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People in Southeast Michigan pay DTE Energy some of the highest rates for electricity in the country, and because of a little known tax that funnels millions every year to the lighting authority and the Detroit Police Department, Detroiters have higher bills than anyone else the company serves.
Detroit is the only city in Michigan with a “utility users tax,” a 5% surcharge Detroit customers pay on both their gas and electric bills. The Public Lighting Authority gets a fixed amount, $12.5 million of the money the tax brings in annually, which it uses to pay down bond debt. Each year, the rest – an amount the city estimates will be $33.3 million in 2022 – goes to fund officer hiring and retention efforts at the Detroit Police Department.
Detroiters have a disproportionately high energy burden, or the portion of income that goes toward paying utility costs. That “burden,” as well as DTE’s high rates, and company policies results in prevalent shutoffs. DTE Energy shut off accounts 178,200 times last year alone, we reported as part of a months-long investigation into DTE shutoffs published last week. Since 2013, when the state started collecting this data, the company has shut off accounts 1.4 million times.
Facing a shutoff or struggling to pay your bill? Text “DETROIT” to 67485 for more information about assistance programs.
The additional utility users tax Detroiters must pay is not new, first showing up more than 50 years ago. But in the months I spent reporting on electric prices and shutoffs in Detroit, almost nobody I spoke with, whether they were a resident or an expert on utilities, knew about it.
The exception was Justin Schott, project manager at the University of Michigan’s Energy Equity Project. Schott learned about the tax when he was working in energy education.
“We would walk people through every line item on the bill, and that tax just stood out,” he said. Schott then learned the tax applied only to Detroit and filed a Freedom of Information Act request to learn more.
“It still strikes me as a really silly approach to plug gaps in one basic service by taxing a human right for people who already can’t afford to pay,” he said. “Of all the things that you could randomly slap a $30 million tax on, there are better ones.”
In 1970, the Michigan Legislature passed a law allowing the city to levy the tax as a strategy to bolster funding for Detroit police, after the 1967 Detroit Rebellion when the department was belatedly working to integrate. The law only applied to cities with more than 1 million residents and calls for funding to be used “exclusively to retain or hire police officers.”
The law has been amended throughout the years to stay in step with Detroit’s declining population and now applies to cities with a population of more than 600,000. In 2012, the law was amended to allow $12.5 million collected through the tax each year to support the lighting authority, a board-run, not-for-profit entity that operates independently from the City and maintains streetlights.
Money from the utility tax is expected to make up nearly 10% of the DPD’s $341 million 2021-2022 fiscal year budget. (DPD is currently seeking to increase its budget to $346 million next fiscal year.) From 2016 through 2020, the tax brought more than $135 million to the department. Revenues from the tax are reported out by the city’s budget office.
The tax applies to both residential and commercial accounts in the city. There are some exceptions for new businesses, as well as for DTE customers in Detroit’s four active Renaissance Zones.
DTE collects the tax on every monthly bill and then sends those funds to the city, where the funds are tracked by the city Treasurer. The Treasurer declined to provide a breakdown of how much of the tax brought in was paid by residential versus commercial customers. saying in an email they were prevented from doing so by “State of Michigan taxpayer confidentiality laws.”
If you are a Detroit resident, you can see how much you are charged for this tax on your monthly bill. The “Detroit Utility Tax” appears as a line item under both your electric and gas heating charges, highlighted in a sample bill below.