Saginaw Property Tax Proposal: Written By Reagan?

City Hall Still Wants to Remove the Tax Caps, But This Time in a Most Unusual Way

By Mike Thompson

            For 30 years, Saginaw city leaders have been trying to persuade voters to cancel the 1979 property tax caps. These provisions were authored by the now departed Allan Schmid, who wrote the City Charter amendment in the spirit of Ronald Reagan’s California-rooted tax cut movement of the 1970s.

            City leaders have constantly complained since then that overall taxes are “frozen” with no boosts for inflation. This is utterly false, because they have found plenty of water in which to swim around the tax caps on a number of occasions. They have enacted an array of other taxes and fees that pretty much have drowned the tax caps’ intended impact.

            Saginaw government indeed has less money than in the past, even when measured per resident to account for loss of population, but this is not because of the property tax caps. Reasons are losses of federal and state aid, pension giveaways in the distant past, and skyrocketing costs for health insurance and utilities.

            But instead of citing these reasons, the tax caps are made into a straw man.

            In fact, Saginaw’s combined city property taxes of 14.3 mills are nearly double the rate of 7.5 mills when the tax caps took effect three decades ago. The income tax rate is 50 percent higher.

            Does anyone ever acknowledge this? No, it’s always, “Oh, those horrible tax caps!”

            And here in calendar year 2009, Reagan might famously say, “Well, there you go again.” Saginaw leaders once more have a specific plan to knock those devilish tax caps out of the City Charter. Residents probably will see a ballot proposal in November.

            But this isn’t just another of those endless tax caps stories. This venture is totally different than all the others. This venture is strange, because this proposal sounds as though Reagan himself might have written it:

            This plan, unlike those of the past, contains tax breaks for the more fortunate, offset by a larger burden for the less fortunate. It also would NOT increase overall revenues, even though City Hall finally might really need the money.

            Saginaw’s hard-right wing element perceives that City Hall is run by a bunch of liberals, but now we have a tax proposal with hard-right wing elements, whether intended or not. Yes, truth is stranger than fiction.

            Basically, in one part, the progressive trash millage is replaced by a whopping regressive trash fee. This is where the less fortunate people get burned. In another part, the regular City Hall millage and the police-fire millage are blended.

            The three combined millages are reduced to 11 mills instead of 14.25 mills, with a $140 trash fee making up the difference. In the process, the tax caps are wiped out and so those 11 mills aren’t frozen, which is why the ardent property tax cutters will still oppose a tax cut. We will explore those details later in this analysis.

            First, here are some eye-catchers.

            Consider that under this tentative proposal:

            • The owner of a home with a $25,000 market value would pay $50 MORE.

            • The owner of a home with a $50,000 market value would pay $8 MORE.

            • The owner of a home with a $100,000 market value would pay $73 LESS.

            • The owner of a small office building or retail shop with a $120,000 market value would   pay $169 LESS.

            • The owner of a small industrial property with a $400,000 market value would pay $376    LESS.

            These aren’t our numbers - they were presented to City Council members by Lori Brown, city assessor, during their February 23 meeting.

            We went a step farther and considered large industrial and commercial properties. Get this: Based on the formula that Lori Brown used for her calculations, GM Powertrain (a.k.a. Grey Iron) on North Washington would pay $24,277 LESS.... yet another General Motors bailout.                        Are you among those who are angry with Kroger for moving out of the city? For the now-empty building at 3430 State, Kroger would pay $2,907 LESS.

            Is this trickle-down economics or what? Somewhere, Ronald Reagan is smiling!

Earley Arrives Late in the Game

            The scenario for the proposal is almost as strange as the proposal itself.

            In 2007, then-Mayor Carol Cottrell appointed a City Charter Advisory Committee. Members have been reviewing the city’s tax system for more than a year. They were about ready to finalize a proposal and conduct public hearings. All of a sudden, at what seems a late hour, City Manager Darnell Earley has come forward with his own plan from a group he describes as the “Ad Hoc Committee on City Tax Structure.” In essence, his administration.

            Advisory Committee members may have cause to wonder why they’ve done all that work, although Earley will seek their feedback. He did not respond to Review Magazine’s inquiry.

            Earley need not worry about discord. Cottrell picked a friendly group. None of her nine committee appointees is a critic of city government, and all of them have discussed removing the tax caps.

            The roots of all this go back a few years. Allan Schmid, who passed away last December, aimed for more than just keeping taxes in check. He perceived that City Hall should have a paid full-time mayor and council, with a district ward system, instead of a strong appointed (non-elected) city manager.

            To attempt to accomplish this in the new millennium, Allan Schmid needed to again revise the City Charter, the same as he accomplished in 1979 with the tax caps. This time, Allan had his son Greg Schmid as a teammate. They went through the process of collecting signatures, and then they won voter approval in November 2004 to create the original, legitimate City Charter Review Commission.

            However, Greg Schmid now acknowledges that they botched their proposal with too many details. Critics rallied, many from outside the city’s borders, some with self-interests. Voters in 2007 crushed the strong mayor plan with 84 percent opposed.

            It’s no surprise, then, that the counterattack is another quest to remove the tax caps.

            The only surprise is that the proposal comes forward in such a regressive, Reaganesque manner.

Putting the Numbers Into Simple Terms

            Now that we know the potential impact of this tentative tax plan, and from where it arrives, let’s look more closely at the specifics.

            This is the point where I, the author, fear that I may lose you, the reader. All these numbers! But c’mon, we grownups can’t complain about our kids’ lousy MEAP scores if we aren’t willing to pay attention ourselves and do a little math.

            Attention renters: This also affects you. You also pay property taxes, and trash fees. They’re part of your rent.

            Keep in mind that for each $1,000 that you could get for selling your property, each 1 mill of property taxes equals roughly 50 cents per year, give or take a few pennies. This is our most simple way to calculate our taxes, without all the gobble-dee-gook of assessed value, taxable value, tax base, Renaissance Zones, Headlee rollbacks, historic districts, Proposal A balloons, and so forth.

             So let’s put these four tax and fee cards on the table:

            • Card Number One: 5.3 mills. This is for City Hall operations, from plowing streets to mowing parks, from inspecting houses to conducting elections. Some of this money also goes to the cops and the firefighters. This is the millage that the tax caps have gradually slashed.

            • Card Number Two: 6 mills. This is an add-on millage for police and fire that voters approved in 2006, the latest example of swimming around the tax caps.

            • Card Number Three: 2.95 mills. This is your trash millage, adopted in 1980, the first example of swimming around the tax caps. (It only took one year!)

            • Card Number Four: $55. This is an added annual trash fee for each housing unit, adopted in 1995 when City Hall decided that the trash tax wasn’t enough.

            Earley and his team looked at those four cards. They saw a new way, a different way, to try to persuade voters to get rid of the tax caps. They took note of the trash millage. They figured, in effect, “Why not scrap the trash millage and put it into a fee?”

            Members of the Ad Hoc Committee thus asked how much bigger they would have to make the $55 fee, in order to replace the revenue from killing the 2.95-mill trash millage. This figure is $140. When you consider that Saginaw has more than 22,000 housing units that comes to a lot of dough.

            In terms of taxation, however, this tradeoff is about as regressive as you can get. No matter whether your home is worth $25,000 or $125,000, you now would pay the same cost for your trash to be picked up.

            Part of the Ad Hoc Committee’s philosophy is that businesses are paying the trash tax without getting their own trashed picked up, and so this is unfair to them. Committee members also figure that it is unfair for the owner of a $25,000 home to pay less in taxes for trash removal than the owner of a $125,000 home. Trash is trash; it’s similar to a water bill.

            There also is sentiment that a number of $25,000 homes are rentals, which is true, but there are a whole lot of good owner-occupied homes as well.

            Form your own opinion.

            Here’s mine: For all of the denials of “socialism,” the United States and member states and local communities for years have had social elements in taxation, starting with Social Security, which in reality is Socialist Security. Those able to pay more generally pay more, even after 30 years of Reaganomics. People of higher means pay higher shares for everything from national defense to Medicare/Medicaid to highways. So, what should be so different about trash pickup? And if there is intent to gain revenue from landlords, find another way.

            Are we in this together, as President Obama asserts? Or are we “rugged individuals,” as Herbert Hoover preached, and is government always “the problem,” as Reagan asserted, and should we instead be an “ownership society,” as George W. Bush insisted?

            The bottom line is that under this proposal, folks who struggle to maintain home ownership while working as stock shelvers and nurse aides and janitors would pay more. The low-middle class would roughly break even. The upper-middle class and people of wealth, in their nice homes, would pay less. So would GM and Kroger.

            What would Barack Obama say?

No Tax Caps? Or Maybe, Revised Tax Caps?

            With the trash millage replaced by a bigger trash fee, now Earley’s team was in a position to attack the tax caps. Look at your two remaining cards, and you will see 5.3 mills for general City Hall functions, and those new 6 mills for police and fire. Combine them and you get 11.3 mills. Heck, said the city manager and friends, let’s just round it at 11 mills.

            Darnell Earley does have a pair of good points in this instance:

            First, those 6 mills for public safety would be folded into a general levy so that businesses would pay their full share, rather than getting a break on personal property (machines, equipment) via special assessment.

            Second, the City Council would have more flexibility, instead of having special millages locked in for police-fire and for trash. As critical as citizens may feel regarding their elected leaders, this doesn’t mean we should tie their hands. If we don’t like what they do, elect someone else.

            Ah, but here’s the rub. To do these two things under this 11-mill wrap, the plan would remove those tax caps. Allan Schmid from the skies above must be rallying his legions: “Don’t believe ‘em. Without tax caps, those 11 mills will become 12, then 15, then 20 ....” Twenty is the state limit.

            Would Manager Earley and city leaders be willing to add a revised 11-mill tax cap to this tentative proposal, to answer such Schmidian concerns? Or maybe a 12-mill cap for some breathing room? That’s one of the next questions for those who have followed and supported Allan Schmid’s legacy.

            My next question, as a progressive generally willing to pay taxes, is different: I’m wondering how the city administration, in one of America’s most poor cities, could have come up with a tax plan that is so aggressively regressive against the very people who are most in need?   Even Ronnie Reagan might blush.

            (Footnote: If you wish to include 3 mills for Saginaw Transit, STARS, then the city tax bill is now 17.3 mills and would drop to 14 mills. Nobody else is including STARS and so we won’t add to confusion by doing so, but it’s debatable.)