The cost of inadequate tax billing software

Nearly every Indiana county has failed to send property tax bills on time this year, forcing many local governments and schools to borrow millions and providing further proof that Indiana’s tax billing system is still a work in progress more than a decade after a court ordered a massive overhaul.  Only two of the state’s 92 counties sent tax bills on time, and 17 were more than six months late sending out the first of this year’s two tax bills, according to an Associated Press review of data from the Department of Local Government Finance, which regulates the property tax system.  Some counties still haven’t billed.

The delays in 2008 and this year have caused cash-flow problems for school districts and other local government agencies.  “It’s been an ulcer and it’s definitely not just for us,” said Sharon Qualkenbush, finance director for the Porter Township Schools, which borrowed $10.8 million last year and about $6 million this year because of the late tax bills.  Much of the money has come from the Indiana Bond Bank, a state agency that issues short-term and long-term loans to schools and local governments.  Executive director Dan Huge said the bond bank typically issues $250 million to $350 million in loans a year. But borrowing in 2008 spiked to more than $1 billion, and so far this year local units have borrowed almost $600 million. The increase in borrowing is due almost entirely to late property tax bills, he said.  Borrowers must repay the loans with interest. The Porter Township school system has paid some interest on this year’s loan but will owe an additional $34,644 by Dec. 31, Qualkenbush said

Getting the bills right

Thousands of property owners in Maricopa County may have paid an incorrect amount on their property taxes. The Maricopa County Assessor Keith Russell has launched a review of all of the county’s records. It is the first review of property tax records since 1994.

According to the Associated Press, the city of Chandler has already found 248 errors in their property tax rolls. Peoria has found around 1,000 mistakes. “We do pay a lot so if there is an error, I would want it to be known,” said Pheonix property owner Victor Harris. “That would concern me a lot,” added Ivan Huish, who owns property in Mesa.

Possible errors on the rolls might include being incorrectly listed as a resident of Phoenix or Tempe, which may have higher municipal tax rates than the city where the home actually exists. Property tax billing software can only do so much. A bill can still be calculated consistently if the valuation parameters provided are incorrect.

City Halls struggle to contain deficits

Peoria and other cities in Illinois are facing difficult decisions to fend off effects of the recession. In Champaign, not only is Chief Illiniwek gone but so are 19 city government positions, and residents are paying more for cable TV and to retrieve their impounded car. Joliet officials have projected a three-year $67 million deficit and, as a result, 90 fewer employees are working in city government today than last year. Springfield is requiring its employees to take eight unpaid furlough days next year. Sales tax also is going up in the Capital City.

Peoria is hardly alone in battling the crippling effect the recession is having on city halls throughout the U.S. and, especially, Illinois. Local and county governments throughout the state are scrambling to find ways to generate enough money to stay afloat during these tough times without sacrificing public safety, road construction and basic services that range from inspecting structurally unsound buildings to picking up stray dogs from neighborhood streets. "It's far worse than anything I've seen," said Larry Frang, executive director of the Illinois Municipal League. He's been with the league since 1974.

Locally, growth cities such as Washington are holding off on hiring new employees until the economy begins to show signs of recovery. East Peoria is contemplating scaling back its Festival of Lights events. Pekin recently introduced two new taxes on packaged liquor and food and beverages. In Peoria, the city's $10 million deficit has city officials pondering what can be done to restructure government. That means the public can expect immediate changes to the way yard waste is collected, library services and local arts awareness.

Replacing property tax

Voters in British Columbia recently re-elected Premier Gordon Campbell, the driving force behind BC's carbon tax. By 2012, the tax will reach about $30 per ton of carbon dioxide, or about 30 cents per gallon of gasoline. Money from the tax is used to reduce other taxes in a "revenue-neutral tax shift," and voters showed their support by backing Campbell and his right-of-center party for a rare third consecutive term. Across the border, two writers opine in the Seattle Times that Washington State should head in the same direction, replacing or winding down the state's property-based taxes with a carbon tax.

Start by eliminating the state property tax, they write, an idea floated a few years ago by the Washington State Tax Structure Committee chaired by Bill Gates Sr. The tax is unpopular and repealing it would ensure that it goes away for good. Control over property taxes then would be entirely in the hands of local voters in cities and counties, and the total burden on the state's property owners would immediately fall by 25 percent.

What about the state's public schools, which currently receive every dollar raised by the state property tax? That's where the carbon tax comes in. A tax on fossil fuels of $30 per ton of carbon dioxide — the same rate as in British Columbia — would be more than enough to backfill the lost revenue.

California's property tax mess

A history lesson. According to some critics it all started in 1978 with Prop. 13, the landmark measure passed by voters that put a cap on property taxes - and reduced them by an average 57 percent. Due to the measure, "the state now relies heavily on income tax and, secondarily, on sales tax" for its revenue stream, and those are "highly cyclically sensitive," Noll said.

State Senate President Pro Tem Darrell Steinberg, a Democrat from Sacramento, agrees. "Until we tackle that intended or unintended consequence of Prop. 13," he said, "we won't fix the system." But Jon Coupal, who heads the Howard Jarvis Taxpayers Association - the nation's largest taxpayer association, named after the author of Prop. 13 - said Steinberg and his fellow Democrats are "still in a state of denial." "Not only did Prop. 13 not slow down the tax burden" on California landowners, he argued. "We're not a low-tax property tax state. We're in the middle." He said efforts to rework the measure - a so-called "split roll" that could recalculate and possibly increase commercial rates - would be exactly the wrong message to business and job-creators in the current fiscal crisis.

And all that property tax billing software will have to be reconfigured.

Concessions for seniors

Many local governments give their seniors - or some of them - discounts or exemptions from property tax. Their tax billing software needs to include algorithms to calculate the amount of the discount according to the various rules. In Will County, IL, beginning in 1994, a Senior Citizens Assessment Freeze Homestead Exemption was granted for those 65 years or older who own and occupy a residence and do not exceed established income requirements.

The current annual income limit is $55,000. The law sets a July 1 deadline for submitting an application, but allows counties to establish a different date by ordinance. On Thursday, the Will County Board approved the extension. The exemption allows senior citizens to have their home's equalized assessed valuation frozen at a base year value and prevent or limit any increase due to inflation.

What happens when you don't pay that property tax

n a move that has historically proved controversial in Williamstown (Vermont), board members this week authorized Town Manager Garrett Earls to take the town's most delinquent property owners to tax sale. Based on the board's vote the tax sales will be scheduled 10 at a time in 90-day intervals starting on Sept. 1. The board's goal is to whittle away at a delinquent tax figure that Earls said was hovering around $315,000 at the end of last month. According to Earls, the town has agreements with some property owners to pay more than $80,000 of that figure, but the balance remains uncollected and – to date – uncollectible.

The mere threat of tax sales – something that hasn't happened in Williamstown in several years – could change that by prompting tardy taxpayers to enter agreements to pay delinquencies, which in some cases are years old.

The alternative involves picking up legal fees involved with the tax sale in addition to the 8 percent penalties and accumulating interest of 1 percent per month associated with having missed the tax deadline in the first place. That money would be owed to the town in one non-negotiable lump-sum payment within one year of the time the property is brought to tax sale. That could prove far more challenging for some than entering into a repayment agreement under a newly adopted policy that essentially allows for any past-due taxes, penalties and interest to be paid off incrementally over a span of 18 months while requiring property owners to pay future tax bills on a timely basis.

This week Earls presented the board with seven delinquent accounts totaling nearly $57,000 that could be considered for tax sale. After reviewing that list board members instructed Earls to bring back a batch of 10 – focusing on the oldest delinquencies without regard to the amount owed. They suggested that process be repeated every 90 days until the delinquent amount is brought down to a more manageable level.

Their tax billing software will have a debt management module that will enable such properties to be identified and flagged automatically.

Georgia tries to cool property tax increases

The Georgia Department of Revenue is moving to eliminate one excuse that local officials give when they're raising property taxes: The state made us do it. The department, at the direction of Gov. Sonny Perdue, is trying to make sure county officials know they don't have to revalue property every three years. The department is proposing a new regulation that, among other things, spells that out.

The state requires that counties keep property assessed at 40 percent of fair market value and that property be assessed uniformly. State officials say counties have interpreted the law to say property had to be revalued every few years. "We're essentially taking away that excuse so counties can run their own businesses and make sure they revalue properly," Perdue said. "But they won't be able to use the excuse that the state made us do it.

County officials say they don't know if the regulation, which could become final by the end of the summer, will have any impact. And they dispute the notion state officials often nurture that local government spending is out of control.

Subsidising solar

In Nevada, solar energy generation is being subsidized (encouraged?) through extended property tax abatements for renewable energy production plants, which were to expire in this year, and expanded them from 50 percent for 10 years to 55 percent for 20 years. The Las Vegas Sun newspaper reports that solar energy developers had been worried about a fierce stance by Assemblywoman Kirkpatrick, who began the year saying she would not support the industry’s request for a 75 percent property tax abatement and would impose a new tax on renewable energy. The revenue would go to offset higher energy costs for ratepayers.

Kirkpatrick was concerned that solar plants would not bring many permanent jobs to Nevada, and that solar plant construction jobs have gone to out-of-state workers in the past. But the possibility of a new tax “brought development to a halt,” said renewable energy lobbyist Tom Clark. “It sent a red flag to every developer.”

Selfless?

Politicians and many commentators are keen to beat the lower taxes drum. But for many, taxes are the price we pay for living in a community in which we have pride. This is borne out by news from Massachusetts that despite hardships, programs have been preserved. In a baffling trend playing out against an abysmal economy, voters have approved property tax increases in at least 11 communities around Boston in recent weeks, reaching into their own pockets to preserve libraries, schools, and public safety services.

Among them was the town of Rockland, which has passed only one other property tax override since voters enacted Proposition 2 1/2 more than 25 years ago. Late last month, as people around the state watched every penny, not to mention every tax dollar, Rockland voted to raise its property taxes to save an elementary school and a library. At least five communities have also rejected property tax increases in recent weeks, but the passage by 11 other communities underscores the impact of budget cuts on cities and towns.

Paying for recycling

It is reported that Oshkosh residents will pay for carts that will be used as part of the city’s switch to automated recycling this fall. Going against a vote from last fall, the Oshkosh Common Council voted 7-0 Tuesday to go ahead with assessing a one-time special fee on property taxes to pay for recycling carts, charging homeowners $46.51 for a 95-gallon cart and $40.18 for a 64-gallon cart. Initially, the council voted 6-1 in November to finance the carts over 10 years. During a discussion on the matter in March, the majority of the councilors expressed desire to switch to the special fee so the city decided to take another vote on the matter.

In discussion of how to pay for the carts, councilors said charging property owners encourages them to take responsibility for their carts. "There’s an ownership associated with it," said councilor Harold Buchholz. Now the city plans to go ahead with its education process over the summer, teaching residents how the switch will affect them. City Manager Mark Rohloff said information will be mailed out to Oshkosh residents regarding the switch and a Web site on single-stream recycling created.

In information mailed out, Public Works Director David Patek said the city would give residents the option of obtaining a 95-gallon or 64-gallon cart. If the residents do not specifically request a 64-gallon cart, they will be provided with the larger cart. As part of the switch to single-stream, residents will put all recyclables – paper, plastic, cardboard, glass – in the one bin for pick up every two weeks.

"I think people will be surprised once they get cardboard and other recyclables in there that they will be able to use that (95-gallon) bin pretty readily," Rohloff said.

Recycling. What recycling?

Cities that manage their own trash collections and get their citizens to pay via their property taxes or utility bills apparently may not be doing so well these days, according to CNN. When Lynn Heinisch and her neighbors in Atlanta's Lake Claire neighborhood take their recycling to the curb for pickup each Thursday, they cross their fingers and hope for the best. Accusing city collectors of unreliable pickups, Heinisch and the others have resorted to stockpiling recyclable materials in their garages.

"It's frustrating," Heinisch said. "People are trying to recycle, and it's not easy. I wish it was easy to do what we all feel strongly about." When she has to, Heinisch drives her recycling 4 miles to a dropoff center in the town of Decatur.

The recession has trashed the nation's booming recycling industry in just a few months, and cities are straining to keep their programs alive. Demand for commodities such as cardboard, paper and glass has taken a nose dive, and prices for those materials have gone south since last fall. In August, a recycler in Georgia could expect to receive about $160 a ton for curbside recyclables. Now the average is about $37 a ton.

In a nutshell

Property tax billing software must convert a property assessment into a billing statement. The Tax Bill is then issued to the taxpayer or to the Mortgage company often via some form of integration. Well-designed tax billing software enjoys dynamic calculation flexibility, which allows it to operate in the US and internationally.

The dead have their uses

Four people are accused of using tax breaks for their dead relatives to avoid paying property taxes on their homes says the Miami Herald. For 18 years, Julian Grande received a special tax break for disabled homeowners from the Miami-Dade property appraiser. But Grande was more than disabled. He's been dead since 1990.

Grande's daughter, Maria, is one of four people now facing criminal charges for allegedly exploiting property-tax breaks meant for relatives long dead. According to investigators with Miami-Dade's inspector general and the state attorney's office, the four people continued to file property-tax records indicating their disabled relatives were alive -- forging signatures, in some cases. Along with Maria Grande, those arrested were: Dane Taylor, 60, of Palmetto Bay; Philip Espinosa, 50, of Miami; and Telenia Piedra, 59, of Miami.

Investigators say the four wrongly benefited from a special tax exemption for quadriplegics and others with profound disabilities and low incomes. Beneficiaries of the tax break must submit medical records to qualify, and in some cases they must file financial information annually to prove eligibility. In 2007, 729 homes in Miami-Dade were untaxed under this exemption.

The California tax election

As a result of California’s election, the state now faces a $21.3 billion gap between revenues and spending, reports The Economist. Life, which has been no picnic for many in this state since the recession began, is about to get a lot worse. There have already been two rounds of budget cuts since last autumn. A third, savage, round must now follow.

Mr Schwarzenegger has already hinted at the cuts he will propose to the legislature. The easy part is to release prisoners. California’s 33 prisons, with about 168,000 inmates, many of them locked up because of inflexible sentencing laws passed by voters, are scandalously overcrowded. Mr Schwarzenegger is thinking about freeing 38,000 people. Half of them are undocumented immigrants whom he would transfer to federal custody.

But “the real money is where the pain is”, says Jean Ross of the California Budget Project, a research firm in Sacramento. In health care, for instance. Just as Mr Obama is trying to give more people access to medical care, California will be taking it away: by cutting funding for Medi-Cal, the state’s programme for the poor, and changing eligibility rules for another programme so that 225,000 children are likely to lose coverage. And this at a time when many of their parents are losing their jobs and their employer-sponsored insurance.

Other programmes, from help with birth-control and HIV-prevention to counselling against drug abuse and domestic violence, will be made smaller or eliminated altogether. Child-welfare programmes will be cut by 10%. This means fewer investigations into allegations of child abuse and less supervision of foster care, even as more children are likely to be abused in difficult economic times, says Linda Canan at the Napa County Health and Human Services Agency.

Cuts in the education budget will probably shorten the school year by a week, require teachers to be laid off and cause classes to get bigger. The University of California, a network of ten campuses, will face cuts equivalent to 50,000 fewer students and perhaps 5,000 fewer staff.

Malaysia door-to-door

Local governments these days try to rely on data that is easily gathered (and modeled) so as to derive the valuations on which to levy property taxes. Not so in Malaysia, where The Star newspaper reports the Johor Baru City Council (MBJB) will be conducting a property reevaluation, from premise to premise beginning May 2.

City mayor Datuk Naim Nasir said that the reevaluation was not to increase property tax but for the council to prepare for a new value list. He said the last valuation was done in 1995 which was more than 10 years ago. He explained that a reevaluation based on the new market value was important because bankers would refer to it when they value the price of a property. Naim said that 20 officers from the council would be going from premise to premise to conduct the evaluation. “They will visit each unit and this will take us about six to seven months to complete the entire area,” he said.

Special treatment for elected officials?

Detroit City councilwoman JoAnn Watson held a press conference Sunday afternoon outside her Tudor-style home to clear the air over news reports of her greatly under-assessed brick house on the city's west side which city records indicate has not existed for several years.

Watson, an outspoken critic of tax deadbeats and the city's lack of getting its fair share in outstanding taxes from property owners and businesses, learned last week from newspaper reporters she had been receiving quite a tax break from the city. In 2008, according to city tax records, Watson was assessed only $67.97 in property taxes for her brick home located in the Russell Woods subdivision on the city's west side. Homeowners owning comparable addresses in the neighborhood pay more than $5,600 a year.

"I've been a target of a smear campaign," Watson told reporters gathered outsider her home on Sturtevant off Dexter Sunday. "... I pay my bills and whatever I was billed, I paid."

Watson, elected to the City Council in 2003, blamed her low tax bill on miscalculations made by the city assessment office -- possibly due to storm-related damage by a tornado sometime in the last 14 years. She bought the home on a land contract in 1990 for $40,000 but -- for still unknown reasons -- it has been listed for years in the city records as a vacant, unoccupied lot and is currently valued at only $1,658.