In Michigan suburbs, once-pricey bedrooms worth less

Some 15 miles southeast of Ann Arbor, the cozy bedroom community of Milan belies stereotypical views of  Michigan's economic decline. Largely white, nestled around a quaint downtown and dotted with upscale, newer homes, it projects the very image of suburban prosperity.

Analysis of property values in 2011 and 2012 tells another story.

In a city of about 6,000 people that straddles Washtenaw and Monroe counties, the Monroe County section lost 15 percent of total property value from 2011 to 2012. In the Washtenaw County side, it dropped 9 percent over the same year. Property values fell by 11 percent in the Washtenaw section, which comprises about three-fourths of city residents.

BILLIONS MORE LOST, BUT PROPERTY VALUE DROP SLOWING

By comparison, Ann Arbor seems downright healthy. It posted a gain in total property value from 2011 to 2012 of just under 1 percent, while residential values grew by just under 2 percent in the same period.

Across the state in Ottawa County, Hudsonville, a community not unlike Milan, had a drop of 6 percent in total property value from 2011 to 2012 and a 10 percent loss in residential value. It has a population of about 7,000, is 94 percent white and serves as a bedroom community for nearby Grand Rapids.

Public attention has long focused on urban centers like Detroit or Flint as poster children for all that has gone wrong in Michigan. But suburbs have by no means been immune to fiscal distress, according to Kurt Metzger, an expert on Michigan demographics and director of Data Driven Detroit, a regional data analysis organization.

WHO’S NO. 1? COUNTY-BY-COUNTY RANKINGS ON PROPERTY VALUES

“The biggest thing that has hit most of the suburban communities is that the majority of their operating funds come from property taxes. It's the residential property that most of the bedrooms depend on,” he said.

In Milan, residential property was assessed at about $96 million in 2012, compared to less than $37 million combined for industrial and commercial property.

WHAT’S PROPERTY WORTH IN YOUR HOMETOWN?

An online real estate site, Homefinder.com, lists numerous foreclosed homes in the ZIP code that encompasses Milan, ranging in price from well under $100,000 to more than $300,000.

But in what has to be encouraging news for the community, data from the Ann Arbor Area Board of Realtors points to recovery in the Milan area housing market in 2012. The average price of homes sold in 2012 climbed to $120,424 on 57 sales, compared to $117,138 on 65 sales in 2011.

A Milan-area Realtor said prices in 2013 are going up.

“Inventory is very low. It's a very good market in Milan right now,” said Dennis O'Hare of Real Estate One. “We're definitely coming back up. We kept going down into this hole and now we are trying to come out the other side.”

But even if residential property rebounds, Metzger warned, “That's not the answer to all issues.”

City and suburb alike face long-term challenges paying for public worker legacy obligations including pensions and health-care costs, Metzger said.

Milan Treasurer Sherry Steinwedel said the city has tried to make do without reducing services. “We have done cuts. It (dropping property value) has hurt us,” she said.

The city functions on a full-time staff of 25, a dozen fewer than before the property plunge. Steinwedel said it accomplished that through retirement incentives and consolidating administrative posts. After the director of Public Works departed, that responsibility was assumed by the Building and Zoning administrator. The position of  Parks and Recreation director was assumed by the city administrator. The city privatized its water and sewer plant.

Steinwedel expects residential values to recover, while adding: “I don't know that it will ever get back to where it was.”

Ted Roelofs worked for the Grand Rapids Press for 30 years, where he covered everything from politics to social services to military affairs. He has earned numerous awards, including for work in Albania during the 1999 Kosovo refugee crisis.

About The Author

Ted Roelofs

Ted Roelofs is a Bridge contributor based in Grand Rapids. He can be reached at ted.roelofs@gmail.com

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Jeffrey Poling
Thu, 04/04/2013 - 10:46am
Why are property taxes tied to fluctuating market values? When market values of property decline (and that is common here in Michigan and can be expected to continue especially in Detroit) then a communities revenue declines and essential city services decline with it. That only exacerbates a negative condition and a community's decline spirals out of control. There is an alternative to the current "Market Value" taxing method. It is termed the "Land Use" system. It is simple but despite its simplicity, the advantages over the Market value system are enormous. 1) Market value of the property has no influence on the tax bill. An empty lot requires essentially the same city services (street maintainance, snow removal, sewer and water, police etc.) and would pay exactly the same taxes as a lot of exactly the same size with a large, up scale, well maintained home. 2) All property would be zoned by use - residential, commercial, industrial. Nothing new here. 3) Each parcel would be taxed at a flat rate according to its area. For example: Residential - $1.00/sq.ft. Commercial - $2.00/sq.ft. etc That is all there is to it. ADVANTAGES of the LAND USE PROPERTY TAX SYSTEM: 1) Inequitable tax assessments based on subjective market values are avoided in the Land Use system. Errors such as Jo Ann Watson's $68 vs. her neighbor's $6,000 tax assessment would be eliminated. 2) Responsible property owners who maintain, build on or otherwise improve their property and its market value would not be penalized with higher taxes. 3) Conversely, deadbeat property owners who neglect their property and allow it to deteriorate to slum conditions would not be rewarded with lower taxes because of decreased market value. 4) City services such as water, sewer, police, fire, garbage collection, street maintainence and snow removal would be funded by a steady, predictable source of revenue. 5) All property owners would shoulder a fair share of the burden for city services. Responsible property owners would not be penalized into paying more taxes to pick up the slack caused by deadbeat owners. 6) Property owners speculating on future market value increases while allowing their property to deteriorate as a way to avoid taxes would be required to pay their fair share of the city services they enjoy. 7) With all property owners paying their fair share for the city services they share in common, property taxes in general could be lowered across the board. 8) Property tax revenue forcast for the city/state would be accurate and predictable - no surprises, no unexpected revenue shortages. Budgets and spending could be forecast to the penny. 9) Property owners would know exactly what their tax bill would be regardless of fluctuating market values. I learned about the Land Use tax system from TIME's Detroit Blog which I frequently read and contributed to (jeff9809). One of the contributers, who I only know as napper1, introduced the idea. I have included two links that will take you to that discussion (see comments) and provide more detail. Napper1 also mentions Robin Boyle, Wayne State Professor of Urban Planning who could provide more expertise on the subject. Read more: http://detroit.blogs.time.com/2010/03/30/shrink-the-suburbs-too/#ixzz19d... Read more: http://detroit.blogs.time.com/2010/03/31/re-thinking-property-taxes/#ixz...
Jeffrey Poling
Fri, 04/05/2013 - 10:29am
Why are property taxes tied to fluctuating market values? When market values of property decline (and that is common here in Michigan and can be expected to continue especially in Detroit) then a communities revenue declines and essential city services decline with it. That only exacerbates a negative condition and a community's decline spirals out of control. There is an alternative to the current "Market Value" taxing method. It is termed the "Land Use" system. It is simple but despite its simplicity, the advantages over the Market value system are enormous. 1) Market value of the property has no influence on the tax bill. An empty lot requires essentially the same city services (street maintainance, snow removal, sewer and water, police etc.) and would pay exactly the same taxes as a lot of exactly the same size with a large, up scale, well maintained home. 2) All property would be zoned by use - residential, commercial, industrial. Nothing new here. 3) Each parcel would be taxed at a flat rate according to its area. For example: Residential - $1.00/sq.ft. Commercial - $2.00/sq.ft. etc That is all there is to it. ADVANTAGES of the LAND USE PROPERTY TAX SYSTEM: 1) Inequitable tax assessments based on subjective market values are avoided in the Land Use system. 2) Responsible property owners who maintain, build on or otherwise improve their property and its market value would not be penalized with higher taxes. 3) Conversely, deadbeat property owners who neglect their property and allow it to deteriorate to slum conditions would not be rewarded with lower taxes because of decreased market value. 4) City services such as water, sewer, police, fire, garbage collection, street maintainence and snow removal would be funded by a steady, predictable source of revenue. 5) All property owners would shoulder a fair share of the burden for city services. Responsible property owners would not be penalized into paying more taxes to pick up the slack caused by deadbeat owners. 6) Property owners speculating on future market value increases while allowing their property to deteriorate as a way to avoid taxes would be required to pay their fair share of the city services they enjoy. 7) With all property owners paying their fair share for the city services they share in common, property taxes in general could be lowered across the board. 8) Property tax revenue forcast for the city/state would be accurate and predictable - no surprises, no unexpected revenue shortages. Budgets and spending could be forecast to the penny. 9) Property owners would know exactly what their tax bill would be regardless of fluctuating market values.