'Business Improvement Zones' = Property Taxes

A Detroit News editorial weighs in with a favorable opinion of a proposed Detroit "Business Improvement Zone" tax, which it denies is a tax and reports will sustain an existing downtown cleanup campaign funded by some property owners.

But it's not hard to see why these so-called "BIZ assessments" are unfair and bad public policy. 

Imagine you and six of the other 10 residents in your subdivision own normal three-bedroom ranch homes with assessed market values of around $200,000 each, or $1.2 million combined. The other three subdivision residents are different. Their lots are the same size but on each stands a 7,000-square-foot mansion valued at $700,000 each, or $2.1 million combined. The McMansion group also has some horses, and would like to spend $300,000 to circle the neighborhood with attractive rail fences. They ask you and the other non-horse owners to each kick-in some money, an invitation you all decline.

Now imagine the McMansion owners go to the state Legislature and get a law passed that authorizes an "improvement zone," in which property owners vote for projects (like rail fences) funded by a special assessment.

There's a catch though. Rather than majority rule or even one vote per property owner, the vote of each person in the zone is weighted by the value of his property. The election takes place at a neighborhood meeting, and the measure passes $2.1 million to $1.2 million. Although you and the other six ranch house owners voted against having to pay for the McMansion group’s fence, based on assessed values their three votes trump your seven.

Sounds unfair? In greatly simplified form, and applied to a residential setting that is not (yet) permitted by current law, welcome to the world of "Business Improvement Zones," where a handful of large property owners can force a less propertied majority to pay for amenities the latter may not want or benefit from.

However, according to The Detroit News, outvoted commercial property owning majorities in one of Michigan's very real "Business Improvement Zones” have no reason to complain, because even though the new levies are authorized under a law passed by the Legislature and approved by their city council, they are not a tax hike. They merely are a "private special assessment, with no use of tax dollars."

Tell that to the taxman when he slaps a lien on your property for failing to pay your private BIZ assessment, complete with interest, fees and costs.

"Business Improvement Zones" have existed in Michigan law since 1961. Last year, the current Legislature voted to expand the concept by reducing procedural obstacles to creating a zone, increasing the potential penalties for not paying these undemocratic assessments, and more.

More broadly, Michigan residents are increasingly plagued with a raft of such local borrow, tax and spend zones and "authorities." Some are obscure and others well known, like downtown development authorities.

Importantly, there is nothing these zones, districts or authorities can do that a local city council cannot do by itself without them. That means these entities exist for just one purpose: To allow local politicians to tax-and-spend more in a manner that avoids democratic accountability and transparency.

The Detroit News has a good record of exposing tricks that local governments use to extract more from residents (such as marketing property tax increases under the "public safety special assessment" label). The same cautious eye should be turned toward a Detroit BIZ tax.