Raising Detroit taxes 'not the way to tackle city bankruptcy', says CFO

http://www.theguardian.com/world/2014/sep/05/raising-detroit-taxes-not-way-tackle-bankruptcy-cfo

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Detroit residents are “highly taxed” and imposing even higher taxes would not be a good way to take the city out of bankruptcy, the chief financial officer testified on Friday.

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

Detroit’s plan includes cutting $12bn in debt to about $5bn and spending $1.7bn over the next decade on quality-of-life improvements, especially demolition of thousands of abandoned homes. Many retirees would see a 4.5% 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%, the highest in Michigan. Non-residents who work in Detroit pay 1.2%. Residents also pay a 5% utility tax.

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

In response to questions from the judge, Hill said it is 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.