Privileged and Con?dential Attorney?Client Communication To: David Massaron, OCFO From: Lawrence Garcia, Corp Counsel Date: February 7, 2020 Re: City?s legal ability to reimburse residents who were overtaxed Dear CF 0 Massaron: You have requested an opinion from the law department regarding ?the City of Detroit?s ability to give direct monetary reimbursement to residents that were overtaxed during the years of 2010?2016.? SHORT ANSWER It would not be lawful for the City to create such a fund. ANALYSIS 1. Relevant Michigan property tax law and terminology. Your question indicates that residents were ?overtaxed.? To avoid confusion, we should de?ne terms. relevant to this topic. Under the General Property Tax Act, MCL 211.1 et seq, properties are taxed 951311? (or ?fair market?) value, big?these concepts are related but not interchangeable. In some situations, taxable values may be indirectly related to ?fair market value? andfor ?true cash value? However, in other situations, FMV and TCV do not impact taxable value in a given year. In attempting to answer your question about ?overtaxed? properties, this memo examines situations in which the taxable value used to calculate property tax paid was higher than the maximum value allowed by law. 1 . mm? 2. Michigan law provides an exclusive procedure to contest taxes. Michigan law provides an exclusive procedure for homeowners to challenge their assessments and taxable values. On an annual basis, taxpayers are given notice of their assessment including any proposed increase} Under the law, the taxpayer has the opportunity annually to appeal the assessment to the City of Detroit Assessors? Board of Review and then to the City of Detroit Board of Review.2 In the event the taxpayer?s appeals is denied and he/she still believes the assessment is too high, the taxpayer may appeal their assessment to the Michigan Tax Tribunal.3 The Tax Tribunal has exclusive jurisdiction to hear claims of over~assessment, and the Tribunal?s jurisdiction cannot be invoked unless the taxpayer timely pursues an appeal of the annual assessment in question. See Electronic Data Corp 12 of fiat, 253 Mich App 538, 548 (2002). The appeal process may be a challenge for some taxpayers, but it is the only legal way to challenge an over-assessment. Furthermore, for an appeal of an assessment on a principal residence, the property owner can file without paying a fee or hiring an attorney. The assessor?s office advises that tens of thousands of taxpayers successfully appealed their assessments during the years in question. There were so many tax tribunal appeals that the assessor?s of?ce was often unable to defend and default judgments were entered in favor of the taxpayers. 3. Policy behind the law. Under the Tax Tribunal Act and Michigan case law, property owners who do not timely pursue the assessment appeal process cannot challenge their tax assessment for the year in question. As our Supreme Court stated: ?[Bjoards of review are the preper tribunals for the correction of unjust assessments, and that parties will not be heard in the courts until they have exhausted their remedy before these tribunals.? Michigan Savings Bankv City ofDerroz't, 107 Mich 246-, 247 (18-95) see also, Imerman Screw Products 67 Mich App 727, 731 (1976). C. f. MCL 205. 731 (Tax Tribunal has exclusive jurisdiction to decide tax appeals and taxpayers must timely appeal from a Board of- Review 1 MCL 211.24c. The notice of proposed assessment describes in detail the process for an individual to appeal their proposed assessment. 2' 2019 Detroit City Code, Sec. 444-3, Sec. and MCL 211.3004) 3MCL 205.735a - - u: an". These processes were put in place, and are strictly enforced, to ensure the ?scal soundness of local governmental units and to allow them to prepare and rely on annual budgets. In Wikman City ofNovz', 413 Mich 617, 626, 627 (1982), the Michigan Supreme Court stated: The Tax Tribunal Act is a culmination of numerous attempts by the Legislature to secure the prompt and fair resolution of disputes concerning the collection of government revenues. The ef?cient resolution of such disputes is important to both the taxpayer and the government. In Eddy v. Lee Twp, 73 Mich. 123, 129?130 (1888), this Court acknowledged this fact, stating: object of that law, as it is of this, is to enable the government to collect its revenues without delay. The significant public interest underlying the collection of revenues by the government resulted in limitations upon a taxpayer's ability to contest tax assessments and obtain refunds of general revenue taxes.* =14 Those principles are particularly relevant to the City of Detroit. The Bankruptcy Court, in approving the 2014 plan of adjustment, carefully analyzed the City?s projected expenditures and revenues. The Court relied on that analysis which included property tax projections to hold, for example, that the plan would be ?feasible? despite the limited pension reductions. The Bankruptcy Court concluded the plan was just barely feasible. City Council was aware that the actuarial analyses underlying the plan of adjustment materially understated future liabilities of the general retirement and police and fire retirement systems, due to use of outdated mortality tables. 4. The preposed reimbursement would be otherwise unlawful. The ?Lending of Credit? clause in the Michigan Constitution of 1963, Art. VII, Sec. 26, expressly prohibits the City?s creation of a reimbursement fund: - ?Except-as otherwise provided in this constitution, no city ?or'vil'lage?shall power to loan its credit for any private purpose or, except as provided by law, for any public purpose.? The Michigan Supreme Court has interpreted that provision, consistent with its plain language, to mean that for a city to properly ?loan its credit,? the act must be (1) authorized by law, and (2) for a public purpose. In re requestfor Advisory- Opz'nz'on 0n Constitutiona?ty of 986 PA 281, 430 Mich 93 (1987). Paying money to homeowners through a ?reimbursement fund? would constitute an unlaw ?lending of credit.? Kapi?an City oanntz?ng-ton Woods, 357 Mich 612 (1959), (Giving away public property without fair consideration deemed lending of credit). There would be no consideration for paying monies to aggrieved homeowners, because, as stated above, under the law, they have no legal claim against the City. Moreover, such an act would not be ?authorized by law.? It would be contrary to the cited Michigan law that specifies the exclusive means by which a homeowner may obtain relief from a proposed assessment. 5. Limitations of this opinion. This opinion is limited to addressing the proposal for direct monetary reimbursement. There are other options that we understand the administration is considering that are not addressed in this opinion.