Detroit Public Schools’ financial precarity and mismanagement has been well reported.
When enrollment fell 72 percent from 2000 to 2015, the dramatic loss of funding created a host of issues for the former district.
Following the DPS bailout in 2016, a new Detroit district was born: Detroit Public Schools Community District. The former district no longer operates as a school system; instead, it exists solely to collect taxes and use those taxes to pay off its legacy debt.
Those taxes are collected through an operating millage on Detroit property taxes for non homestead properties. When property values, and therefore taxes, shot up last year, the state rolled back the amount the Detroit district was allowed to collect. Proposal S was created to reinstate the original property tax levy amount.
Read on for a full explanation of Proposal S and its effects.
What is Proposal S?
In a letter to the Detroit community, Detroit Public Schools Community District Superintendent Nikolai Vitti laid out the facts of the recently passed Proposal S.
The proposal is an operating millage renewal which raises the cap on the amount that can be levied on property taxes on businesses and second properties in the city. It does not raise property taxes on homeowners.
The proposal increases the millage back to its original amount after it was rolled back.
Why was the millage rolled back?
The millage was originally set at 18 mills or $18 for every $1,000 of taxable value. However, because Detroit’s property taxes have gone up so much in the past year (there was a 9 percent increase) the inflation triggered a state law that caps property tax millage. The law protects property owners by rolling back millage rates so that the growth does not exceed the rate of inflation.
The capped millage was roughly 16.6 mills. The district estimated the loss from the cap to be $10 million annually and $225 million over the next decade.
What is the long term effect?
The Detroit district estimates it will pay off its legacy debt roughly seven years earlier thanks to the passing of the proposal.
While the Detroit district was on track to pay off the debt regardless, the money will instead be used to invest in students and staff even sooner.
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