New Tax Delinquency Policy Questioned

Vermont Standard

8/4/16

By Curt Peterson

Standard Correspondent

Killington — If new Town Manager Debby Schwartz thought her efforts to clean up the town’s onerous delinquent property tax situation were going to earn her universal appreciation, she found out differently at Tuesday evening’s select board meeting.

At the July 19 meeting the board had voted unanimously to adopt a new delinquent tax policy – that properties are now eligible for tax sale proceedings if any portion of levies remain unpaid 30 days after the 10-day grace period following the final installment for that year. This was Schwartz’s proposal, inspired by $500,000 in delinquent property taxes, some of which have been due for over a year.

At that meeting Schwartz had announced execution of a $900,000 cashflow loan from People’s Bank to cover the town’s expenses from July 1, the beginning of the fiscal year, until the town starts to receive property tax payments during the month of August. She had pointed out that part of the reason the town needs the loan is because taxes on which the previous year’s budget was based remained unpaid.

“A year is just an unreasonable period of time to let delinquent taxes remain uncollected. We need that money for the budget, and all the other taxpayers have to make it up,” she said.

Schwartz was careful to point out that under the new rule, tax sale proceedings “may,” rather than “shall” be instituted when delinquency reaches the prescribed tardiness, which leaves some flexibility for special circumstances, including negotiating a workable payment plan with property owners that would get them up to date in a reasonable period of time.

If it sounded reasonable on July 19, it certainly didn’t sound reasonable to some residents on Aug. 2.

George Brant and his wife Nicole Levesque, owner of Vermont Gift and Garden Shop in Killington, challenged the board’s sensitivity to hardships resulting from a “terrible winter season” by threatening tax sales.

“It’s cold,” Brant said. “We just had a bad season. We could have a couple more. Then what? People just lose everything because they can’t pay their property taxes on time?”

Added Levesque: “Several people are already out of business in the area because of the taxes.”

Selectman Chris Bianchi pointed out that taxpayers can come to the town manager, who is also the tax collector, to work out a payment plan if they need one.

“The longer people wait to pay, and the longer we wait for them to do it, the harder it is for them to catch up,” he said.

Brant said he felt the payment plan should be spelled out up front, that leaving the negotiations up to an individual might lead to favoritism for one taxpayer and draconian measures for another.

Schwartz repeated that leaving the payment plan up to negotiations allows the tax collector to take individual situations into account, rather than creating a power struggle between town and taxpayer.

Bianchi said that if a taxpayer is unhappy with treatment by the tax collector, he or she can apply to the Board of Civil Authority — they adjudicate grievances about issues such as delinquent taxes that residents might have against the town. Bianchi also pointed out that the town had a surplus fund at one time that they could use as a cushion, but extraordinary expenses from 2011’s Tropical Storm Irene wiped out much of that money.

Jim Hoff joined the fray, saying his wife became very ill and had to be hospitalized in Burlington for 62 days.

“I wasn’t reading my email, I wasn’t going to the post office, I wasn’t talking on the phone,” he said. “What if my tax bill came and I didn’t notice it, and under this new plan my property came up for tax sale? I don’t think that’s right.”

He said during his wife’s illness he got behind on the taxes for five properties.

“Once she was well again I met with Seth (Webb), the town manager, and worked out a plan to get caught up. Now I am behind on only 1 1/2 properties,” Hoff said. “Under this new arrangement I’ve only got thirty days before my house gets sold.”

Schwartz went through the process step-by-step. “First of all,” she said, “right now you are billed your taxes in four installments. They are not technically delinquent until the ten-day grace period runs out following the last of the four installments. Then the delinquency stands for 30 more days before a tax sale is even considered. So you have almost a year to arrange an alternative plan and avoid the sale.”

Hoff said he remembered former Town Manager Webb’s efforts to collect delinquent taxes, which were very successful.

Levesque and Vito Rasenas asked if delinquent taxes didn’t actually add to the town’s revenue.

“Aren’t those delinquent taxes earning interest and penalties until they are paid,” Rasenas asked.

Select board chair Patty McGrath pointed out that the interest and penalties only become revenue when they are paid, along with the taxes. Until then, she said, they are just anticipated revenue.

“We do receive delinquent taxes from previous years every current year,” she said. “But it’s unpredictable and we can’t budget based on that.”

Schwartz presented the Board with three tax items under “Listers’ Errors and Omissions.” One of the cases involves a gentleman named Andy Merman who filed his Homestead Exemption Declaration form in June, after the prescribed deadline of April 15. The town has assessed a penalty equal to 8 percent of the education portion of his property tax bill. He feels the penalty is excessive for failure to file a form, and asked the Board to consider lowering the fine to a more reasonable level.

Remarks from the audience and among the Select Board members rallied between lowering the penalty to 3 percent, to worrying about fairness to any other late filers who might have paid the higher penalty already.

Chris Bianchi looked up the rules regarding the penalties on the Vermont Department of Taxes website, which clearly state that, in municipalities where the non-resident tax rate is lower than the resident tax rate, (as is the case in Killington) the town “shall” charge a delinquent Homestead Exemption filer the 8 percent penalty.

“When a legal document says ‘shall’ do it,” Bianchi said, “that means you have to do it.”

McGrath and Schwartz had the actual statute in front of them, which agreed with the website.

Comment: From the State of Vermont website:

"Homestead Declarations filed after April 18, 2016, are classified as homesteads but may be assessed the following penalty by the town:

• Up to 3% if the nonresidential rate is higher than the homestead education property tax rate.
  
• Up to 8% if the nonresidential rate is lower than the homestead education property tax rate. "
  
  
  "may" and "up to" in the above quote from the website to me indicate a wide latitude is allowed in assessing penalties. I even connotes no penalty at all can be considered.
  
  Vito