What are "tax captures"? (short version)
In May of 2021, DPL Commissioner Russ Bellant published a social media post explaining what tax captures are and how they affect the Detroit Public Library system. Here is a paraphrase of that explanation that I have lightly edited. There are also informational documents about tax captures available at https://detroitpubliclibrary.org/about/commission.
What Are Tax Captures?
Tax captures are the act of diverting portions of our property taxes into projects that benefit developers that are relieved of having to pay some of their project costs. They have been around for years as a result of a 1975 state law that sanctioned shifting taxpayer funds into private hands in furtherance of private profit. The law puts no cap on how much a local unit of government can capture, but it has been assumed that no mayor would take so much as to hurt their city's schools and libraries. That assumption is an error in today's Detroit.
The Detroit Public Library Crisis
The Detroit Public Library (DPL) depends on the property tax millage for 89% of its revenue. The City is now capturing about 12% of that millage, triple the amount taken in 2015. In the last five years $7.5 million has been taken from DPL, creating deficits since 2018. Over the next five years the City projects taking $17.1 million. The annual DPL budget is only about $30 million.
At the time COVID struck, the DPL had 21 operating branches. By 2021 it had reopened only six branches due to various COVID factors but when full reopening occurs, the massive tax captures will impair operation and reduce financial stability. The deficits created several years ago by tax captures were covered by using "rainy day" funds. It was hoped that conversations with the City would correct the problem, but DPL concerns fell on deaf ears and the size of the capture continued to grow. The City prevents the DPL from having capital funds for building repairs and renovations, so our modest operation dollars must cover emergency building costs, an unsound way to maintain stable program operations. The DIA and the Detroit Zoo were exempted from tax captures, but our basic educational institutions focused on Detroit youth (schools and libraries) were not.
Detroit Public Schools (DPSCD)
The tax capture machine took $12 million from the debt and the operating millages for our school system in 2017. The amount since has undoubtedly increased substantially, but as of May 2021 the City has not published those figures. The amount of the annual tax capture has obstructed the DPSCD's ability to sell bonds because the size of the capture creates uncertainty in the bond market about the district's ability to repay bondholders. Not selling bonds means not creating the capital funds needed for extensive building improvements needed after years of state-appointed "emergency manager" neglect. This in turn reduces the quality of the learning environment for many DPSCD students.
Other Targets
Other entities experiencing the tax capture losses are Wayne County Community College District; Wayne RESA (the county intermediate school district), as well as the State School millage. Wayne RESA has three millages—one for supporting special education, another for enhancing local school district funding and a small one for operating costs. The first two millages result in funds for DPSCD. In total there are eight education millages, and tax captures hit all of them. How does anyone calculate that brownfield projects for developers are more important than special education, especially since "emergency managers" smashed special education programs across the district, including the schools for the deaf and blind?
This is not just about supporting these important institutions but also about asserting the full authority of the voters and not letting someone elected by the voters exercise power to supersede the decision of the voters. If voters approve a millage for the operation of the schools, no elected official should be rerouting that money to a private developer's project, regardless of whether Lansing says it's okay.
What Are Tax Captures?
Tax captures are the act of diverting portions of our property taxes into projects that benefit developers that are relieved of having to pay some of their project costs. They have been around for years as a result of a 1975 state law that sanctioned shifting taxpayer funds into private hands in furtherance of private profit. The law puts no cap on how much a local unit of government can capture, but it has been assumed that no mayor would take so much as to hurt their city's schools and libraries. That assumption is an error in today's Detroit.
The Detroit Public Library Crisis
The Detroit Public Library (DPL) depends on the property tax millage for 89% of its revenue. The City is now capturing about 12% of that millage, triple the amount taken in 2015. In the last five years $7.5 million has been taken from DPL, creating deficits since 2018. Over the next five years the City projects taking $17.1 million. The annual DPL budget is only about $30 million.
At the time COVID struck, the DPL had 21 operating branches. By 2021 it had reopened only six branches due to various COVID factors but when full reopening occurs, the massive tax captures will impair operation and reduce financial stability. The deficits created several years ago by tax captures were covered by using "rainy day" funds. It was hoped that conversations with the City would correct the problem, but DPL concerns fell on deaf ears and the size of the capture continued to grow. The City prevents the DPL from having capital funds for building repairs and renovations, so our modest operation dollars must cover emergency building costs, an unsound way to maintain stable program operations. The DIA and the Detroit Zoo were exempted from tax captures, but our basic educational institutions focused on Detroit youth (schools and libraries) were not.
Detroit Public Schools (DPSCD)
The tax capture machine took $12 million from the debt and the operating millages for our school system in 2017. The amount since has undoubtedly increased substantially, but as of May 2021 the City has not published those figures. The amount of the annual tax capture has obstructed the DPSCD's ability to sell bonds because the size of the capture creates uncertainty in the bond market about the district's ability to repay bondholders. Not selling bonds means not creating the capital funds needed for extensive building improvements needed after years of state-appointed "emergency manager" neglect. This in turn reduces the quality of the learning environment for many DPSCD students.
Other Targets
Other entities experiencing the tax capture losses are Wayne County Community College District; Wayne RESA (the county intermediate school district), as well as the State School millage. Wayne RESA has three millages—one for supporting special education, another for enhancing local school district funding and a small one for operating costs. The first two millages result in funds for DPSCD. In total there are eight education millages, and tax captures hit all of them. How does anyone calculate that brownfield projects for developers are more important than special education, especially since "emergency managers" smashed special education programs across the district, including the schools for the deaf and blind?
Demanding Change
There has been no campaign to stop tax captures (aka, wealth transfers) from our neighborhoods to the rich and super-wealthy. Our libraries and schools return services to neighborhoods from the revenues provided by the neighborhoods. Tax-captured money is overwhelmingly transferred to downtown and midtown assets and most of the resulting profits leave the City. Now a petition drive has begun to put an advisory question on the November 2021 ballot that says: We the Citizens of Detroit expect elected officials of our City to ensure that all millages approved by Detroit voters will be used solely for the purposes that we approved the millage. Hence we want our library and school millages used strictly to support our libraries and schools.
There has been no campaign to stop tax captures (aka, wealth transfers) from our neighborhoods to the rich and super-wealthy. Our libraries and schools return services to neighborhoods from the revenues provided by the neighborhoods. Tax-captured money is overwhelmingly transferred to downtown and midtown assets and most of the resulting profits leave the City. Now a petition drive has begun to put an advisory question on the November 2021 ballot that says: We the Citizens of Detroit expect elected officials of our City to ensure that all millages approved by Detroit voters will be used solely for the purposes that we approved the millage. Hence we want our library and school millages used strictly to support our libraries and schools.
This is not just about supporting these important institutions but also about asserting the full authority of the voters and not letting someone elected by the voters exercise power to supersede the decision of the voters. If voters approve a millage for the operation of the schools, no elected official should be rerouting that money to a private developer's project, regardless of whether Lansing says it's okay.
If I recall correctly, Commissioner Bellant abandoned the idea for the ballot proposal in favor of enshrining its language in the new City Charter, which was encapsulated in Proposal P for the November 2021 election. As we in the city know, Prop P failed because it was torpedoed by a very dedicated disinformation campaign that was heavily funded by Mayor Duggan and his political allies, DTE Energy, Blue Cross Blue Shield, and others. But that's another story.
