Detroit Mayor Mike Duggan sat down with The Detroit News Wednesday during the Detroit Regional Chamber’s Mackinac Policy Conference to discuss his Land Value Tax plan and other matters.
The highlights:
- His plane will lower property taxes on occupied land to 67 mills from 86 mills.
- Detroit has not explored absorbing the financially troubled enclave of Highland Park into Detroit.
- The city is beefing up police patrols to prevent crime from surging during the summer months.
- He will make a decision on his political future in a year. What follows is a transcript of the interview, edited for length and clarity.
Nolan Finley: So I mean, so a lot of those folks who have these surface lots they, you know, maybe they’re an extra small business. They bought them up to keep the trash out or something coming in. I mean, it’s going to be a burden on some of those folks, isn’t it?
Mayor Mike Duggan: In the short run, it will be. But if they decide to build on it, the building itself, is going to be 25, 30% less taxes. So now all of a sudden, your property is worth a lot more for anybody who wants to build. But if you want to park cars on that side of the surface lot, it’s going to be more expensive for it. And so, but these are kind of choices that in any other city, they choose to go up. Yeah. And in Detroit we choose to go out.
Finley: So there’s a lot of lots, a lot of a lot of empty lots, a lot of lots with blighted structures on them. Is there enough demand to fill all those lots? I mean, there’s some people are going to, we got these lots…nobody wants it. We don’t know what to do with it.
Duggan: The answer is we’ll see. Right now, we have 30,000 vacant lots that the taxpayers are paying taxes on.
Finley: How many?
Duggan: 30,000. You can have it for 30 bucks, and if the Illitches or somebody comes to build on it, you ask for a million dollars. So, it’s a cheap lottery ticket. There are a thousand vacant commercial buildings in this area that they’re paying taxes on. And the reason is, you know, the assessment laws, when you’re building in an area where it’s unusable, the building is assessed at zero, which means now you’re assessing the land. So, you’ve got a thousand vacant buildings where nobody has any incentive
And if you were to build on it,you’re being taxed at 86 mil, the highest rate in the country for a commercial. And so, what we’ve done is we’ve created a system over decades that incentivizes you to let you go into a vacant interior and taxes you at a very high rate. So you got have written about this for a long time.
So, you say it’s going to be complicated. Going to be complicated to implement it or.
Duggan: Yeah. So everybody’s affected differently.
If you’re a homeowner. You’re almost certainly going down. You’ve got a mid-rise or high rise, you’ve got a big auto factory, almost certainly going down. You’ve got an auto yard. You’re almost certainly going up. You’ve got all kinds of land with the willing. If you look at it, you look at warehouses. Go look at a warehouse in the suburbs. And that warehouse is built all the way out except for employee parking. Because you use every square foot the land has to go to. In Detroit. Some warehouses like that, though. They’ll go down by the warehouses, have lots of surplus land around. So you could have some warehouse businesses, and you will, have some warehouse businesses go up.
Now, if they expand their warehouse to come out way ahead, because we’ve just given a huge break on the building side. But in the short run, are they going to think like that? I don’t know. So, I’m not expecting this to be a cakewalk through the legislature because there will be interest whose entire business among all these land speculators.
Miles: Who the most powerful interest group?
Duggan: We’re going to find out. So, I mean, you know, you’ve got some prominent people that have acquired a lot of land. Sitting down with them individually and trying to say, guys, right now, you couldn’t sell that land to somebody to build a house. You know, at one point in time, we had 2,000 vacant houses renovated last year. We had 500 apartments built last year. Last year, we only had 8 new single-family homes. And it has been true the last five years because the cost of the taxes on a single family home makes it impossible.
You cut those taxes 25%, and all of a sudden Detroit versus Ferndale, Detroit versus Ann Arbor, for home building, becomes almost even. And we have other reasons to be in one city or another.
But today you are taxed so high you can’t build a new house in Detroit. So, these guys who own these properties, I’m not telling you 30,000 houses will be built. But you could see the property have value over time. And our plan is to phase this in: a third in 2025, a third in 2026, and a third in 2027. So people who have got their long term land use, their long-term speculation to do over one, then they’re going to have a chance.
Finley: But the tax cuts will come.
Duggan: We’ll phase them in by a third.
Finley: So some people in the city will see a tax break in the first year?
Duggan: In the summer of ‘25. You’ll see a 30-year break. Summer of 26. The second two-thirds of your break of the summer of 27, all of you break. So, the whole thing will be phased in one third of summer taxes in ‘25. So you think about this. We’ve got to pass this in February 2024. We gotta redo every assessment in the city.
And the bills that go out in February ‘25 and paid in the summer ‘25. So, the earliest one will go smoothly. We can do anything in the summer of ‘25, but I’m not looking for an overnight fix. For 50 years, we’ve incentivized the city to subsidize blight.
Finley: When I want to get back to the phase in. I mean, you don’t, you know, expect it to change everything right away, but a homeowner out there is going to expect a tax break when everybody else gets it.
Duggan: They will get it the same time.
Finley: Okay. When you when you talk about phasing in the tax break, what do you mean?
Duggan: One third of any change in the taxes – up or down, business or home. The new assessment bills will go out in Summer ’25 and we will put one-third of the change on that bill. So, if you’ve got a thousand-dollar homeowner tax cut coming, you’ll get $300 in ‘25, $600 in ‘26 and $1,000 in ‘27.
Finley: That is particularly helps the neighborhoods, right?
Duggan: Oh, it helps the neighborhoods tremendously. But if you are sitting on vacant lots and vacant buildings or your warehouse, that has way more land that you need, your taxes will get…
The downtown has more of an effect because in the neighborhoods land is worth virtually zero. Downtown, Midtown, Corktown — land is higher. So, when you triple land values, it’s going to hit the land in downtown, Corktown, Midtown prime. On the other hand, they tend to have bigger buildings. Those are going to have huge cuts.
Miles: So how do you ensure that the folks who are sitting on the land pay their taxes?
Duggan: If they don’t, they are foreclosed. Today, there are 90,000 vacant lots in the city, the land bank owns 60,000 and the five owners own 30,000. Which means 30,000 people have been paying for years to hang onto that property.
Miles: So, if they foreclose they go to the Land Bank?
Duggan: Right. Exactly. Their taxes will go from $30 a year to $85 a year.
But I would rather have them at the Land Bank where you can assemble them. But even better would be if they didn’t just do the calculation.
But when they see the taxes on the houses come down 25%, do some people start looking at building out? Nobody. Right now, if you sit down, you don’t tell them I’m going to go to Farmington or Detroit and everything else aside the mortgages to not going higher. Just Google that. So who would build a new subdivision in Detroit? That’s a big part.
Finley: Yeah. How confident are you that it will be revenue neutral?
Duggan: It will be close enough. We’re going to get 90-100% of it back.
The increase in growth… It will be so much more benefit income tax revenue that if we don’t get 100% that it’s not a great concern. But again, we think about phasing in over 25, 26, 27. There’s plenty of time to adjust, but we just believe the income tax revenue growth will be worth any lost property taxes. But if we get 90%, we still come out way ahead.
Speaker 3 In the meantime, do property values in the in the neighborhoods increase?
Speaker 2 Absolutely.
Miles: And that means a revenue increase on that eventually when the value increases.
Duggan: When it’s sold, we have the right vision in Michigan that your property taxes will go up as long as you hold it. But there’s no doubt when those houses are sold, the values will be up.
Miles: So they’ll be a long-term benefit as well.
Duggan: Absolutely. Your house tomorrow will be worth more because the person who buys it knows that my taxes are, you know, for the long run down 25%. Right. I mean, everybody factors into what’s my monthly mortgage bill.
Finley: And you believe you’ll get it through the legislature. Have you had any conversation at all?
Duggan: Don’t know. I don’t discount anything.
Finley: And you think you have a citywide vote as well?
Duggan: Yeah. So, remember, the HEADLEE Amendment says you can’t raise property tax for most people. Right? So, we would we’re going to have to raise the basically land tax 86 mills to 246 mills.
Finley: So it’ll go from 86 mills to 246 mills.
Duggan: The land will.Your building, your house, will go from 86 to 60.
Miles: You got someone crafting that ballot language.
Duggan: But when you put the two together, you go from 86 to 67, that’s a 25% cut because the land in Detroit is taxed at virtually zero.
Finley: 86 to 67.
Duggan: An average homeowner is going to get, when you add the increase in the land, the decrease in the house, we’ll get an average of 25% property tax cut.
Now, if they look at the ballot language and it says 246 mils? Yeah, but I don’t think Detroit will have a whole lot of trouble understanding this.
Finley: So you think you’ll get it through this, through the voters.
Duggan: I think the voters will overwhelmingly approve this. Our challenge will be the legislature, because there will be people who, you know, who have been operating on this speculative basis for a long time, more than they want. And they will certainly push back on the legislation. That’s a challenge.
Miles: But aside from the speculators, are there any interest groups that are negatively affected, that.
Duggan: Parking lot owners, people who have scrap yards and oil yards and think about it, they spread out the land before the typical land, they’ll be affected. And people who have most businesses, what we’re going to say is if the parking is needed for your business by zoning, so you’ve got a grocery store, we’ve got to have out point. We’re going to tax that as a lower 60 mills. So, we’re going to treat your required parking as a business the same as your building. But if you get a bunch more land than you need for parking, it’s going to get tripled. And so there will be a lot of people who have never worried about it before because they never cared about the cost. Will they sell off some of that land? Will they expand their businesses? These are we’re putting the incentives in the right place. So we’ll see what happens over the next year.
Miles: How does this impact, if you know, something like an arena? It requires a lot of parking, but only occasionally.
Duggan: The arena is publicly owned.
Finley: So even parking structures would count.
Duggan: You will have structures that remember, we just tax the land itself. If your land goes up to three or four floors, you’re doing well. The land goes up 10 floors, you’re doing really well. But if you leave it just surface, you’re going to see a big increase.
Finley: You saw the report on rents in the district being well above market rate in Detroit or being well above the current proposed rents for the District Detroit. Does that concern you at all?
Duggan: Again, you look at what they did, 20% are affordable to take in Section eight vouchers. So, you’re going to have what I think we ought to have in the city, which is people of all income will be living there. And so, you’re going to have folks in section eight subsidize apartment units in the same buildings as doctors and lawyers. But that’s the way it is in New York. So, no, we got a nice mix. This is the first time I know of that any one of these downtown midtown developers is taking Section eight vouchers. But that was one of the commitments they made. If you look at what we’ve done in Corktown, the rents have risen significantly. That’s natural. We have got more affordable housing in Corktown now that we started because we’re building a good deal of affordables. You’re going to have more upscale housing in Corktown and more affordable housing. More of everything, that’s what we should have.
Finley: So you’re taking care of — hope to take care of — the tax obstacle to make Detroit attractive for middle class families or developers or what have you. The other obstacles? Crime? Schools, you don’t have a whole lot to do with. But crime has been a very troublesome subject. I mean, you haven’t been able to make a whole lot of impact. You expect a bad summer?
Duggan: So I do not. So again, everything is relative, and homicides are down 30% from when I started, but they are higher than they were before COVID.
But we’ve got a great police chief. We’re hiring 300 cops who filled 100 vacancies already this year. We will fill the other 200 by the end of the year because of the $10,000 raises last year allowed us to fill our positions. So now, Chief White, literally by the week, has more officers on the street.
The courts are doing a great job.
But our report card is going to be what the numbers are. But I think what Chief White is showing you is that one bad weekend downtown where we had unseasonably warm weather in early April, and we had a spring deployment out, and we had a summer deployment. But if you look at — I’m down there every Saturday downtown, and you look at what DPD has done, and it’s been a dramatic improvement. Now, we had shootings at Rouge Park. There will be a new park strategy being rolled out, but I am really confident. I think we’ve got the best police chief in the country. They’re finally getting the staff that they need. And it’s critical that the legislature has a proposal for the police officer revenue share, which is they’re proposing $100 million to go to cities based on crime rate, to hire more police staff.
Finley: And that’ll claim part of the sales tax within a city.
Duggan: Right. But out of all of their priorities, public safety ought to be the highest. And so now you’ve got resources for this in Detroit. People would like to see a patrol car coming down their neighborhood streets. Right now, we’re responding to 911 calls pretty well. We’re investigating the shootings pretty well. But you see people running the red lights in Detroit all the time. There are just not enough basic patrol cars. And that’s a responsibility I’ve got to solve and hopefully legislation to help us.
Finley: Do you have any thoughts on the why behind the increase in crime?
Duggan: I understand exactly why. I watched it happen. Every city in the country has had this. So, in March of 20, courts in America shut down. And, most trials in Wayne County, at least criminal trials, have been bench trials. They don’t normally take a half a day to pick a jury or two or three witnesses and topple somebody over. But when that happened, every defense attorney demanded a jury trial in every single case, which meant for two years you had virtually no criminal case in processing. Who would take a plea when you know you’re two years away from trial date? So, then they backed up with the jails, and then you had to release tons of people.
You would write the stories about the ridiculously low bonds. Well, they had to reduce the bonds because they were backed up with the jails. And when that happened, you had lots of people who were charged with crimes with guns who were literally on the street, and that caused a lot of other folks on the street who wouldn’t normally carry to carry themselves.
You got more people carrying guns in this country than we’ve ever had. And it’s a different kind of violence. Ten years ago, a lot of the violence was gang or turf kind of violence. Now it is beefs. Everybody’s carrying a gun. Somebody cuts in front of somebody in line. Somebody dumps the leaves on somebody else’s lawn.
And so now we are seeing the rise in the violence, being beef-driven. We have to change the decision making so you don’t leave the house with the gun under the belt in the first place. And that’s everything that DPD is trying to do right now and all of our other partners. We need to get back to that. But the fact that the courts are clearing out the backlog is a huge help. The fact that Sheriff Washington now is picking up the guys who violate the law, he’s going out and picking them up. It’s a help. Kym Worthy is doing a nice job catching up on her side. And so, I think within a year the courts will be normalized in Detroit.
But it’s been frustrating for these cops to arrest these guys and see them out on the street the next day because the systems come with stuff like that. I mean, every mayor in America has exactly the same problem.
Finley: So what do you expect this summer and what’s your preparations?
Duggan: You know, we’re going to just wait and see, but all the preparations are phenomenal. So, you should talk to Chief White. But literally, the feds, the county, the state, the city all have plans that are working together. And we’ll see.
Finley: I ran into Aric Nesbitt from the Senate walking down the hill last night, and he asked, ‘why doesn’t Detroit just take over Highland Park?’
Duggan: Nobody’s asked us, you know? There’s been no conversation about that.
Finley: What’s your feelings on that?
Duggan: Nobody has approached. There’s been no conversation. The only way to merge cities is with a vote of both cities. But I know nothing about Highland Park’s finances.
I don’t know what kind of pension debt they have.
Finley: So, you know, you don’t have any thoughts on whether it’s viable or not?
Duggan: No. No conversation. No matter what, though, somebody would ask us to look at it. But nobody has. And I don’t have enough information.
Miles: What about you? What’s next for you.
Duggan: I am going to pass this flat rate tax, this land value tax. And we’ve got about four more major parcels in the city that don’t have employers on them. Then we will be out of large parcels.
Finley: Are you nearing the end of the job? That you’ve accomplished what you wanted to?
Duggan: A year from now I’ll make that assessment.
Finley: So a year from now puts you right in the decision of what you’re going to do in terms of mayor. One person has mentioned the possibility that you’ll run for governor. I know you were asked that the other day.
Duggan: I’ve been asked about the governor for 20 years.
Finley: Is it looking more attractive to you than it was 20 years ago?
Duggan: I don’t know. I don’t know what the future holds. So, I get two and a half years of my term and we just had a governor’s election. So, we’ll see.
Finley: You’re not interested in retiring.
Duggan: I Don’t know.So, I’ve been married for two years now. My wife is participating in this decision. But right now, things are really good. I’m enjoying the job very much. People in the city have just been tremendously supportive of me.
Finley: So, if you if you were to sort of give odds that you’d run for yet another term.
Duggan: I don’t know. I going to sit down a year from now and see how things are going.
Finley: Do you feel like if you don’t run for mayor, there’s a good pool of potential mayors?
Duggan: There’s lots of candidates out there whether I run or don’t.
Finley: Well, there’s obviously lots of candidates. Are there candidates that you would be comfortable handing things over to?
Duggan: You know, I don’t want to endorse somebody who might become my opponent. So.
Finley: Well, I’m not asking for specifics, but as you look at the talent—
Duggan: There is a whole range of talent and you’re seeing it in the legislature, you’re seeing it at the city level, you’re see it in business as a whole. I mean, the city has come back with a lot of people who played a role in it. There’s a lot of big talent out there. And I think whether I run or don’t run in 2025, there’s going to be a lot of candidates.
Finley: If you were to decide to run for governor, what would you bring to that office that you think needs.
Duggan: Haven’t given it any thought.
Finley: Not a bit?
Duggan: Not a bit. If I do the mayor’s job well, other opportunities will present themselves. But Gretchen Whitmer’s not calling me for my advice on how to run this state, so.
Finley: So we just saw the census report where we had a decline in population statewide, and in this city. You said famously said to judge by population, and it’s not been positive.
Duggan: Well, we’ll see. If you ask people in the neighborhoods who lived in blocks where there were 15 or 20% vacant ten years ago, and those houses are all filled with people. We’re at 10,000 vacant houses that people have renovated and moved into.
People in neighborhood don’t believe the census number, but they react to me. If you’re hanging out with me in a neighborhood, people are not complaining that the folks are moving out. They may be complaining about the dead tree in the front yard. So, we’ll see.
We’re going to get a chance to appeal this estimate because now, finally, the Census Bureau will have to turn over their formula, which they’ve guarded like it was the secret formula for Coke. I don’t believe they’re going to be able to.
DTE says we’ll be able to provide power to 5,000 more residential houses. Waterpower says we’re running water to 6,000 more residential houses. The post office says we’re delivering mail to 4,000 more residential houses. Somehow, the Census Bureau is looking at some formula and saying, people will go. So we’ll get the data in the next month or so because it required our turn over to us.
We’ll challenge it. But the statewide issue, which is the more concerning issue, which is the reason we have a statewide issue, is our population is aging and young people aren’t moving in our state. And I look at that and say the key to that is the city of Detroit, that the kind of environment that the young folks want is the urban environment. It’s true all over the country. And the more attractive a city Detroit gets, the more vibrant city Detroit gets, the better chance we have at keeping our young people.
Finley: Has that urban environment changed because of the pandemic? Is it as dynamic and vibrant downtown?
Duggan: Oh, I think so. I think so. It may not be the mid-day office workers, but, you know, a whole lot of people move in. Our housing is booming. If you are working from home, you don’t want to be working from home out of some suburban house. You want to be where when you get off work, you’ve got the sports events, the concerts, the riverfront, the festivals they like. So, we are seeing huge demand increase for housing. So come on down on a Friday or Saturday and see what’s going on. It is very vibrant.
Finley: So, if the legislature doesn’t approve this plan, any city in the state could take advantage of it?
Duggan: They could do it one or two ways, they can either do it an opt in or do it for Detroit only. But you would really have to have a city whose land values is almost zero for it to work. Only a handful of cities would even look at this. But from our standpoint, we don’t care if it’s opt-in for everybody, which they’d have to have a local vote or whether it’s Detroit only it’ll be whatever the legislature wants.
