Property Tax Revenue On a Slow Rise

Value of property increased 12 percent over past four years

The largest source of revenue for local governments is property taxes. They raised $14.0 billion for the state, schools, community colleges and local governments in 2017, a 2.42 percent increase from the previous year. Property tax revenues are approaching their 2007 peak of $14.3 billion. But with inflation, they would still be 13 percent below these peak levels.

That’s not bad considering that the tax is based on the value of property in Michigan. Assessed values dropped 31 percent from 2007 to 2013 when adjusted for inflation. This is the value of all real estate, including industrial and commercial properties. Things may have been even worse for homes. According to the Michigan Association of Realtors, the average home sold for $192,000 in 2005, but this dropped to $114,000 in 2011. Nevertheless, assessed values are on the upswing since 2013.

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A property’s taxable value cannot increase faster than inflation, a policy in the state constitution. But values are reset when a home is sold. This may explain why property tax revenue has lagged the increase in property values. But according to the Michigan Association of realtors, the number of home sales has been on the rise and is within 3 percent of 2005 peaks.

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Detroit Prep is a top-rated and economically and racially diverse charter school in the city. It's growth means it needs to move out from a church basement and into a new location. Nearby is a former Detroit Public Schools building, sitting empty for years. But, worried about competition, the public school district refused to sell. For years, district and local government officials in Detroit had worked to block public charter schools. They pushed legislation at the Michigan Capitol to hinder them, refused to sell to them, transferred surplus buildings from the district to the city government and imposed deed restrictions on property sales to private developers. All of it was aimed to hinder or even prevent charter school choice outside the confines of the Detroit school district.

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