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$68 Property Taxes – The JoAnn Watson Saga

May 27, 2009

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A reporter recently discovered the fact that Detroit city council member JoAnn Watson had been paying just $68 in annual property taxes for about a decade.  Her home was incorrectly classified as a vacant lot by the city, when in fact there had been a house on that property since 1926.

Watson said that she noticed the change in taxes, but believed it was due to the fact that a tornado had hit the house.  Let’s digest a few points of the story.

Did she know?

If Watson had escrowed her taxes (as many people do) , then it would be somewhat believable that she simple wasn’t aware of the amount of property taxes she was paying.  Although I can probably guess my property taxes to within $50, I suspect that a lot of people don’t pay a lot of attention to what individual amounts make up their escrow payments.  Watson did not escrow her taxes, though, so she would have been very aware of the amount, since she would be physically writing a check for the taxes.  Watson does freely admit that she was aware of the amount of her taxes.

I find it a bit strange that her tax accountant wouldn’t have pointed out a disparity when comparing her mortgage interest deduction to her property tax deduction – but perhaps she did her own taxes.

The tornado

The tornado is a fascinating aspect of the story.  Watson says the the tornado did great damage to the home, specifically to the roof and foundation.  She felt that this damage caused her home’s assessment to be lowered.  A few question about the tornado remain unanswered:

• Watson says that the tornado occurred in either 1993 or 2002.  I have never suffered a direct hit from a tornado, but I have come frightening close.  I sincerely doubt that I’ll ever forget that the tornado that passed about a block from my house before ripping through another part of town was in 2006.  It made enough of a lasting impact that I doubt I’ll err by nine years on an estimate.
• Watson also says that she never informed the city (assessor), nor did she file an insurance claim.  Why on earth would you NOT file a claim?  I understand the logic of not filing small claims for fear of higher premiums.  However, a tornado directly hitting your house is a near worst case scenario – it’s the reason why you would buy insurance in the first place.  If you aren’t going to file a claim in such a situation, why ever bother to have the insurance?

Mortgage

Watson obtained a mortgage in 2002 (after the tornado, apparently) for $60,000.  It never dawned on her that the fact the  the appraisal was high enough to warrant the loan was an indication that it had regained value (for reference, she paid $40,000 for the home in 1990).  Watson says that she thought that appraisers used their “financial wizardry” to help her get the loan.  That’s a great quote, because I wasn’t aware of the fact that appraisers used financial wizardry, nor did I realize that it is their job to try to get you a mortgage.  I thought they were simply trying to estimate the fair market value of the house.

The future

First of all, Watson should probably stay away from neighborhood barbeques.  The neighbors are not happy that they were paying roughly 40 times what she paid in taxes.  I suspect that her time on the city council (along with the $80,000 salary and use of a car) is also coming to an end.  Watson has informed the city of the error and is prepared to pay back taxes that are owed on the property.

You can read more about this in the Detroit Free Press.

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JoAnn Watson