DETROIT (WXYZ) — A former library commissioner is sounding the alarm about a state law he says is draining city entities.
Tuesday at a Detroit City Council meeting, Russ Bellant, who served as a library commissioner for 12 years, spoke during public comment about the concerns he has regarding tax increment financing or tax capturing and its impact on the city's public library system.
Tax capturing describes a state law that gives municipalities the power to take a percentage of property tax dollars to provide subsidies to developers.
"If you ask the people, about 99% have never heard of (tax capturing) because there’s virtually nothing on the city website," said Bellant.
The library's annual budget is typically around $30 million each year to fund 21 branches and the main library. Around 11% of the $30 Million comes from state funding, grant dollars, a portion of revenue generated by traffic fines and other sources. The other 89% of the budget comes from a taxpayer approved millage. Bellant says because of the tax capture, the library has only received a fraction of the money that taxpayers voted to designate to the library.
"Out of our $30 million annual budget, in three years, we’ve lost $10 million just to the tax capture," said Bellant.
Bellant says it’s forced the library to operate in part with their fund balance which is similar to a rainy-day fund.
"If we have to use our fund balance to cover these expenses, in five years we may not have a fund balance. Then we don’t have emergency funds for capital improvements, for maintenance emergencies or flood emergencies or any other emergency. Then the library would have to significantly reduce operations," said Bellant.
Bellant says the deficit the libraries face as a result of the tax capture has also made it impossible to keep up with library building maintenance. Currently five branches remain temporarily closed, including the Monteith branch, which is in need of $3.3 million in repairs to the building's structure.
"We have millions of dollars in building structure costs that we can’t afford to conduct right now. The maintenance we can’t do. We have a couple branches closed because we need to redo the HVAC systems," said Bellant.
The law has also received pushback from city council leaders. In 2022, council president Mary Sheffield requested that the Legislative Policy Division draft a resolution urging a change to state law to exclude Detroit Public Schools Community District and the Detroit Public Library from tax abatements and tax captures.
City officials say they're aware of the libraries concerns but the tax capture is a part of a state law that they have to comply with.
Kenyetta Bridges is the Executive Vice President for the Detroit Economic Growth Corporation (DEGC). She says the tax capture is about leveling the playing field.
"We are number one for the highest property taxes on commercial property valued at over a million dollars. So when you talk about being competitive or talk about leveling the playing field so that businesses would be attracted to the City of Detroit, these incentives are very important," said Bridges.
Bridges says a lot of properties throughout the city are at a structural disadvantage, battling issues like obsolescence or contamination, which makes them less desirable for developers to build on. She says incentives provided through tax capture dollars makes them more attractive to developers.
"At its simplest form, the tax capture freezes the taxes at the pre-renovated rate on that site," said Bridges. "The taxes levied on that base value continues to be collected by the taxing jurisdiction however the pursuant to the brownfield, the new property taxes that are generated through the improvement, the developer is allowed to capture some of those taxes to be reimbursed for the activities that they put forth to clean that site."
Developers like Olympia and billionaire Stephen Ross' related company took advantage of the subsidy for projects like District Detroit. Developers with Bedrock in Detroit also used the subsidy for projects downtown that were expected to have transformational value.
Bridges says although a portion of the library's tax revenue is captured and funneled to the Downtown Development Authority (DDA), it ultimately helps neighborhood projects too by creating jobs and therefore generating income tax revenue that can be used elsewhere throughout the city. There are also opportunities for developers working on projects in different parts of the city to take advantage of the tax increment finance subsidies if the project meets the qualifications.
"It’s about economic growth. It’s about making sure Detroiters have access to employment opportunities where they can provide for their families. It’s making sure the city is on a fiscally sustainable track," said Bridges.
The city says when the library's millage renews in July 2025, it will no longer be a part of the tax capture downtown. They expect it to see about $3 million in revenue return to the library's budget.
Belmont says he would still like to see state law change.
"If you believe in a healthy, civic society, if you believe in healthy neighborhoods, you can’t focus and take all these resources from the neighborhoods and put it downtown," said Bellant.
