Just how high are the taxes in Ypsilanti anyway?

193nt5As several people have pointed out over the past few weeks in relation to the Water Street debt reduction millage which was recently defeated at the polls, the people of Ypsilanti already pay a much higher tax rate than those who live elsewhere in the region. In hopes of finding out why that is, I thought that I’d ask a few folks who I thought might be able to offer some insight. What follows is my conversation with former Ypsilanti City Planner Richard “Murph” Murphy, Ypsilanti Director of Economic Development Beth Ernat, and Ypsi City Council member Brian Robb.

MARK: As of right now, what can the typical Ypsilanti homeowner expect to pay in the way of taxes? For the purposes of our discussion, let’s assume we’re talking about a house that someone just purchased this past year for $100,000.

MURPH: A homeowner in City of Ypsilanti pays 35.0727 mills in City taxes. This includes the general operating millage and the dedicated millages: transit, sanitation (trash/recycling), police and fire protection, and local street repair bonds. Ypsilanti homeowners also pay another 32.4252 mills to other various entities including Washtenaw County, Ypsilanti Community Schools (YCS), the Ypsilanti District LIbrary (YDL), the Washtenaw Intermediate School District (WISD), the Ann Arbor Area Transportation Authority (AAATA), Washtenaw Community College (WCC), and the state education fund. [Source: City of Ypsilanti Treasurer.]

MARK: So, when you add it all up, what does that come to?

MURPH: 1 mill = $1 per $1,000 of taxable value. And the taxable value of a property is assessed at half of “market” value. So your hypothetical homeowner, who purchased a property for $100,000, would be taxed based on a value of $50,000… Here’s the math:

$50,000 / 1,000 * (35.0727 + 32.4252) = $3,374.74 in taxes.

MARK: So, if you just moved to Ypsilanti this year, and paid $100,000 for a home, you should expect to pay 3,374.74 in taxes your first year?

MURPH: Yes, and someone who has owned their home longer would pay less, because a property’s taxable value doesn’t rise as fast as its market value… It might also be worth noting that rental property anywhere in the State pays an extra 18 mills.

MARK: And how does that stack up against communities elsewhere in Michigan?

MURPH: It depends on who you’re comparing us with. Within Washtenaw County, Ann Arbor residents pay 16.3003 mills to the city + 25.8754 mills to other entities, or 42.1757 mills total. So, if by some miracle, you found a $100,000 house in Ann Arbor, you’d pay $2,198.79 in taxes. Using Zillow’s numbers for median home value in each city, though, the median new homeowner in Ann Arbor will pay $6,705.94, vs. the median new homeowner in Ypsilanti paying $4,606.73. Saline has 16.28 local mills, and 45.0289 mills total, so a median new homeowner there would pay $5,108.53.

MARK: So, while it’s true that our tax rate is higher in Ypsilanti, it’s also true that, on average, we pay less in taxes than elsewhere in the county, given that houses here tend to sell for less.

MURPH: Yes, but people are right when they say that Ypsilanti has among the highest local millage rates in the state. It’s also true that Washtenaw County has higher than average taxes.

MARK: And it’s not just Saline and Ann Arbor that we’re higher than. Online, in a recent discussion about our Ypsilanti tax situation, someone posted the following: “Not everyone is willing to live in hipsterville if they can move a block out of the city and pay $600 less a year in taxes.” Leaving aside for a moment his comment about “Hipsterville”, the person who wrote this is correct about the significant tax savings that can be had by purchasing a home in Ypsilanti Township, just a few feet outside of the city, right? What accounts for that difference between city and township taxes?

BRIAN: Well, there are structural reasons why the millage rate is high in the city, but the high millage rate is also due to decisions we’ve made as a community.

Somewhere in the distant past, voters adopted a fire and police pension millage that will be 7.8415 mills in FYE 2017. And, in 2001, the voters passed a road millage that will account for 4.5866 mills in FYE 2017. And, in 2010, we overwhelming supported a 0.9789 mill increase for public transit. If we pass the Regional Transit Authority (RTA) and Washtenaw County road millages this November, we’ll be adding another 1.7 mills to our annual tax bills.

Some of those decisions were questionable. For example, back in 2004, City Council adopted new fire and police labor contracts that increased the retirement multiplier from 2.5 to 3. The Council seated at the time made this change retroactive. Not to get into the weeds too much, but, in 2003, the fire and police pension was overfunded by $4.9 million. In just two years, the system was underfunded by $1.6 million. That’s a swing of $6.5 million. Today the pension is underfunded by more than $15 million. That’s the biggest reason our millage rate has increased from 1.7197 in FYE 2005 to 7.8415 in FYE 2017. Given the opportunity, I’d like to think the Council, as currently constructed, would not make that same mistake.

You could also argue the road bond was a poor decision. The local streets were allowed to deteriorate to the point they all needed replacing at the same time. The road bond millage raised $16,930,000. The problem is that money was all in-hand at once, but the construction couldn’t all be done at the same time. As a result, a significant portion of that revenue was used to pay interest on the debt resulting in a higher millage rate. It was important to fix the roads, but the millage as executed was the wrong mechanism. Again, I would like to think the Council, as currently constructed, would not make that same mistake if given the opportunity.

MARK: So it’s not just that we’ve got an aging city, and state revenue sharing is drying up… You’re suggesting that, to some extent, our current tax rates can be attributed to poor decisions in the past.

BRIAN: Right, but it should also be noted that Council has done some good things that are saving us money. The transportation millage of 2010, for instance, was a genius creation thought up by Council member Murdock. It preserved busing and led to the City (and eventually the Township) joining the AATA. And, ultimately, it led to the expansion of bus service throughout the AAATA service area.

BETH: I would also add that, in Michigan, we’re living in an era of al la carte government. With reduced overall revenue sources, city governments no longer determine the types of services that are offered. Instead, the services are dictated by millages decided by the people. As was mentioned earlier, the voters decide what types of transportation services are available, if parks are created, and if recreation services are offered. Voters also decide how they fund employee pensions, as well as what types of police, fire, and ambulance services are available. In the past, when revenues were available, all of these services had been provided for by our traditional cities. That was the main difference between city and township types of government. The urbanized cities had transportation, parks and recreation, libraries, arts and culture, sidewalks and paved streets. In today’s economy, what you get is dependant on how many mills a city or township can change, and what the voters choose when the options are provided.

MARK: Murph, do you have anything to add on the subject of why our tax rate is so high in the City of Ypsilanti? Are there statewide patterns that we should be talking about?

MURPH: Yes, Brian mentioned “structural reasons,” and a lot of this has to do with the dynamics we’re seeing statewide – Ypsilanti is not unique. Look at SEMCOG’s report “Running on Empty” from 2014, or Michigan Municipal League’s “SaveMICity” website, especially the report “Michigan’s Great Disinvestment” by the former head of the Michigan House Fiscal Agency. Both of these outline the fiscal straitjacket that Michigan has put local communities in, especially with the combination of the Headlee Amendment and 1994’s Proposal A. (For transparency, MML is my employer.)

The big takeaway from those is that, no matter how fast home values go up, or how many new businesses open downtown, cities’ property tax revenues can only go up by the rate of inflation every year. Which means, in real dollars, the revenue the city collects from an existing millage never goes up. In a down market, though, it can drop 5%, 10%, whatever in a year – there’s no floor, and then the cap is reinstated at that lower level. The only way around this is new construction, or new millages.

MARK: And this is exacerbated in Ypsilanti because so much of our property is owned by non-tax-paying entities.

MURPH: Yes, we’re hindered by the amount of non-taxable property we have: state and county offices on Michigan Ave, the school properties, the churches, parks, etc. Our taxable value per capita is a lot lower than some nearby communities, so we have to pay higher rates to get the same revenue. And we have to provide services to those destinations (police and fire protection, maintaining roads for traffic to them, etc.) but they don’t bring in income. (The state is supposed to reimburse locals for fire protection to state-owned properties, but they’ve been shorting those payments by about 50% for over a decade.)

Many cities host non-taxable regional destinations, but EMU’s campus is our unique piece, for how big a portion of the city it takes up. In bigger college cities like Kalamazoo or Ann Arbor, the much larger size of the city reduces the impact of campus some. In other small college towns like Albion or Big Rapids (Ferris State) where the campus makes up a similarly large part of the city area, they use income tax to make up the difference.

BETH: Adding on to what Murph is saying, we should also note that EMU is our biggest economic development opportunity. The school creates jobs in the city and region, provides education, and generates traffic All three of those items are necessary when building a business ecosystem in a community. However, EMU does account for 40% of the land area in the city. And, if you include the schools and other non-tax paying entities in the community, the tax base is reduced by another 10%, bringing the total to 50%. All of these entities still require city services, police, fire, roads and plowing. The tax rate is based on the 100 percent of the City, therefore, the other taxpayers have to make up the difference in their taxes. When there are more taxpayers, the tax burden on individuals is spread more evenly.

MARK: Speaking of schools, we should probably acknowledge the fact that home value to a large extent is a function of a school district’s perceived quality, correct?

MURPH: Yes. When the County did their regional equity analysis a year or two ago, and the consultant was pressed about the potential impact of schools, he gave an off-the-cuff estimate that putting Ypsi into the Ann Arbor school district would “overnight” raise the value of every residential unit in the Ypsi school district by $10k-$40k, just from the relative perception of the school districts.

The schools are also a factor in terms of the value of individual properties. Homebuyers pay for perceived school district quality–often even if they don’t have kids themselves. When I try to recruit friends to move to Ypsilanti, local complaints like taxes or crime fears are never the deal breaker for them–they move to Ann Arbor or Saline for the school district. It’s probably the biggest factor in why Saline’s home prices are nearly twice Ypsi’s, feeding that taxable value per capita equation.

MARK: OK, let’s talk a little more about the effects of Proposition A and the Headlee Amendment on aging cities like Ypsilanti.

BRIAN: Prop A and Headlee are killing everyone… not just those of us in aging cities. After the housing crash, the City lost 35% of its property tax revenue in two budget cycles. Even as values continue to rise, our tax revenues barely increases. Taxable value cannot increase more than the lesser of 5% or the rate of inflation. Last year the assessment on my house went up over 10%, but my taxable value only increased by 1.5% (compared to less than 0.5% city-wide). At it’s peak, my house had a taxable value of $60,900 in 2008. If my taxable value increases 1.5% a year, it will take until 2044 until my house has the same taxable value as before the crash.

MURPH: Right, Headlee and Prop A hit everybody, and the only way around those limits without adding millages is new construction. That’s where older, “built-out” cities face an extra challenge: they don’t have farmland to build on in order to add that new construction taxable value; they have to try to upcycle existing properties, and deal with the brownfield and other challenges that come with that. (This is where Water Street came from.)

MARK: As an illustration of that, I’ve heard that property tax revenues only went up something like $11,000 in fiscal 2016, right?

BETH: To start with, property taxes are always calculated one year in arrears. So when we are discussing this year, the 2016 fiscal year, we are working off of 2015 taxes. The tax increases for 2016 are minimal to the City revenue, but they show a better fiscal vision of the future than not. As with any loss, the rebuild will take significantly longer. The 2008 downturn and recession was partly caused by overinflated property values. The creep in tax revenues is a more realistic outlook on where the property tax revenues should be. That being said, it does not help the City and the financial realities of provided services without an increasing revenue stream.

MURPH: And even when a property sells, and the taxable value “pops up” under Proposal A, that doesn’t yield an increase in revenue for the city. Under Headlee, the city’s revenue is still capped, so having properties pop up during sales means the millage rate has to be reduced to keep revenues at the rate of inflation. The good news there is that having property values increasing and lots of properties selling at those higher values will reduce the tax rate…but not increase the city’s budget.

MARK: Let’s jump back for a minute and talk a little more about revenue sharing from the state. How have things changed on that front over the past few decades?

MURPH: Over the years, the State of Michigan has strictly limited local communities’ options for raising revenues; in exchange the state was supposed to provide funding through “revenue sharing”. The idea was that the state would take care of collecting funds and then distribute them out to the locals, and be more efficient than having the locals collect these taxes. Starting in 2002, though, the state has gone back on those promises, and hasn’t paid the full amount in any year since then. From then until 2015, the state has shorted the City of Ypsi by about $10.5 million in total. Currently they’re shorting Ypsi about $1.26 million / year–which would be more than enough to cover the Water Street payments. (MML has a calculator online that you can look up other cities.)

For more on this, see Citizens Research Council’s 2015 report, Reforming Statutory State Revenue Sharing, especially the section “Promises Made” starting on page 15.

MARK: As one of you mentioned earlier, the only real option to increase your tax base in a significant way is through new construction, which Michigan’s older cities, like Ypsilanti, can’t easily do, given that we don’t have a lot green space to expand into.

BETH: Yes, this is true. Ypsi only has about a dozen greenfield sites, if that. We have no room for expansion or mega subdivisions. Industrial parks and properties are also great ways to increase the tax base and diversify the tax base. Cities that have had long term success through many economic downturns tend to have diversified tax bases, that is the right mixture of commercial, industrial, multifamily and single family. However, older cities prided as bedroom communities and communities with industrialized niches have been hardest hit by revenue sharing, reduction/elimination of personal property tax, and Michigan’s overall tax structure.

MARK: And, it’s probably worth noting, this is why, a few decades ago, our Mayor and City Council decided that, as we didn’t have large parcels of development-ready property available, we should buy-out the largely industrial businesses on Water Street with the intention of bringing new, higher-value construction downtown…

MURPH: That’s my understanding, yes – as early as the mid-80s, the city was looking at Water Street as an opportunity to replace blighted, low-value property with higher value development. (See the 1985 comprehensive development plan for that era’s version of the project.) I wasn’t around for the first 20-some years of discussion, though, so can’t say well what other motives were there or how the plan evolved during that time.

Because construction is the only way to grow revenue, and Ypsilanti doesn’t have miles of cornfields to build on, Ypsilanti does need to support “up-cycling” of properties – but Water Street demonstrates the risk in having the city manage land assembly, and in having that done in such large chunks.

MARK: So, where does that leave us, especially relative to the Water Street debt, which is going to require that we start paying something on the order of $700,000 a year. I’ve heard from a number of people that they’d like to support a millage, so that we can pay off the debt, but they’re afraid that, by doing so, we’d discourage new home ownership in the city, as “the taxes are already too damn high.” What’s the solution?

MURPH: Good question. If no new millages, cuts are the easiest fix to think up, and probably need to be a part of a solution. Some things might also be restructured or done differently–there was a discussion of combining police and fire into a public safety department a few years ago, and before that there was an analysis of using the County Sheriff instead of a standalone police department; I don’t know if either of those offered significant savings, but it might be time to revisit those ideas.

I’d most like to see us think about development as a way to increase the revenue per mill, though. Water Street is obviously a big part of that, and the city has other vacant properties available for sale. Somehow finally getting the Ford plant owners to do something with that 80 acres would be good. Getting revenue up and tax rate down probably needs a lot of small projects to happen too, though. The new neighborhood enterprise zone to help support reinvestment in the neighborhood south of Michigan Avenue was a great step in that direction. We’re still limited by lack of vacant land, as Beth noted, and with most of our taxable land area limited by zoning to single-family homes, there’s only so much upcycling we can do – it takes a lot of people doing $50k additions on their houses to create significant new revenue.

[note: If you’re interested, our last conversation about the Headlee Amendment and Prop A, can be found here. And, if you want to make your own “too damn high” image, you can do so with the Jimmy McMillan meme generator.]

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42 Comments

  1. Anonymous
    Posted August 18, 2016 at 6:42 am | Permalink

    So what you’re telling me is that we’re fucked. 50% of our city is un-taxable, and, because of Headlee and Prop A, the revenues collected from the other 50% can’t keep up with our costs, which are rapidly escalating due to legacy debts, like public employee pensions and health insurance. The only alternative is new construction, and our best parcel is contaminated.

  2. Glen S.
    Posted August 18, 2016 at 6:49 am | Permalink

    I wasn’t thrilled about the recent tax proposal, since I think simply piling an additional millage on homeowners and small business owners isn’t the best approach.

    Still, I voted “yes,” because above all – I don’t want to see the Ypsilanti go broke or end up with an EM.

    Now that City Council has decided not to put the original measure back on the ballot in November, I hope they’ll use the opportunity to come up with a more balanced approach – ideally one that combines a smaller millage increase with new assessments or fees that make EMU, churches, and other non-profit entities pay more of their share for the services from which they benefit.

  3. M
    Posted August 18, 2016 at 6:59 am | Permalink

    “…one that combines a smaller millage increase with new assessments or fees that make EMU, churches, and other non-profit entities pay more of their share for the services from which they benefit.”

    I’m intrigued. Have other cities found ways to do this? I thought that our only option, if we wanted this other 50% to contribute, was to pass an income tax. Is that not the case? Is there a mechanism by which we can get EMU and other non-profits to contribute?

  4. stupid hick
    Posted August 18, 2016 at 7:03 am | Permalink

    Bravo, Mark. Valuable and interesting work you’ve been doing lately.

  5. The Real Real McCoy
    Posted August 18, 2016 at 7:23 am | Permalink

    “So, while it’s true that our tax rate is higher in Ypsilanti, it’s also true that, on average, we pay less in taxes than elsewhere in the county, given that houses here tend to sell for less.”

    We pay “less in taxes” because our houses sell for less. They sell for less because the value is eaten by the higher tax rate. We also get less value because you don’t have the Saline or Ann Arbor school district in your backyard. There’s no silver lining here.

  6. Jay walker
    Posted August 18, 2016 at 7:55 am | Permalink

    Close the terrible school that we have and send the kids to the better school districts that surround us. Forcing these children stay in these terrible schools because their parents can’t afford transportation to Ann Arbor or surrounding areas is shameful. Everyone has a basic human right to have their kids safe and educated. Collapsing Ypsi schools would be the best for the kids and the citizens. Our home values would go up and because of that the city would get more taxes and our problems could start to go away. Our kids would be safe with better educations.
    Combine the township and the city fire department. The firefighters in Ypsi could all go work for the township. We could also use the sheriffs in the city and get rid of all of our legacy costs.
    A lot of our Ypsi Police Department has already gone over to the sheriffs department anyway. The rest could get jobs as Sheriffs instead of Ypsi police.
    We need to start thinking more regional.

  7. Linda French
    Posted August 18, 2016 at 8:04 am | Permalink

    Thank you Mark for putting this all into perspective. You have become a very valuable asset to the city.

  8. Dan Blakeney
    Posted August 18, 2016 at 8:26 am | Permalink

    I have a question: How can the State not follow through with revenue sharing promises?

  9. Shane
    Posted August 18, 2016 at 8:40 am | Permalink

    This article, and the containing interviews, was what I’ve been waiting for. Everyone living in Ypsi needs to read this…seriously…everyone.

  10. Rat
    Posted August 18, 2016 at 8:56 am | Permalink

    The question is, how do we get the churches to sell their buildings and move to the Township.

  11. Shane McParland
    Posted August 18, 2016 at 9:03 am | Permalink

    Sounds like we need a city income tax, particularly to capture revenue from EMU, churches, etc. That was tried already though as I understand it.

  12. Andrew Clock
    Posted August 18, 2016 at 9:09 am | Permalink

    Thank you, Mark. This is one of the discussions that needs to happen if there’s going to be a real, inclusive path forward for Ypsilanti.

    If someone can post a comparison of rates in Washtenaw County, it would be a big help. I haven’t found a link with a good, legible comparison. When I took the first time home buyer’s class and they passed around a tax rate sheet, the difference in rates shocked the whole class. I can’t imagine that was the only time. That’s a problem.

    For the record, I made the hipsterville comment, and I made it to make a very specific point about the economic concerns of Ypsilanti’s broader electorate. And this starts to address that point. Thanks again.

  13. Dan
    Posted August 18, 2016 at 9:30 am | Permalink

    Andrew,

    Washtenaw County rates start on page 164:

    http://www.michigan.gov/documents/taxes/2015_Total_Rates_Report_-_Entire_State_515118_7.pdf

  14. John Nipper
    Posted August 18, 2016 at 9:35 am | Permalink

    Thank you for discussing an important topic. I’m not sure how the city can get income from non-taxable entities, but it is an important part of getting to a healthier place. People need to be informed on this topic as they approach public decisions.

  15. AM
    Posted August 18, 2016 at 10:06 am | Permalink

    mmm. Damn fine unpacking of the vagaries of rust belt revenue generation. The thing that makes me queesy though is that notion of “up-cycling” properties. This isn’t an Ypsi problem, but a regional problem. You’ve got a place that has, for some time, been fairly affordable for working folks. How do you attract (if it’s even possible) that money the city needs to provide basic services without ending up with blocks of those homogenous, ugly, and damn expensive “sky lofts”? I’m not advocating for the continued existence of the shitty ypsi slumlord, I’m asking if (if it’s even possible) that the interests of those who don’t own property, of people who rent, who likely will for some time/forever, have a place in the conversation? Do we consider “stakeholders” beyond (below) homeowners, when we think of the city’s future? And if not, why not?

  16. Donald Harrison
    Posted August 18, 2016 at 1:56 pm | Permalink

    I reckon we should pass a millage to support MM doing more of this kind of reporting.

  17. Joe M.
    Posted August 18, 2016 at 3:03 pm | Permalink

    Thinking of ideas outside of cuts/restructuring…

    Can a city income tax penalize non-residents more than residents?

    Detroit residents pay 2.4%, while non-residents pay 1.2%. I believe it would be a much more appealing option for the City of Ypsilanti voters if the roles were reversed and non-residents paid more than residents. It could maybe even be used as an incentive to live in the city instead of the township.

  18. wobblie
    Posted August 18, 2016 at 3:36 pm | Permalink

    The horses have already left the barn. We should be setting up a non-profit community trust that the city can sell all the assets worth anything ie. Rutherford pool, Parkridge community center, the Senior Center ect.. That way we as a community would still control those assets when the EFM arrives. We can not cut our way out of the problem, and all attempts at generating new revenue have failed.

  19. Brainless
    Posted August 18, 2016 at 4:02 pm | Permalink

    Honest question: Should the city consider un-incorporating itself? Is that even possible?

    We have a history of gross mis-management and apparently we have an insurmountable structural barrier to ever being solvent anyway. Also, from what I’ve seen, city governance hasn’t been changed enough to prevent the Water Streets of the future (train station anybody? tax abatements to slumlords? the upcoming markmaynard.com millage?).

    Maybe if we broom the whole thing and just roll ourselves back into the township from whence we came we might see the light.

  20. Barry LaRue
    Posted August 18, 2016 at 5:07 pm | Permalink

    I’m not entirely in agreement with Murph’s view on the road millage from years ago. We got an extremely good rate and, since there was a bit of a recession, the prices for the work allowed more streets to be done cheaper. That, and it allowed us to work with YCUA to install new ductile iron water mains under each of those streets. But maybe some would prefer a Flint style water crisis? Instead, we have fewer main breaks in the winter, safer water and less leakage into the ground than adjoining municipalities.

  21. Barry LaRue
    Posted August 18, 2016 at 5:12 pm | Permalink

    The whole “disincorporation” thing is kinda complex. Even if it were possible, the debts we have such as bonding and other obligations would remain and would be part of a special assessment district. There is no way the township would take on that debt, and it’s not fair to their taxpayers. Studies have also shown that combining the fire departments of the city and the township would only produce marginal savings. Still need the same amount of stations, equipment and firefighters. You would really only save on the chief’s salary, which would probably get eaten up in the whole combining process. Police, yeah, the Sheriff could do it, but I suspect the contract deputy rate is pretty expensive. That would be interesting to study, though.

  22. Adam Gainsley
    Posted August 18, 2016 at 6:28 pm | Permalink

    This article did a nice job of laying that out and giving a realistic picture of the situation we’re operating in. One piece of the puzzle is reforming the state government and its approach to financing.

    So one way to get off the couch is to get out and support state legislature candidates who will work to mitigate or ameliorate the broken financial relationship between our state and our cities. In two years we’ll also have an opportunity to elect a governor who wont try to sell our state to his friends.

  23. Richard Murphy
    Posted August 18, 2016 at 6:29 pm | Permalink

    Though keep in mind the majority of the revenue sharing cuts happened pre-Snyder — it is a problem that was very much created through a bipartisan effort; legislative work to fix it will require focusing on issue, not party.

  24. Robert P.
    Posted August 18, 2016 at 6:33 pm | Permalink

    This is really excellent… It should be read by all tax payers… But especially by those who express empty, mindless complaints about how high taxes are and how “wasteful” government is with regard to spending, etc.

  25. Posted August 18, 2016 at 6:50 pm | Permalink

    I take some responsibility for it, but I think if we had been having conversations like this prior to the last millage vote, it might have passed. We need more in the way of open, honest debate on the real issues at play. We need to dig beneath the simple talking points about how we already pay too much, and discuss why that is, and what can be done about it.

  26. Dan
    Posted August 18, 2016 at 8:31 pm | Permalink

    correct me if I’m wrong, but isn’t the benefit/attractiveness of contracting with the Sheriff Dept that you pay “legacy costs” up front? So instead of being unsure of what the pensions and other benefits will cost over decades in the future, you pay the sheriff dept a bit more now so you are not saddled with it later (and perpetually)?

    Also, as noted, the township will never take on the debt of the city. Its far more likely that the township changes its name than engulf the city.

  27. Dan
    Posted August 18, 2016 at 8:38 pm | Permalink

    “if we had been having conversations like this prior to the last millage vote, it might have passed. ”

    A similar argument could be made that if homebuyers were aware of all of the complications with the city tax structure, that even less people would consider buying a home there.

    And there really wasnt much attention paid to your comment that someone can live withing a foot of the city limits and pay far lower taxes. I understand you guys were trying to explain the reasons for that, but you didnt get into any of the impacts of that. It goes for businesses as well. What is the incentive to buy a home in the city limits, when you cna buy one literally next door in the township? What is the incentive for building on Water Street, when you can build a mile down the same road and pay far less taxes?

  28. Paul Schreiber
    Posted August 18, 2016 at 9:16 pm | Permalink

    Back in the early aughts, city council formed a Blue Ribbon committee to study the city finances. The income tax proposal and multiple public meetings resulted. The public was quite well informed at the time of the first income tax ballot question. It was also a campaign issue in the 2006 city council elections.

    Seems that these public information sessions were sorely missed this time around.

    Maybe next time.

    By the way, the Road Bond comment was made by current city council member Brian Robb, not Murph.

  29. Frosted Flakes
    Posted August 18, 2016 at 9:32 pm | Permalink

    Like Dan suggested, I do not understand the notion that people would be more likely to pay more tax to Ypsilanti after understanding the real challenges Ypsilanti is facing. I have often thought one of the worst things Ypsi did to itself is to propose the income tax **because** in the process people became educated about 1) the actual high rate of tax they are paying and 2) the structural challenges Ypsi is facing because of prop a and headlee.

    Murph is basically dispelling a myth that people who are also invested in Ypsilanti love (ed) to cling to–that is, he dispelled the myth that attracting more people to buy a home in Ypsianti will give Ypsilanti more revenue….That wrong belief gives a lot invested people hope…..I tried to explain the situation to Ypsilanti residents many years ago and they laughed at me and accused me of not understanding how “it” works….Honestly, I think having this info out, and common knowledge, would cause people to want to move quickly away from Ypsilanti.

  30. Dan
    Posted August 19, 2016 at 12:11 am | Permalink

    Interesting that the former mayor says the public was very well informed about the proposed income tax, and then they handily voted it down.

    I highly doubt the public was very well informed about how the various state laws restrict ypsis ability to increase tax revenue. But it’s not like the former mayor ever had a clue about anything else either.. Keep voting for clowns and you’ll find yourself in a circus.

  31. kjc
    Posted August 19, 2016 at 6:19 am | Permalink

    Dan I don’t think you fathom the incentive of not living next door to you.

  32. PC
    Posted August 19, 2016 at 6:43 am | Permalink

    I inferred from this interview that EMU utilizes city services for things like plowing, street repairs, etc. I thought they did that themselves. And policing seems to be much more from inside EMU to Ypsi rather than the other way around.

  33. Dan
    Posted August 19, 2016 at 7:40 am | Permalink

    Another great, and useful post kjc. Good stuff as always

  34. Posted August 19, 2016 at 7:44 am | Permalink

    One acronym to rule them all: PILOT. Get the bad PILOT’s off the books, and create good, moderate and uniformly-applied ones to replace them.

    An example of a bad PILOT? The senior towers. An example of a good potential PILOT? One that applies to all non-profit entities (including state and federal owned land, universities, hospitals, churches, etc). across the board – proportional to the value of the land they own. If this was done at even a minuscule percentage of fair market assessments I think city budget woes would be eased.

    Ann Arbor could use one too, but we have our own problems. First, we have the no-longer needed DDA skimming around $24 Million/year from our general fund. Also, it seems our city council is all too happy to violate state law if it benefits their moral/political agendas (like raising the age for sale of cigarettes to 21 in city limits) but can you imagine them asking U of M to participate in PILOT, also cited as being in violation of state law? Of course not. In some sense Ypsi and A2 are company towns, which has done as much as Prop A and Headlee to put the burden of high taxes on residents. A mix of PILOT and non-resident city income tax, combined with cutting the DDA’s improper use of TIF, might be just what our budgets need, then we can give serious consideration to combining school districts.

    Does it really seem like paying $18/day in taxes to own a $100K house in A2 is reasonable, while U of M has an $10 Billion endowment that generates over $100K/day in interest income, and they pay $0/day in taxes?

    FYI- I won’t be checking back to defend this against arguments like “Without the universities our city’s would be tiny crossroads in the wilderness you ungrateful bastard”, because people who say things like that are usually employed by the Universities.

  35. Posted August 19, 2016 at 8:51 am | Permalink

    Jeff Haynor — I’m not going to call you an ungrateful bastard, nor am I employed by a university, but I do work with communities across the state and from that experience think Ypsi would have much different (and larger) problems without EMU here. (Also, the comment that came up repeatedly during the CVB merger that Ypsi would be better off if we weren’t next door to and competing with Ann Arbor: no, we really really wouldn’t.)

    Frosted Flakes — yes, I was alarmed during the recent debt millage campaign when even Mr. Pierce, speaking for the “no” campaign, repeatedly asserted that the millage was unnecessary because rising property values would lead to increased revenue. The only way that works is several years of rising taxable value followed by a Headlee Override vote– which is pretty indistinguishable from a tax increase to the average voter. But, that rising taxable value *does* push down the millage rate (again Headlee), so it’s wrong to say it has no part in the solution here.

    And, the way rising property values and sales *can* lead to increased tax revenue is when those increases hit points where they support construction — whether of new housing on vacant property, additions to existing housing, or replacement of existing structures with new construction. Generally, that’s what I meant in my “upcycling” comment.

  36. Frosted Flakes
    Posted August 19, 2016 at 8:57 am | Permalink

    Jeff Hayner,

    I read your last paragraph, which oddly announces you are unwilling to consider the benefits of living in a university town, but I will ask anyway: Imagine yourself to be a tax paying citizen of a struggling rural town. Part of your taxes goes toward state universities. How infuriated would you be if it was the case that the university of Michigan was also giving money to the city of Ann Arbor?

  37. Posted August 19, 2016 at 8:59 am | Permalink

    Note for transparency, in case needed: comment further up from “Richard Murphy” regarding revenue sharing cuts having a bipartisan history was from me, on facebook.

    Check out graph here of cuts over time, starting in Engler’s last two budgets (FY01-02 and FY02-03), continuing every year of Granholm’s administration except the last (FY10-11) and the first Snyder budget (FY11-12). Since then, Snyder’s budgets have made small year-on-year increases in statutory revenue sharing, though not catching up to historical “full funding” levels.

  38. Frosted Flakes
    Posted August 19, 2016 at 9:14 am | Permalink

    Thanks Murph. I do see how a lot of home sales/ purchases could cause a lot uncapping and lowering of the rates which could snowball into even more purchases…I just wonder how many people would bet on that as an attainable step as part of the solution….It seems like more invested people would just conclude “we are screwed”. Here is an odd fact: Many years ago I asked Steve Peirce about the interaction of headlee and prop a and its effect on revenue. He knew the exact effects exactly as you spelled it out, when I asked him, so yeah, it is weird that he was acting as if there was a direct correlation between an uncapped home purchase and an increase in revenue. The only thing I can think of is he believes there is only one thing to do: shut up and cut. Give that the tax increases have failed he might have a point but I really don’t see how having all this information out there will help prop up property values.

  39. EOS
    Posted August 19, 2016 at 10:45 am | Permalink

    The Headlee Amendment has been extremely beneficial for Michigan taxpayers. Prior to its implementation, rising property tax rates were forcing many to sell their homes and move. This adversely affected many on fixed incomes and the average family. Retirees living in homes they owned for most of their lives didn’t receive any value as their home assessments rose by double digits, but often couldn’t afford the associated property tax increases. Local governments had no brakes on spending and often increased property taxes in a number of ways that didn’t require taxpayer approval in the voting booth. Local government spending typically increased faster than the rate of inflation, yet few citizens received pay raises above the rate of inflation.

    Since 1978, Local governments had to limit their rate of growth to the rate of inflation. If property values rise faster than the rate of inflation, then there must be a rollback in the millage to keep revenues at the rate of inflation. If property values decrease, local governments can have a vote on a Headlee override, which could increase the millage to the previous revenue levels, but they must get voter approval to do so.

    Despite the fact that this was enacted nearly 40 years ago, many local governments continue to spend at rates faster than the rate of inflation. Union contracts are signed that give salaries and benefits beyond what the local government can afford and new municipal employees salaries continue to escalate costs. Assorted new fees, income tax, and other gimmicks are employed to get around the limits.

    Just as hardworking families budget their resources, local communities need to constrain their spending habits for the betterment of all.

  40. EOS
    Posted August 19, 2016 at 10:57 am | Permalink

    When the value of housing dropped in the Township, the voters approved millage increases to maintain revenues. In November, there will be 4 millage renewals on the ballot (In addition to the Wayne County Transit millage). But now that the value of homes have rebounded, and new developments are adding to increasing revenues, there has been no reduction of the millage rates. Township voters should reject these renewals and ask the board to come back with revenue neutral rates. Please vote No on all 5 millages.

  41. Lynne
    Posted August 19, 2016 at 1:23 pm | Permalink

    Headlee is straight up racist though in that it seems to negatively affect communities in proportion to the number of minorities. Surely we can come up with a way to make a system that is structurally going to fuck with the EOS’s of the world for a change?

  42. Meta
    Posted August 29, 2016 at 8:44 am | Permalink

    Speaking of revenue sharing, did you see the Free Press today?

    “Economy improved, but Michigan cities still in crisis”

    The $1.2 billion in revenue-sharing payments the state will distribute to local governments in 2016 is down from nearly $1.6 billion in 2001, without even accounting for the effects of inflation. An April report by Robert Kleine, a former state treasurer, and Mitch Bean, a former head of the House Fiscal Agency, pegged total cuts in revenue sharing to local governments, not including counties, at $5.5 billion since 1988.

    “It is truly difficult to be a city in this state,” and that’s true relative to all other states, said Josh Sapotichne, an assistant professor of political science at Michigan State University who studies financial relationships between states and local governments.

    State Treasurer Nick Khouri told the Free Press he doesn’t agree the system is broken, but now, while the economy is healthy, “is a good time to review and make improvements” to how local governments are funded. Still, the Treasury Department, while happy to assist, isn’t spearheading such a review. Gov. Rick Snyder has named special commissions this year to deal with infrastructure, education, the economy, and painkiller abuse — but none of them relates to funding cities…

    Other states allow local governments greater flexibility in ways to raise revenue, including local or regional sales taxes, business taxes, or liquor taxes, Weinfeld said. A mix of revenue sources is generally better than a single source such as property taxes, he said.

    To Sapotichne, the outlook for Michigan cities is “dire” if state policies don’t change.

    “Cities are really starting to feel the cumulative effects of these different choices,” made by state officials over several decades, he said.

    Read more:
    http://www.freep.com/story/news/local/michigan/flint-water-crisis/2016/08/28/economy-improved-but-michigan-cities-still-crisis/89213194/

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