Detroit Fails To Collect 20 Percent of Property Taxes Owed

The city of Detroit collected 80.1 percent of the property taxes it levied on its property owners during the fiscal year ending on June 30, 2017. This is the highest collection rate achieved by the city in six years, up from 78.0 percent of property taxes it reported in the previous fiscal year.

The city’s property tax collection rate is still well below the 95.1 percent rate it claimed for fiscal year 2007. In fiscal year 2013, when the city declared bankruptcy, it fell to 68.3 percent.

Detroit’s property tax collection rate is well below that of other cities in Michigan. For fiscal year 2016, Kalamazoo, Grand Rapids and Howell had a rate of nearly 100 percent, while Saginaw collected 99.0 percent of taxes levied, according to the cities’ financial records. Flint collected 81.5 percent of the property taxes it levied in fiscal year 2016.

As a result of not collecting about 22 percent of the taxes it levied in fiscal year 2016, Detroit would have lost $43.5 million except for a state law that shifts the burden. The law requires local governments to turn over their delinquent property tax accounts to a Delinquent Tax Revolving Fund run by either the county or state, in return for which they get an upfront payment of the entire amount of unpaid taxes. Detroit turns its unpaid accounts over to Wayne County, which then gets to keep all the eventual proceeds from fees, fines, interest and the eventual sale of tax-foreclosed properties.

According to Detroit’s annual financial report for fiscal year 2016, the $205.5 million in total property tax revenue the city collected made up 15 percent of its total revenue of $1.4 billion.

Detroit’s property tax collection rate is not affected by parcels of land owned by the city’s land bank or by residents who are given an exemption from paying due to hardship.

“It is important to note that collection percentages are on the rise,” Detroit’s Treasurer Christa McClellan said in a statement. “The economic downturn devastated the collection rate of the City's taxes, reaching a low in 2013.”

McClellan said the city is trying to improve its collection rate by letting residents pay their property taxes online and at kiosks in the city.

According to fiscal analyst James Hohman of the Mackinac Center for Public Policy, property tax collection rates are just one of many issues facing Detroit.

“It’s one of the many challenges facing the city and its residents, and a sign that things aren’t normal in Detroit yet,” Hohman said.