Detroit CFO says higher taxes wouldn't help city

9/5/2014

DETROIT — Detroit residents are “highly taxed” and imposing even higher taxes wouldn’t be a good way to take the city out of bankruptcy, the chief financial officer testified today.

John Hill, who was recruited last fall from Washington, D.C., wrapped up his testimony at a trial that will determine whether Detroit emerges from the largest public bankruptcy in U.S. history. The trial in front of Judge Steven Rhodes began Tuesday and will last for weeks.

Detroit’s plan includes cutting $12 billion in debt to about $5 billion and spending $1.7 billion over the next decade on quality-of-life improvements, especially demolition of thousands of abandoned homes. Many retirees would see a 4.5 percent pension cut. No tax increases are planned.

The city is a “highly taxed jurisdiction and one suffering from long-term economic crisis. ... It would be very difficult to imagine a scenario where this city would benefit from raising taxes,” Hill testified.

The income tax on city residents is 2.4 percent, highest in Michigan. Non-residents who work in Detroit pay 1.2 percent. Residents also pay a 5 percent utility tax.

In January, Mayor Mike Duggan announced plans to cut property assessments on homes by as much as 20 percent, resulting in lower property tax bills, after years of excessive assessments.

In response to questions from the judge, Hill said it’s important that city leaders keep a “crisis mentality” in the months ahead to successfully implement any post-bankruptcy plan.

Hill said it could take two years to get the best use from a new computer system.