Civil Liberties Union of Michigan.
The coalition earlier this year convened more than 700 Detroiters for a public forum and later released a report laying out “fiscally responsible” ways residents would be repaid. Among the ideas: property tax credits to use against future property bills, Section 8 rental vouchers, home repair grants, Detroit Land Bank Authority’s rehabbed homes, as-is Land Bank homes paired home repair grants or cash payments.
“We are here fighting for what Detroiters clearly said they wanted, which is property tax credits and cash compensation for the theft that happened through these illegally inflated property tax foreclosures,” said Bernadette Atuahene, a professor and property law scholar at the University of Wisconsin-Madison Law School.
The City of Detroit’s Law Department has said that a reimbursement fund for overtaxed Detroiters would “not be lawful” citing the Michigan constitution, according to a memo to Detroit City Council.
Paying money, the memo said, through a “reimbursement fund” would be an unlawful “lending of credit.”
City officials have reiterated the limitations of using general funds to compensate overtaxed residents.
But advocates are pushing back against that. Atuahene said the coalition spoke with Nessel on Thursday morning and are planning to meet with her later this month.
“The concerns raised by this group do not fall under the jurisdiction of the Department of Attorney General, but instead are a matter for the City. The Attorney General has offered to meet with representatives of the group, and we are working to schedule that meeting. In the meantime, staff at the Department have been in contact with this group to hear their concerns,” said Amber McCann, communications director for the Michigan Department of Attorney General, in an email.
Michigan law allows the top legal official to “give legal advice to the Legislature, and to departments and agencies of state government,” according to the Michigan attorney general‘s website.
In a statement, the City of Detroit’s Office of the Chief Financial Officer (OCFO) said neither the state Legislature nor Detroit City Council can change the constitution and past attorneys general “have recognized this constitutional restriction on spending public money for private purposes.”
“Mayor Duggan is the one who dealt with the overassessment issue, cutting assessments 20% his first month in office in January 2014 and making other reductions in subsequent years. Under his administration, the City has spent millions modernizing the assessment process which has been reviewed and approved by the State Tax Commission,” the statement said.
Marie Sheehan, with the nonprofit Street Democracy, said the coalition has conducted “extensive legal research” and says there are many ways to fund compensation.
That includes, she said, appropriating money from prior year budget surpluses, using revenue from other programs like a reparations fund in Illinois and federal grants.
Detroit City Council allocated $2 million dollars for a program to support overtaxed Detroiters, with a goal of boosting that amount to $6 million, Sheffield said. The program — providing access to home repair grants, nonpayment assistance and land bank properties access — is up and running but is limited in scope, she said.
“Unfortunately, we cannot do anything via an ordinance that speaks to cash compensation or tax credits because of the legal issues that we’ve encountered to date,” Sheffield said.
Michigan law prohibits municipalities from assessing any property at more than 50% of its market value. If the market value of a house is $100,000, local authorities cannot assess the home for more than $50,000.
Research published in 2018 in the Southern California Law Review found that Detroit over-assessed 53% to 83% of residential properties between 2009 and 2015.
A separate study from the Center for Municipal Finance found that Detroit was over-assessing most of its lower-value properties — homes priced below $19,000 — between 2016 and 2018.
“Regarding the claim of ongoing overassessment, we maintain that there is no systemic overassessment occurring in the City of Detroit. Out of over 400,000 parcels, there will be cases of overassessment because nothing is 100%. That’s why we have the longest appeals process in the State,” according to a statement from OCFO.
Those who want to challenge their assessment can contact the assessor’s office at Assessorreview@Detroitmi.gov.
Detroit City Council previously rejected a proposal from Mayor Mike Duggan’s proposal to offer over-assessed homeowners a 50% discount on city-controlled vacant properties and prioritize them for affordable housing and applying for city jobs. Under the mayor’s proposal, anyone who owned a home in the city and lived in it as a primary residence between 2010 and 2013 — amounting to about 130,000 residents — would have been eligible.
Free Press staff writers Dana Afana and Christine MacDonald contributed to this report.