By: Bob Kittle
The headline of this March 21, 2019 post, Property Taxes Up $638 Million In 2018, by Michigan Capitol Confidential is eye-catching—and surely stoked the fire of those who believe they pay too much in property taxes—but let’s not let the facts get in the way.
While Michigan property tax collections may be up for the sixth consecutive year, it must be considered that the drop from 2008–2012 was so severe that the increases still haven’t caught up to pre-recession levels. That’s an important piece of information missing from the article, and is caused by the limitations of 1978’s Headlee Tax Amendment to the State’s Constitution, then followed up by 1994’s Proposal A.
To make this easier to understand, I will use an analogy with our retirement savings plans and homes. During the recession, most of us saw a 40–50% drop in the value of our retirement savings, only to see it storm back and exceed where we were initially—if we were patient. Same with housing values. Property owners saw their home values cut in half, and subsequently watched as they stormed back from 2012 to today. In most cases, our property is now worth more than it was worth pre-recession.
But local units of government in Michigan don’t see that appreciation because they are limited to a taxable value increase of CPI or 5% per year, whichever is lower. CPI didn’t exceed 2% until 2017 – so while our 401Ks and home values were rebounding at compounding double digit rates, municipalities had to watch as everybody else got well, but they were (are) handcuffed. In Auburn Hills, where I am a councilperson, our Total Taxable Value is still down $1B from its 2007 level, meaning we must operate on nearly $1M less in property tax revenue when it comes to paying our police and fire personnel, fixing roads and generally running the government.
On top of that, the State fixed their budget by pulling much needed sales tax revenue from local governments to fix their structural deficit. The last straw is that IF a community sees tax increases on certain properties exceed the constitutional limits, the rest of the city’s properties must be reduced by the corresponding value to make sure, on a city-wide basis, the total taxable value doesn’t exceed the allowable limit. The laws never considered a market crash!
Look, Munetrix is in the municipal data business, so we understand the role of data, especially in communicating to constituents. What we don’t like is half-truths, and appreciate when journalists provide balanced stories.
At the end of the day, many communities are cash-strapped and starving, but mostly not by their own actions.
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