Comments (0) 11:45 PM posted by admin |
Q3: How will the tax passing or failing impact the Water Street development, on which so much of our future is riding? Are there studies that show how similar taxes, like those passed previously in 22 Michigan cities, have impacted home sales, property values, new development, etc?
The simple answer to this question is that, as a Council member, I have never been presented with any studies showing the impact of a City Income Tax on any of Michigan’s communities that currently have a tax even though the Plante & Moran income tax study suggested,
the City may wish to identify research available on the business impact when communities establish an income tax. This research will want to address the following:
- Possible business exodus upon establishment of an income tax
- Impact on business location choices
Construction in Ypsilanti costs the same as it does in surrounding areas, but property does not lease for an equivalent rate. For example, on one end of the spectrum, we have property in downtown Ypsilanti that is being advertised for $10 a square foot. Ashley Mews, on the other hand, is located in downtown Ann Arbor, is on the market for twice that. We’re already at a competitive disadvantage for getting a return on investment, an additional cost like an income tax would exacerbate that.
As Bob Doyle, Ypsilanti resident and urban landscape planner, said so eloquently in an Other Voices Op-Ed piece in the Sunday edition of the Ann Arbor News, an income tax would have a “dampening effect on economic development … Instituting an income tax will add another hurdle, real and perceived … New development and business creates jobs, and though some may revel in our not-quite-successful grittiness, adding real jobs in our community could have a critical impact in helping residents out of poverty. We already lose many site selection battles to our sister communities in the county because of our tax burden. Increasing the discrepancy in taxation levels will only push more jobs and tax revenue away from Ypsilanti.”
The Water Street Project is important to the City’s financial success. Vertical construction is needed to pay for the $20M that has already been bonded for and borrowed to start the project. Putting more hurdles to success in the path of the project could have a significant impact on how long residents will have to pay these debts before the project pays for itself one day.
An income tax will make buying a home in Ypsilanti more expensive.
A house on my street is currently for sale. It was purchased in 2001 for $220K. It was initially listed for $249K, but it’s now being advertised for just $200K. It’s a 3 bedroom Victorian, and runs almost 1,900 square feet. The City has it assessed with a taxable value of $110K and property taxes are currently a little over $6,380 a year (I’ve rolled the taxes back 2 mills). If Ypsilanti had a City Income Tax, payments on a 30-year fixed mortgage ($180K) with 20% down an interest rate of 6.125% would result in a monthly payment of $1,094. Property taxes add another $532 per month bringing the total up to $1,644 a month. A couple making $120K a year would pay another $1,180 a year, or $98 a month towards an income tax. That’s a grand total of $1,724 a month.
A house in the City of Dearborn, walking distance to their downtown, is listed for $239K. It’s a 3 bedroom Colonial with 1,947 square feet of space. With 20% down and a 30-year mortgage ($191K) with an interest rate of 6.125%, the monthly payments would $1,161. The house would have a taxable value of $119,500 and at 46.3 mills, the property taxes would be $5,533 a year or $461 a month. The same couple would pay no CIT resulting in a grand total of $1,622.
These are two equivalent house located in urban areas. You would basically be able to get $39K more house for $100 a month less than you could in Ypsilanti with a CIT. You’d have to go to Miller’s instead of The Sidetrack, but that is one example. You could make this analysis even more dramatic by comparing a house in a sub-development around Ypsilanti, but I wanted to keep the urban factor.
According to the 2020 Task Force created by City Council earlier this year, more than 20 percent of homes for sale in Washtenaw County are located in Ypsilanti even though less than 10 percent of the county’s population is here. Homes will stay on the market longer and will be sold for less than asking price.
Nearly 60 percent of homes in foreclosure in Washtenaw County are located in Ypsilanti. That figure will continue to rise as a city income tax will add to the problems residents are currently experiencing.
In addition, the problems of unemployment (6.6 percent in Ypsilanti compared to 4.5 percent in Washtenaw County) and poverty (23 percent of Ypsilanti’s residents live below the poverty line) will be exacerbated.
Finally, Ypsilanti is the only community in Washtenaw County whose population has been decreasing (down 5.4 percent since the 2000 Federal Census). A City Income Tax will certainly not reverse the trend of a declining population.
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