Late city property taxes prompt suit
Tlaib: Detroit residents couldn’t appeal
Joe Guillen
A federal class action lawsuit filed Thursday claims the City of Detroit was late delivering more than 260,000 residential property tax notices in 2017 — a widespread delay that compounded inflated property tax bills the city issued to scores of residents in recent years.
The late notices began going out in mid-February 2017, leaving residents insufficient time to appeal their property tax assessments, which in many cases exceeded the state’s legal limit, according to the lawsuit.
“In 2017, Detroiters had no real right to appeal their systematic, inflated assessments due to the city’s failure to mail timely notices of assessment and the right to appeal,” U.S. Rep. Rashida Tlaib, D-Detroit, said at a news conference Thursday where the lawsuit was announced.
“This is not right. And please, let’s not pretend that you didn’t hear from residents …we have the data to show that you absolutely were denied your right to appeal and your right to keep your home,” Tlaib said.
The class action lawsuit is the latest development in the city’s recent struggle to reckon with several years’ worth of inflated property tax bills sent to residents following the Great Recession. The city overtaxed homeowners by at least $600 million between 2010 and 2016, according to a Detroit News report last month.
The lawsuit, filed by the Chicago law firm Goldman Ismail Tomaselli Brennan & Baum, names Mayor Mike Duggan, Deputy CFO/Assessor Alvin Horhn, Wayne County and state tax officials as defendants.
“By denying homeowners an opportunity to appeal and lower frequently overassessed property taxes, the Detroit government … compounded a well-documented crisis that has plagued Detroit for years, leaving many homeowners no recourse but to pay more than they should owe, face delinquency, or even fall prey to property tax foreclosure,” the lawsuit reads.
Horhn called the lawsuit frivolous. The city mailed notices on Jan. 24 that year and extended the period to appeal by two weeks, he said in a written statement.
To emphasize his point, Horhn’s statement included a link to a Free Press article in February 2017 that said the first batch of notices went out that year on Feb. 8.
“This suit has nothing to do with concerns about overassessments in prior years. It refers only to 2017. … Mayor Duggan fixed the overassessments in 2014 in his first month in office and has led efforts starting in 2015 that have reduced tax foreclosures by 90%,” Horhn said in his statement.
Homeowners must follow a multistep process prescribed by city and state laws to appeal their property tax assessments. In 2017, the delayed notices, which contained misleading information, effectively denied Detroit homeowners their appeal rights that year, according to the lawsuit.
The first step of the appeal process — an appeal to the city’s Board of Assessors — must be filed by Feb. 15 of a given year. The notices began going out on Feb. 14 in 2017 and the city extended the deadline to Feb. 18, according to the lawsuit.
“This extension did Detroit homeowners little good, as almost all notices were mailed just four days before that deadline,” the lawsuit reads.
The announcement of the class action lawsuit was part of a news conference downtown at the Coleman A. Young Municipal Center where officials and housing rights activists demanded justice for unconstitutional property tax assessments in Detroit.
Michigan’s Constitution prohibits property tax assessments in excess of 50% of a home’s market value. City officials have acknowledged previous administrations failed to keep assessments in proportion with home values.
The inflated tax bills contributed to widespread property tax delinquencies and the city’s foreclosure crisis.
Detroit resident Sonja Bonnett, who lost her home to foreclosure in 2018, said a fire was lit under her when she learned about the city’s inflated property tax bills.
“It feels very personal to lose your home. You feel like you did something very wrong, like you just couldn’t keep it together,” Bonnett said. “Land is so very important, and they are stealing your land. We cannot let them get away with this yet again because Lord knows they’ve stolen enough land.”
In addition to the class action lawsuit, new research released Thursday shows the city has continued to overtax low-income Detroiters based on inaccurate property values, despite a citywide reappraisal that took effect in 2017.
Detroit resident Sonja Bonnett,
The findings raise fresh doubts about Duggan’s claims that his administration dealt with the problem of inflated property tax bills with the reappraisal three years ago.
“Still to this day, evidence shows that the city is still over assessing low-value homes throughout the City of Detroit,” Council President Pro Tem Mary Sheffield said. “Justice and compensation belong to the people of Detroit and we plan to ensure that it is delivered expeditiously.”
While the percentage of Detroit homes assessed in excess of the state’s legal limit fell from one-half to one-third since the city’s reappraisal, the burden of overtaxation has increased on those living in lower-valued homes, according to the study by the Center for Municipal Finance at the University of Chicago Harris School of Public Policy.
The study examined data from the Detroit assessor’s office of residential property sales between 2016 and 2018. The data included more than 9,700 transactions and sales prices ranging from $1,800 to $690,000.
Anger and frustration among residents and City Council members has grown since the report put a $600 million price tag on the city’s overtaxation.
In response, Duggan’s office has pointed out that the mayor has made it a top priority since he took office in 2014 to address the gap between home prices and property assessments.
“The current administration has moved dramatically to correct those deficiencies, investing more than $10 million in a citywide revaluation and providing the (assessor’s) department with a nearly 50% increase in staff,” Detroit Chief Financial Officer Dave Massaron and Horhn wrote to City Council in a Feb. 5 memo.
While acknowledging past overassessments, the city “believes” the $600 million estimate is inflated, the memo reads. Furthermore, there is no legal remedy for past overassessments.
“If there were a legal means to reopen them, the cost would be so enormous, the only practical means to raise the funds would be a citywide judgment levy on property taxes,” the memo reads.
“In other words, a huge property tax increase would be needed to fund the repayment of past property taxes.”
The University of Chicago study claims the problem of overassessment persists despite corrective actions under Duggan.
Before the city’s reappraisal, homes with the lowest sales prices (between $1,800 and $10,000) were assessed at nearly 90% of their price while the top 10% of homes (those sold at $60,000 and up) were assessed at less than 30% of their price, according to the study. The figures mean that the lowest valued homes were assessed at a rate of about three times that of the highest-priced homes.
Since the reappraisal, the bottom 10% of homes were assessed at a rate roughly four times the most expensive homes, the study found.
Christopher Berry, academic director for the Center for Municipal Finance and one of the study’s authors, said it’s unfortunate that the reappraisal did not fix the overassessments.
“After having studied a lot of jurisdictions around the country, Detroit is not the only place that has this problem. But it is one of the worst that I’ve seen,” Berry said.
Joe Guillen, a member of the Free Press Investigations Team, has been covering city governance and development issues for the newspaper since 2013. He previously worked at The (Cleveland) Plain Dealer covering county and state government. Contact him at 313-2226678 or jguillen@freepress.com.