Property tax reform

[expatriate]

I have been curious about this parcel for some time which is owned by a Canadian partnership. This seems to me that this is the sort land speculation that the Duggan tax plan is suppose to curtail. Allowing it to languish puts a drag on any revitalization efforts in the Jefferson/Chalmers neighborhood.

From Axios Detroit:

Annalise here. Sandwiched between two large pieces of riverfront public park land in Jefferson Chalmers is a mass of private property fenced off with a "No Trespassing" sign.

• It's across the street from Coriander Kitchen and runs along the creek.
• I walk past this mysterious spot often and wonder about its possibilities — or rather, lack thereof.

Why it matters: The long-vacant seven acres along the river is among key pieces of land that are wasting away without any accessibility when they could be used for public benefit.

• The parcel was last sold in 2013 for $3 million, per city records. The current owner is a company called Riverfront Limited Partnership

[MikeM]

I have been curious about this parcel for some time which is owned by a Canadian partnership. This seems to me that this is the sort land speculation that the Duggan tax plan is suppose to curtail. Allowing it to languish puts a drag on any revitalization efforts in the Jefferson/Chalmers neighborhood.

From Axios Detroit:

Annalise here. Sandwiched between two large pieces of riverfront public park land in Jefferson Chalmers is a mass of private property fenced off with a "No Trespassing" sign.

• It's across the street from Coriander Kitchen and runs along the creek.
• I walk past this mysterious spot often and wonder about its possibilities — or rather, lack thereof.

Why it matters: The long-vacant seven acres along the river is among key pieces of land that are wasting away without any accessibility when they could be used for public benefit.

• The parcel was last sold in 2013 for $3 million, per city records. The current owner is a company called Riverfront Limited Partnership

That's the former trailer park. I thought it the soil was contaminated. Are the current owners the ones who wanted to build a casino there?

[JBMcB]

The long-vacant seven acres along the river is among key pieces of land that are wasting away without any accessibility when they could be used for public benefit.

So what should go there? Next to it is a similarly sized park. On the other side is a much larger park. Next to *that* park, on the other side of the canal, is an even larger park. A few hundred feet down the river is an enormous park. A mile down Jefferson is the entrance to Bell Isle, one of the largest urban parks in the country.

So, do we need yet another park on that stretch of riverfront? Maybe an apartment building would be nice right on the water. Or a restaurant. Or a few houses.

[Richard]

I remember when it was first listed on Loopnet for $900k and sold for $3m ?

What does it have to do with property tax reform? As long as they are current on their property taxes,lots of foreign companies and individuals park money in American real estate as a hedge in their own country with no intention to ever do anything with it,big problem in California where Chinese investors and individuals bought homes and they just sit vacant for many years effectively removing them from the market.

If you are looking at property tax reform in the bigger picture personally I would be looking at kicking more incentives to developers up front,versus long term tax captures,maybe it would give the means to actually complete projects and as soon as it is done,it goes back on the tax rolls instead of 30 years later.

[angry_fred]

I remember when it was first listed on Loopnet for $900k and sold for $3m ?

What does it have to do with property tax reform? As long as they are current on their property taxes,lots of foreign companies and individuals park money in American real estate as a hedge in their own country with no intention to ever do anything with it,big problem in California where Chinese investors and individuals bought homes and they just sit vacant for many years effectively removing them from the market.

If you are looking at property tax reform in the bigger picture personally I would be looking at kicking more incentives to developers up front,versus long term tax captures,maybe it would give the means to actually complete projects and as soon as it is done,it goes back on the tax rolls instead of 30 years later.

Tax reform, as proposed by duggan, would increase taxes on vacant land and cut taxes on buildings [[there's a bit more nuance than that, but it's not super relevant here).

These higher taxes might make it less desirable for someone to hold a vacant plot of land in the city.

For this old waterfront trailer Park, eminent domain might be another solution. The feds used it to expand sleeping bear national Lakeshore.

[Richard]

Tax reform, as proposed by duggan, would increase taxes on vacant land and cut taxes on buildings [[there's a bit more nuance than that, but it's not super relevant here).

These higher taxes might make it less desirable for someone to hold a vacant plot of land in the city.

For this old waterfront trailer Park, eminent domain might be another solution. The feds used it to expand sleeping bear national Lakeshore.

The use of eminent domain is a lot different from when it was used to clear a neighborhood for a factory,extremely hard to implement and years of taxpayer money used in litigation.

The tax reform proposal looks good on paper but the implementation of it is another story,it would take years and all of the residents that were encouraged to buy that vacant lot next to them would be screwed.

Taxes on buildings are the bread and butter and let’s be honest,the homeowners in the city will benefit the least.

Its based on taxable value and if the homeowner with a 100k house pays the same taxes as a downtown skyscraper it opens the door for more speculation,as long as it has a building on it,you would have to ramp up enforcement by the millions.

Its cause and effect ,a majority of current projects are effectively being removed from the tax roles for the next 30 years,you still have to maintain the city services using the money collected from property taxes.

It’s repeating the same thing that got you where you are in the first place putting more demand on the current residents while pulling funds from a smaller pool.

You do not have enough vacant land that you can increase taxes on while lowering taxes on already developed land.

Look at the downtown core,outside of parking lots ,which would not be considered vacant land ,if you remove that tax base how are you going to provide city services?

That is what caused the blight in the neighborhoods in the first place,increasing the holding costs of a vacant lot where it reaches the point to where it is better to just walk away,then the taxpayers are stuck with it.

There are laws on the books,taxpayers are paying city workers to enforce them,maybe enforce the laws?

As it stands now,the city is walking into a trap,the more development you are kicking out,the less you are collecting and the only way to offset that is by increasing property taxes on existing residents.

Some would call that,a bit backwards.

In order for the Ponzi scheme of development to work,you want development to increase the value of improved properties which raises the taxable value.

Realistically how do you base it on dirt value only? Somebody that has a $500k house is appraised based simply because that is what the dirt is worth and taxed on?

How can you even buy home owners insurance if the physical house is considered to have no value?

Sorry your house was destroyed by fire,but according to the city the physical structure has no value and you still have the ground it was on so suffered no loss.

Personally I would love that scheme ,where I am at it would save me $3500 a year in property taxes over multiple properties,but the question I would ask is what is the next tax going to be that they would have to implement in order to make up for that $3500 loss in revenue in order to pay for city services?

It’s not actually lowering tax rates it’s giving the appearance of doing so with creative bookkeeping.

You could use eminent domain and take everybody’s property and it all becomes the property of the city,Kinda like Mexico where the government owns all land and you long term lease it without actually ever owning it.

Cuba and now Venezuela is the same way.

It’s not going to change anything,land value in EEV will be higher because of the location,land values where there is high crime will still be worthless it’s not going to incentivize people to develop,it will force them to walk because in order to improve the value they would have to develop it,but in the cities eyes developing it adds no value to it,so under a capitalist society what is the point?

Yea okay let me buy a $1 lot in the hood,spend $100k building a house on it while the value remains $1 taxable.

So when you try to sell the house they say,the lot is only worth $1 so that is my offer.

A bit simplified but that is the gist of it.

[K-slice]

Tax reform, as proposed by duggan, would increase taxes on vacant land and cut taxes on buildings [[there's a bit more nuance than that, but it's not super relevant here).

These higher taxes might make it less desirable for someone to hold a vacant plot of land in the city.

For this old waterfront trailer Park, eminent domain might be another solution. The feds used it to expand sleeping bear national Lakeshore.

This type of land/ ownership situation is exactly what the new tax law is designed to prevent. Right now this company pays virtually nothing in tax for that land as it has no improvements. If their tax burden get doubled, tripled, or more, it becomes a lot less appealing to just hold it year after year in an unproductive state.

[mwilbert]

This type of land/ ownership situation is exactly what the new tax law is designed to prevent. Right now this company pays virtually nothing in tax for that land as it has no improvements. If their tax burden get doubled, tripled, or more, it becomes a lot less appealing to just hold it year after year in an unproductive state.

Correct. This is exactly the type of land [[along with downtown surface parking and scrapyards) that the tax change would be pointed at--it's presumably worth a fair bit, and it's just sitting there. Random lots in the middle of Grixdale aren't worth anything, and tripling the taxes on them isn't likely to change anyone's behavior unless they own hundreds of them.

I would very much like this change to happen, but it's the type of thing that's very hard to do, so I'm not holding my breath.

[Rocket]

I wonder what the new tax laws will do to investors willingness to buy up dilapidated eye-sores? Then only to pay to ball them down, fence them and forever pay property taxe on them?

I mean, someone has to own, mow and fence these pieces of property. If not investors, then it falls on the City, and the City gets to eat those expenses in addition to losing the tax revenue.

Currently this field we're talking about is probably generating $240,000 a year in tax revenue. And it's not costing the City anything to maintain and secure.

If that tax number gets raised to $500k or $800k a year, will that turn off investors to Detroit?

Will anyone be willing to buy up pieces of land with plans to do some big project? Because sometimes things change and the project doesn't happen. Perhaps the deals to acquire the adjacent pieces of land that you need falls through? Or you can't get the permits you need. Or the City doesn't give you approval? Or the bank financing doesn't happen. Or the economy collapses like 2008 or 2020, and everything stops.

I'm guessing the owners of that land on the river probably IS available to buy if someone really wanted it. It's unlikely the current owners have some big attachment to it.

They bought it for what? $3.3 mil? Then paid another $2.5 million in taxes over the years, plus whatever fencing, security, liability insurance etc cost them. They might sell it for $10 - $12 million if someone made them the offer.

The fact that it hasn't happened yet may be a sign that the economics aren't right yet to build what the City would want there.

[K-slice]

Will anyone be willing to buy up pieces of land with plans to do some big project? Because sometimes things change and the project doesn't happen. Perhaps the deals to acquire the adjacent pieces of land that you need falls through? Or you can't get the permits you need. Or the City doesn't give you approval? Or the bank financing doesn't happen. Or the economy collapses like 2008 or 2020, and everything stops.

I'm guessing the owners of that land on the river probably IS available to buy if someone really wanted it. It's unlikely the current owners have some big attachment to it.

They bought it for what? $3.3 mil? Then paid another $2.5 million in taxes over the years, plus whatever fencing, security, liability insurance etc cost them. They might sell it for $10 - $12 million if someone made them the offer.

The fact that it hasn't happened yet may be a sign that the economics aren't right yet to build what the City would want there.

You're setting up a lot of straw men, that look nothing like the "investors" this law is targeted at, if they can even be called that.

I'll bite though, because the answer to your question is a simple one. "Sell the property!" Something falls through and you can no longer use your desirable property you've purchased, then sell it to someone who will.

And to be clear, selling and sitting are two different things. If this company was actively marketing this property to others through a brokerage then fine. But they're not, like so many others, they're making 0 effort to do anything besides let it set in disuse.

[Richard]

^ if people were tripping over themselves to buy property in Detroit you would not be where you are at.

Even with move in ready house the average in Detroit is $78,000 with 46 days on the market with a 4.5 reduction in values over last year or $3685 less.

How do you force somebody to buy a property,spend $100k in development and market it for $78k?

I would bet everybody in Detroit that owns vacant land would love to sell it tomorrow,just as soon as the long line of available buyers come up with the funds.

It’s easier to say,if you do not maintain or build on it today just sell it,then to say if you are not selling it maintain it.

Just think how much money you could make on commissions selling all of those vacant properties,you just have to find thousands of buyers willing to lose money.

Ya have to figure at some point there is a valid reason they are sitting vacant.

It’s trying to do everything under the sun not to address the issues that cause the property tax rates to begin with or even addressing how they got there to begin with.

It is easy to market a property,just with a phone call,it does not mean anything you just price it so nobody in their right mind would even think about buying it,but technically it is being marketed.

Doing something that makes it look like you are doing something,without actually doing anything seems to be the standard way of approach all around.

[Rocket]

"Sell the property!" Something falls through and you can no longer use your desirable property you've purchased, then sell it to someone who will.

Your argument presumes that there are a number of buyers out there with the willingness AND the resources to do a development on the riverfront, [hopefully some nice riverfront condos with a shopping district on the lower levels], and that the only hold up is their inability to acquire the land they need.

But what if there's no one out there ready to spend $10 million on your land plus another $100 million to develop it? You just get perpetually stuck with paying $1.5 million a year in taxes?


I suppose the owners could always throw a single-wide on the land and rent it out to someone, thereby keeping the taxes where they were.

[Richard]

It’s river front,so luxury condos which are running $400-$600 per sqft to build out not including the land.

Which would put it over the threshold of where the builders would also have to set aside a few more million for community investment,and justify it to the lenders.

Also the current fad in the city is affordable housing,so doubt they would even let development even begin let alone any kind of incentives.

If they paid $3m for the property the intent is not for market rate apartments,it’s going to have to be something high end.

In this case I would say it is actually current city policy that is preventing it from being developed,unless you are building something that offers below market rate it’s really not feasible to build multi family even more so with current cost of materials.

That narrow focus is actually hurting the city as much as it is helping it because those who choose to live in high end are limited in options which lowers the average medium wage when they live outside of the city.

Your millage rate is 69.5937 and is going to have a 20% increase this year due to inflation.

Ours is 19.71 and they are trying for a 15% increase for inflation,but my house is capped at no more then 3% for as long as I own it.

That’s a big difference.

Here is a link that compares property taxes across the country,nothing personal but as a blue state,you actually pretty much inline with others,just a lower medium home sales price,it seems to be a common goal to see who can out tax the others.

https://www.bankrate.com/real-estate...tate/#by-state

What happened with the $600 million in property tax overcharge?

Did you guys get a refund? Or credit?

[Rocket]

It’s river front,so luxury condos which are running $400-$600 per sqft to build out not including the land.

Which would put it over the threshold of where the builders would also have to set aside a few more million for community investment,and justify it to the lenders.

Also the current fad in the city is affordable housing,so doubt they would even let development even begin let alone any kind of incentives.

If they paid $3m for the property the intent is not for market rate apartments,it’s going to have to be something high end.

Yes, and yes.

The buildings being built or re-developed in Detroit are largely done with tax and other credits, which then require a certain percentage of the units to be rented out at well below market rates. Often a mix of 50% / 60% /75% of AMI.

This is essentially another one of the dozens of hidden welfare systems operating currently, which skews the market, and makes other types of construction less competitive than would otherwise be. Non welfare units seem overpriced by comparison. This hurts the ability of luxury builders to sell their new builds.

And the people that would buy new luxury high-rise construction condos don't want to use the same elevator as Section 8 and other low income.


Also, the $3 million was just the purchase price. They would have paid another $2.5 million or so just in property taxes in the last decade. Plus fencing, security / liability insurance, mowing etc.

For sure they have $6 million or more in it at this point.

[expatriate]

So, do we need yet another park on that stretch of riverfront? Maybe an apartment building would be nice right on the water. Or a restaurant. Or a few houses.

I agree. Detroit already has plenty of parks that it can hardly afford to maintain.

[mwilbert]

I suppose the owners could always throw a single-wide on the land and rent it out to someone, thereby keeping the taxes where they were.

That's not how the proposed change would work. It isn't a vacant land tax; it's a land tax. Putting a random structure on it wouldn't make the land tax go away. It's just that for you typical non-vacant property in Detroit, the structure is a lot more valuable than the land, so the proposed decrease in taxes on structures would more than offset the proposed increase in taxes on land. But putting a little structure on a formerly empty parcel would just make your taxes go up a little more.

[Richard]

^ the way I reading it no,improvement over the dirt are not taxed,adding another room or bathroom to an existing structure in theory will not increase value.

Taking a empty lot and building a house on it becomes pointless because it will always be viewed as the value of the dirt,so all you are really doing is transferring the value of the structure to the dirt.

So how do you you then place a value on the dirt?

Based on if you built a structure on it that had a value of $200k they will look at that dirt is worth $200k,so what exactly are they accomplishing?

In the future if that structure burns down they are still going to view it as a $200k piece of dirt,nobody is going to pay that unless it is in a prime area.

The only way to lower property taxes is to lower the mileage rate and the millage rate is determined by the amount of funds needed for the city to operate.

The $600 million that people over paid in property taxes tells you that you have a governmental problem that is jacking the rates up artificially,it’s not how much you make it’s how you spend it,it is probably more prudent to be looking at how tax money is being spent that is in turn jacking milage rates up.

You have legacy costs that are hurting but it also seems like you have a lot of governmental costs with little to show for it currently.

I have a friend in the UK that owns lots of rental properties and factories,what they do,mostly because of housing shortages,if you have a property that has a empty house on it you pay a fine until you rent it,a vacancy fine.

Every other city in the country except for Detroit and the Black belt in the south if you have a derelict property they are on you to fix it 24/7.

Detroit city government is tasked with handling all of that,you have laws in the books but yet anybody can buy a derelict property and let it sit for years while doing nothing to it and many are demolition by neglect.

You cannot blame the speculators when you yourself gives them free rein.

So you either need to increase property taxes or offset the increase by fining the stagnant ones.

The whole thing about making it expensive to own a parking lot downtown is insane,because they just pass the cost on to who pays to park there.

That is a simple fix,change the zoning so they are not allowed.

Or use tax payer monies and build a few parking garages and charge $1 and squeeze the other lots out.

They are proposing to tax land 5x more then they did with buildings,I am not seeing anything where it says once the property is improved it then reverts back to the regular tax rate .

It has to pass state legislation highly unlikely but social experiments have been tried before and it is always only a certain group of people they end up throwing under the bridge,so who knows,what does the city have to lose through experimentation?

Worse case senário when the dust settles if it does not work,the city can always try enforcing the laws already on the books.

[JonWylie]

^ the way I reading it no,improvement over the dirt are not taxed,adding another room or bathroom to an existing structure in theory will not increase value.

This excerpt from the Freep is the best explanation I've found.
Editorial: Duggan’s Detroit property tax shift is important, necessary [[freep.com)

How Duggan's tax proposal would work

Current state law requires local assessors to slash the value ― and thus the taxes ― of both vacant lots and lots with structures so derelict they are unusable, Duggan explained in his Mackinac Island address. At the same time, occupied residential and commercial properties are taxed at a whopping 86 mills, the highest rate in the state. Many former Detroit homeowners and small businesses have been lured by more reasonable rates in Detroit’s suburbs. Duggan wants to increase the tax on vacant land to 246 mills, and cut the tax rate on buildings to 60 mills. Cutting that rate would provide a tangible boon to longtime Detroit residents, prospective new residents, old and new businesses.

Equally important, the mayor says, the tax change will prompt Detroit property owners to reconsider the value proposition of allowing vacant land or derelict buildings to languish. The average tax bill for a vacant lot, Duggan says, is $30, and there are some 30,000 neglected vacant lots from which the city must pay crews to clear illegally dumped trash and mow the grass. The foreclosure auction all but invited speculators to acquire mass quantities of land, gambling on future development boosting the property’s value. Sometimes, that means decades of waiting, while property sits unused or in disrepair.

Just eight new single family homes were built in Detroit in 2022. There are nearly 1,000 abandoned, privately owned commercial and industrial buildings in Detroit, Duggan said last week. Rehabbing a derelict building, or new construction on a vacant lot, returns the property to the 86-mill tax rate — a disincentive for many property owners.

[Richard]

The foreclosure auction all but invited speculators to acquire mass quantities of land, gambling on future development boosting the property’s value. Sometimes, that means decades of waiting, while property sits unused or in disrepair.

They are creating problems then looking for solutions.

Where I am at,if I buy at the tax auction and fail to maintain,it automatically reverts back to the city in with zero recourse and I can no longer purchase property at the sale in the future.

And I lose the money that I paid for the purchase,but if I owed taxes on another property,I would not be allowed to bid in the first place.

Regulations for grass is 18” in height,miss mowing it 2 x and you do not have to bother anymore,it’s no longer yours.

If you create and feed speculation,you cannot get mad when it happens.

So it would not matter if the city was stuck with the neglected property for decades,the money they make in taking it back and reselling it 100 times in that time frame more then enough offsets costs.

Thats how they can lower the property taxes,by flipping those vacant and derelict lots at the auction every year.

Its entirely possible to stop doing the same thing that brought you to the place you are at while expecting different results. Or blaming it on speculators.

There are well run cities all across this country,red and blue,all of this basic stuff has been around 200 years it’s not hard to pick what works and know what does not long term.

There is zero reason to try and invent the wheel,because if it fails the people of the city are going to be in a worse place,it’s high risk and unproven and the city is not in a position to be gambling,they have to much to lose.

They went after Packard with bulldozers,they went after MTS,they went after the P building.

But all the others that are in the click including the large well known speculators that they are claiming are doing all the damage,get a free pass at the expense of 599,000 other residents that have to pay the price.

So who exactly are they referring to because it definitely does not include the current speculators.

[expatriate]

OK, here's another example: 215 Burns. Almost 3 riverfront acres with a $3000 annual tax bill [[delinquent) which is $1K less than I pay for my 1200 sq ft. house. Owner listed as Phoenix Communications. This property has sat fallow as long as I can remember. And you know they are even taking a loss write-off on this for some other income. There is something seriously wrong with this picture.

[Richard]

^ that’s a strange one,has a listed value of $1m but with a $2.8m private sourced mortgage.

[ABetterDetroit]

It is an obvious failure in Detroit to provide financial incentive to property owners to lower their taxes by blighting property. Blight is a tremendous strain on resources. From law enforcement all the way to education the cost of blight on city services is high. Finally a mayor is recognizing and calling out a simple fact that is a major f’ing problem in the city.

[Rocket]

It is an obvious failure in Detroit to provide financial incentive to property owners to lower their taxes by blighting property. Blight is a tremendous strain on resources.

They do have blight violations. Presumably this gets added to your taxes.

Perhaps if you don't respond to blight violations for un-mowed lawn for instance, they city could send a crew to mow it for you [[and remove the tires, garbage, bodies etc), and then add that to the owner's bill. Then if unpaid, the city can sell the property to someone else for the unpaid taxes.

[ABetterDetroit]

They do have blight violations. Presumably this gets added to your taxes.

Perhaps if you don't respond to blight violations for un-mowed lawn for instance, they city could send a crew to mow it for you [[and remove the tires, garbage, bodies etc), and then add that to the owner's bill. Then if unpaid, the city can sell the property to someone else for the unpaid taxes.

On so many levels Michigans property tax system is a mess. Detroits are among the highest in the country…does it look like thats working? The way it is now the property taxes encourage people who want to change a residence or a business location to move all the way out of state where almost everywhere property taxes are a fraction of what they are here. If that is the goal, it is working extremely well. Now your solution to this problem is more bureaucracy for more bureaucrats… Don’t they already have enough to do figuring out all the damn abatements so the whole damn city doesn’t rot into the ground? Change the system, eliminate the bureaucracy. Join the states in the 21 century and compete for new business instead of trying to bleed who can’t get the abatements.

[Gistok]

The tax system in Michigan did get some relief many years ago with passing the Headlee Amendment. It lowered property taxes, and increased the sales tax from 4% to 6%.

This really helps homeowners who live in their house for many years, but doesn't help new buyers.

I purchased my house in SCS in 1990 for 84K. This year my next door neighbor, in an almost identical house to mine, sold his for 215K. Now I am paying $2,200 for my property taxes, but my new next door neighbor is paying nearly $4000.

The Headlee Amendment caps property tax increases so that long time homeowners benefit much more than new owners...

How the cap works. In Michigan, homeowners have an overall cap on how much the value of their home can go up each year. The annual assessment increase for each property is constitutionally limited to 5% or the inflation rate, whichever is less.

However, very high property tax areas such as Detroit don't benefit from this as much, since they have high tax rates to begin with. That's where those "zones" come in... but they only help for a set number of years, with a potential additional cap. But the majority of Detroiters don't live in one of those reduced tax rate "zones".